Exhibit 10.6
LOAN AND SECURITY AGREEMENT
Agreement No. __________ Dated as of August 5, 1999
among
MMC/GATX PARTNERSHIP NO. I
and
COMDISCO, INC.
as Lenders
and
▇▇▇▇▇.▇▇▇, INC.
a Washington, Inc. corporation
▇▇▇ ▇/▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
as Borrower
CREDIT AMOUNT: $7,000,000
Commitments: MMC/GATX Partnership No. I: $3,000,000
Comdisco, Inc.: $4,000,000
Repayment Period: 30 months
Treasury Note Maturity: 30 months
Loan Margin: 744 basis points
Commitment Termination Date: July 31, 1999
The defined terms and information set forth on this cover page are a part
of the LOAN AND SECURITY AGREEMENT, dated as of the date first written above
(this "Agreement"), entered into by and among MMC/GATX PARTNERSHIP NO. I and
COMDISCO, INC. (each individually a "Lender" and collectively, "Lenders") and
the borrower ("Borrower") set forth above. The terms and conditions of this
Agreement agreed to between Lenders and Borrower are as follows:
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ARTICLE I
INTERPRETATION
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1.01. Certain Definitions. Unless otherwise indicated in this Agreement or
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any other Operative Document, the following terms, when used in this Agreement
or any other Operative Document, shall have the following respective meanings:
"Applicable Premium" shall mean an amount equal to the greater of (i) zero and
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(ii) the excess of (x) the sum of the present values, at the date of prepayment
of the amount of each remaining scheduled payment of interest on and principal
on a Loan, or portion of such payment, which will not be required to be made as
a result of such prepayment (each such payment an "Amount Payable") (each such
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Amount Payable discounted separately at the Treasury Rate, determined on the
date three (3) Business Days before the date of prepayment, compounded monthly,
from the date such Amount Payable would be due), over (y) the principal amount
of such Note to be prepaid. The "Treasury Rate" shall be the yield (as quoted in
The Wall Street Journal on the date which is three (3) Business Days prior to
the date of prepayment) on U.S. Treasury securities adjusted to a constant
maturity equal to the then remaining number of full months to maturity of the
applicable Note.
"Borrower's Home State" shall mean Washington, the state in which Borrower's
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principal place of business is located.
"Business Day" shall mean any day other than a Saturday, Sunday or public
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holiday under the laws of California, Illinois or Borrower's Home State or other
day on which banking institutions are authorized or obligated to close in
California, Illinois or Borrower's Home State.
"Claim" has the meaning given to that term in Section 10.03.
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"Collateral" has the meaning given to that term in Section 5.01.
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"Commitment" means, with respect to each Lender, the amount set forth
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following such term on the cover page of this Agreement and "Commitments" means
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all such amounts collectively.
"Commitment Fee" has the meaning given to that term in Section 2.04.
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"Commitment Termination Date" shall mean the date specified on the cover page
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of this Agreement.
"Credit Amount" shall mean the maximum aggregate amount of the Loans under
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this Agreement (if the conditions specified in Schedule 3 are satisfied), which
amount is set forth following such term on the cover page of this Agreement.
"Default" shall mean any event which with the passing of time or the giving of
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notice or both would become an Event of Default hereunder.
"Default Rate" shall mean the per annum rate of interest equal to the higher
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of (i) 18% or (ii) the Prime Rate plus 6%, but such rate shall in no event be
more than the highest rate permitted by applicable law.
"Disclosure Schedule" has the meaning set forth in the definition of the term
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"Permitted Liens."
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"Environmental Law" shall mean the Resource Conservation and Recovery Act of
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1987, the Comprehensive Environmental Response, Compensation and Liability Act,
and any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree (in each case having the force of law) regulating or
imposing liability or standards of conduct concerning any Hazardous Material, as
now or at any time hereafter in effect.
"Equity Securities" of any Person shall mean (a) all common stock, preferred
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stock, participations, shares, partnership interests or other equity interests
in and of such Person (regardless of how designated and whether or not voting or
non-voting) and (b) all warrants, options and other rights to acquire any of the
foregoing.
"Event of Default" has the meaning given to that term in Section 9.01.
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"Facility Fee" has the meaning given to that term in Section 2.04.
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"Funding Date" shall mean a date on which a Loan is made to or on account of
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Borrower under this Agreement.
"GAAP" shall mean generally accepted accounting principles and practices as in
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effect in the United States of America from time to time, consistently applied.
"Hazardous Material" means any hazardous, dangerous or toxic constituent
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material, pollutant, waste or other substance, whether solid, liquid or gaseous,
which is regulated by any federal, state or local governmental authority.
"Indebtedness" shall mean, with respect to Borrower or any Subsidiary, the
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aggregate amount of, without duplication, (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person to pay the deferred purchase price of property or services (excluding
trade payables aged less than 180 days), (d) all capital lease obligations of
such Person, (e) all obligations or liabilities of others secured by a lien on
any asset of such Person, whether or not such obligation or liability is
assumed, (f) all obligations or liabilities of others guaranteed by such Person;
and (g) any other obligations or liabilities which are required by GAAP to be
shown as debt on the balance sheet of such Person. Unless otherwise indicated,
the term "Indebtedness" shall include all Indebtedness of Borrower and the
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Subsidiaries.
"Intellectual Property" shall mean all of Borrower's right, title and interest
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in and to patents, patent rights (and applications and registrations therefor),
trademarks and service marks (and applications and registrations therefor),
inventions, copyrights, mask works (and applications and registrations
therefor), trade names, trade styles, software and computer programs, trade
secrets, methods, processes, know how, drawings, specifications, descriptions,
and all memoranda, notes, and records with respect to any research and
development, all whether now owned or subsequently acquired or developed by
Borrower and whether in tangible or intangible form or contained on magnetic
media readable by machine together with all such magnetic media.
"Investment" shall mean the purchase or acquisition of any capital stock,
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equity interest, or any obligations or other securities of, or any interest in,
any Person, or the extension of any advance, loan, extension of credit or
capital contribution to, or any other investment in, any Person.
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"Lien" shall mean any pledge, bailment, lease, mortgage, hypothecation,
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conditional sales and title retention agreements, charge, claim, encumbrance or
other lien in favor of any Person.
"Loan" means a Loan advanced by a Lender to Borrower under this Agreement
----
according to the Commitment of such Lender.
"Loan Margin" shall mean the number of basis points set forth following such
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term on the cover page of this Agreement.
"Loan Rate" shall mean, with respect to each Loan, the per annum rate of
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interest (based on a year of twelve 30 day months) equal to the sum of (a) the
U.S. Treasury note rate of a term equal to the Treasury Note Maturity as quoted
in The Wall Street Journal on the date the Note with respect to each Loan is
prepared, plus (b) the Loan Margin.
"Note" shall mean one of the secured promissory notes of Borrower
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substantially in the form of Exhibit A.
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"Obligations" has the meaning given to that term in Section 5.01.
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"Operative Documents" shall mean this Agreement, the Notes and the Warrants
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and all other documents, instruments and agreements executed and delivered in
connection herewith or therewith or in respect of the closing of the
transactions contemplated hereby or thereby.
"Payment Date" has the meaning given to that term in the Note.
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"Permitted Indebtedness" shall mean and include:
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(a) Indebtedness of Borrower to Lenders;
(b) Indebtedness of Borrower secured by Liens permitted under clause
(e) of the definition of Permitted Liens;
(c) Indebtedness arising from the endorsement of instruments in the
ordinary course of business;
(d) Indebtedness existing on the date hereof and set forth on the
Disclosure Schedule;
(e) Indebtedness in an aggregate principal amount not exceeding
$2,500,000.00 consisting of a revolving credit facility in which
the loans are limited to less than 100% of Borrower's outstanding
accounts receivable and which are secured solely by Borrower's
accounts receivable (and general intangibles in the nature of
rights to payment) and the proceeds thereof; and
(f) Subordinated Indebtedness.
