EXHIBIT 10.7
INKTOMI CORPORATION
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
TABLE OF CONTENTS
Page
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1. DEFINITIONS AND CONSTRUCTION..................................... 1
1.1 Definitions................................................. 1
1.2 Accounting Terms............................................ 9
2. LOAN AND TERMS OF PAYMENT........................................ 9
2.1 Revolving, Term and Equipment Loan Facilities............... 9
2.2 Overadvances................................................ 13
2.3 Interest Rates, Payments, and Calculations.................. 13
2.4 Crediting Payments.......................................... 14
2.5 Fees........................................................ 14
2.6 Additional Costs............................................ 14
2.7 Term........................................................ 15
3. CONDITIONS OF LOANS.............................................. 15
3.1 Conditions Precedent to Initial Advance..................... 15
3.2 Conditions Precedent to all Advances........................ 15
4. CREATION OF SECURITY INTEREST.................................... 16
4.1 Grant of Security Interest.................................. 16
4.2 Delivery of Additional Documentation Required............... 16
4.3 Right to Inspect............................................ 16
5. REPRESENTATIONS AND WARRANTIES................................... 16
5.1 Due Organization and Qualification.......................... 16
5.2 Due Authorization; No Conflict.............................. 17
5.3 No Prior Encumbrances....................................... 17
5.4 Merchantable Inventory...................................... 17
5.5 Intellectual Property....................................... 17
5.6 Name; Location of Chief Executive Office.................... 17
5.7 Litigation.................................................. 17
5.8 No Material Adverse Change in Financial Statements.......... 17
5.9 Solvency.................................................... 17
5.10 Regulatory Compliance....................................... 17
5.11 Environmental Condition..................................... 18
5.12 Taxes....................................................... 18
5.13 Subsidiaries................................................ 18
5.14 Government Consents......................................... 18
5.15 Full Disclosure............................................. 18
6. AFFIRMATIVE COVENANTS............................................ 18
6.1 Good Standing............................................... 18
6.2 Government Compliance....................................... 18
6.3 Financial Statements, Reports, Certificates................. 19
6.4 Inventory; Returns.......................................... 19
6.5 Taxes....................................................... 19
6.6 Insurance................................................... 19
6.7 Bank Balances............................................... 20
6.8 Quick Ratio................................................. 20
6.9 Liquidity Coverage/Debt Service Coverage.................... 20
6.10 Tangible Net Worth.......................................... 20
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6.11 Registration of Intellectual Property Rights................ 20
6.12 Further Assurances.......................................... 21
7. NEGATIVE COVENANTS............................................... 21
7.1 Dispositions................................................ 21
7.2 Change in Business.......................................... 21
7.3 Mergers or Acquisitions..................................... 21
7.4 Indebtedness................................................ 21
7.5 Encumbrances................................................ 21
7.6 Distributions............................................... 21
7.7 Investments................................................. 22
7.8 Transactions with Affiliates................................ 22
7.9 Intellectual Property Agreements............................ 22
7.10 Subordinated Debt........................................... 22
7.11 Inventory................................................... 22
7.12 Compliance.................................................. 22
7.13 Prohibition on Transfer of Assets........................... 22
8. EVENTS OF DEFAULT................................................ 22
8.1 Payment Default............................................. 22
8.2 Covenant Default............................................ 23
8.3 Material Adverse Change..................................... 23
8.4 Attachment.................................................. 23
8.5 Insolvency.................................................. 23
8.6 Other Agreements............................................ 23
8.7 Subordinated Debt........................................... 23
8.8 Judgments................................................... 23
8.9 Misrepresentations.......................................... 23
9. BANK'S RIGHTS AND REMEDIES....................................... 24
9.1 Rights and Remedies......................................... 24
9.2 Power of Attorney........................................... 24
9.3 Accounts Collection......................................... 25
9.4 Bank Expenses............................................... 25
9.5 Bank's Liability for Collateral............................. 25
9.6 Remedies Cumulative......................................... 25
9.7 Demand; Protest............................................. 26
10. NOTICES.......................................................... 26
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER....................... 26
12. GENERAL PROVISIONS............................................... 26
12.1 Successors and Assigns..................................... 26
12.2 Indemnification............................................ 27
12.3 Time of Essence............................................ 27
12.4 Severability of Provisions................................. 27
12.5 Amendments in Writing, Integration......................... 28
12.6 Counterparts............................................... 28
12.7 Survival................................................... 28
12.8 Confidentiality............................................ 28
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This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Agreement") is
entered into as of September 2, 1998, by and between SILICON VALLEY BANK
("Bank") and INKTOMI CORPORATION ("Borrower").
RECITALS
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A. Borrower and Bank are parties to that certain Amended and Restated
Loan and Security Agreement dated as of May 12, 1998, as amended
(collectively, the "Original Agreement").
B. Borrower and Bank desire to amend and restate the Original Agreement
on the terms stated herein. This Agreement amends and restates in its entirety
the Original Agreement, and sets forth the terms on which Bank will advance
credit to Borrower, and Borrower will repay the amounts owing to Bank.
AGREEMENT
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The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
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1.1 Definitions. As used in this Agreement, the following terms
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shall have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering
of services by Borrower, 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.
"Advance" or "Advances" means a Revolving Advance, a Term
Advance, an Equipment Facility A Advance, an Equipment Facility B Advance, or
an Equipment Facility C Advance.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls
or is controlled by or is under common control with such Person, and each of
such Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection
with the preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents (including fees and
expenses of appeal), whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or required
to close.
"Cash Management Service" or "Cash Management Services" has the
meaning set forth in Section 2.1.1.4 herein.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
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hereto.
"Committed Line" means Two Million Five Hundred Thousand Dollars
($2,500,000).
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold
with recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices;
provided, however, that the term "Contingent Obligation" shall not include
endorsements for collection or deposit in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determined amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by
such Person in good faith; provided, however, that such amount shall not in
any event exceed the maximum amount of the obligations under the guarantee or
other support arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its
Subsidiaries, as at such date, plus, to the extent not already included
therein, all outstanding Advances made under this Agreement, including all
Indebtedness that is payable upon demand or within one year from the date of
determination thereof unless such Indebtedness is renewable or extendable at
the option of Borrower or any Subsidiary to a date more than one year from the
date of determination, but excluding Subordinated Debt.
"Debt Service Coverage" means, as measured quarterly as of the
last day of each fiscal quarter of Borrower, on a consolidated basis
determined in accordance with GAAP, the ratio of (a) an amount equal to the
sum of (i) quarterly net income plus (ii) quarterly depreciation, amortization
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of intangible assets and other non-cash charges to income plus (iii) quarterly
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interest expense plus (iv) the amortization expense of capitalized software
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during such quarter minus (v) any increase in capitalized software during such
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quarter, to (b) an amount equal to (i) the sum of all scheduled repayments and
mandatory prepayments of principal on account of long-term Debt for such
quarter, plus (ii) quarterly interest expense.
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"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"Equipment Facility A Advance" or "Equipment Facility A
Advances" has the meaning set forth in Section 2.1.3.
"Equipment Facility B Advance" or "Equipment Facility B
Advances" has the meaning set forth in Section 2.1.4.
"Equipment Facility C Advance" or "Equipment Facility C
Advances" has the meaning set forth in Section 2.1.5.
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"Equipment Facility A Committed Line" means One Million Seven
Hundred Fifty Thousand Dollars ($1,750,000).
"Equipment Facility B Committed Line" means Two Million Dollars
($2,000,000).
"Equipment Facility C Committed Line" means Five Million Dollars
($5,000,000).
"Equipment Facility A Maturity Date" means May 2, 2001.
"Equipment Facility B Availability End Date" means June 12, 1998.
"Equipment Facility B Maturity Date" means the date thirty-six
(36) months from the Equipment Facility B Availability End Date.
