EXHIBIT 10.4
[ORIX LOGO]
LOAN AND SECURITY AGREEMENT
BORROWER: ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC., A WASHINGTON CORPORATION
ADDRESS: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇. ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: MAY 21, 2004
This Loan and Security Agreement is entered into on the above date between ORIX
Venture Finance LLC, a Delaware limited liability company ("ORIX"), successor in
interest to ORIX USA Corporation, with an address at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇, and the borrower named above ("Borrower"), whose chief executive
office is located at the above address ("Borrower's Address"). The Schedule to
this Loan and Security Agreement being signed concurrently (the "Schedule") is
an integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 7 below.)
1. LOANS.
1.1 LOANS. Subject to the terms and conditions in this Agreement, ORIX
shall make a loan to Borrower (the "Loan"), in the amount shown on the Schedule.
The Loan shall be evidenced by a Secured Promissory Note made by Borrower to
ORIX, on ORIX's standard form (the "Note") and shall be repayable as therein set
forth, provided that the entire unpaid principal balance of the Loan and any
accrued and unpaid interest thereon shall be due and payable on the Maturity
Date set forth in the Schedule. The Loan may not be repaid and reborrowed.
1.2 CONDITIONS. The making of the Loan is subject to the satisfaction of
the following conditions precedent, which Borrower agrees to satisfy * : (i) all
filings have been completed that are necessary or advisable to perfect the
security interest of ORIX in the Collateral, including without limitation
filings in the United States Copyright Office and United States Patent and
Trademark Office (subject to the provisions of the Intellectual Property
Security Agreement of even date between Borrower and ORIX), (ii) all documents
relating to this Agreement have been executed and delivered, (iii) ORIX has
confirmed to its satisfaction that there has been no Material Adverse Change
since the date of the last financial statements provided to ORIX, (iv) UCC and
other searches deemed necessary by ORIX have been completed and the results
thereof are satisfactory to ORIX, and (v) all other matters relating to the Loan
have been completed to ORIX's satisfaction.
*PRIOR TO THE EXECUTION OF THE INITIAL NOTE BY BORROWER
1.3 INTEREST. The Loan and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement or in another written agreement signed by ORIX
and Borrower. Borrower shall pay interest on the Loan accrued for each month no
later than the 15th day of the following month, and at maturity.
1.4 FEES. Borrower shall pay ORIX the fees shown on the Schedule, which
are in addition to all interest and other sums payable to ORIX and are not
refundable.
1.5 LATE FEE. If any payment of accrued interest for any month is not made
by the 15th day of the following month, or if any payment of principal or any
other payment is not made within five Business Days after the date due, Borrower
shall pay ORIX a late payment fee equal to 5% of the amount of such late
payment. The provisions of this paragraph shall not be construed as ORIX's
consent to Borrower's failure to pay any amounts when due, and ORIX's acceptance
of any such late payments shall not restrict ORIX's exercise of any remedies
arising out of any such failure.
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to ORIX a security interest in all
of the following (collectively, the "Collateral"): all right, title and interest
of Borrower in and to the following, whether now owned or hereafter arising or
acquired and wherever located: all Accounts; all Inventory; all Equipment; all
General Intangibles (including without limitation all
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ORIX LOAN AND SECURITY AGREEMENT
Intellectual Property and Deposit Accounts); all Investment Property; all Other
Property; and any and all claims, rights and interests in any of the above, and
all guaranties and security for any of the above, and all substitutions and
replacements for, additions, accessions, attachments, accessories, and
improvements to, and proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties) of, any and all of the
above, and all Borrower's books relating to any of the above, including without
limitation the assets identified in the Representations. *
* NOTWITHSTANDING THE FOREGOING PROVISIONS OF THIS SECTION 2, THE GRANT,
ASSIGNMENT AND TRANSFER OF A SECURITY INTEREST AS PROVIDED HEREIN SHALL NOT
EXTEND TO, AND THE TERM "COLLATERAL" SHALL NOT INCLUDE: (a) "INTENT-TO-USE"
TRADEMARKS AT ALL TIMES PRIOR TO THE FIRST USE THEREOF, WHETHER BY THE ACTUAL
USE THEREOF IN COMMERCE, THE RECORDING OF A STATEMENT OF USE WITH THE UNITED
STATES PATENT AND TRADEMARK OFFICE OR OTHERWISE OR (b) ANY OF THE FOLLOWING
("NON-ASSIGNABLE CONTRACTS": ANY CONTRACT, INSTRUMENT OR CHATTEL PAPER IN WHICH
BORROWER HAS ANY RIGHT, TITLE OR INTEREST IF AND TO THE EXTENT SUCH CONTRACT,
INSTRUMENT OR CHATTEL PAPER INCLUDES A PROVISION CONTAINING A RESTRICTION ON
ASSIGNMENT SUCH THAT THE CREATION OF A SECURITY INTEREST IN THE RIGHT, TITLE OR
INTEREST OF BORROWER THEREIN WOULD BE PROHIBITED AND WOULD, IN AND OF ITSELF,
CAUSE OR RESULT IN A DEFAULT THEREUNDER ENABLING ANOTHER PERSON PARTY TO SUCH
CONTRACT, INSTRUMENT OR CHATTEL PAPER TO ENFORCE ANY REMEDY WITH RESPECT
THERETO; PROVIDED THAT THE FOREGOING EXCLUSION SHALL NOT APPLY IF (i) SUCH
PROHIBITION HAS BEEN WAIVED OR SUCH OTHER PERSON HAS OTHERWISE CONSENTED TO THE
CREATION HEREUNDER OF A SECURITY INTEREST IN SUCH CONTRACT, INSTRUMENT OR
CHATTEL PAPER OR (ii) SUCH PROHIBITION WOULD BE RENDERED INEFFECTIVE PURSUANT TO
SECTIONS 9-407(a) OR 9-408(a) OF THE CODE, AS APPLICABLE AND AS THEN IN EFFECT
IN ANY RELEVANT JURISDICTION, OR ANY OTHER APPLICABLE LAW (INCLUDING THE
BANKRUPTCY CODE) OR PRINCIPLES OF EQUITY); PROVIDED FURTHER THAT IMMEDIATELY
UPON THE INEFFECTIVENESS, LAPSE OR TERMINATION OF ANY SUCH PROVISION, THE
COLLATERAL SHALL INCLUDE, AND BORROWER SHALL BE DEEMED TO HAVE GRANTED A
SECURITY INTEREST IN, ALL ITS RIGHTS, TITLE AND INTERESTS IN AND TO SUCH
CONTRACT, INSTRUMENT OR CHATTEL PAPER AS IF SUCH PROVISION HAD NEVER BEEN IN
EFFECT; AND PROVIDED FURTHER THAT THE FOREGOING EXCLUSION SHALL IN NO WAY BE
CONSTRUED SO AS TO LIMIT, IMPAIR OR OTHERWISE AFFECT ORIX'S UNCONDITIONAL
CONTINUING SECURITY INTEREST IN AND TO ALL RIGHTS, TITLE AND INTERESTS OF
BORROWER IN OR TO ANY PAYMENT OBLIGATIONS OR OTHER RIGHTS TO RECEIVE MONIES DUE
OR TO BECOME DUE UNDER ANY SUCH CONTRACT, INSTRUMENT OR CHATTEL PAPER AND IN ANY
SUCH MONIES AND OTHER PROCEEDS OF SUCH CONTRACT, INSTRUMENT OR CHATTEL PAPER.