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"Permitted Investments" shall mean and include:
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(a) Deposits with commercial banks organized under the laws of the
United States or a state thereof to the extent such deposits are
fully insured by the Federal Deposit Insurance Corporation;
(b) Investments in marketable obligations issued or fully guaranteed
by the United States and maturing not more than one (1) year from
the date of issuance; and
(c) Investments in open market commercial paper rated at least "A1"
or "P1" or higher by a national credit rating agency and maturing
not more than one (1) year from the creation thereof.
(d) Investments pursuant to or arising under currency agreements or
interest rate agreements entered into in the ordinary course of
business;
(e) Investments consisting of deposit accounts of Borrower in which
Lenders have a perfected security interest; and
(f) Other Investments aggregating not in excess of Two Hundred Fifty
Thousand Dollars ($250,000) at any time.
"Permitted Liens" shall mean (a) the Lien created by this Agreement, (b) Liens
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for fees, taxes, levies, imposts, duties or other governmental charges of any
kind which are not yet delinquent or which are being contested in good faith by
appropriate proceedings which suspend the collection thereof (provided, however,
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that such proceedings do not involve any substantial danger of the sale,
forfeiture or loss of any item of equipment and that Borrower has adequately
bonded such Lien or reserves sufficient to discharge such Lien have been
provided on the books of Borrower), (c) Liens identified on the disclosure
schedule attached hereto as Schedule 2 ("Disclosure Schedule"), (d) Liens to
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secure payment of worker's compensation, employment insurance, old age pensions
or other social security obligations of Borrower in the ordinary course of
business of Borrower, (e) Liens upon any equipment or other personal property
acquired by Borrower after the date hereof to secure (i) the purchase price of
such equipment or other personal property or (ii) lease obligations or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment or other personal property; provided that (A) such Liens are
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confined solely to the equipment or other personal property so acquired and the
amount secured does not exceed the acquisition price thereof, and (B) no such
Lien shall be created, incurred, assumed or suffered to exist in favor of
Borrower's officers, directors or shareholders holding five percent (5%) or more
of Borrower's Equity Securities, (f) carriers', warehousemen's, mechanics',
landlords', materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business which are not delinquent or remain payable without
penalty or which are being contested in good faith and by appropriate
proceedings; (g) non-exclusive licenses of Intellectual Property entered into in
the ordinary course of business and licenses, Liens or similar arrangements
entered into in connection with joint ventures and corporate collaborations; and
(h) Liens of the type contemplated under clause (e) of the definition of
Permitted Indebtedness securing Indebtedness permitted under such clause (e).
"Person" shall mean and include an individual, a partnership, a corporation, a
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business trust, a joint stock company, a limited liability company, an
unincorporated association or other entity and any domestic or foreign national,
state or local government, any political subdivision thereof, and any
department, agency, authority or bureau of any of the foregoing.
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"Prime Rate" shall mean the interest rate per annum specified in the "Money
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Rates" column of The Wall Street Journal, but such rate shall in no event be
more than the highest interest rate permitted by applicable law.
"Subordinated Indebtedness" shall mean Indebtedness subordinated to the
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Obligations on terms and conditions acceptable to Lenders in their sole
discretion.
"Subsidiary" shall mean any corporation of which a majority of the outstanding
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capital stock entitled to vote for the election of directors (otherwise than as
the result of a default) is owned by Borrower directly or indirectly through
Subsidiaries.
"Term" shall mean the period from and after the date hereof until the payment
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or satisfaction in full of all Obligations under this Agreement and the other
Operative Documents.
"Treasury Note Maturity" shall mean the period of months set forth following
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such term on the cover page of this Agreement.
"Warrants" shall mean separate warrants to be issued at the direction of the
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Lenders to purchase securities of Borrower substantially in the form of Exhibit
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B.
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1.02. Headings. Headings in this Agreement and each of the other Operative
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Documents are for convenience of reference only and are not part of the
substance hereof or thereof.
1.03. Plural Terms. All terms defined in this Agreement or any other
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Operative Document in the singular form shall have comparable meanings when used
in the plural form and vice versa.
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1.04. Construction. This Agreement is the result of negotiations among, and
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has been reviewed by, Borrower and Lenders and their respective counsel.
Accordingly, this Agreement shall be deemed to be the product of all parties
hereto, and no ambiguity shall be construed in favor of or against Borrower or
Lenders.
1.05. Entire Agreement. This Agreement, together with the terms set forth in
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each of the other Operative Documents, taken together, constitute and, contain
the entire agreement of Borrower and Lenders and, with regard to their
respective subject matters, supersede any and all prior agreements, term sheets,
negotiations, correspondence, understandings and communications among the
parties, whether written or oral, with respect to their respective subject
matters.
1.06. Other Interpretive Provisions. References in this Agreement to
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"Articles," "Sections," "Exhibits," "Schedules" and "Annexes" are to articles,
sections, exhibits, schedules and annexes herein and hereto unless otherwise
indicated. References in this Agreement and each of the other Operative
Documents to any document, instrument or agreement shall include (a) all
exhibits, schedules, annexes and other attachments thereto, (b) all documents,
instruments or agreements issued or executed in replacement thereof, and (c)
such document, instrument or agreement, or replacement or predecessor thereto,
as amended, modified and supplemented from time to time and in effect at any
given time. The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement or any other Operative Document shall refer
to this Agreement or such other Operative Document, as the case may be, as a
whole and not to any particular provision of this Agreement or such other
Operative Document, as the case may be. The words "include" and "including" and
words of similar import when used in this Agreement or any other Operative
Document shall not be construed to be limiting or exclusive. Unless otherwise
indicated in this
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Agreement or any other Operative Document, all accounting terms used in this
Agreement or any other Operative Document shall be construed, and all accounting
and financial computations hereunder or thereunder shall be computed, in
accordance with GAAP.
ARTICLE II
THE CREDIT
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2.01. Credit Facility.
(a) The Credit Amount. Subject to the terms and conditions of this
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Agreement and relying upon the representations and warranties herein set forth
as and when made or deemed to be made, each Lender severally agrees to lend to
Borrower a Loan in the amount of such Lender's Commitment. No Lender shall be
required to make a Loan in an amount in excess of its Commitment. The Loans may
be prepaid only as set forth in Section 2.01(d).
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(b) Interest Rates. Borrower shall pay interest on the unpaid
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principal amount of each Loan from the date of such Loan until such Loan is paid
in full, at a per annum rate of interest equal to the Loan Rate for such Loan
determined in accordance with the definition of Loan Rate. The Loan Rate
applicable to a Loan shall not be subject to change in the absence of manifest
error. All computations of interest on a Loan shall be based on a year of twelve
30 day months. If Borrower pays interest on a Loan which is determined to be in
excess of the then legal maximum rate, then that portion of each interest
payment representing an amount in excess of the then legal maximum rate shall be
deemed a payment of principal and applied against the principal of such Loan.
(c) Payments of Principal and Interest. Borrower shall make payments
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of accrued interest only on the outstanding principal amount of each Loan on the
first three (3) Payment Dates specified in each Lender's Note, and twenty-seven
(27) equal payments of principal plus accrued interest on the outstanding
principal amount of such Lender's Loan on each subsequent Payment Date as set
forth in such Lender's Note.
(d) Optional Prepayment with Premium. Upon ten (10) Business Days'
--------------------------------
prior written notice to Lenders, Borrower may, at its option, at any time,
prepay all, and not less than all, of the Loans in full at a prepayment price
equal to the principal amount of each Loan, plus interest accrued on each Loan
through and including the date of such prepayment, plus a premium on each Loan
equal to the Applicable Premium. If an Event of Default occurs and is
continuing, and the Lenders exercise their right under Section 9.02 to
accelerate the Loans or the Loans are automatically accelerated, Borrower
expressly agrees that the amount then due and payable shall include the
Applicable Premium as of the date of such acceleration.
2.02. Use of Proceeds; the Loan and the Notes; Disbursement.
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(a) Use of Proceeds. The proceeds of the Loans shall be used solely
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for working capital or general corporate purposes of Borrower.