"Equipment Facility C Availability End Date" means the date nine
(9) calendar months from the date of this Agreement.
"Equipment Facility C Maturity Date" means the date thirty-six
(36) months from the Equipment Facility C Availability End Date.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"Foreign Exchange Reserve" has the meaning set forth in Section
2.1.1.3 herein.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or
the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds
and letters of credit, (b) all obligations evidenced by notes, bonds,
debentures or similar instruments, (c) all capital lease obligations and (d)
all Contingent Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief.
"Intellectual Property Collateral" means any and all right,
title and interest of Borrower in the following:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to
Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but
not the obligation, to ▇▇▇ for and collect such damages for said use or
infringement of the intellectual property rights identified above;
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(e) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such
use to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished
products intended for sale or lease or to be furnished under a contract of
service, of every kind and description now or at any time hereafter owned by
or in the custody or possession, actual or constructive, of Borrower,
including such inventory as is temporarily out of its 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.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Letter of Credit" or "Letters of Credit" has the meaning set
forth in Section 2.1.1.1 herein.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note
or notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or
extended from time to time.
"Material Adverse Effect" means a material adverse effect on (i)
the business operations or financial condition of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Microsoft Accounts" means Accounts owed to Borrower by
Microsoft Corporation pursuant to the Microsoft Hosting Agreement.
"Microsoft Debt" means all amounts owed by Borrower to Microsoft
Corporation pursuant to the terms of the Microsoft Loan Agreement.
"Microsoft Hosting Agreement" means that certain Software
Hosting Agreement dated as of July 27, 1997 by and between Borrower and
Microsoft Corporation.
"Microsoft Loan Agreement" means that certain Loan Agreement by
and between Borrower and Microsoft Corporation dated as of July 27, 1997 and
all promissory notes executed thereunder, and that certain Security Agreement
by and between Borrower and Microsoft Corporation related thereto and any
other documents executed in connection with any of them, pursuant to which
Borrower may borrow amounts for the acquisition of certain Equipment as
described therein.
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"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank Expenses
and other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Patents means all patents, patent applications and like
protections including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the
same.
"Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Indebtedness to trade creditors and with respect to surety
bonds and similar obligations incurred in the ordinary course of business;
(d) Subordinated Debt;
(e) Indebtedness of Borrower to any Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of Borrower
(provided that the primary obligations are not prohibited hereby), and
Indebtedness of any Subsidiary to any other Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of any other
Subsidiary (provided that the primary obligations are not prohibited hereby);
(f) Indebtedness secured by Permitted Liens;
(g) Capital leases or indebtedness incurred solely to purchase
equipment which is secured in accordance with clause (c) of "Permitted Liens"
below and is not in excess of the lesser of the purchase price of such
equipment or the fair market value of such equipment on the date of
acquisition;
(h) Extensions, refinancings, modifications, amendments and
restatements of any of items of Permitted Indebtedness (a) through (g) above,
provided that the principal amount thereof is not increased or the terms
thereof are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be; and
(i) Other Indebtedness not to exceed $500,000 in the aggregate
at any time.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
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(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 Bank;
(c) Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transaction in the ordinary
course of business;
(d) Investments accepted in connection with Transfers permitted
by Section 7.1;
(e) Investments consisting of (i) compensation of employees,
officers and directors of Borrower or its Subsidiaries so long as the Board of
Directors of Borrower determines that such compensation is in the best
interests of Borrower, (ii) travel advances, employee relocation loans and
other employee loans and advances in the ordinary course of business, and
(iii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower's Board of Directors;
(f) 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 business;
(g) Investments pursuant to or arising under currency
agreements or interest rate agreements entered into in the ordinary course of
business;
(h) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions to, customers and suppliers who are not
Affiliates, in the ordinary course of business; provided that this paragraph
(i) shall not apply to Investments by Borrower in any Subsidiary;
(i) Investments constituting acquisitions permitted under
Section 7.3;
(j) Deposit accounts of Borrower in which Bank has a Lien prior
to any other Lien;
(k) Deposit accounts of any Subsidiaries maintained in the
ordinary course of business;
(l) Investments in Subsidiaries not to exceed $2,500,000; and
(m) other Investments not to exceed $250,000 in any fiscal year.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
(b) 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 Bank's
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security interests;
(c) Liens (i) upon or in any Equipment other than Equipment
financed hereunder acquired or held by Borrower or any of its Subsidiaries to
secure the purchase price of such Equipment or indebtedness incurred solely
for the purpose of financing the acquisition of such Equipment, (ii) Liens on
any
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deposit account into which funds borrowed pursuant to the Microsoft Loan
Agreement are deposited prior to the purchase of such Equipment, or (iii)
Liens existing on such Equipment other than Equipment financed hereunder at
the time of its acquisition, provided that the Lien is confined solely to the
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property so acquired and improvements thereon, and the proceeds of such
Equipment;
(d) Liens on Equipment other than Equipment financed hereunder
leased by Borrower or any Subsidiary pursuant to an operating or capital lease
in the ordinary course of business (including proceeds thereof and accessions
thereto) incurred solely for the purpose of financing the lease of such
Equipment (including Liens pursuant to leases permitted pursuant to Section
7.1 and Liens arising from UCC financing statements regarding leases permitted
by this Agreement);
(e) Leases or subleases and licenses and sublicenses granted to
others in the ordinary course of Borrower's business not interfering in any
material respect with the business of Borrower and its Subsidiaries taken as a
whole, and any interest or title of a lessor, licensor or under any lease or
license;
(f) Liens on assets (including the proceeds thereof and
accessions thereto) that existed at the time such assets were acquired by
Borrower or any Subsidiary (including Liens on assets of any corporation that
existed at the time it became or becomes a Subsidiary); provided such Liens
are not granted in contemplation of or in connection with the acquisition of
such asset by Borrower or a Subsidiary;
(g) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.8;
(h) Easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
affecting real property not constituting a Material Adverse Effect;
(i) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payments of customs duties in connection with the
importation of goods;
(j) Liens that are not prior to the Lien of Bank which
constitute rights of set-off of a customary nature or banker's Liens with
respect to amounts on deposit, whether arising by operation of law or by
contract, in connection with arrangement entered in to with banks in the
ordinary course of business;
(k) Earn-out and royalty obligations existing on the date
hereof or entered into in connection with an acquisition permitted by Section
7.3;
(l) Liens on insurance proceeds in favor of insurance companies
granted solely as security for financed premiums; and
(m) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) (c), (d), (e), (f) and (k) above, provided that any extension,
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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,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
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"Quick Assets" means, as of any applicable date, the
unrestricted cash; unrestricted cash-equivalents; net, billed accounts
receivable and investments with maturities of fewer than one year of Borrower
determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer,
the Chief Financial Officer and the Controller of Borrower.
"Revolving Advance" or "Revolving Advances" means a cash advance
or cash advances under the Revolving Facility.
"Revolving Facility" means the facility under which Borrower may
request Bank to issue Revolving Advances, as specified in Section 2.1.1
hereof.
"Revolving Maturity Date" means May 11, 1999.
"Schedule" means the schedule of exceptions attached hereto, if
any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms reasonably
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i)
any general partnership interest or (ii) more than 50% of the stock of which
by the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through
an Affiliate.
"Tangible Net Worth" means at any date as of which the amount
thereof shall be determined, the consolidated total assets of Borrower and its
Subsidiaries minus, without duplication, (i) the sum of any amounts
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attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, patents, trade and service marks and names, copyrights
and research and development expenses except prepaid expenses, and (c) all
reserves not already deducted from assets, and (ii) Total Liabilities.
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"Term Advance" means the cash advance under the Term Facility.
"Term Availability Date" means June 2, 1997.
"Term Loan Amount" means Two Million Dollars ($2,000,000).
"Term Maturity Date" means the date thirty-six (36) months from
the date of the Term Availability Date.