BORROWER REPRESENTS AND WARRANTS THAT THERE ARE NO NON-ASSIGNABLE CONTRACTS
WHICH ARE MATERIAL TO BORROWER'S BUSINESS, AND IN THE EVENT, IN THE FUTURE,
BORROWER ENTERS INTO ANY NON-ASSIGNABLE CONTRACT WHICH IS MATERIAL TO ITS
BUSINESS, OR ANY NON-ASSIGNABLE CONTRACT BECOMES MATERIAL TO ITS BUSINESS,
BORROWER SHALL GIVE ORIX PROMPT WRITTEN NOTICE OF THE SAME AND SHALL USE
COMMERCIALLY REASONABLE EFFORTS TO HAVE THE OTHER PARTY TO THE CONTRACT CONSENT
TO THE GRANT OF A SECURITY INTEREST THEREIN TO ORIX PURSUANT TO THIS AGREEMENT.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce ORIX to enter into this Agreement and to make the Loan,
Borrower represents and warrants to ORIX as follows, and Borrower covenants that
the following representations will continue to be true, and that Borrower will
at all times comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower is and will continue to
be, duly organized, validly existing and in good standing under the laws of the
State of WASHINGTON. Borrower is and will continue to be qualified and licensed
to do business in all jurisdictions in which any failure to do so would result
in a Material Adverse Change. The execution, delivery and performance by
Borrower of this Agreement, and all other documents contemplated hereby (i) have
been duly and validly authorized, (ii) are enforceable against Borrower in
accordance with their terms (except as enforcement may be limited by equitable
principles and by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to creditors' rights generally), (iii) do not violate Borrower's
articles or certificate of incorporation, or Borrower's by-laws, or any law or
any material agreement or instrument which is binding upon Borrower or its
property, and (iv) do not constitute grounds for acceleration of any
indebtedness or obligation under any agreement or instrument which is binding
upon Borrower or its property.
3.2 NAME; TRADE NAMES AND STYLES. The full correct name of Borrower and
its state of incorporation are set forth in the heading to this Agreement.
Listed on the Representations are all prior names of Borrower and all of
Borrower's present and prior trade names. Borrower shall give ORIX * days' prior
written notice before changing its name or doing business under any other name.
Borrower has complied, and will in the future comply, with all laws relating to
the conduct of business under a fictitious business name.
*10
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth in the Representations. Borrower will give ORIX at least 15 days prior
written notice before opening any additional place of business, changing its
chief executive office, or moving any of the Collateral to a location other than
Borrower's Address or one of the locations set forth on the Schedule.
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ORIX LOAN AND SECURITY AGREEMENT
3.4 TITLE TO COLLATERAL. Borrower is now, and will at all times in the
future be, the sole owner of all the Collateral*, except for specific items of
Equipment which are leased by Borrower. ** The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for the security interest in favor of ORIX and
Permitted Liens. ORIX now has, and will continue to have, a first-priority
perfected and enforceable security interest in all of the Collateral, subject
only to Permitted Liens, and Borrower will at all times defend ORIX and the
Collateral against all claims of others. None of the Collateral now is or will
be affixed to any real property in such a manner, or with such intent, as to
become a fixture. Borrower will keep in full force and effect, and will comply
with all the terms of, any lease of real property where any of the Collateral
now or in the future may be located.
* OR, WITH RESPECT TO INTELLECTUAL PROPERTY LICENSED FROM OTHER PERSONS,
THE LICENSEE OF SUCH LICENSED ITEM OF COLLATERAL,
**BORROWER REPRESENTS AND WARRANTS THAT IT IS NOT THE LICENSEE UNDER ANY
LICENSES THE ROYALTIES UNDER WHICH EXCEED $250,000 IN ANY YEAR, AND, IN THE
EVENT, IN THE FUTURE, THE ROYALTIES UNDER ANY LICENSE UNDER WHICH THE BORROWER
IS THE LICENSEE EXCEED $250,000 IN ANY YEAR, BORROWER SHALL PROVIDE PROMPT
WRITTEN NOTICE OF THE SAME TO ORIX.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in
good working condition, ordinary wear and tear excepted, and Borrower will not
use the Collateral for any unlawful purpose. Borrower will immediately advise
ORIX in writing of any material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements
now or in the future delivered to ORIX have been, and will be, prepared in
conformity with GAAP and now and in the future will completely and fairly
reflect the financial condition of Borrower, at the times and for the periods
therein stated. Between the last date covered by any such statement provided to
ORIX and the date hereof, there has been no Material Adverse Change. Borrower is
now and will continue to be solvent.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all tax returns and reports required by applicable
law, and Borrower has timely paid, and will timely pay, all applicable taxes,
assessments, deposits and contributions now or in the future owed by Borrower.
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all
material respects, with all provisions of all applicable laws and regulations,
including, but not limited to, those relating to Borrower's ownership of real or
personal property, the conduct and licensing of Borrower's business,
compensation and benefits payable or provided to Borrower's employees, and all
environmental matters. Proceeds of all Loans shall be used solely to repay the
Prior Note (as defined in Section 1 of the Schedule) without prepayment fee and
for other lawful business purposes.
3.10 LITIGATION. * there is no claim, suit, litigation, proceeding or
investigation pending or threatened against or affecting Borrower involving more
than ** . Borrower will promptly inform ORIX in writing of any claim,
proceeding, litigation or investigation in the future threatened or instituted
by or against Borrower involving any claim of * or more.
*THE BORROWER HAS BEEN SUED BY ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ IN KANSAS CITY, MO. FEDERAL
COURT, ▇▇▇▇▇▇▇▇ V. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC. CASE NO. 2-03-CV-2366. PLAINTIFF
IS CLAIMING THAT THE BORROWER HAS INFRINGED ON PLAINTIFF'S COPYRIGHT TO A
UNICORN DESIGN. THE BORROWER IS TAKING THESE ALLEGATIONS SERIOUSLY, BUT DENIES
THE CLAIMS OF INFRINGEMENT. EXCEPT FOR THE FOREGOING,
**$50,000
4. ADDITIONAL DUTIES OF THE BORROWER.
4.1 INSURANCE. Borrower shall, at all times, insure all of the Collateral
and carry such other business insurance, with insurers reasonably acceptable to
ORIX, in such form and amounts as ORIX may reasonably require, and Borrower
shall provide evidence of such insurance to ORIX, so that ORIX is satisfied that
such insurance is, at all times, in full force and effect. All such insurance
policies shall name ORIX as the exclusive additional loss payee, and shall
contain a lenders loss payee endorsement in form reasonably acceptable to ORIX.
Upon receipt of the proceeds of any such insurance, ORIX shall apply such
proceeds in reduction of the Obligations as ORIX shall determine in its sole
discretion, except that, provided no Default or Event of Default has occurred
and is continuing, ORIX shall release to Borrower insurance proceeds with
respect to Equipment totaling less than $100,000, which shall be utilized by
Borrower for the replacement of the Equipment with respect to which the
insurance proceeds were paid. ORIX may require reasonable assurance that the
insurance proceeds so released will be so used. If Borrower fails to provide or
pay for any insurance, ORIX may, but is not obligated to, obtain the same at
Borrower's expense. Borrower shall promptly deliver to ORIX copies of all
reports made to insurance companies.