(b) The Loans and the Notes. The obligation of Borrower to repay the
unpaid principal amount of and interest on each Lender's Loan shall be evidenced
by a Note issued to each Lender and each Lender is authorized to endorse on a
grid annexed to its Note appropriate notations regarding payments made
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on the Note; provided, however, that the failure to make, or an error in making,
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any such notation shall not limit or otherwise affect the obligations of
Borrower hereunder or thereunder.
(c) Disbursement. Each Lender shall disburse its Loan by wire transfer
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to Borrower unless otherwise directed in writing by Borrower. Notwithstanding
anything stated herein to the contrary, no Lender shall have any obligation to
advance funds on behalf of the another Lender.
(d) Termination of Commitment to Lend. Notwithstanding anything to the
---------------------------------
contrary in the Operative Documents, Lenders' obligations to advance the Loans
hereunder shall terminate on the earliest of (i) the occurrence of any Event of
Default hereunder and (ii) the Commitment Termination Date.
2.03. Other Payment Terms.
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(a) Place and Manner. Borrower shall make all payments due to Lenders
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in lawful money of the United States, in immediately available funds, at the
address for payments and in the manner specified in Section 10.05(b).
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(b) Date. Whenever any payment due hereunder shall fall due on a day
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other than a Business Day, such payment shall be made on the next succeeding
Business Day.
(c) Default Rate. If either (i) any amounts required to be paid by
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Borrower under this Agreement or the other Operative Documents (including
principal or interest payable on the Loan, any fees or other amounts) remain
unpaid after such amounts are due, or (ii) an Event of Default has occurred and
is continuing, Borrower shall pay interest on the outstanding principal balance
hereunder from the date due or from the date of the Event of Default, as
applicable, until such past due amounts are paid in full or until all Events of
Defaults are cured, as applicable, at a per annum rate equal to the Default
Rate, such rate to change from time to time as the Prime Rate shall change. All
computations of such interest at the Default Rate shall be based on a year of
360 days and twelve 30 day months.
2.04. Facility Fee; Commitment Fee.
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(a) Facility Fee. Upon the execution and delivery of this Agreement,
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Borrower will pay to Lenders a facility fee (a "Facility Fee") of $70,000.
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(b) Borrower has paid a Commitment Fee to the Lenders in the aggregate
amount of $25,000 (the "Commitment Fee"). The Commitment Fee, less $10,000 for
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transaction and due diligence expenses, will be applied pro rata to the Facility
Fee due to each Lender.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
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3.01. Representations and Warranties. Except as set forth in the Disclosure
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Schedule, Borrower makes the following representations and warranties to Lenders
as of the date hereof and again on the Funding Date:
(a) Organization and Qualification. Borrower is a corporation duly
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organized, validly existing and in good standing under the laws of its state of
incorporation and is duly qualified to do business
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in Borrower's Home State. Borrower has no Subsidiaries other than ▇▇▇▇▇.▇▇▇
Channels, Inc., a corporation organized under the laws of British Columbia.
(b) Authority. Borrower has all necessary corporate power, authority
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and legal right and has obtained all approvals and consents and has given all
notices necessary to execute and deliver this Agreement and the other Operative
Documents and to perform the terms hereof and thereof. Borrower has all
requisite corporate power and authority to own and operate its properties and to
carry on its businesses as now conducted.
(c) Conflict with Other Instruments, etc. Neither the execution and
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delivery of any Operative Document to which Borrower is a party nor the
consummation of the transactions therein contemplated nor compliance with the
terms, conditions and provisions thereof will conflict with or result in a
breach of any of the terms, conditions or provisions of the charter or the
bylaws of Borrower or, to its knowledge, any law or any regulation, order, writ,
injunction or decree of any court or governmental instrumentality or any
material agreement or instrument to which Borrower is a party or by which it or
any of its properties is bound or to which it or any of its properties is
subject, or constitute a default thereunder or result in the creation or
imposition of any Lien, other than Permitted Liens.
(d) Properties. Borrower has good and marketable title to the
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Collateral, free and clear of all Liens, other than Permitted Liens. Borrower
has good title and ownership of, or is licensed under, all of Borrower's current
Intellectual Property, with no known infringement of the rights of others.
Borrower has not received any communications alleging that Borrower has
violated, or by conducting its business as proposed, would violate any
proprietary rights of any other Person. Borrower has no knowledge of any
infringement or violation by it of the intellectual property rights of any third
party and has no knowledge of any violation or infringement by a third party of
any of its Intellectual Property. The Collateral and the Intellectual Property
constitute substantially all of the assets and property of Borrower.
(e) Authorization, Governmental Approvals, etc. The execution and
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delivery by Borrower of each Operative Document, the granting of the security
interest in the Collateral, the issuance of the Warrants, the issuance of the
securities into which the Warrants are exercisable, the issuance of any
securities into which the securities issuable upon exercise of the Warrants are
convertible, and the performance of the obligations herein and therein
contemplated have each been duly authorized by all necessary action on the part
of Borrower. No authorization, consent, approval, license or exemption of, and
no registration, qualification, designation, declaration or filing with, or
notice to, any Person is, was or will be necessary to (i) the valid execution
and delivery of any Operative Document to which Borrower is a party, (ii) the
performance of Borrower's obligations under any Operative Document, or (iii) the
granting of the security interest in the Collateral, except for filings in
connection with the perfection of the security interest in any of the Collateral
or the issuance of the Warrants. The Operative Documents have been or will be
duly executed and delivered and constitute or will constitute legal, valid and
binding obligations of Borrower, enforceable in accordance with their respective
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws of general application relating to or affecting
the enforcement of creditors' rights or by general principles of equity.
(f) Litigation. There are no actions, suits, proceedings or
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investigations pending or, to the knowledge of Borrower, threatened against or
affecting Borrower, or the business or any property or asset owned by it, before
any court or governmental department, agency or instrumentality which, if
adversely determined, could reasonably be expected to have a material adverse
effect on the financial condition, business or operations of Borrower.
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(g) Security Interest. Assuming the proper filing of one or more
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financing statement(s) identifying the Collateral with the proper state and/or
local authorities, the security interests in the Collateral granted to Lenders
pursuant to this Agreement (i) constitute and will continue to constitute first
priority security interests (except to the extent any other Permitted Lien may
create any priority to Lenders' Lien under this Agreement) and (ii) are and will
continue to be superior and prior to the rights in the Collateral of all other
creditors of Borrower (except to the extent of such Permitted Liens). Except as
set forth in the Disclosure Schedule, Borrower does not own any right, title or
interest in or to any real property (other than leasehold interests), motor
vehicles, promissory notes or other property (excluding Intellectual Property)
with respect to which a security interest must be perfected by a method other
than the filing of a UCC-1 financing statement.
(h) Executive Offices. The principal place of business and chief
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executive office of Borrower, and the office where Borrower will keep all
records and files regarding the Collateral, is set forth on the cover page of
this Agreement.
(i) Solvency, Etc. To Borrower's knowledge, Borrower is Solvent (as
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defined below) and, after the execution and delivery of the Operative Documents
and the consummation of the transactions contemplated thereby, Borrower will be
Solvent. "Solvent" shall mean, with respect to any Person on any date, that on
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such date (a) the fair value of the property of such Person is greater than the
fair value of the liabilities (including, without limitation, contingent
liabilities) of such Person, (b) the present fair saleable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature and (d) such Person is not engaged in business or a
transaction, and is not about in business or a transaction, for which such
Person's property would constitute an unreasonably small capital.
(j) Catastrophic Events; Labor Disputes. None of Borrower or its
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properties is or has been affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or other casualty that could reasonably be expected to have a material
adverse effect on the financial condition, business or operations of Borrower.
There are no disputes presently subject to grievance procedure, arbitration or
litigation under any of the collective bargaining agreements, employment
contracts or employee welfare or incentive plans to which Borrower is a party,
and there are no strikes, lockouts, work stoppages or slowdowns, or, to the
knowledge of Borrower, jurisdictional disputes or organizing activity occurring
or threatened which could reasonably be expected to have a material adverse
effect on the financial condition, business or operations of Borrower.