"Total Liabilities" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of
Borrower, including in any event all Indebtedness, but specifically excluding
Subordinated Debt.
"Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Assignor
connected with and symbolized by such trademarks.
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1.2 Accounting Terms. All accounting terms not specifically
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defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
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2.1 Revolving, Term and Equipment Loan Facilities.
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2.1.1 Revolving Facility.
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(a) Revolving Advances. Subject to and upon the terms and
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conditions of this Agreement, Bank agrees to make Revolving Advances to
Borrower in an aggregate amount not to exceed (i) the Committed Line minus
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(ii) the sum of (A) the face amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit), (B) the Foreign Exchange
Reserve, and (C) the aggregate amount outstanding for Cash Management
Services. Subject to the terms and conditions of this Agreement, amounts
borrowed pursuant to this Section 2.1.1 may be repaid and reborrowed at any
time prior to the Revolving Maturity Date.
(b) Procedures. Whenever Borrower desires a Revolving Advance,
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Borrower will notify Bank by facsimile transmission or telephone no later than
3:00 p.m. California time, on the Business Day that the Revolving Advance is
to be made. Each such notification shall be promptly confirmed by a
Payment/Advance Form in substantially the form of Exhibit B hereto. Bank
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is authorized to make Revolving Advances under this Agreement, based upon
instructions received from a Responsible Officer, or without instructions if
in Bank's discretion such Revolving Advances are necessary to meet Obligations
which have become due and remain unpaid. Bank shall be entitled to rely on any
telephonic notice given by a person who Bank reasonably believes to be a
Responsible Officer, and Borrower shall indemnify and hold Bank harmless for
any damages or loss suffered by Bank as a result of such reliance. Bank will
credit the amount of Revolving Advances made under this Section 2.1.1 to
Borrower's deposit account.
(c) Interest, Payments. Interest shall accrue from the date of
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each Revolving Advance at the rate specified in Section 2.3(a) and shall be
payable on the first (1st) calendar day of each month during the term hereof.
Bank shall, at its option, charge such interest, all Bank Expenses, and all
Periodic Payments against any of Borrower's deposit accounts or against the
Committed Line, in which case those amounts shall thereafter accrue interest
at the rate then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) Maturity. The Revolving Facility shall terminate on the
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Revolving Maturity Date, at which time all Revolving Advances under this
Section 2.1.1 shall be immediately due and payable.
2.1.1.1 Letters of Credit.
-----------------
(a) Subject to the terms and conditions of this Agreement,
Bank agrees to issue or cause to be issued letters of credit (each a "Letter
of Credit," collectively, the " Letters of Credit") for the account of
Borrower in an aggregate face amount not to exceed (i) the Committed Line
minus (ii) the sum of (A) the then outstanding principal balance of the
-----
Revolving Advances, (B) the Foreign Exchange Reserve and (C) amounts
outstanding for Cash Management Services. Each such Letter of Credit shall
have an expiry date no later than the Revolving Maturity Date. All such
Letters of Credit shall be, in form and substance, acceptable to Bank in its
sole discretion and shall be subject to the terms and conditions of Bank's
form of application and letter of credit agreement. All amounts actually paid
by Bank in respect of a Letter of Credit shall, when paid, constitute a
Revolving Advance under this Agreement.
(b) The Obligation of Borrower to immediately reimburse
Bank for drawings made under Letters of Credit shall be absolute,
unconditional and irrevocable, and shall be performed
9
strictly in accordance with the terms of this Agreement and such Letters of
Credit, under all circumstances whatsoever. Borrower shall indemnify, defend
and hold Bank harmless from any loss, cost, expense or liability, including,
without limitation, reasonable attorneys' fees, arising out of or in
connection with any Letters of Credit.
2.1.1.2 Letter of Credit Reimbursement; Reserve.
---------------------------------------
(a) Borrower may request that Bank issue a Letter of
Credit payable in a currency other than United States Dollars. If a demand for
payment is made under any such Letter of Credit, Bank shall treat such demand
as an advance to Borrower of the equivalent of the amount thereof (plus cable
charges) in United States currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other currency for cable transfer
to the country of which it is the currency.
(b) Upon the issuance of any Letter of Credit payable in a
currency other than United States Dollars, Bank shall create a reserve under
the Committed Line for letters of credit against fluctuations in currency
exchange rates, in an amount equal to twenty percent (20%) of the face amount
of such Letter of Credit. The amount of such reserve may be amended by Bank
from time to time to account for fluctuations in the exchange rate. The
availability of funds under the Committed Line shall be reduced by the amount
of such reserve for so long as such Letter of Credit remains outstanding.
2.1.1.3 Foreign Exchange Contract; Foreign Exchange
--------------------------------------------
Settlements.
-----------
(a) Subject to the terms of this Agreement, Borrower may
enter into foreign exchange contracts (the "Exchange Contracts") not to exceed
(i) the Committed Line minus (ii) the sum of (A) the then outstanding
-----
principal balance of the Revolving Advances, (B) the face amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit, (C) the Foreign Exchange Reserve, and (D) amounts outstanding for Cash
Management Services (the "Contract Limit"), pursuant to which Bank shall sell
to or purchase from Borrower foreign currency on a spot or future basis.
Borrower shall not request any Exchange Contracts at any time it is out of
compliance with any of the provisions of this Agreement. All Exchange
Contracts must provide for delivery of settlement on or before the Revolving
Maturity Date. The amount available under the Committed Line at any time shall
be reduced by the following amounts (the "Foreign Exchange Reserve") on any
given day (the "Determination Date"): (i) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement allowed more than
two business days after the Determination Date, ten percent (10%) of the gross
amount of the Exchange Contracts; plus (ii) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement allowed within two
(2) business days after the Determination Date, one hundred percent (100%) of
the gross amount of the Exchange Contracts.
(b) Bank may, in its discretion, terminate the Exchange
Contracts at any time (a) that an Event of Default occurs or (b) that there is
no sufficient availability under the Committed Line and Borrower does not have
available funds in its bank account to satisfy the Foreign Exchange Reserve.
If Bank terminates the Exchange Contracts, and without limitation of any
applicable indemnities, Borrower agrees to reimburse Bank for any and all
fees, costs and expenses relating thereto or arising in connection therewith.
(c) Borrower shall not permit the total gross amount of
all Exchange Contracts on which delivery is to be effected and settlement
allowed in any two business day period to be more than Two Million Five
Hundred Thousand Dollars ($2,500,000) (the "Settlement Limit"), nor shall
Borrower permit the total gross amount of all Exchange Contracts to which
Borrower is a party, outstanding at any one time, to exceed the Contract
Limit. Notwithstanding the above, however, the amount which may be settled in
any two (2) business day period may be increased above the Settlement Limit up
to, but in no event to exceed, the amount of the Contract Limit under either
of the following circumstances:
10
(i) if there is sufficient availability under the
Committed Line in the amount of the Foreign Exchange Reserve as of each
Determination Date, provided that Bank in advance shall reserve the full
amount of the Foreign Exchange Reserve against the Committed Line; or
(ii) if there is insufficient availability under the
Committed Line, as to settlements within any two (2) business day period,
provided that Bank, in its sole discretion, may: (A) verify good funds
overseas prior to crediting Borrower's deposit account with Bank (in the case
of Borrower's sale of foreign currency); or (B) debit Borrower's deposit
account with Bank prior to delivering foreign currency overseas (in the case
of Borrower's purchase of foreign currency).
(d) In the case of Borrower's purchase of foreign
currency, Borrower in advance shall instruct Bank upon settlement either to
treat the settlement amount as a Revolving Advance under the Committed Line,
or to debit Borrower's account for the amount settled.
(e) Borrower shall execute all standard form applications
and agreements of Bank in connection with the Exchange Contracts and, without
limiting any of the terms of such applications and agreements, Borrower will
pay all standard fees and charges of Bank in connection with the Exchange
Contracts.