4.2 REPORTS. Borrower, at its expense, shall provide ORIX with the written
reports set forth in the Schedule, and such other written reports with respect
to Borrower (including budgets, sales projections, operating plans and other
financial documentation), as ORIX shall from time to time reasonably specify.
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ORIX LOAN AND SECURITY AGREEMENT
4.3 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on
three Business Day's notice (except if a Default or Event of Default has
occurred and is continuing or if ORIX in its good faith business judgment
believes or suspects that Borrower has engaged in defalcation, intentional
misrepresentation, or fraud, in which case then ORIX may do the following at any
time and without any notice), ORIX, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records. The foregoing inspections and audits shall be at Borrower's expense and
the charge therefor shall be at ORIX's then standard charge for the same, plus
all other reasonable out-of-pockets costs and expenses incurred by ORIX in
connection therewith.
4.4 REMITTANCE OF PROCEEDS. All proceeds arising from the sale or other
disposition of any Collateral (other than (i) the proceeds of the sale of
Inventory in the ordinary course of business or the non-exclusive licensing of
Intellectual Property in the ordinary course of business, or (ii) proceeds of
dispositions of obsolete or unneeded Equipment in the ordinary course of
business in an amount not in excess of * in any fiscal year) shall be delivered,
in kind, by Borrower to ORIX in the original form in which received by Borrower
not later than the following Business Day after receipt by Borrower, to be
applied to the Obligations in such order as ORIX shall determine. Nothing in
this Section limits the restrictions on disposition of Collateral set forth
elsewhere in this Agreement.
*$100,000
4.5 NEGATIVE COVENANTS. Borrower shall not, without ORIX's prior written
consent, do any of the following: (i) merge or consolidate with another
corporation or entity; (ii) acquire any assets, except in the ordinary course of
business; (iii) enter into any other transaction outside the ordinary course of
business; (iv) sell or transfer any Collateral (except that, provided no Default
or Event of Default has occurred and is continuing, Borrower may do the
following in good faith arm's length transactions, in the ordinary course of
business: (A) sell Inventory; (B) enter into non-exclusive licenses with respect
to its Intellectual Property; and (C) trade-in or dispose of obsolete or
unneeded Equipment); (v) store any Inventory or other Collateral with any
warehouseman or other third party; (vi) make any loans of any money or other
assets to, or purchase the stock or other securities of, or make any other
investment in, any other Person *; (vii) guarantee or otherwise become liable
with respect to the obligations of another Person; (viii) pay or declare any
dividends on Borrower's stock (other than dividends payable solely in shares of
stock of Borrower); (ix) redeem, retire, purchase or otherwise acquire, directly
or indirectly, any of Borrower's stock **; (x) make any change in Borrower's
capital structure; (xi) reincorporate in another state; or (xii) dissolve or
elect to dissolve; or (xiii) agree to do any of the foregoing.
*OTHER THAN (A) INVESTMENTS EXISTING ON THE DATE HEREOF AND DISCLOSED IN
THE REPRESENTATIONS, (B) (i) MARKETABLE DIRECT OBLIGATIONS ISSUED OR
UNCONDITIONALLY GUARANTEED BY THE UNITED STATES OF AMERICA OR ANY AGENCY OR ANY
STATE THEREOF MATURING WITHIN ONE (1) YEAR FROM THE DATE OF ACQUISITION THEREOF,
(ii) COMMERCIAL PAPER MATURING NO MORE THAN ONE (1) YEAR FROM THE DATE OF
CREATION THEREOF AND CURRENTLY HAVING THE HIGHEST RATING OBTAINABLE FROM EITHER
STANDARD & POOR'S CORPORATION OR ▇▇▇▇▇'▇ INVESTORS SERVICE, INC., AND (iii)
CERTIFICATES OF DEPOSIT MATURING NO MORE THAN ONE (1) YEAR FROM THE DATE OF
INVESTMENT THEREIN ISSUED BY BORROWER'S DEPOSITARY INSTITUTIONS; (C) EXTENSIONS
OF CREDIT IN THE NATURE OF ACCOUNTS RECEIVABLE OR NOTES RECEIVABLE ARISING FROM
THE SALE OR LEASE OF GOODS OR SERVICES IN THE ORDINARY COURSE OF BORROWER'S
BUSINESS; (D) INVESTMENTS CONSISTING OF THE ENDORSEMENT OF NEGOTIABLE
INSTRUMENTS FOR DEPOSIT OR COLLECTION OR SIMILAR TRANSACTIONS IN THE ORDINARY
COURSE OF BORROWER'S BUSINESS; (E) INVESTMENTS (INCLUDING DEBT OBLIGATIONS)
RECEIVED IN CONNECTION WITH THE BANKRUPTCY OR REORGANIZATION OF CUSTOMERS OR
SUPPLIERS AND IN SETTLEMENT OF DELINQUENT OBLIGATIONS OF, AND OTHER DISPUTES
WITH, CUSTOMERS OR SUPPLIERS ARISING IN THE ORDINARY COURSE OF BORROWER'S
BUSINESS; (F) INVESTMENTS CONSISTING OF LOANS AND ADVANCES TO BORROWER'S
EMPLOYEES, OFFICERS AND DIRECTORS IN THE ORDINARY COURSE OF BUSINESS OR AS
OTHERWISE APPROVED BY THE BOARD OF DIRECTORS OF BORROWER NOT IN EXCESS OF ONE
HUNDRED THOUSAND DOLLARS ($100,000) IN THE AGGREGATE; AND (G) OTHER INVESTMENTS
NOT DESCRIBED ABOVE AGGREGATING NOT IN EXCESS OF TWENTY-FIVE THOUSAND DOLLARS
($25,000) AT ANY TIME
**EXCEPT THAT BORROWER MAY REPURCHASE STOCK FROM FORMER EMPLOYEES,
CONSULTANTS, OR INDEPENDENT CONTRACTORS OF BORROWER IN ACCORDANCE WITH THE TERMS
OF REPURCHASE OR SIMILAR AGREEMENTS BETWEEN BORROWER AND SUCH EMPLOYEES,
CONSULTANTS, OR INDEPENDENT CONTRACTORS, FOR A TOTAL PURCHASE PRICE FOR ALL SUCH
REPURCHASES IN ANY FISCAL YEAR NOT TO EXCEED $150,000, PROVIDED THAT NO DEFAULT
OR EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING BEFORE, AND AFTER
GIVING EFFECT TO, SUCH REPURCHASE
4.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against ORIX with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to ORIX, make available
Borrower and its officers, employees and agents, and Borrower's books and
records, without charge, to the extent that ORIX may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding*.
* EXCEPT INSOFAR AND TO THE EXTENT THAT BORROWER'S INTERESTS WITH RESPECT
THERETO MAY BE ADVERSE TO ORIX'S, AS DETERMINED BY BORROWER IN BORROWER'S GOOD
FAITH BUSINESS JUDGMENT.
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ORIX LOAN AND SECURITY AGREEMENT
4.7 NOTIFICATION OF CHANGES. Borrower will promptly notify ORIX in writing
of any change in its officers or directors, the opening of any new bank account
or other Deposit Account, and any Material Adverse Change.
4.8 FINANCIAL COVENANTS. Borrower shall comply with all of the Financial
Covenants set forth in the Schedule, and all other covenants and provisions set
forth in the Schedule.