(k) No Material Adverse Effect. To Borrower's knowledge, no event has
--------------------------
occurred and no condition exists which could reasonably be expected to have a
material adverse effect on the financial condition, business or operations of
Borrower since [date of last audited financial statements].
(l) Accuracy of Information Furnished. None of the Operative
---------------------------------
Documents and none of the other certificates, statements or information
furnished to Lenders by or on behalf of Borrower in connection with the
Operative Documents or the transactions contemplated thereby contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Lenders recognize that
all financial projections furnished to Lenders by or on behalf of Borrower in
connection with the Operative Documents or the transactions contemplated thereby
are not to be viewed as facts and that actual results during the period or
periods covered by such projections may differ from the projected or forecasted
results.
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(m) Certain Agreements of Officers, Employees and Consultants.
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(i) To the knowledge of Borrower, no officer, employee or
consultant of Borrower is, or is now expected to be, in violation of any term of
any employment contract, proprietary information agreement, nondisclosure
agreement, noncompetition agreement, or any other material contract or agreement
or any restrictive covenant relating to the right of any such officer, employee
or consultant to be employed by Borrower because of the nature of the business
conducted or to be conducted by Borrower or relating to the use of trade secrets
or proprietary information of others, and to Borrower's knowledge, the continued
employment of Borrower's officers, employees and consultants does not subject
Borrower to any material liability for any claim or claims arising out of or in
connection with any such contract, agreement, or covenant.
(ii) To the knowledge of Borrower, no officers of Borrower, and
no employee or consultant of Borrower whose termination, either individually or
in the aggregate, could reasonably be expected to have a material adverse effect
on the financial condition, business or operations of Borrower, has any present
intention of terminating his or her employment or consulting relationship with
Borrower.
ARTICLE IV
REPORTING REQUIREMENTS
----------------------
4.01. Furnishing Reports. Borrower shall furnish to Lenders:
------------------
(a) Financial Statements. So long as Borrower is not subject to
--------------------
the reporting requirements of Section 12 or Section 15 of the Securities and
Exchange Act of 1934, as amended, promptly as they are available, unaudited
quarterly and audited annual financial statements of Borrower and such other
financial information as Lenders may reasonably request from time to time. From
and after such time as Borrower becomes a publicly reporting company, promptly
as they are available and in any event: (i) at the time of filing of Borrower's
Form 10-K with the Securities and Exchange Commission after the end of each
fiscal year of Borrower, the financial statements of Borrower filed with such
Form 10-K; and (ii) at the time of filing of Borrower's Form 10-Q with the
Securities and Exchange Commission after the end of each of the first three
fiscal quarters of Borrower, the financial statements of Borrower filed with
such Form 10-Q.
(b) Notice of Defaults. As soon as possible, and in any event
------------------
within five (5) Business Days after the discovery of a Default or Event of
Default provide Lenders with an officer's certificate of Borrower setting forth
the facts relating to or giving rise to such Default or Event of Default and the
action which Borrower proposes to take with respect thereto.
(c) Miscellaneous. Such other information as Lenders may reasonably
-------------
request from time to time.
-11-
ARTICLE V
GRANT OF SECURITY INTEREST
GENERAL PROVISIONS CONCERNING SECURITY
---------------------------------------
5.01. Grant of Security Interest. Borrower, in order to secure the
--------------------------
payment of the principal and interest with respect to the Loans made pursuant to
this Agreement, all other sums due under and in respect hereof and of the other
Operative Documents, including fees, charges, expenses and attorneys' fees and
costs and the performance and observance by Borrower of all other terms,
conditions, covenants and agreements herein and in the other Operative Documents
(all such amounts and obligations being herein sometimes called the
"Obligations"), does hereby grant to Lenders and their successors and
------------
assigns, a security interest in and to the following property (collectively, the
"Collateral"): All right, title, interest,claims and demands of Borrower in
-----------
and to:
(a) All goods and equipment now owned or hereafter acquired,
including, without limitation, all laboratory equipment, computer equipment,
office equipment, machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory now owned or hereafter acquired, including,
without limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's books relating to any of the foregoing;
(c) All contract rights and general intangibles (including
Intellectual Property), now owned or hereafter acquired, including, without
limitation, goodwill, license agreements, franchise agreements, blueprints,
drawings, purchase orders, customer lists, route lists, infringements, claims,
computer programs, computer disks, computer tapes, literature, reports,
catalogs, design rights, income tax refunds, payments of insurance and rights to
payment of any kind;
(d) All now existing and hereafter arising accounts, contract
rights, royalties, license rights and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods, the licensing of technology
or the rendering of services by Borrower (subject, in each case, to the
contractual rights of third parties to require funds received by Borrower to be
expended in a particular manner), whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, letters of credit,
certificates of deposit, instruments, chattel paper and investment property,
including, without limitation, 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, now owned or hereafter acquired and Borrower's
books relating to the foregoing; and
(f) Any and all claims, rights and interests in any of the
above and all substitutions for, additions and accessions to and proceeds
thereof, including, without limitation, insurance, condemnation, requisition or
similar payments and proceeds of the sale or licensing of Intellectual Property.
-12-
5.02. Duration of Security Interest. Lenders' security interest in
-----------------------------
the Collateral shall continue until the payment in full and the satisfaction of
all Obligations, whereupon such security interest shall terminate. Lenders, upon
payment in full and the satisfaction of the Obligations, shall execute such
further documents and take such further actions as may be necessary to effect
the release and/or termination contemplated by this Section 5.02, including duly
------------
executing and delivering termination statements for filing in all relevant
jurisdictions.
5.03. Possession of Collateral. Except as set forth in Section 5.04,
------------------------
so long as no Event of Default has occurred and is continuing, Borrower shall
remain in full possession, enjoyment and control of the Collateral (except only
as may be otherwise required by Lenders for perfection of its security interest
therein) and to manage, operate and use the same and each part thereof with the
rights and franchises appertaining thereto; provided, however, that the
-------- -------
possession, enjoyment, control and use of the Collateral shall at all times be
subject to the observance and performance of the terms of this Agreement.
5.04. Location of Collateral. The Collateral is and shall remain in
----------------------
the possession of Borrower at Borrower's address stated on the cover page of
this Agreement.
5.05. Lien Subordination. Lenders agree that the Liens granted to it
------------------
hereunder shall be subordinate to (i) the Liens existing in connection with
Indebtedness permitted by clause (e) of the definition of Permitted
Indebtedness, and (ii) the Liens of existing and future lenders providing
equipment financing and equipment lessors and/or accounts receivable
financing; provided, that, in the case of equipment financings and leasing
--------
such Liens are confined solely to the equipment so financed and the proceeds
thereof and in the case of accounts receivable financings such Liens are
confined solely to the accounts receivable so financed; and provided, further,
that the Obligations hereunder shall not be subordinate in right of payment to
any obligations to other lenders, equipment lenders or equipment lessors and
Lenders' rights and remedies hereunder shall not in any way be subordinate to
the rights and remedies of any such lenders or equipment lessors. Lenders agree
to execute and deliver such agreements and documents as may be reasonably
requested by Borrower from time to time which set forth the lien subordination
described in this Section 5.05 and are reasonably acceptable to Lenders. Lenders
------------
shall have no obligation to execute any agreement or document which would impose
obligations, restrictions or lien priority on Lenders which are less favorable
to Lenders than those described in this Section 5.05.
------------
5.06 Intellectual Property. (a) Within 30 days of the date of this
---------------------
Agreement, Borrower shall register or cause to be registered with the United
States Copyright Office (i) any software (material to the business of Borrower)
developed or acquired by Borrower in connection with any product developed or
acquired for sale or licensing. (b) While any Obligations remain outstanding,
Borrower shall register or cause to be registered with the United States
Copyright Office (i) any software (material to the business of Borrower)
developed or acquired by Borrower hereafter from time to time in connection with
any product developed or acquired for sale or licensing and (ii) any major
revisions or upgrades to any software that has previously been registered with
the United States Copyright Office. Borrower shall file for registration within
30 days from the development or acquisition of such software, major revision or
upgrade.