(f) Without limiting any of the other terms of this
Agreement or any such standard form applications and agreements of Bank,
Borrower agrees to indemnify Bank and hold it harmless from and against any
and all claims, debts, liabilities, demands, obligations, actions, costs and
expenses (including, without limitation, attorneys' fees of counsel of Bank's
choice), of every nature and description which it may sustain or incur, based
upon, arising out of, or in any way relating to any of the Exchange Contracts
or any transactions relating thereto or contemplated thereby.
2.1.1.4 Cash Management Sublimit. Subject to the terms and
------------------------
conditions of this Agreement, Borrower may utilize up to an aggregate amount
not to exceed Two Million Five Hundred Thousand Dollars ($2,500,000) (the
"Cash Management Sublimit") for cash management services provided by Bank,
which services may include merchant services, PC-ACH, direct deposit of
payroll, business credit card, Firstax, and other related check cashing
services as defined in that certain Cash Management Services Agreement
provided to Borrower in connection herewith (a "Cash Management Service", or
the "Cash Management Services"). Any amounts actually paid by Bank in respect
of a Cash Management Service or Cash Management Services shall, when paid,
constitute a Revolving Advance under this Agreement.
2.1.2 Term Advance.
------------
(a) Borrower and Bank acknowledge that Bank has made the Term
Advance under the Original Agreement on or prior to the Term Availability Date
in an amount equal to the Term Loan Amount. As of the date hereof, the
outstanding principal amount of the Term Advance is $_________________.
Amounts borrowed under this Section 2.1.2 may not be reborrowed once repaid.
(b) Interest shall accrue from the date of the Term Advance at
the rate specified in Section 2.3(a). Bank shall, at its option, charge such
interest, all Bank Expenses, and all Periodic Payments against any of
Borrower's deposit accounts or against the Committed Line, in which case those
amounts shall thereafter accrue interest at the rate then applicable
hereunder. Any interest not paid when due shall be compounded by becoming a
part of the Obligations, and such interest shall thereafter accrue interest at
the rate then applicable hereunder. The Term Advance shall be payable in
thirty-six (36) equal monthly installments of principal, plus accrued
interest, beginning on the first (1st) calendar day of the month following the
date of the Term Advance, and continuing on the same day of each month
thereafter through the Term Maturity Date, at which time all Obligations owing
under this Section 2.1.2 shall be immediately due and payable.
2.1.3 Equipment Facility A Advances.
-----------------------------
11
(a) Borrower and Bank acknowledge that from time to time from the
date of the Original Agreement prior to the date hereof, Bank has made
advances to Borrower under the Original Agreement for the purchase of
Equipment (each, an "Equipment Facility A Advance" and, collectively, the
"Equipment Facility A Advances") in an aggregate amount equal to the Equipment
Facility A Committed Line. Borrower may not request or receive additional
Equipment Facility A Advances. Equipment Facility A Advances may not be
reborrowed once repaid.
(b) Interest shall accrue from the date of each Equipment
Facility A Advance at the rate specified in Section 2.3(a), and shall be
payable monthly on the first (1st) calendar day of the month for each month
through May 2, 1998. Bank shall, at its option, charge such interest, all Bank
Expenses, and all Periodic Payments against any of Borrower's deposit accounts
or against the Committed Line, in which case those amounts shall thereafter
accrue interest at the rate then applicable hereunder. Any interest not paid
when due shall be compounded by becoming a part of the Obligations, and such
interest shall thereafter accrue interest at the rate then applicable
hereunder. All Equipment Facility A Advances that are outstanding on May 2,
1998 will be payable in thirty-six (36) equal monthly installments of
principal, plus accrued interest, beginning on June 1, 1998, and continuing on
the same day of each month thereafter through the Equipment Facility A
Maturity Date, at which time all amounts owing under this Section 2.1.3 shall
be immediately due and payable.
2.1.4 Equipment Facility B Advances.
-----------------------------
(a) Borrower and Bank acknowledge that from time to time from May
12, 1998 through the Equipment Facility B Availability End Date, Bank has made
advances (each an "Equipment Facility B Advance" and, collectively, the
"Equipment Facility B Advances") to Borrower in an aggregate amount not
exceeding the Equipment Facility B Committed Line. Borrower may not request or
receive additional Equipment Facility B Advances. Equipment Facility B
Advances may not be reborrowed once repaid.
(b) Interest shall accrue from the date of each Equipment
Facility B Advance at the rate specified in Section 2.3(a), and shall be
payable monthly on the first (1st) calendar day of the month for each month
through the month in which the Equipment Facility B Availability End Date
falls. Any Equipment Facility B Advances that are outstanding on the Equipment
Facility B Availability End Date will be payable in thirty-six (36) equal
monthly installments of principal, plus all accrued interest, beginning on the
first (1st) calendar day of the month following the Equipment Facility B
Availability End Date, and continuing on the same day of each month thereafter
through the Equipment Facility B Maturity Date, at which time all amounts
owing under this Section 2.1.4 shall be immediately due and payable.
2.1.5 Equipment Facility C Advances.
-----------------------------
(a) Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through the Equipment Facility C
Availability End Date, Bank agrees to make advances (each an "Equipment
Facility C Advance" and, collectively, the "Equipment Facility C Advances") to
Borrower in an aggregate outstanding amount not to exceed the Equipment
Facility C Committed Line. The Equipment Facility C Advances shall be used
only to purchase or refinance Equipment approved from time to time by Bank.
(b) Interest shall accrue from the date of each Equipment
Facility C Advance at the rate specified in Section 2.3(a), and shall be
payable monthly on the first (1st) calendar day of each month through the
month in which the Equipment Facility C Availability End Date falls. Any
Equipment Facility C Advances that are outstanding on the Equipment Facility C
Availability End Date will be payable in thirty-six (36) equal monthly
installments of principal, plus accrued interest, beginning on the first (1st)
calendar day of the month following the Equipment Facility C Availability End
Date, and continuing on the same day of each month thereafter through the
Equipment Facility C Maturity Date, at which time all amounts owing under this
Section 2.1.5, and any other amounts due under this Agreement, shall be
immediately due and payable. Equipment Facility C Advances, once repaid, may
not be reborrowed.
12
(c) When Borrower desires to obtain an Equipment Facility C
Advance, Borrower shall notify Bank (which notice shall be irrevocable) by
facsimile transmission to be received no later than 3:00 p.m. Pacific time one
(1) Business Day before the day on which the Equipment Facility C Advance is
to be made. Such notice shall be substantially in the form of Exhibit B. The
---------
notice shall be signed by a Responsible Officer or its designee.
2.2 Overadvances. If, at any time or for any reason, the amount of
------------
Obligations owed by Borrower to Bank pursuant to Section 2.1.1 of this Agreement
is greater than the Committed Line, Borrower shall immediately pay to Bank, in
cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
------------------------------------------
(a) Interest Rate.
-------------
(i) Revolving Advances. Except as set forth in Section
------------------
2.3(b), all Revolving Advances shall bear interest, on the average daily
balance thereof, at a per annum rate equal to the Prime Rate.
(ii) Term Advance. Except as set forth in Section 2.3(b),
------------
the Term Advance shall bear interest, on the average daily balance thereof, at
a per annum rate equal to one-half of one percentage point (0.5%) above the
Prime Rate.
(iii) Equipment Facility A Advances. Except as set forth in
-----------------------------
Section 2.3(b), all Equipment Facility A Advances shall bear interest, on the
average daily balance thereof, at a rate equal to one-half of one percentage
point (0.5%) above the Prime Rate.
(iv) Equipment Facility B Advances. Except as set forth in
-----------------------------
Section 2.3(b), all Equipment Facility B Advances shall bear interest, on the
average daily balance thereof, at a per annum rate equal to one-quarter of one
percentage point (0.25%) above the Prime Rate.