4.9 LANDLORD AGREEMENTS. Borrower shall, from time to time, upon ORIX's
request, use its best efforts to obtain written waivers and agreements from
Borrower's landlords, on such form and containing such provisions as ORIX shall
specify.
4.10 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
ORIX, to execute all documents and take all actions, as ORIX may deem reasonably
necessary or useful in order to perfect and maintain ORIX's perfected security
interest in the Collateral, and in order to fully consummate the transactions
contemplated by this Agreement.
4.11 INDEMNITY. Borrower hereby agrees to indemnify the following Persons
(collectively, the "Indemnitees"): ORIX and its affiliates, subsidiaries,
parent, directors, officers, employees, agents, and attorneys, and to hold them
harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, costs and expenses (including
* attorneys' fees and expenses), of every nature, character and description,
which any Indemnitee may sustain or incur based upon or arising out of any of
the Obligations, any relationship or agreement between ORIX and Borrower, or any
other matter, cause or thing whatsoever occurred, done, omitted or suffered to
be done by any Indemnitee relating to Borrower or the Obligations; provided that
the indemnity hereunder to an Indemnitee shall not extend to damages ** such
Indemnitee's own gross negligence or willful misconduct. Notwithstanding any
provision in this Agreement to the contrary, the indemnity agreement set forth
in this Section shall survive any termination of this Agreement and shall for
all purposes continue in full force and effect.
*REASONABLE
**RESULTING FROM
4.12 BOARD OBSERVATION RIGHTS. Borrower shall notify ORIX at least two
weeks in advance of the time and place of any regularly scheduled meeting, or as
soon as reasonably possible of any unscheduled meeting, of the Board of
Directors of Borrower (including without limitation telephone, conference call
and video meetings), and ORIX shall have the right to have a representative
attend all meetings of the Board of Directors of Borrower (including without
limitation telephone, conference call and video meetings), in a
nonvoting-observer capacity. Borrower shall give ORIX copies of all notices,
minutes, consents and other materials the Borrower provides to its directors in
connection with said meetings. Any information provided to ORIX shall be subject
to the confidentiality agreement in Section 8.2 of this Agreement.
5. TERM.
5.1 MATURITY DATE. On the maturity date set forth on the Schedule (the
"Maturity Date") or any earlier occurrence of any Event of Default*, Borrower
shall pay and perform in full all Obligations, whether evidenced by installment
notes or otherwise, and whether or not all or any part of such Obligations are
otherwise then due and payable.
*AS PROVIDED IN SECTION 6.2 HEREOF
5.2 PREPAYMENT. Borrower shall have the option of prepaying the principal
amount of the Note, prior to the Maturity Date, in whole or in part, provided
that Borrower concurrently pays ORIX (i) all accrued and unpaid interest on the
principal so prepaid and (ii) a prepayment fee equal to 1% of the amount prepaid
if prepayment occurs prior to April 30, 2005, and 2% of the amount prepaid if
prepayment occurs on or after April 30, 2005. Said prepayment fee shall be due
from Borrower to ORIX upon any prepayment of the principal of the Note,
including without limitation any prepayment as a result of an Event of Default
or the exercise of any rights or remedies by ORIX following the same. Borrower
shall not pay any prepayment fee on the repayment of the Prior Note (as defined
in Section 1 of the Schedule), with the proceeds of the Loan made pursuant to
this Agreement.
5.3 TERMINATION STATEMENTS. Upon payment and performance in full of all
the Obligations, ORIX shall promptly deliver to Borrower UCC termination
statements and such other documents as may be reasonably required to terminate
ORIX's security interests in the Collateral.
6. EVENTS OF DEFAULT AND REMEDIES.
6.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
ORIX immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to ORIX by Borrower or any of
Borrower's officers, employees or agents, now or in the future, shall be untrue
or misleading in a material respect*; or (b) Borrower shall fail to pay the
principal of and accrued interest on the Loan which is due on the Maturity Date,
on the date due; or (c) Borrower shall fail to pay any other principal or
interest payment on any Loan or any other monetary Obligation, within three
Business Days after the date due; or (d) Borrower shall fail to comply with any
of the Financial Covenants set forth in the Schedule or with any provision under
Subsection 4.5 hereof; or (e) Borrower shall fail to perform any non-monetary
Obligation within ** Business Days after the date due; or (f) any levy,
assessment, attachment, seizure, lien or encumbrance (other than a Permitted
Lien) is made on all or any part of the Collateral which is not cured within
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ORIX LOAN AND SECURITY AGREEMENT
10 days after the occurrence of the same; or (g) Borrower breaches any material
contract or obligation, which has or may reasonably be expected to have a
material adverse effect on Borrower's business or financial condition ***; or
(h) dissolution, termination of existence, insolvency, business failure or
temporary or permanent suspension of business of Borrower; or appointment of a
receiver, trustee or custodian, for all or any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding by or against Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect ****; or (i)
revocation or termination of, or limitation or denial of liability upon, any
guaranty of the Obligations or any attempt to do any of the foregoing; or (j)
revocation or termination of, or limitation or denial of liability upon, any
pledge of any certificate of deposit, securities, money or other property or
asset pledged by any third party to secure any or all of the Obligations, or any
attempt to do any of the foregoing, or commencement of proceedings by or against
any such third party under any bankruptcy or insolvency law; or (k) there shall
be a change in the record or beneficial ownership of an aggregate of more than
30% of the outstanding shares of stock or other equity ownership interest in
Borrower, in one or more transactions, compared to the ownership of outstanding
shares of stock of Borrower in effect on the date hereof, without the prior
written consent of ORIX; or (l) Borrower shall generally not pay its debts as
they become due, or Borrower shall conceal, remove or transfer any part of its
property, with intent to hinder, delay or defraud its creditors, or make or
suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or (m) a Material Adverse
Change shall occur; or (n) Borrower makes any payment on account of any
indebtedness or obligation which has been subordinated to the Obligations other
than as permitted in the applicable subordination agreement, or if any Person
who has subordinated such indebtedness or obligations terminates or in any way
limits his subordination agreement; or (o) an event of default shall occur and
be continuing under any other Loan Document (after giving effect to, but without
duplication of, grace periods under such other Loan Document applicable
thereto).