ARTICLE VI
AFFIRMATIVE COVENANTS
---------------------
6.01. Affirmative Covenants.
---------------------
-13-
(a) Payment of Taxes, etc. Borrower shall pay and discharge all
---------------------
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits, or upon any properties belonging to it, prior to the date
on which penalties attach thereto, and all lawful claims which, if unpaid, might
become a Lien upon any of its properties; provided that there shall be no
--------
requirement to pay any such tax, assessment, charge, levy or claim (i) which is
being contested in good faith and by appropriate proceedings or which presents
no risk of seizure, forfeiture, levy or other event which could jeopardize any
Collateral or (ii) for which payment in full is bonded or reserved in Borrower's
financial statements.
(b) Inspection Rights. Borrower shall, at any reasonable time and
-----------------
from time to time, permit Lenders or any of its agents or representatives to
inspect the Collateral, to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, Borrower and to
discuss the affairs, finances and accounts of Borrower with any of its officers
or directors relating in each case to Lenders' capacity as lenders and secured
party hereunder and with respect to the Collateral.
(c) Maintenance of Equipment and Similar Assets. Borrower shall keep
-------------------------------------------
and maintain all items of equipment and other similar types of personal property
that form any significant portion or portions of the Collateral in good
operating condition and repair and shall make all necessary replacements thereof
and renewals thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved, ordinary wear and tear excepted. Borrower
shall not permit any such material item of Collateral to become a fixture to
real estate or an accession to other personal property, without the prior
written consent of Lenders. Borrower shall not permit any such material item of
Collateral to be operated or maintained in violation of any applicable law,
statute, rule or regulation. With respect to items of leased equipment (to the
extent Lenders have any security interest in any residual Borrower's interest in
such equipment under the lease), Borrower shall keep, maintain, repair, replace
and operate such leased equipment in accordance with the terms of the applicable
lease.
(d) Insurance. Borrower shall, obtain and maintain, at its own
---------
expense, insurance of a type and with such limits as are carried by similarly
situated companies, including at a minimum:
(i) "All risk" insurance against loss or damage to the
Collateral. The coverage limit shall be determined to Lenders' reasonable
satisfaction. The deductible shall not exceed $25,000. The policy shall name
Lenders as loss payees with respect to the Equipment, shall not be invalidated
by any action of or breach of warranty by Borrower of any provision thereof and
waive subrogation against Lenders.
(ii) Commercial general liability insurance (including
contractual liability, products liability and completed operations coverages)
reasonably satisfactory to Lenders. The limit of liability shall be at least
$2,000,000 per occurrence. The policy shall be without deductible, except for
products liability coverage which may have a deductible up to $25,000. The
policy(ies) shall name Lenders as an additional insured in the full amount of
Borrower's liability coverage limits (or the coverage limits of any successor to
Borrower or such successor's parent which is providing coverage), be primary and
without contribution as respects any insurance carried by Lenders, and contain
cross liability and severability of interest clauses.
(iii) Such other insurance against risks of loss and with terms
as shall be reasonably required by Lenders.
All policies of insurance shall be placed with financially sound,
commercial insurers reasonably satisfactory to Lenders. All policies of
insurance shall provide that Lenders shall be given 30 days notice of
cancellation of coverage. This notice provision shall be without qualification.
On or prior to the first
-14-
Funding Date and prior to each policy renewal, Borrower shall furnish to Lenders
certificates of insurance or other evidence satisfactory to Lenders that
insurance complying with all of the above requirements is in effect.
ARTICLE VII
NEGATIVE COVENANTS
------------------
7.01. Negative Covenants. So long as the Obligations remain
------------------
outstanding, Borrower shall not:
(a) Name; Location of Chief Executive Office and Collateral.
-------------------------------------------------------
Without thirty (30) days prior written notice to Lenders, change its chief
executive office or principal place of business or remove or cause to be removed
from the location set forth on the cover page hereof or move any Collateral to a
location other than that set forth on the cover page hereof.
(b) Liens on Collateral. Create, incur, assume or suffer to
-------------------
exist any Lien of any kind upon any Collateral, whether now owned or hereafter
acquired, except Permitted Liens.
(c) [reserved]
(d) Dispositions of Collateral or Intellectual Property.
---------------------------------------------------
Convey, sell, offer to sell, lease, transfer, exchange or otherwise dispose of
(collectively, a "Transfer") all or any part of the Collateral or Intellectual
--------
Property to any Person, other than: (i) transfers of inventory in the ordinary
course of business; (ii) transfers which would constitute Permitted Liens under
clause (g) of the definition of Permitted Liens; or (iii) transfers of worn-out
or obsolete equipment.
(e) Distributions. (i) Pay any dividends or make any
-------------
distributions on its Equity Securities; (ii) purchase, redeem, retire, defease
or otherwise acquire for value any of its Equity Securities (other than
repurchases pursuant to the terms of employee stock purchase plans, employee
restricted stock agreements or similar arrangements in an aggregate amount not
to exceed $100,000); (iii) return any capital to any holder of its Equity
Securities as such; (iv) make any distribution of assets, Equity Securities,
obligations or securities to any holder of its Equity Securities as such; or (v)
set apart any sum for any such purpose; provided, however, that Borrower may pay
dividends payable solely in Common Stock.
(f) Mergers or Acquisitions. Merge or consolidate with or
-----------------------
into any other Person or acquire or all or substantially all of the capital
stock or assets of another Person.
(g) Indebtedness Payments. (i) Prepay, redeem, purchase,
---------------------
defease or otherwise satisfy in any manner prior to the scheduled repayment
thereof any Indebtedness for borrowed money (other than amounts due or permitted
to be prepaid under this Loan Agreement or the Notes or under any revolving
credit agreement constituting Permitted Indebtedness under clause (e) of the
definition of Permitted Indebtedness) or lease obligations, (ii) amend, modify
or otherwise change the terms of any Indebtedness for borrowed money or lease
obligations so as to accelerate the scheduled repayment thereof or (iii) repay
any notes to officers, directors or shareholders.
(h) Indebtedness. Create, incur, assume or permit to exist
------------
any Indebtedness except Permitted Indebtedness.
(i) Investments. Make any Investment except for Permitted
-----------
Investments.
-15-
ARTICLE VIII
CONDITIONS PRECEDENT
--------------------
8.01. Closing. At the time of execution and delivery of this
-------
Agreement, Borrower shall have duly executed and/or delivered to Lenders the
items set forth in Part I of Schedule 3.
--------------------
8.02. Other Conditions. The obligation of the Lenders to make the
----------------
Loans shall be subject to the execution and/or delivery to such Lenders of each
of the items set forth in Part I of Schedule 3 and the satisfaction by
--------------------
Borrower of each condition set forth in Part II of Schedule 3.
---------------------
8.03. Covenant to Deliver. Borrower agrees (not as a condition but
-------------------
as a covenant) to deliver to Lenders each item required to be delivered to
Lenders as a condition to a Loan, if the Loan is advanced. Borrower expressly
agrees that the extension of any Loan prior to the receipt by Lenders of any
such item shall not constitute a waiver by Lenders of Borrower's obligation to
deliver such item.