(v) Equipment Facility C Advances. Except as set forth in
-----------------------------
Section 2.3(b), all Equipment Facility C Advances shall bear interest, on the
average daily balance thereof, at a per annum rate equal to one-quarter of one
percentage point (0.25%) above the Prime Rate.
(b) Default Rate. All Obligations shall bear interest, from and
------------
after the occurrence of an Event of Default, at a rate equal to five (5)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.
(c) Computation. In the event the Prime Rate is changed from time
-----------
to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
13
2.4 Crediting Payments. Prior to the occurrence of an Event of
------------------
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or
unless and until such check or other item of payment is honored when presented
for payment. Notwithstanding anything to the contrary contained herein, any
wire transfer or payment received by Bank after 12:00 noon California time
shall be deemed to have been received by Bank as of the opening of business on
the immediately following Business Day. Whenever any payment to Bank under the
Loan Documents would otherwise be due (except by reason of acceleration) on a
date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall
accrue and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
----
(a) Facility Fees. A facility fee equal to Twenty Five Thousand
-------------
Dollars ($25,000), which shall be fully earned and nonrefundable;
(b) Financial Examination and Appraisal Fees. Bank's customary
----------------------------------------
fees and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and
for each appraisal of Collateral and financial analysis and examination of
Borrower performed from time to time by Bank or its agents; and,
(c) Bank Expenses. Upon the date hereof, all Bank Expenses
-------------
incurred through the Closing Date, including reasonable attorneys' fees and
expenses, and, after the date hereof, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.
2.6 Additional Costs. In case any change in any law, regulation,
----------------
treaty or official directive or the interpretation or application thereof by
any court or any governmental authority charged with the administration
thereof or the compliance with any guideline or request of any central bank or
other governmental authority (whether or not having the force of law), in each
case after the date of this Agreement:
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for
taxes on the overall net income of Bank imposed by the United States of
America or any political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error; provided, however, that Borrower shall
not be liable for any such amount attributable to any period prior to the date
of hundred eighty (180) days prior to the date of such certificate.
14
2.7 Term. This Agreement shall become effective on the Closing Date
----
and, subject to Section 12.7, shall continue in full force and effect for a term
ending on the Equipment Facility C Maturity Date. Notwithstanding the
foregoing, Bank shall have the right to terminate its obligation to make
Advances under this Agreement immediately and without notice upon the occurrence
and during the continuance of an Event of Default. Notwithstanding termination,
Bank's Lien on the Collateral shall remain in effect for so long as any
Obligations (excluding Obligations under Section 2.6 and 12.2 to the extent they
remain inchoate at the time outstanding payment obligations are paid in full)
are outstanding.
3. CONDITIONS OF LOANS
-------------------
3.1 Conditions Precedent to Initial Advance. The obligation of Bank
---------------------------------------
to make the initial Advance is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, the
following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) an intellectual property security agreement;
(d) financing statements (Forms UCC-1);
(e) insurance certificate;
(f) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof; and
(g) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of Bank to
------------------------------------
make each Advance, including the initial Advance, is further subject to the
following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as provided
in Section 2.1;
(b) timely receipt by Bank of the documents, instruments and/or
invoices as provided in Sections 2.1.5 and 2.1.6; and
(c) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of
such Payment/Advance Form and on the effective date of each Advance as though
made at and as of each such date (except to the extent they relate
specifically to any earlier date, in which case such representations and
warranties shall continue to have been true and accurate as of such date), and
no Event of Default shall have occurred and be continuing, or would result
from such Advance. The making of each Advance shall be deemed to be a
representation and warranty by Borrower on the date of such Advance as to the
accuracy of the facts referred to in this Section 3.2(c).
15
4. CREATION OF SECURITY INTEREST
-----------------------------
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
--------------------------
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents, provided, however, that
-------- -------
notwithstanding the foregoing, such grant of a security interest shall not
include, any intellectual property rights which are now or hereafter held by
Borrower as licensee, lessee or otherwise to the extent that such rights are not
assignable or capable of being encumbered as a matter of law or under written
terms of the license, lease or other agreement applicable thereto provided that
Borrower was or is required in its commercially reasonable judgment to enter
into such written terms restricting the grant hereunder. Except as set forth in
the Schedule, such security interest constitutes a valid, first priority
security interest in the presently existing Collateral, and will constitute a
valid, first priority security interest in Collateral acquired after the date
hereof, in each case, to the extent that a security interest in such Collateral
can be perfected by the filing of a financing statement or, in the case of
Collateral consisting of instruments, documents, chattel paper or certificated
securities, to the extent that Bank takes possession of such Collateral. Bank
agrees to execute and deliver to Borrower from time to time agreements to
subordinate its Lien as Borrower may request and as are necessary to give to
other lenders which finance new Equipment for Borrower a first priority security
interest in the new Equipment financed so long as the Liens and the Indebtedness
incurred with respect to such Equipment financing are permitted under this
Agreement. Bank agrees to execute and deliver to Borrower from time to time
such Lien releases as Borrower may request and as are necessary to give
Microsoft Corporation a first priority security interest in the (i) Equipment
financed under the Microsoft Loan Agreement; proceeds thereof; increases,
accessions, substitutions, additions thereto and replacements therefor; and (ii)
any deposit account into which amounts borrowed under the Microsoft Loan
Agreement are deposited prior to the purchase of such Equipment.
4.2 Delivery of Additional Documentation Required. Borrower shall from
---------------------------------------------
time to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees, or
----------------
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary
----------------------------------
is a corporation duly existing and in good standing under the laws of its
state of incorporation and qualified and licensed to do business in, and is in
good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified, except for states as
to which any failure to so qualify would not have a Material Adverse Effect.
5.2 Due Authorization; No Conflict. The execution, delivery, and
------------------------------
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound except to the extent that
certain intellectual property agreements prohibit the assignment of the rights
thereunder to a third party without the Borrower's or other party's consent and
the Loan Documents constitute an assignment. Borrower is not in default under
any agreement to which it is a party or by which it is bound, which default
could reasonably be expected to have a Material Adverse Effect.
16
5.3 No Prior Encumbrances. Borrower has good and indefeasible title
---------------------
to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Merchantable Inventory. All Inventory is in all material respects
----------------------
of good and marketable quality, free from all material defects.
5.5 Intellectual Property. Borrower is the sole owner of the
---------------------
Intellectual Property Collateral, except for non-exclusive licenses granted by
Borrower to its customers in the ordinary course of business. Each of the
Patents is valid and enforceable, and no part of the Intellectual Property
Collateral has been judged invalid or unenforceable, in whole or in part, and
to Borrower's knowledge no claim has been made that any part of the
Intellectual Property Collateral violates the rights of any third party.
Except for and upon the filing with the United States Patent and Trademark
Office with respect to the Patents and Trademarks and the Register of
Copyrights with respect to the Copyrights necessary to perfect the security
interests created hereunder, and except as has been already made or obtained,
no authorization, approval or other action by, and no notice to or filing
with, any United States governmental authority or United States regulatory
body is required either (i) for the grant by Borrower of the security interest
granted hereby or for the execution, delivery or performance of Loan Documents
by Borrower in the United States or (ii) for the perfection in the United
States or the exercise by Bank of its rights and remedies hereunder.
5.6 Name; Location of Chief Executive Office. Except as disclosed in
----------------------------------------
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.
5.7 Litigation. Except as set forth in the Schedule, there are no
----------
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could
reasonably be expected to have a Material Adverse Effect or a material adverse
effect on Borrower's interest or Bank's security interest in the Collateral.
Borrower does not have knowledge of any such pending or threatened actions or
proceedings.