*AS OF THE DATE MADE OR DELIVERED OR DEEMED MADE OR DELIVERED
** FIVE
***PROVIDED, HOWEVER, THAT THE EVENT OF DEFAULT UNDER THIS SECTION 6.1(g)
CAUSED BY THE BREACH OF ANOTHER MATERIAL AGREEMENT OR OBLIGATION DESCRIBED IN
THIS SECTION SHALL BE AUTOMATICALLY CURED FOR PURPOSES OF THIS AGREEMENT UPON
THE PERMITTED CURE OR WAIVER OF THE BREACH UNDER SUCH OTHER MATERIAL AGREEMENT
OR OBLIGATION
**** PROVIDED THAT IN THE CASE OF AN INVOLUNTARY BANKRUPTCY PROCEEDING
FILED AGAINST BORROWER, BORROWER SHALL HAVE 30 DAYS TO HAVE SUCH PROCEEDING
DISMISSED
6.2 REMEDIES. Upon the occurrence and during the continuance of any Event
of Default, ORIX, at its option, and without notice or demand of any kind (all
of which are hereby expressly waived by Borrower), may do any one or more of the
following: (a) Cease making Loans or otherwise extending credit to Borrower
under this Agreement or any other document or agreement; (b) Accelerate and
declare all or any part of the Obligations to be immediately due, payable, and
performable, notwithstanding any deferred or installment payments allowed by any
instrument evidencing or relating to any Obligation; (c) Accelerate or extend
the time of payment of, compromise, issue credits on, or bring suit on the
Accounts and other Collateral (in the name of Borrower or ORIX), settle or
adjust disputes or claims directly with Account Debtors for amounts and upon
terms which it considers advisable, and notify Account Debtors on the Accounts
and other Collateral that the Accounts and Collateral have been assigned to
ORIX, and that payments in respect thereof shall be made directly to ORIX, and
otherwise administer and collect the Accounts and other Collateral; (d) Collect,
receive, dispose of and realize upon any Investment Property, including
withdrawal of any and all funds from any securities accounts; (e) Take
possession of any or all of the Collateral wherever it may be found, and for
that purpose Borrower hereby authorizes ORIX without judicial process to enter
onto any of Borrower's premises without interference to search for, take
possession of, keep, store, or remove any of the Collateral, and remain on the
premises or cause a custodian to remain on the premises in exclusive control
thereof, without charge for so long as ORIX deems it reasonably necessary in
order to complete the enforcement of its rights under this Agreement or any
other agreement; provided, however, that should ORIX seek to take possession of
any of the Collateral by court process, Borrower hereby irrevocably waives: (i)
any bond and any surety or security relating thereto required by any statute,
court rule or otherwise as an incident to such possession; (ii) any demand for
possession prior to the commencement of any suit or action to recover possession
thereof; and (iii) any requirement that ORIX retain possession of, and not
dispose of, any such Collateral until after trial or final judgment; (f) Require
Borrower to assemble any or all of the Collateral and make it available to ORIX
at places designated by ORIX which are reasonably convenient to ORIX and
Borrower, and to remove the Collateral to such locations as ORIX may deem
advisable; (g) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, ORIX shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge; (h) Sell, lease or otherwise dispose of any of the Collateral, in its
condition
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ORIX LOAN AND SECURITY AGREEMENT
at the time ORIX obtains possession of it or after further manufacturing,
processing or repair, at one or more public and/or private sales, in lots or in
bulk, for cash, exchange or other property, or on credit, and to adjourn any
such sale from time to time without notice other than oral announcement at the
time scheduled for sale. ORIX shall have the right to conduct such disposition
on Borrower's premises without charge, for such time or times as ORIX deems
reasonable, or on ORIX's premises, or elsewhere and the Collateral need not be
located at the place of disposition. ORIX may directly or through any affiliated
company purchase or lease any Collateral at any such public disposition, and if
permissible under applicable law, at any private disposition. Any sale or other
disposition of Collateral shall not relieve Borrower of any liability Borrower
may have if any Collateral is defective as to title or physical condition or
otherwise at the time of sale. All reasonable attorneys' fees, expenses, costs,
liabilities and obligations incurred by ORIX with respect to the foregoing shall
be added to and become part of the Obligations, shall be due on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations. Without limiting any of ORIX's rights and remedies, from
and after the occurrence of any Event of Default, the interest rate applicable
to the Obligations shall be increased by an additional two percent per annum.
6.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and ORIX
agree that a sale or other disposition (collectively, "sale") of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable: (i) Notice of the sale is given to Borrower at least
seven days prior to the sale, and, in the case of a public sale, notice of the
sale is published at least seven days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted; (ii) Notice of the
sale describes the collateral in general, non-specific terms; (iii) The sale is
conducted at a place designated by ORIX, with or without the Collateral being
present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m.;
(v) Payment of the purchase price in cash or by cashier's check or wire transfer
is required; (vi) With respect to any sale of any of the Collateral, ORIX may
(but is not obligated to) direct any prospective purchaser to ascertain directly
from Borrower any and all information concerning the same. ORIX shall be free to
employ other methods of noticing and selling the Collateral, in its discretion,
if they are commercially reasonable.
6.4 INVESTMENT PROPERTY. If a Default or an Event of Default has occurred
and is continuing, Borrower shall hold all payments on, and proceeds of, and
distributions with respect to, Investment Property in trust for ORIX, and
Borrower shall deliver all such payments, proceeds and distributions to ORIX,
immediately upon receipt, in their original form, duly endorsed, to be applied
to the Obligations in such order as ORIX shall determine. Borrower recognizes
that ORIX may be unable to make a public sale of any or all of the Investment
Property, by reason 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 thereof.
6.5 POWER OF ATTORNEY. Borrower grants to ORIX an irrevocable power of
attorney coupled with an interest, authorizing and permitting ORIX (acting
through any of its employees, attorneys or agents) at any time, at its option,
but without obligation, with or without notice to Borrower, and at Borrower's
expense, to do any or all of the following, in Borrower's name or otherwise, but
ORIX agrees to exercise the following powers in a commercially reasonable
manner: (a) Execute on behalf of Borrower any documents that ORIX may, in its
good faith business judgment, deem advisable in order to perfect and maintain
ORIX's security interest in the Collateral, or in order to exercise a right of
Borrower or ORIX, or in order to fully consummate all the transactions
contemplated under this Agreement, or under any and all other present and future
agreements, to execute and deliver 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 constituting
Collateral, to make any payment or take any action necessary or desirable to
protect or preserve any Collateral or ORIX's security interest therein or the
priority thereof, or in order to fully consummate all the transactions
contemplated under this Agreement or any other Loan Document; (b) After the
occurrence and during the continuance of any Event of Default, without limiting
ORIX's other rights and remedies, do any of the following: (i) Take control in
any manner of any cash or non-cash items of payment or proceeds of Collateral;
endorse the name of Borrower upon any instruments, or documents, evidence of
payment or Collateral that may come into ORIX's possession; (ii) Grant
extensions of time to pay, compromise claims and settle Accounts, General
Intangibles and Other Property for less than face value and execute all releases
and other documents in connection therewith; (iii) Pay any sums required on
account of Borrower's taxes or to secure the release of any liens therefor; and
(iv) Settle and adjust, and give releases of, any insurance claim that relates
to any of the Collateral and obtain payment therefor.
6.6 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale or other disposition of the Collateral shall be applied by ORIX first to
the reasonable costs, expenses, liabilities, obligations and * attorneys' fees
incurred by ORIX in the exercise of its rights under this Agreement, second to
the interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as ORIX shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other Persons legally entitled thereto;
Borrower shall remain liable to ORIX for any deficiency. If ORIX, in its sole
discretion, directly or indirectly enters into a deferred
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ORIX LOAN AND SECURITY AGREEMENT
payment or other credit transaction with any purchaser at any sale of
Collateral, ORIX shall have the option, exercisable at any time, in its sole
discretion, of either reducing the Obligations by the principal amount of
purchase price or deferring the reduction of the Obligations until the actual
receipt by ORIX of the cash therefor.
*REASONABLE
6.7 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth
in this Agreement, ORIX shall have all the other rights and remedies accorded a
secured party under the Code and under all other applicable laws, and under any
other instrument or agreement now or in the future entered into between ORIX and
Borrower, and all of such rights and remedies are cumulative and none is
exclusive. Exercise or partial exercise by ORIX of one or more of its rights or
remedies shall not be deemed an election, nor bar ORIX from subsequent exercise
or partial exercise of any other rights or remedies. The failure or delay of
ORIX to exercise any rights or remedies shall not operate as a waiver thereof,
but all rights and remedies shall continue in full force and effect until all of
the Obligations have been fully paid and performed.
7. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Accounts" means all of the following, now owned and hereafter acquired by
Borrower: all "accounts" as defined in the Code in effect on the date hereof
with such additions to such term as may hereafter be made (whether or not earned
by performance), and all guaranties and other security therefor, and all rights
of stoppage in transit and all other rights or remedies of an unpaid vendor,
lienor or secured party.
"Account Debtor" means the obligor on an Account.
"Agreement" and "this Agreement" means this Loan and Security Agreement
and all Exhibits and Schedules hereto and all modifications and amendments to,
extensions of, and replacements for this Agreement.
"Business Day" means any day other than a Saturday, Sunday or any other
day on which commercial banks in Los Angeles, California or New York, New York
are required or permitted by law to close.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of California on the date hereof.
"Collateral" has the meaning set forth in Section 2.1 above.
"continuing" when used with reference to a Default or an Event of Default
means that the Default or Event of Default has occurred and has not been either
waived in writing by ORIX or cured within any applicable cure period.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Deposit Account" means all of the following, now owned and hereafter
acquired by Borrower: all "deposit accounts" as defined in the Code in effect on
the date hereof with such additions to such term as may hereafter be made, and
includes without limitation all general and special bank accounts, demand
accounts, checking accounts, savings accounts and certificates of deposit.
"Equipment" means all of the following, now owned and hereafter acquired
by Borrower: all "equipment" as defined in the Code in effect on the date hereof
with such additions to such term as may hereafter be made, and includes without
limitation all machinery, fixtures, goods, vehicles, and any interest in any of
the foregoing.
"Event of Default" means any of the events set forth in Section 6.1 of
this Agreement.
"GAAP" means generally accepted accounting principles consistently
applied.
"General Intangibles" means all of the following, now owned and hereafter
acquired by Borrower: all "general intangibles" as defined in the Code in effect
on the date hereof with such additions to such term as may hereafter be made,
and includes without limitation all Intellectual Property, Deposit Accounts,
royalties, contract rights, goodwill, franchise agreements, purchase orders,
customer lists, route lists, telephone numbers, licenses, permits, domain names,
claims, income tax refunds, security and other deposits, options to purchase or
sell real or personal property, rights in all litigation presently or hereafter
pending (whether in contract, tort or otherwise), insurance policies (including
without limitation key man, property damage, and business interruption
insurance), payments of insurance and rights to payment of any kind.
"Intellectual Property" means all of the following, now owned and
hereafter acquired by Borrower: all (a) copyrights, copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work thereof, whether published or unpublished, (b)
trade secret rights, including all rights to unpatented inventions and know-how,
and confidential information; (c) mask work or similar rights available for the
protection of semiconductor chips; (d) patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same; (e)
trademarks, servicemarks, trade styles, and trade names, whether or not any of
the foregoing are registered, and all applications to register and registrations
of the same and like protections, and the entire goodwill of the business of
Borrower connected with and symbolized by any such trademarks; (f) computer
software and computer software products; (g) designs and design rights; (h)
technology; (i) all claims for damages by way of past, present and future
infringement of any of the
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ORIX LOAN AND SECURITY AGREEMENT
rights included above; (j) all licenses or other rights to use any property or
rights of a type described above.
"Inventory" means all of the following, now owned and hereafter acquired
by Borrower: all "inventory" as defined in the Code in effect on the date hereof
with such additions to such term as may hereafter be made, and includes without
limitation all merchandise, raw materials, parts, supplies, packing and shipping
materials, work in process and finished products, including without limitation
such inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returned goods and any documents of title representing
any of the above.
"Investment Property" means all of the following, now owned and hereafter
acquired by Borrower: all investment property, securities, stocks, bonds,
debentures, debt securities, partnership interests, limited liability company
interests, options, security entitlements, securities accounts, commodity
contracts, commodity accounts, and all financial assets held in any securities
account or otherwise, wherever located, and all other securities of every kind,
whether certificated or uncertificated.
"Material Adverse Change" means (i) a material adverse change in the
business, operations, results of operations, assets, liabilities, condition or
prospects of Borrower, (ii) the impairment of Borrower's ability to perform the
Obligations, or of ORIX to enforce the Obligations or realize upon the
Collateral, or (iii) a material adverse change in the value of the Collateral or
the amount which ORIX would be likely to receive in the liquidation of the
Collateral.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower or any of its subsidiaries or affiliates to ORIX or its
parent or any of its subsidiaries or affiliates, whether evidenced by this
Agreement or any note or other instrument or document, whether arising from an
extension of credit, loan, guaranty, indemnification or otherwise, whether
direct or indirect (including, without limitation, those acquired by assignment
and any participation by ORIX in Borrower's indebtedness or obligations owing to
others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorney's fees, expert
witness fees, audit fees, loan fees, prepayment fees, and any other sums
chargeable to Borrower under this Agreement or under any other present or future
instrument or agreement between Borrower and ORIX.
"Other Property" means all of the following, now owned and hereafter
acquired by Borrower: all of the following as defined in the Code in effect on
the date hereof with such additions to such term as may hereafter be made, and
all rights relating thereto: "documents", "instruments", "chattel paper",
"letters of credit", "fixtures", and "money", and all other tangible and
intangible personal property and rights of any other kind which are not included
in the other items of Collateral, whether or not covered by the Code.
"Permitted Liens" shall mean the following: * (iii) liens for taxes, fees,
assessments or other governmental charges or levies, either not delinquent or
being contested in good faith by appropriate proceedings, provided the same have
no priority over any of ORIX's security interests; (iv) liens of materialmen,
mechanics, warehousemen, carriers, or other similar liens arising in the
ordinary course of business and securing obligations which are not delinquent or
are being contested in good faith by appropriate proceedings, (v) liens which
constitute banker's liens, rights of set-off or similar rights as to deposit
accounts or other funds maintained with a bank or other financial institution
(but only to the extent such banker's liens, rights of set-off or other rights
are in respect of customary service charges relative to such deposit accounts
and other funds, and not in respect of any loans or other extensions of credit
by such bank or other financial institution to Borrower), (vi) cash deposits or
pledges of an aggregate amount not to exceed $100,000 to secure the payment of
worker'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 **.