ARTICLE IX
DEFAULT AND REMEDIES
--------------------
9.01. Events of Default. An "Event of Default" shall mean the
-----------------
occurrence of one or more of the following described events:
(a) Borrower shall (i) default in the payment of principal of
or interest on any Loan when the same is due for five (5) business days after
receipt of written notice from a Lender that the same is due, or (ii) default in
the payment of any expense or other amount payable hereunder or thereunder for
five (5) business days after receipt of written notice from a Lender that the
same is due; or
(b) Borrower shall breach in any material respect any
provision of Section 6.01(d) or Section 7.01; or
--------------- ------------
(c) Borrower shall default in the performance in any material
respect of any covenant, agreement or obligation (other than a covenant,
agreement or obligation referred to in, Section 9.01(a) or Section 9.01(b))
--------------- ---------------
contained in any Operative Document (other than the Warrants) and Borrower shall
fail to cure within thirty (30) days after receipt of written notice from
Lenders any default in the performance of any such covenant, agreement or
obligation contained therein; or
(d) Borrower shall have breached in any material respect the
terms of any of the Warrants; or
(e) Any representation or warranty made herein or on the
Funding Date by Borrower in any Operative Document, or any certificate or
financial statement furnished pursuant to the provisions of any Operative
Document, shall prove to have been false or misleading in any material respect
as of the time made or furnished; or
(f) Any Operative Document shall in any material respect cease
to be, or Borrower shall assert that any Operative Document is not, a legal,
valid and binding obligation of Borrower enforceable in accordance with its
terms; or
-16-
(g) Defaults shall exist under any agreements of Borrower which
consist of the failure to pay any Indebtedness at maturity or which result in a
right by such third party or parties, whether or not exercised, to accelerate
the maturity of Indebtedness of Borrower in an aggregate amount in excess of Two
Hundred Fifty Thousand Dollars ($250,000) or a default shall exist under any
financing agreement with a Lender or any of such Lender's affiliates; or
(h) A proceeding shall have been instituted in a court of competent
jurisdiction seeking a decree or order for relief in respect of Borrower in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or for the appointment of a receiver,
liquidator, assignee, custodian, trustee (or similar official) of Borrower or
for any substantial part of its property, or for the winding-up or liquidation
of its affairs, and such proceeding shall remain undismissed or unstayed and in
effect for a period of thirty (30) consecutive days or such court shall enter a
decree or order granting the relief sought in such proceeding; or
(i) Borrower shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian (or other similar official)
of Borrower or for any substantial part of its property, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action in furtherance of
any of the foregoing; or
(j) A final judgment or order for the payment of money in excess of
Two Hundred Fifty Thousand Dollars ($250,000) (exclusive of amounts covered by
insurance issued by an insurer not an affiliate of Borrower) shall be rendered
against Borrower and the same shall remain undischarged for a period of thirty
(30) days during which execution shall not be effectively stayed, or any
judgment, writ, assessment, warrant of attachment, or execution or similar
process shall be issued or levied against a substantial part of the property of
Borrower and such judgment, writ, or similar process shall not be released,
stayed, vacated or otherwise dismissed within thirty (30) days after issue or
levy.
9.02. Consequences of Event of Default.
--------------------------------
(a) If an Event of Default specified under any of clauses (a)
-----------
through (g) or (j) of Section 9.01 shall occur and be continuing for ___ days,
------------------ ------------
any Lender may (i) declare all of the Loans, together with interest thereon,
plus the Applicable Premium and all other liabilities of Borrower hereunder and
under the other Operative Documents to be immediately due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived, and (ii) terminate any commitment to make the Loans and
terminate any commitment to advance money or extend credit to or for the benefit
of Borrower pursuant to any other agreement or commitment extended by a Lender
to Borrower.
(b) If an Event of Default specified under clause (h) or (i) of
--------------------
Section 9.01 shall occur, then upon Borrower's receipt of written notice
------------
specifying in reasonable detail the nature of the Event of Default (i) the
Loans, together with interest thereon, plus the Applicable Premium and all other
liabilities of Borrower hereunder and under the other Operative Documents shall
automatically become due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, and (ii) Lenders'
commitments hereunder to make the Loans and any other commitment of Lenders to
Borrower to advance money or extend credit pursuant to any other agreement or
commitment shall be terminated.
-17-
(c) Borrower expressly agrees that the amount due and payable upon
any such acceleration or prepayment of the Loans contrary to the terms hereof
shall include a Applicable Premium as of the date of such acceleration or
prepayment.
9.03. Rights Regarding Collateral. Borrower agrees that when any Event of
---------------------------
Default has occurred and is continuing, Lenders shall have the rights, options,
duties and remedies of a secured party as permitted by law and, in addition to
and without limiting the foregoing, Lenders may exercise any one or more or all,
and in any order, of the remedies herein set forth, including the following:
(a) Lenders, personally or by agents or attorneys, shall have the
right (subject to compliance with any applicable mandatory legal requirements)
to require Borrower to assemble the Collateral and make it available to Lenders
at a place to be designated by Lenders or to take immediate possession of the
Collateral, or any portion thereof, and for that purpose may pursue the same
wherever it may be found, and may enter any of premises of Borrower, with or
without notice, demand, process of law or legal procedure, to the extent
permitted by applicable law, and search for, take possession of, remove, keep
and store the same, or use and operate or lease the same until sold. In
furtherance of Lenders' rights hereunder, Borrower hereby grants to Lenders an
irrevocable, non-exclusive license (exercisable without royalty or other payment
by Lenders) to use, license or sublicense any patent, trademark, trade name,
copyright or other intellectual property in which Borrower now or hereafter has
any right, title or interest together with the right of access to all media in
which any of the foregoing may be recorded or stored; provided, however, that
such license shall only be exercisable in connection with the disposition of
Collateral upon Lenders' exercise of their remedies hereunder.
(b) Lenders may, if at the time such action may be lawful and
always subject to compliance with any mandatory legal requirements, either with
or without taking possession and either before or after taking possession,
without instituting any legal proceedings whatsoever, having first given notice
of such sale by registered or certified mail to Borrower once at least ten (10)
days prior to the date of such sale, and having first given any other notice
which may be required by law, sell and dispose of the Collateral, or any part
thereof, at a private sale or at public auction, to the highest bidder, in one
lot as an entirety or in separate lots, and either for cash or on credit and on
such terms as Lenders may determine, and at any place (whether or not it be the
location of the Collateral or any part thereof) designated in the notice
referred to above. To the extent permitted by applicable law, any such sale or
sales may be adjourned from time to time by announcement at the time and place
appointed for such sale or sales, or for any such adjourned sale or sales,
without further published notice, and Borrower, Lenders or the holder or holders
of the Notes, or of any interest therein, may bid and become the purchaser at
any such sale.
(c) Lenders may proceed to protect and enforce this Agreement and
the other Operative Documents by suit or suits or proceedings in equity, at law
or in bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted;
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for any real property security or any part thereof, or for the recovery of
judgment for the Obligations or for the enforcement of any other proper, legal
or equitable remedy available under applicable law.
9.04. Waiver by Borrower. Upon the occurrence of an Event of Default, to
------------------
the extent permitted by law, Borrower covenants that it will not at any time
insist upon or plead, or in any manner whatsoever claim or take any benefit or
advantage of, any stay or extension law now or at any time hereafter in force,
nor claim, take nor insist upon any benefit or advantage of or from any law now
or hereafter in force providing for the valuation or appraisement of the
Collateral or any part thereof prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or to the decree, judgment or order
of any court of
-18-
competent jurisdiction; nor, after such sale or sales, claim or exercise any
right under any statute now or hereafter made or enacted by any state or
otherwise to redeem the property so sold or any part thereof, and, to the full
extent legally permitted, except as to rights expressly provided herein, hereby
expressly waives for itself and on behalf of each and every Person, except
decree or judgment creditors of Borrower, acquiring any interest in or title to
the Collateral or any part thereof subsequent to the date of this Agreement, all
benefit and advantage of any such law or laws, and covenants that it will not
invoke or utilize any such law or laws or otherwise hinder, delay or impede the
execution of any power herein granted and delegated to Lenders, but will suffer
and permit the execution of every such power as though no such power, law or
laws had been made or enacted.
9.05. Effect of Sale. Any sale, whether under any power of sale available
--------------
to Lenders or by virtue of judicial proceedings, shall operate to divest all
right, title, interest, claim and demand whatsoever, either at law or in equity,
of Borrower in and to the property sold, and shall be a perpetual bar, both at
law and in equity, against Borrower, its successors and assigns, and against any
and all persons claiming the property sold or any part thereof under, by or
through Borrower, its successors or assigns.