5.8 No Material Adverse Change in Financial Statements. All consolidated
--------------------------------------------------
financial statements related to Borrower and any Subsidiary that have been
delivered by Borrower to Bank fairly present in all material respects Borrower's
consolidated financial condition as of the date thereof and Borrower's
consolidated results of operations for the period then ended. There has not
been a material adverse change in the consolidated financial condition of
Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.9 Solvency. The fair saleable value of Borrower's assets (including
--------
good will minus disposition costs) exceeds the fair value of its liabilities;
Borrower is not left with unreasonably small capital after the transactions
contemplated by this Agreement; and Borrower is able to pay its debts (including
trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has met the
---------------------
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could reasonably be expected to have a Material Adverse
Effect. Borrower is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940.
Borrower is not engaged principally, or as one of the important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations G, T and U of the Board of
Governors of the Federal Reserve System). Borrower has complied with all the
provisions of the Federal Fair Labor Standards Act. Borrower has not violated
any statutes, laws, ordinances or rules applicable to it, violation of which
could have a Material Adverse Effect.
17
5.11 Environmental Condition. None of Borrower's or any Subsidiary's
-----------------------
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency concerning any action or
omission by Borrower or any Subsidiary resulting in the releasing, or otherwise
disposing of hazardous waste or hazardous substances into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or caused to be filed
-----
all material tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein.
5.13 Subsidiaries. Borrower does not own any stock, partnership
------------
interest or other equity securities of any Person, except for Permitted
Investments.
5.14 Government Consents. Borrower and each Subsidiary has obtained all
-------------------
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted except
where the failure to obtain any such consent, approval or authorization, to make
any such declaration or filing, or to be given any such notice could not
reasonably be expected to have a Material Adverse Effect.
5.15 Full Disclosure. No representation, warranty or other statement
---------------
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates
or statements not misleading (it being recognized by Bank that the projections
and forecasts provided by Borrower are not to be viewed as facts and that
actual results during the period or periods covered by any such projections
and forecasts may differ from the projected or forecasted results).
6. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to
make an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain or cause to be maintained its
-------------
and each of its Subsidiaries' corporate existence and good standing in its
jurisdiction of incorporation and maintain qualification in each jurisdiction in
which the failure to so qualify could reasonably be expected to have a Material
Adverse Effect. Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, to the extent consistent with prudent management of
Borrower's business, in force all licenses, approvals and agreements, the loss
of which could reasonably be expected to have a Material Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
---------------------
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could reasonably be expected to have a Material Adverse Effect or a
material adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall
-------------------------------------------
deliver to Bank:
18
(a) as soon as available, but in any event within forty-five (45) days
after the end of each fiscal quarter of Borrower, all reports on Form 10-Q
required to be filed with the Securities and Exchange Commission;
(b) as soon as available, but in any event within one hundred twenty
(120) days after the end of Borrower's fiscal year, all reports on Form 10-K
required to be filed with the Securities and Exchange Commission;
(c) within five (5) days upon becoming available, copies of all
statements, reports and notices sent or made available generally by Borrower
to its security holders or to any holders of Subordinated Debt;
(d) promptly upon receipt of notice thereof, a report of any legal
actions pending or threatened against Borrower or any Subsidiary that could
result in damages or costs to Borrower or any Subsidiary of Three Hundred
Thousand Dollars ($300,000) or more;
(e) prompt notice of any material change in the composition of the
Intellectual Property Collateral, including, but not limited to, any
subsequent ownership right of the Borrower in or to any Copyright, Patent or
Trademark not specified in any intellectual property security agreement
between Borrower and Bank or knowledge of an event that materially adversely
effects the value of the Intellectual Property Collateral; and
(f) such budgets, sales projections, operating plans or other financial
information as Bank may reasonably request from time to time.
Borrower shall deliver to Bank, together with the quarterly and annual
reports on Form 10-Q and 10-K required to be filed with the Securities and
Exchange Commission, a Compliance Certificate signed by a Responsible Officer
in substantially the form of Exhibit C hereto.
---------
6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
------------------
marketable condition, free from all material defects. Returns and allowances,
if any, as between Borrower and its account debtors shall be on the same basis
and in accordance with the usual customary practices of Borrower, as they exist
at the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to make,
-----
due and timely payment or deposit of all material federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrower will make, and will cause each Subsidiary to make,
timely payment or deposit of all material tax payments and withholding taxes
required of it by applicable laws, including, but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrower or a Subsidiary has made such payments or
deposits; provided that Borrower or a Subsidiary need not make any payment if
the amount or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by
Borrower.
6.6 Insurance.
---------
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain
insurance relating to Borrower's ownership and use of the Collateral in
amounts and of a type that are customary to businesses similar to Borrower's.
19
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All
such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional
loss payee thereof and all liability insurance policies shall show the Bank as
an additional insured, and shall specify that the insurer must give at least
twenty (20) days notice to Bank before canceling its policy for any reason.
Upon Bank's request, Borrower shall deliver to Bank certified copies of such
policies of insurance and evidence of the payments of all premiums therefor.
So long as no Event of Default has occurred and is continuing, Borrower shall
have the option of applying the proceeds of any casualty policy to the
replacement or repair of destroyed or damaged property; provided, that after
--------
the occurrence and during the continuance of an Event of Default, all proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
for application to the Obligations.
6.7 Bank Balances. Borrower shall maintain its principal operating
-------------
accounts with Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last day of each
-----------
fiscal quarter, a ratio of Quick Assets to Current Liabilities (minus deferred
revenues and Microsoft Debt) of at least 2.00 to 1.00. For purposes of this
Section, "Quick Assets" shall not include Microsoft Accounts to the extent the
proceeds of such Accounts service the Microsoft Debt.
6.9 Liquidity Coverage/Debt Service Coverage. Subject to the remainder
----------------------------------------
of this section, Borrower shall maintain, as of the last day of each fiscal
quarter, a Liquidity Ratio of at least 2.00 to 1.00. Notwithstanding the
foregoing, if Borrower attains two consecutive quarters of Debt Service Coverage
of not less than 1.50 to 1.00, then Liquidity Ratio will no longer be tested and
instead Borrower shall maintain, as of the last day of each of Borrower's fiscal
quarters, a Debt Service Coverage of at least 1.50 to 1.00. For purposes of
this Section, "Liquidity Ratio" means as of any date for which it is tested, the
ratio of (a) the sum of (i) cash and cash equivalents plus (ii) sixty percent
----
(60%) of Borrower's net accounts receivable minus (iii) any outstanding
-----
Revolving Advances, to (b) the aggregate outstanding amount of the Term Advance,
Equipment Facility A Advances, Equipment Facility B Advances, and Equipment
Facility C Advances.
6.10 Tangible Net Worth. Borrower shall maintain, as of the last day of
------------------
each fiscal quarter, a Tangible Net Worth of not less than Fifteen Million
Dollars ($15,000,000).
6.11 Registration of Intellectual Property Rights.
--------------------------------------------
(a) Borrower shall register or cause to be registered (to the
extent not already registered) with the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, those
intellectual property rights listed on Exhibits A, B and C to the Intellectual
Property Security Agreement delivered to Bank by Borrower in connection with
this Agreement within thirty (30) days of the date of this Agreement. Borrower
shall register or cause to be registered with the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, those
additional material intellectual property rights developed or acquired by
Borrower from time to time, including without limitation revisions or
additions to the intellectual property rights listed on such Exhibits A, B and
C, when Borrower reasonably determines that such registration is appropriate;
provided that Borrower shall in any case promptly register such additional
Patents, Trademarks and/or Copyrights as are developed or obtained in
connection with any product accounting for more than five percent (5%) of
Borrower's gross revenues in any calendar month.