*(i) LIENS (A) UPON OR IN ANY EQUIPMENT ACQUIRED OR HELD BY BORROWER TO
SECURE THE PURCHASE PRICE OF SUCH EQUIPMENT OR INDEBTEDNESS INCURRED SOLELY FOR
THE PURPOSE OF FINANCING THE ACQUISITION OF SUCH EQUIPMENT OR (B) EXISTING ON
SUCH EQUIPMENT AT THE TIME OF ITS ACQUISITION, PROVIDED THAT THE LIEN IS
CONFINED SOLELY TO THE EQUIPMENT SO ACQUIRED, IMPROVEMENTS THEREON AND THE
PROCEEDS OF SUCH EQUIPMENT; (ii) LIENS SECURING CAPITAL LEASE OBLIGATIONS ON
ASSETS SUBJECT TO SUCH CAPITAL LEASES AND LIENS ON EQUIPMENT LEASED BY BORROWER
PURSUANT TO AN OPERATING LEASE IN THE ORDINARY COURSE OF BORROWER'S BUSINESS
(INCLUDING PROCEEDS THEREOF AND ACCESSIONS THERETO), ALL INCURRED SOLELY FOR THE
PURPOSE OF FINANCING THE LEASE OF SUCH EQUIPMENT (INCLUDING LIENS ARISING FROM
FINANCING STATEMENTS REGARDING SUCH LEASES)
** AND (vii) LIENS INCURRED IN CONNECTION WITH THE EXTENSION, RENEWAL OR
REFINANCING OF THE INDEBTEDNESS SECURED BY LIENS OF THE TYPE DESCRIBED IN
CLAUSES (i), (ii), AND (iii) ABOVE, PROVIDED THAT ANY EXTENSION, RENEWAL OR
REPLACEMENT LIEN SHALL BE LIMITED TO THE PROPERTY ENCUMBERED BY THE EXISTING
LIEN AND THE PRINCIPAL AMOUNT OF THE INDEBTEDNESS BEING EXTENDED, RENEWED OR
REFINANCED DOES NOT INCREASE
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, limited liability company, unincorporated organization,
association, corporation,
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ORIX LOAN AND SECURITY AGREEMENT
government, or any agency or political division thereof, or any other entity.
"Prime Rate" means the rate of interest per annum publicly announced from
time to time by Citibank N.A., or, if not available, another major money center
bank in New York City selected by ORIX in its sole discretion, as its prime rate
in effect (said prime rate not being intended to be the lowest rate of interest
charged by the referenced bank in connection with extensions of credit), or if
such rate is not available, by a reasonable alternative means of determining the
rate of interest selected by ORIX in its sole discretion.
"Representations" means the written Representations and Warranties
previously delivered by Borrower to ORIX dated June 4, 2002.
"Warrant" means the warrant to purchase stock of the Borrower being issued
to ORIX, and all extensions and renewals thereof and replacements therefor.
Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with GAAP.
All other terms contained in this Agreement, unless otherwise indicated, shall
have the meanings provided by the Code, to the extent such terms are defined
therein.
8. GENERAL PROVISIONS.
8.1 APPLICATION OF PAYMENTS. All payments with respect to the Obligations
may be applied, and in ORIX's sole discretion reversed and re-applied, to the
Obligations, in such order and manner as ORIX shall determine in its good faith
business judgment.
8.2 CONFIDENTIALITY. ORIX agrees to use the same degree of care that it
exercises with respect to its own proprietary information, to maintain the
confidentiality of any and all proprietary, trade secret or confidential
information provided to or received by ORIX from the Borrower, which indicates
that it is confidential, including business plans and forecasts, non-public
financial information, confidential or secret processes, formulae, devices and
contractual information, customer lists, and employee relation matters, provided
that ORIX may disclose such information to its officers, directors, employees,
attorneys, accountants, affiliates, participants, prospective participants,
assignees and prospective assignees, and such other Persons to whom ORIX shall
at any time be required to make such disclosure in accordance with applicable
law, and provided, that the foregoing provisions shall not apply to disclosures
made by ORIX in its good faith business judgment in connection with the
enforcement of its rights or remedies after an Event of Default. The
confidentiality agreement in this Section supersedes any prior confidentiality
agreement of ORIX relating to Borrower.
8.3 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed as follows: (a) if to Borrower, at its address shown in the
heading to this Agreement; and (b) if to ORIX, at ORIX USA CORPORATION, ▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: Legal
Department, with a copy to ORIX USA CORPORATION, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇. The parties hereto may change
the address at which they are to receive notices hereunder, by notice in writing
in the foregoing manner given to all other parties. All notices shall be deemed
to have been given upon delivery in the case of notices personally delivered, or
at the expiration of one Business Day following delivery to the private delivery
service, or two Business Days following the deposit thereof in the United States
mail, with postage prepaid.
8.4 ATTORNEYS FEES AND COSTS. Borrower shall reimburse ORIX for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by ORIX, pursuant to, or
in connection with, or relating to this Agreement (whether or not a lawsuit is
filed), including, but not limited to, all reasonable attorneys' fees and costs
ORIX incurs in order to do the following: prepare and negotiate this Agreement
and the documents relating to this Agreement; obtain legal advice in connection
with this Agreement or Borrower; enforce, or seek to enforce, any of its rights;
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; protect, obtain
possession of, lease, dispose of, or otherwise enforce ORIX's security interest
in, the Collateral; and otherwise represent ORIX in any litigation relating to
Borrower. If either ORIX 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.
8.5 WAIVERS. The failure of ORIX 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 ORIX shall not waive or
diminish any right of ORIX 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 ORIX shall be deemed to have been waived
by any act or knowledge of ORIX or its agents or employees, but only by a
specific written waiver signed by an authorized officer of ORIX and delivered to
Borrower. Borrower waives the benefit of all statutes of limitations relating to
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ORIX LOAN AND SECURITY AGREEMENT
any of the Obligations or this Agreement or any other Loan Document, and
Borrower waives demand, protest, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, account, Account,
General Intangible, document or guaranty at any time held by ORIX on which
Borrower is or may in any way be liable, and notice of any action taken by ORIX,
unless expressly required by this Agreement. NEITHER ORIX NOR ITS PARENT, NOR
ANY OF ITS AFFILIATES, SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR
ATTORNEYS SHALL BE RESPONSIBLE OR LIABLE TO BORROWER OR TO ANY OTHER PARTY FOR
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A
RESULT OF ANY FINANCIAL ACCOMMODATION HAVING BEEN EXTENDED, SUSPENDED OR
TERMINATED UNDER THIS AGREEMENT OR ANY OTHER OR AS A RESULT OF ANY OTHER
TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
8.6 GENERAL. The provisions of this Agreement shall be binding upon and
inure to the benefit of the respective successors, assigns, heirs, beneficiaries
and representatives of Borrower and ORIX; provided, however, that Borrower may
not assign or transfer any of its rights under this Agreement without the prior
written consent of ORIX, and any prohibited assignment shall be void. No consent
by ORIX to any assignment shall release Borrower from its liability for the
Obligations. 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. This Agreement and all acts, transactions disputes and controversies
arising hereunder or relating hereto, and all rights and obligations of ORIX and
Borrower shall be governed by, and construed in accordance with the internal
laws (and not the conflict of laws rules) of the State of California. Borrower
(i) agrees that all actions and proceedings relating directly or indirectly to
this Agreement shall, at ORIX's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Los Angeles County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding. Paragraph headings are only used in
this Agreement for convenience, and shall not be used in any manner to construe,
limit, define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". 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 ORIX or Borrower under any rule of
construction or otherwise. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect. This Agreement may be executed and delivered by the signing and
delivery of this Agreement with original signatures or by facsimile copy. This
Agreement and such other written agreements, documents and instruments as may be
executed in connection herewith, including without limitation the
Representations, are the final, entire and complete agreement between Borrower
and ORIX and supersede all prior and contemporaneous negotiations and oral
representations and agreements, all of which are merged and integrated in this
Agreement. There are no oral understandings, representations or agreements
between the parties which are not set forth in this Agreement or in other
written agreements signed by the parties in connection herewith. The terms and
provisions of this Agreement may not be waived or amended, except in a writing
executed by Borrower and a duly authorized officer of ORIX. Time is of the
essence in the performance by Borrower of each and every obligation under this
Agreement.