9.06. Application of Collateral Proceeds. The proceeds and/or avails of
----------------------------------
the Collateral, or any part thereof, and the proceeds and the avails of any
remedy hereunder (as well as any other amounts of any kind held by Lenders at
the time of, or received by Lenders after, the occurrence of an Event of Default
hereunder) shall be paid to and applied as follows:
(a) First, to the payment of reasonable costs and expenses,
-----
including all amounts expended to preserve the value of the Collateral, of
foreclosure or suit, if any, and of such sale and the exercise of any other
rights or remedies, and of all proper fees, expenses, liability and advances,
including reasonable legal expenses and attorneys' fees, incurred or made
hereunder by Lenders;
(b) Second, to the payment to Lenders of the amount then owing or
------
unpaid on the Notes, and in case such proceeds shall be insufficient to pay in
full the whole amount so due, owing or unpaid upon the Notes, then first, to the
-----
unpaid interest thereon, second, to unpaid principal thereof and third to the
------ -----
remaining balance of the Obligations under the Notes; such application to be
made upon presentation of the Notes, and the notation thereon of the payment, if
partially paid, or the surrender and cancellation thereof, if fully paid;
(c) Third, to the payment of other amounts then payable to Lenders
-----
under any of the Operative Documents; and
(d) Fourth, to the payment of the surplus, if any, to Borrower, its
------
successors and assigns, or to whomsoever may be lawfully entitled to receive the
same.
9.07. Reinstatement of Rights. If Lenders shall have proceeded to enforce
-----------------------
any right under this Agreement or any other Operative Document by foreclosure,
sale, entry or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely, then and in
every such case (unless otherwise ordered by a court of competent jurisdiction),
Lenders shall be restored to their former position and rights hereunder with
respect to the property subject to the security interest created under this
Agreement.
-19-
ARTICLE X
MISCELLANEOUS
-------------
10.01. Modifications, Amendments or Waivers. The provisions of any
------------------------------------
Operative Document may be modified, amended or waived only by a written
instrument signed by the parties thereto.
10.02. No Implied Waivers; Cumulative Remedies; Writing Required. No delay
---------------------------------------------------------
or failure of Lenders in exercising any right, power or remedy hereunder shall
affect or operate as a waiver thereof; nor shall any single or partial exercise
thereof or any abandonment or discontinuance of steps to enforce such a right,
power or remedy preclude any further exercise thereof or of any other right,
power or remedy. The rights and remedies hereunder of Lenders are cumulative and
not exclusive of any rights or remedies which it would otherwise have. Any
waiver, permit, consent or approval of any kind or character on the part of
Lenders of any breach or default under this Agreement or any such waiver of any
provision or condition of this Agreement must be in writing and shall be
effective only in the specified instance and to the extent specifically set
forth in such writing.
10.03. Expenses; Indemnification. Borrower agrees upon demand to pay or
-------------------------
reimburse Lenders for all liabilities, obligations and out-of-pocket expenses,
including reasonable fees and expenses of counsel for Lenders, from time to time
arising in connection with the enforcement or collection of sums due under the
Operative Documents, and in connection with any amendment or modification of the
Operative Documents or any "work-out" in connection with the Operative
Documents. Borrower shall indemnify, reimburse and hold Lenders, each of
Lenders' partners, and each of their respective successors, assigns, agents,
officers, directors, shareholders, servants, agents and employees harmless from
and against all liabilities, losses, damages, actions, suits, demands, claims of
any kind and nature (including claims relating to environmental discharge,
cleanup or compliance), all costs and expenses whatsoever to the extent they may
be incurred or suffered by such indemnified party in connection therewith
(including reasonable attorneys' fees and expenses), fines, penalties (and other
charges of applicable governmental authorities), licensing fees relating to any
item of Collateral, damage to or loss of use of property (including
consequential or special damages to third parties or damages to Borrower's
property), or bodily injury to or death of any person (including any agent or
employee of Borrower) (each, a "Claim"), directly or indirectly relating to or
-----
arising out of the use of the proceeds of the Loans or otherwise, the falsity of
any representation or warranty of Borrower or Borrower's failure to comply with
the terms of this Agreement or any other Operative Document during the Term.
The foregoing indemnity shall cover, without limitation, (i) any Claim in
connection with a design or other defect (latent or patent) in any item of
equipment included in the Collateral, (ii) any Claim for infringement of any
patent, copyright, trademark or other intellectual property right, (iii) any
Claim resulting from the presence on or under or the escape, seepage, leakage,
spillage, discharge, emission or release of any Hazardous Materials on the
premises of Borrower, including any Claims asserted or arising under any
Environmental Law, or (iv) any Claim for negligence or strict or absolute
liability in tort; provided, however, that Borrower shall not indemnify Lenders
-----------------
for any liability incurred by Lenders as a direct and sole result of Lenders'
gross negligence or willful misconduct. Such indemnities shall continue in full
force and effect, notwithstanding the expiration or termination of this
Agreement. Upon Lenders' written demand, Borrower shall assume and diligently
conduct, at its sole cost and expense, the entire defense of Lenders, each of
its partners, and each of their respective, agents, employees, directors,
officers, shareholders, successors and assigns against any indemnified Claim
described in this Section 10.03. Borrower shall not settle or compromise any
-------------
Claim against or involving Lenders without first obtaining Lenders' written
consent thereto, which consent shall not be unreasonably withheld.
10.04. Waivers. (a) Borrower shall give Lenders written notice within one
-------
hundred eighty (180) days of obtaining knowledge of the occurrence of any claim
or cause of action it believes it has, or may seek
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to assert to allege against Lenders whether such claim is based in law or
equity, arising under or related to this Agreement or any of the other Operative
Documents or to the transactions contemplated hereby or thereby, or any act or
omission to act by Lenders with respect hereto or thereto, and that if it shall
fail to give such notice to Lenders with regard to any such claim or cause of
action, Borrower shall be deemed to have waived, and shall be forever barred
from bringing or asserting such claim or cause of action in any suit, action or
proceeding in any court or before any governmental agency or authority or any
arbitrator. (b) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS
AGREEMENT OR ANYWHERE ELSE, BORROWER AGREES THAT IT SHALL NOT SEEK FROM LENDERS
UNDER ANY THEORY OF LIABILITY (INCLUDING ANY THEORY IN TORTS), ANY SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.
10.05. Notices; Payments.
-----------------
(a) All notices and other communications given to or made upon any
party hereto in connection with this Agreement shall be in writing (including
telexed, telecopied or telegraphic communication) and mailed (by certified or
registered mail), telexed, telegraphed, telecopied or delivered to the
respective parties, as follows:
Borrower: At the address set forth on the cover page of this Agreement.
Lenders: MMC/GATX PARTNERSHIP NO. I
c/o ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & COMPANY
▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and
COMDISCO, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: ▇▇▇-▇▇▇-▇▇▇▇
or in accordance with any subsequent written direction from either party to the
other. All such notices and other communications shall, except as otherwise
expressly herein provided, be effective when received; or in the case of
delivery by messenger or overnight delivery service, when left at the
appropriate address.
(b) Unless Lenders specify otherwise in writing, all payments shall
be made by wire transfer to:
GATX Capital Corporation
Bank Name: NationsBank
Bank Address: ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Account No.: 3750878673
ABA Routing No.: 111-000012
Reference: ▇▇▇▇▇.▇▇▇ Invoice #___________
and
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COMDISCO, INC.
Bank Name: Bank of America
Bank Address: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Account No.: 81882-00644
ABA Routing No.: ▇▇▇▇▇▇▇▇▇
Reference: ▇▇▇▇▇.▇▇▇
10.06. Termination. This Agreement shall terminate at the end of the Term;
-----------
provided, however, that the termination of this Agreement shall not affect any
-------- -------
of the rights and remedies of Lenders hereunder, it being understood and agreed
that all such rights and remedies shall continue in full force and effect until
payment of all amounts owed to Lenders under or in connection with the Operative
Documents, whether on account of principal, interest, fees or otherwise.