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request
to perfect Bank's security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the validity
and enforceability of the Trademarks, Patents and Copyrights, (ii) use
commercially reasonable efforts to detect infringements of the Trademarks,
Patents and Copyrights and promptly advise Bank in writing of material
infringements detected and
20
(iii) not allow any Trademarks, Patents or Copyrights to be abandoned,
forfeited or dedicated to the public without the written consent of Bank,
which shall not be unreasonably withheld, unless Bank determines that
reasonable business practices suggest that abandonment is appropriate.
(d) Bank shall have the right, but not the obligation, to take,
at Borrower's sole expense, any actions that Borrower is required under this
Section to take but which Borrower fails to take, after fifteen (15) days'
notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise
of its rights under this Section.
6.12 Further Assurances. At any time and from time to time Borrower
------------------
shall execute and deliver such further instruments and take such further
action as may reasonably be requested by Bank to effect the purposes of this
Agreement.
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until payment in full of the outstanding Obligations or for so
long as Bank may have any commitment to make any Advances, Borrower will not do
any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
------------
of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than: (i)
Transfers of Inventory in the ordinary course of business; (ii) Transfers of
non-exclusive licenses or exclusive licenses for particular geographic regions
and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment or
Equipment financed by other vendors; (iv) Transfers which constitute
liquidation of Investments permitted under Section 7.7; (v) Transfers that
constitute payment of normal and usual operating expenses in the ordinary
course of business; or (v) other Transfers not otherwise permitted by this
Section 7.1 not exceeding One Hundred Thousand Dollars ($100,000) in the
aggregate in any fiscal year.
7.2 Change in Business. Engage in any business, or permit any of its
------------------
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto). Borrower will not, without thirty (30) days prior
written notification to Bank, relocate its chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
-----------------------
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person; provided
--------
that this Section 7.3 shall not apply to (i) the purchase of inventory,
equipment or intellectual property rights in any transaction valued at less than
15% of Borrower's Tangible Net Worth in the ordinary course of business or (ii)
transactions among Subsidiaries or among Borrower and its Subsidiaries in which
Borrower is the surviving entity.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
------------
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien with
------------
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution or
-------------
payment on account of or in redemption, retirement or purchase of any capital
stock; provided, that (i) Borrower may declare and make any dividend payment or
other distribution payable in its equity securities, (ii) Borrower may convert
any of its convertible securities into other securities pursuant to the terms of
such convertible securities or otherwise in exchange therefor and (iii) for so
long as an Event of Default has not occurred, Borrower may repurchase stock
21
from former employees of Borrower in accordance with the terms of repurchase
or similar agreements between Borrower and such employees.
7.7 Investments. Directly or indirectly acquire or own, or make any
-----------
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into or
----------------------------
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a nonaffiliated Person and except
for transactions with a Subsidiary that are upon fair and reasonable terms and
transactions constituting Permitted Investments.
7.9 Intellectual Property Agreements. Borrower shall not permit the
--------------------------------
inclusion in any material contract to which it becomes a party of any provisions
that could or might in any way prevent the creation of a security interest in
Borrower's rights and interests in any property included within the definition
of the Intellectual Property Collateral acquired under such contracts, except to
the extent that such provisions are necessary in Borrower's exercise of its
reasonable business judgment.
7.10 Subordinated Debt. Make any payment in respect of any Subordinated
-----------------
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any provision
contained in any documentation relating to the Subordinated Debt without Bank's
prior written consent.
7.11 Inventory. Store the Inventory with a bailee, warehouseman, or
---------
similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.12 Compliance. Become an "investment company" or become "controlled"
----------
by an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose.
Fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur, fail to comply
with the Federal Fair Labor Standards Act or violate any law or regulation,
which violation could have a Material Adverse Effect or a material adverse
effect on the Collateral or the priority of Bank's Lien on the Collateral, or
permit any of its Subsidiaries to do any of the foregoing.
7.13 Prohibition on Transfer of Assets. Transfer any of its property
---------------------------------
or assign or otherwise convey any right to receive income, including the sale of
any Accounts, to any Subsidiary, other than as permitted under the definition of
Permitted Investments.
8. EVENTS OF DEFAULT
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay the principal of, or any
---------------
interest on, any Advances when due and payable; or fails to pay any portion of
any other Obligations not constituting such principal or interest, including
without limitation Bank Expenses, within thirty (30) days of receipt by Borrower
of an invoice for such other Obligations;
22
8.2 Covenant Default. If Borrower fails to perform any obligation under
----------------
Sections 6.3, 6.7, 6.8, 6.9, 6.10, 6.11 or 6.12 or violates any of the covenants
contained in Article 7 of this Agreement, or fails or neglects to perform, keep,
or observe any other material term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Bank and as to any default
under such other term, provision, condition, covenant or agreement that can be
cured, has failed to cure such default within ten (10) days after Borrower
receives notice thereof or any Responsible Officer of Borrower becomes aware
thereof; provided, however, that if the default cannot by its nature be cured
within the ten (10) day period or cannot after diligent attempts by Borrower be
cured within such ten (10) day period, and such default is likely to be cured
within a reasonable time, then Borrower shall have an additional reasonable
period (which shall not in any case exceed thirty (30) days) to attempt to cure
such default, and within such reasonable time period the failure to have cured
such default shall not be deemed an Event of Default (provided that no Advances
will be required to be made during such cure period);
8.3 Material Adverse Change. If there occurs a material adverse change
-----------------------
in Borrower's business or financial condition or a material impairment of the
value or priority of Bank's security interests in the Collateral;
8.4 Attachment. If any material portion of Borrower's assets is
----------
attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any trustee, receiver or person acting in a
similar capacity and such attachment, seizure, writ or distress warrant or
levy has not been removed, discharged or rescinded within ten (10) days, or if
Borrower is enjoined, restrained, or in any way prevented by court order from
continuing to conduct all or any material part of its business affairs, or if
a judgment or other claim becomes a lien or encumbrance upon any material
portion of Borrower's assets, or if a notice of lien, levy, or assessment is
filed of record with respect to any of Borrower's assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, and the same is not paid
within ten (10) days after Borrower receives notice thereof, provided that
none of the foregoing shall constitute an Event of Default where such action
or event is stayed or an adequate bond has been posted pending a good faith
contest by Borrower (provided that no Advances will be required to be made
during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
----------
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement to which
----------------
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Million Dollars ($1,000,000) or
that could reasonably be expected to have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
-----------------
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money in an
---------
amount, individually or in the aggregate, of at least Three Hundred Thousand
Dollars ($300,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of thirty (30) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or material
------------------
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.