8.7 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND ORIX 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, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN ORIX AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF ORIX OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH ORIX OR BORROWER, IN ALL
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER:
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
BY /s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
SECRETARY OR ASS'T SECRETARY
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ORIX LOAN AND SECURITY AGREEMENT
ORIX:
ORIX VENTURE FINANCE LLC
BY /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
PRESIDENT AND CEO
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[ORIX LOGO]
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
ADDRESS: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇. ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: MAY __, 2004
This Schedule is an integral part of the Loan and Security Agreement between
ORIX Venture Finance LLC ("ORIX") and the above-borrower ("Borrower") of even
date.
1. LOAN AMOUNT (Section 1.1): $5,000,000
The Loan shall be made in two disbursements, as follows:
(1) The first disbursement of the Loan (the "First
Disbursement") shall be in the amount of
$3,333,333.33 and shall be made concurrently
herewith. The proceeds of the first disbursement
of the Loan shall be applied by ORIX to the
payment of the unpaid principal balance of that
certain Secured Promissory Note dated July 17,
2002, made by Borrower to the order of ORIX, in
the original principal amount of $5,000,000 (the
"Prior Note"). Accrued and unpaid interest on the
Prior Note shall be paid concurrently herewith.
(2) The second disbursement of the Loan in the amount
of $1,666,666.67 (the "Second Disbursement") shall
be made by ORIX within five Business Days
following ORIX' receipt of written request
therefor from the Borrower, in one disbursement,
provided that (i) at the date the Second
Disbursement is to be made, and after giving
effect thereto, no Default or Event of Default
shall have occurred and be continuing, and (ii)
the Second Disbursement shall not be made after
June 30, 2004. The Borrower shall not be obligated
to request the second disbursement of the Loan.
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ORIX SCHEDULE TO LOAN AND SECURITY AGREEMENT
2. INTEREST.
The interest rate in effect throughout each calendar
month shall be the highest Prime Rate in effect during
such month, plus 2.75% per annum, provided that the
interest rate in effect in each month shall not be less
than 7.75% per annum. Interest shall be calculated on
the basis of a 360-day year for the actual number of
days elapsed. Prime Rate has the meaning set forth in
Section 7 above.
3. FEES (Section 1.4):
Loan Fee: $25,000, payable concurrently herewith.
4. MATURITY DATE
(Section 5.1): APRIL 30, 2006.
5. REPORTING
(Section 4.2): Borrower, at its expense, shall provide ORIX with the
reports shown in Section 4.2 of the Loan Agreement and
the following:
(a) Monthly financial statements within 30 days after
the end of each month;
(b) Quarterly financial statements within 45 days
after the end of each fiscal quarter;
(c) Annual, unqualified financial statements, audited
by independent certified public accountants
acceptable to ORIX, within 90 days after the end
of each fiscal year of Borrower;
(d) Compliance certificates, showing compliance with
the financial covenants set forth in this
Agreement and confirming that no Defaults have
occurred, at such intervals and times as the ORIX
shall specify;
6. FINANCIAL COVENANTS.
(Section 4.8): Borrower shall have positive EBITDA during each fiscal
quarter of Borrower, commencing with the fiscal quarter
ending May 31, 2004.
As used herein, "EBITDA" means, on a consolidated basis,
Borrower's earnings before interest, taxes, depreciation
and other non-cash
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ORIX SCHEDULE TO LOAN AND SECURITY AGREEMENT
amortization expenses and other non-cash expenses of
Borrower, determined in accordance with GAAP.
7. ADDITIONAL PROVISIONS.
(a) WARRANTS. Borrower shall concurrently
issue to ORIX a seven-year Warrant to
purchase 10,000 shares of common stock of
Borrower, at $1.10 per share, and
otherwise in the form being executed by
Borrower and ORIX concurrently (the "New
Warrant"). In addition, if for any reason
the Note and all accrued interest thereon
is not prepaid in full prior to May 15,
2005, then Borrower shall, on May 15,
2005, issue and deliver to ORIX an
additional seven-year Warrant to purchase
an additional 10,000 shares of common
stock of Borrower, at $1.10 per share, on
the same terms as the New Warrant, and any
failure to issue and deliver to ORIX said
additional Warrant on said date shall
constitute an immediate Event of Default
hereunder. The Warrants provided for
hereunder are not refundable, and are in
addition to the warrants previously issued
by the Borrower to ORIX. Borrower agrees
to use its reasonable best efforts to
permit ORIX to sell the stock subject to
the Warrant in a public market as soon as
practically possible.
(b) DEPOSIT ACCOUNTS. Borrower represents and
warrants that all banks and other
institutions where its Deposit Accounts
are maintained have entered into control
agreements with ORIX sufficient to perfect
ORIX's first-priority security interest in
said Deposit Accounts, except that the
Company's payroll account at ▇▇▇▇▇ Fargo
Bank is not currently subject to a control
agreement.
(c) STOCK. Borrower hereby grants ORIX the
right to purchase shares of Borrower's
preferred stock, in its next preferred
stock offering (the "Next Offering"), at
the same purchase price per share being
paid by the other purchasers (provided
that, if more than one price per share is
being paid by the purchasers, the price to
ORIX shall be the lowest of such prices).
The number of shares to be purchased by
ORIX shall be determined by ORIX in its
discretion, provided that the total
purchase price may not exceed $1,000,000.
Borrower shall give ORIX written notice of
the date of the Next Offering and details
as to the terms thereof at least 30 days
prior to the date the Next Offering is to
be consummated, and ORIX may exercise its
right to purchase
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ORIX SCHEDULE TO LOAN AND SECURITY AGREEMENT
said preferred stock by written notice to
Borrower within 60 days after the date
said notice is given to ORIX (but in no
event prior to the date the Next Offering
is consummated). Within five business days
after the date the Next Offering is
consummated, Borrower shall give ORIX
written notice thereof and such
information concerning the same as ORIX
shall reasonably request. Promptly
following the exercise of such right by
ORIX, the Borrower shall issue such
preferred stock to ORIX, and ORIX shall
concurrently pay the purchase price
thereof. In connection with its purchase
of Series C preferred stock, ORIX shall
enter into the same stock purchase
agreement and shareholders agreement that
the Borrower enters into with the other
purchasers of such stock, provided the
terms thereof are reasonably acceptable to
ORIX, but notwithstanding the terms of
such agreements, ORIX shall be entitled to
receive "piggy-back" registration rights
and S-3 registration rights, on terms
reasonably acceptable to ORIX, even if the
other purchasers of such preferred stock
are given more or less extensive rights.
The rights of ORIX to purchase stock
hereunder and its related rights may be
exercised by ORIX or its designees, and
any designees shall also enter into the
foregoing stock purchase agreement and
shareholders agreement.
(d) SUBSIDIARY. Borrower represents and
warrants that its sole subsidiary is List
Selector & Processing, Inc., and that said
subsidiary is, and throughout the term of
this Agreement will continue to be, a
shell corporation which has no assets and
does not engage in business.
Borrower: ORIX:
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. ORIX Venture Finance LLC
By /s/ ▇▇▇▇▇ ▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------- -------------------------
President or Vice President ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
President and CEO
By /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
Secretary or Ass't Secretary
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