10.07. Severability. If any provision of any Operative Document is held
------------
invalid or unenforceable to any extent or in any application, the remainder of
such Operative Document and all other Operative Documents, or the application of
such provision to different Persons or circumstances or in different
jurisdictions, shall not be affected thereby.
10.08. Survival. All representations, warranties, covenants and agreements
--------
of Borrower contained herein or made in writing in connection herewith shall
survive the execution and delivery of the Operative Documents, the making of the
Loans hereunder, the granting of security and the issuance of the Notes.
10.09. Relationship of Parties. Subject to a separate Intercreditor
-----------------------
Agreement between the Lenders, Borrower and each Lender acknowledge, understand
and agree that:
(a) The relationship between the Borrower, on the one hand, and
Lenders, on the other, is, and at all time shall remain solely that of a
borrower and lenders. Lenders shall not under any circumstances be construed to
be partners or joint venturers of Borrower or any of its Affiliates; nor shall
Lenders under any circumstances be deemed to be in a relationship of confidence
or trust or a fiduciary relationship with Borrower or any of its Affiliates, or
to owe any fiduciary duty to Borrower or any of its Affiliates. Lenders do not
undertake or assume any responsibility or duty to Borrower or any of its
Affiliates to select, review, inspect, supervise, pass judgment upon or
otherwise inform the Borrower or any of its Affiliates of any matter in
connection with its or their Property, any Collateral held by any Lender or the
operations of Borrower or any of its Affiliates. Borrower and each of its
Affiliates shall rely entirely on their own judgment with respect to such
matters, and any review, inspection, supervision, exercise of judgment or supply
of information undertaken or assumed by any Lender in connection with such
matters is solely for the protection of Lenders and neither Borrower nor any
Affiliate is entitled to rely thereon.
(b) The relationship between the Lenders is, and at all time shall
remain solely that of co-lenders. Lenders shall not under any circumstances be
construed to be partners or joint venturers of each other; nor shall the Lenders
under any circumstances be deemed to be in a relationship of confidence or trust
or a fiduciary relationship with each other, or to owe any fiduciary duty to
each other. Lenders do not undertake or assume any responsibility or duty to
each other to select, review, inspect, supervise, pass judgment upon or
otherwise inform each other of any matter in connection with Borrower or
Borrower's Property, any Collateral held by any Lender or the operations of
Borrower. Each Lender shall rely entirely on its own judgment with respect to
such matters, and any review, inspection, supervision, exercise of judgment or
supply of information undertaken or assumed by any Lender in connection with
such matters is solely for the protection of such Lender.
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10.10. Governing Law. This Agreement, the other Operative Documents and the
-------------
rights and obligations of the parties hereto and thereto shall be governed by
and construed and enforced in accordance with the laws of the State of Illinois.
Any action to enforce this Agreement against Borrower may be brought in Illinois
or, with regard to Collateral, may also be brought wherever such Collateral is
located.
10.11. Successors and Assigns. This Agreement and the other Operative
----------------------
Documents shall be binding upon and inure to the benefit of Lenders, all future
holders of the Notes, Borrower and their respective successors and permitted
assigns, except that Borrower may not assign or transfer its rights hereunder or
any interest herein without the prior written consent of Lenders. Each Lender
may sell to any other financial entity (a "Participant") participation interests
-----------
in Lender's rights under this Agreement and the other Operative Documents;
provided that notwithstanding the sale of participations, such Lender shall
remain solely responsible for the performance of its obligations under this
Agreement, such Lenders shall remain the holder of its Note for all purposes
under this Agreement and Borrower shall continue to deal solely and directly
with such Lender in connection with this Agreement and the other Operative
Documents. Lenders may disclose the Operative Documents and any other financial
or other information relating to Borrower or any Subsidiary to any potential
Participant, provided that such Participant agrees to protect the
confidentiality of such documents and information using the same measures that
it uses to protect its own confidential information.
10.12. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
10.13. Further Assurances. Borrower will, at its own expense, from time to
------------------
time do, execute, acknowledge and deliver all further acts, deeds, conveyances,
transfers and assurances, and all financing and continuation statements and
similar notices, reasonably necessary or proper for the perfection of the
security interest being herein provided for in the Collateral, whether now owned
or hereafter acquired.
10.14. Power of Attorney in Respect of the Collateral. Borrower does hereby
----------------------------------------------
irrevocably appoint Lenders (which appointment is coupled with an interest), the
true and lawful attorney-in-fact of Borrower with full power of substitution,
for it and in its name (a) to perform (but Lenders shall not be obligated to and
shall incur no liability to Borrower or any third party for failure to perform)
any act which Borrower is obligated by this Agreement to perform, (b) to ask,
demand, collect, receive, receipt for, ▇▇▇ for, compound and give acquittance
for any and all rents, issues, profits, avails, distributions, income, payment
draws and other sums in which a security interest is granted under Section 5.01
------------
with full power to settle, adjust or compromise any claim thereunder as fully as
if Lenders were Borrower itself, (c) to receive payment of and to endorse the
name of Borrower to any items of Collateral (including checks, drafts and other
orders for the payment of money) that come into Lenders' possession or under
Lenders' control, (d) to make all demands, consents and waivers, or take any
other action with respect to, the Collateral, (e) in Lenders' discretion, to
file any claim or take any other action or institute proceedings, either in its
own name or in the name of Borrower or otherwise, which Lenders may reasonably
deem necessary or appropriate to protect and preserve the right, title and
interest of Lenders in and to the Collateral, and (f) to otherwise act with
respect thereto as though Lenders were the outright owner of the Collateral;
provided, however, that the power of attorney herein granted shall be
-------- -------
exercisable only upon the occurrence and during the continuation of an Event of
Default unless in Lenders' reasonable opinion immediate action is necessary to
preserve or protect the Collateral. Borrower agrees to reimburse Lenders upon
demand for all reasonable costs and expenses, including attorneys' fees and
expenses, which Lenders may incur while acting as Borrower's attorney in fact
hereunder, all of which costs and expenses are included within the Obligations.
-23-
10.15. Confidentiality. All information (other than periodic reports filed
---------------
by Borrower with the Securities and Exchange Commission) disclosed by Borrower
to Lenders in writing or through inspection pursuant to this Agreement shall be
held strictly confidential by Lenders. Lenders agree to use at least the same
degree of care to safeguard and prevent disclosure of such confidential
information as Lenders uses with its own confidential information, but in any
event no less than a reasonable degree of care. Lenders shall not disclose such
information to any third party (other than Lenders' or Lenders' partner's
attorneys and auditors subject to the same confidentiality obligation set forth
herein) and shall use such information only for purposes of evaluation of its
investment in Borrower and the exercise of Lenders' rights and the enforcement
of their remedies under this Agreement and the other Operative Agreements. The
obligations of confidentiality shall not apply to any information that (a) was
known to the public prior to disclosure by Borrower under this Agreement, (b)
becomes known to the public through no fault of Lenders, (c) is disclosed to
Lenders by a third party' having a legal right to make such disclosure, or (d)
is independently developed by Lenders.
10.16 Integration. This Agreement and the Operative Documents constitute
-----------
the entire agreement between the Lenders, on the one hand, and the Borrower, on
the other, and supercede any prior written or oral agreements or understandings
of the parties. Borrower acknowledges that it is not relying on any
representation or agreement made by any Lender or any employee, agent or
attorney of any Lender, other than the specific agreements set forth in this
Agreement and the Operative Documents.
-24-
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
▇▇▇▇▇.▇▇▇, INC.,
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
Title: CFO
-----------------------------
MMC/GATX PARTNERSHIP NO. I
GATX Capital Corporation, as general
partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Title: Vice President
-----------------------------
COMDISCO, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇, President
------------------------------
Title: Comdisco Ventures Division
-----------------------------