23
9. BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies. Upon the occurrence and during the continuance
-------------------
of an Event of Default, Bank may, at its election, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in Section
8.5 all Obligations shall become immediately due and payable without any
action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Without notice to or demand upon Borrower, make such payments
and do such acts as Bank considers necessary or reasonable to protect its
security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank
as Bank may designate. Borrower authorizes Bank to enter the premises where
the Collateral is located, to take and maintain possession of the Collateral,
or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien which in Bank's determination appears to be prior
or superior to its security interest and to pay all expenses incurred in
connection therewith. With respect to any of Borrower's owned premises,
Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(e) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right,
solely pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or
any property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral
and, in connection with Bank's exercise of its rights under this Section 9.1,
Borrower's rights under all licenses and all franchise agreements shall inure
to Bank's benefit;
(g) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the
Obligations in whatever manner or order Bank deems appropriate;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the Collateral
as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during the
-----------------
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or
24
security that may come into Bank's possession; (c) sign Borrower's name on any
invoice or ▇▇▇▇ of lading relating to any Account, drafts against account
debtors, schedules and assignments of Accounts, verifications of Accounts, and
notices to account debtors; (d) make, settle, and adjust all claims under and
decisions with respect to Borrower's policies of insurance; and (e) settle and
adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable;
(f) to modify, in its sole discretion, any intellectual property security
agreement entered into between Borrower and Bank without first obtaining
Borrower's approval of or signature to such modification by amending Exhibit A,
Exhibit B and Exhibit C, thereof, as appropriate, to include reference to any
right, title or interest in any Copyrights, Patents or Trademarks acquired by
Borrower after the execution hereof or to delete any reference to any right,
title or interest in any Copyrights, Patents or Trademarks in which Borrower no
longer has or claims any right, title or interest; (g) to file, in its sole
discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of Borrower
where permitted by law; and (h) to transfer the Intellectual Property Collateral
into the name of Bank or a third party to the extent permitted under the
California Uniform Commercial Code provided Bank may exercise such power of
attorney to sign the name of Borrower on any of the documents described in
Section 4.2 regardless of whether an Event of Default has occurred. The
appointment of Bank as Borrower's attorney in fact, and each and every one of
Bank's rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and Bank's
obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. At any time from the date of this Agreement,
-------------------
Bank may notify any Person owing funds to Borrower of Bank's security interest
in such funds and verify the amount of such Account. Upon the occurrence and
during the continuation of an Event of Default, Borrower shall collect all
amounts owing to Borrower for Bank, receive in trust all payments as Bank's
trustee, and immediately deliver such payments to Bank in their original form
as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any
-------------
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following: (a)
make payment of the same or any part thereof; (b) set up such reserves under the
Revolving Facility as Bank deems necessary to protect Bank from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or
deposited by Bank shall constitute Bank Expenses, shall be immediately due and
payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement. Bank shall
have a non-exclusive, royalty-free license to use the Intellectual Property
Collateral to the extent reasonably necessary to permit Bank to exercise its
rights and remedies upon the occurrence of an Event of Default.
9.5 Bank's Liability for Collateral. So long as Bank complies with its
-------------------------------
obligations under Section 9207 of the Code, Bank shall not in any way or manner
be liable or responsible for: (a) the safekeeping of the Collateral; (b) any
loss or damage thereto occurring or arising in any manner or fashion from any
cause; (c) any diminution in the value thereof; or (d) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other person whomsoever.
Subject to the foregoing, all risk of loss, damage or destruction of the
Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
-------------------
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one
right or remedy shall be deemed an election, and no waiver by Bank of any
Event of Default on Borrower's part shall be deemed a continuing waiver. No
delay by Bank shall constitute a waiver, election, or acquiescence by it. No
waiver by Bank shall be effective unless made in a written document signed on
behalf of Bank and then shall be effective only in the specific instance and
for the specific purpose for which it was given.
25
9.7 Demand; Protest. Borrower waives demand, protest, notice of
---------------
protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees at any time held by Bank on which Borrower may in any
way be liable.
10. NOTICES
-------
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: Inktomi Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
If to Bank: Silicon Valley Bank
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
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 the other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
------------------------------------------
The Loan Documents shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to
principles of conflicts of law. Each of Borrower and Bank hereby submits to
the exclusive jurisdiction of the state and Federal courts located in the
County of Santa ▇▇▇▇▇, State of California. BORROWER AND BANK EACH HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH
PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
------------------
12.1 Successors and Assigns.
----------------------
(a) This Agreement shall bind and inure to the benefit of the
respective successors and permitted assigns of each of the parties; provided,
--------
however, that neither this Agreement nor any rights hereunder may be assigned
-------
by Borrower without Bank's prior written consent, which consent may be granted
or withheld in Bank's sole discretion. Bank shall have the right without the
consent of or notice to Borrower to sell, transfer, negotiate, or grant
participations in all or any part of, or any interest in, Bank's obligations,
rights and benefits hereunder, subject to the provisions of this Section 12.1.
26
(b) Bank may sell, negotiate or grant participations to other
financial institutions in all or part of the obligations of the Borrower
outstanding under the Loan Documents, without notice to or the approval of
Borrower; provided that any such sale, negotiation or participation shall be
--------
in compliance with the applicable federal and state securities laws and the
other requirements of this Section 12.1. Notwithstanding the sale, negotiation
or grant of participations, Bank shall remain solely responsible for the
performance of its obligations under this Agreement, and Borrower shall
continue to deal solely and directly with Bank in connection with this
Agreement and the other Loan Documents.
(c) The grant of a participation interest shall be on such terms
as Bank determines are appropriate, provided only that (1) the holder of such
a participation interest shall not have any of the rights of Bank under this
Agreement except, if the participation agreement so provides, rights to demand
the payment of costs of the type described in Section 2.6, provided that the
aggregate amount that the Borrower shall be required to pay under Section 2.6
with respect to any ratable share of the Committed Line or any Advance
(including amounts paid to participants) shall not exceed the amount that
Borrower would have had to pay if no participation agreements had been entered
into, and (2) the consent of the holder of such a participation interest shall
not be required for amendments or waivers of provisions of the Loan Agreement
other than those which (i) increase the amount of the Committed Line, (ii)
extend the term of this Agreement, (iii) decrease the rate of interest or the
amount of any fee or any other amount payable to Bank under this Agreement,
(iv) reduce the principal amount payable under this Agreement, or (v) extend
the date fixed for the payment of principal or interest or any other amount
payable under this Agreement.
(d) Bank may assign, from time to time, all or any portion of the
Committed Line to an Affiliate of Bank or to The Federal Reserve Bank or,
subject to the prior written approval of Borrower (which approval will not be
unreasonably withheld), to any other financial institution; provided, that (i)
the amount of the Committed Line being assigned pursuant to each such
assignment shall in no event be less than Five Hundred Thousand Dollars
($500,000) and shall be an integral multiple of One Hundred Thousand Dollars
($100,000) and (ii) the parties to each such assignment shall execute and
deliver to Borrower an assignment agreement in a form reasonably acceptable to
each. Upon such execution and delivery, from and after the effective date
specified in such assignment agreement (x) the assignee thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such assignment agreement, have the rights and
obligations of a Bank hereunder and (y) Bank shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such assignment
agreement, relinquish its rights and be released from its obligations under
this Agreement (other than pursuant to this Section 12.1(d)), and, in the case
of an assignment agreement covering all or the remaining portion of Bank's
rights and obligations under this Agreement, Bank shall cease to be a party
hereto. In the event of an assignment hereunder, the parties agree to amend
this Agreement to the extent necessary to reflect the mechanical changes which
are necessary to document such assignment. Each party shall bear its own
expenses (including without limitation attorneys' fees and costs) with respect
to such an amendment.
12.2 Indemnification. Borrower shall defend, indemnify and hold harmless
---------------
Bank and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by the Loan Documents and (b) all
losses or Bank Expenses in any way suffered, incurred, or paid by Bank as a
result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance of all
---------------
obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement shall
--------------------------
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
27
12.5 Amendments in Writing, Integration. This Agreement cannot be
----------------------------------
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in
--------
this Agreement shall continue in full force and effect so long as any
Obligations (excluding Obligations under Section 2.6 and 12.2 to the extent
they remain inchoate at the time the outstanding payment Obligations are paid
in full) remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 Confidentiality. In handling any confidential information Bank
---------------
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Loans, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower, (iii) as required by law, regulations, rule or order, subpoena,
judicial order or similar order, (iv) as may be required in connection with the
examination, audit or similar investigation of Bank and (v) as Bank may
determine in connection with the enforcement of any remedies hereunder.
Confidential information hereunder shall not include information that either:
(a) is in the public domain or in the knowledge or possession of Bank when
disclosed to Bank, or becomes part of the public domain after disclosure to Bank
through no fault of Bank; or (b) is disclosed to Bank by a third party, provided
Bank does not have actual knowledge that such third party is prohibited from
disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
INKTOMI CORPORATION
By:_______________________________
Title:____________________________
SILICON VALLEY BANK
By:_______________________________
Title:____________________________
28
EXHIBIT A
---------
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all 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 now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs,
computer discs, 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, 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, securities, investment
property, securities accounts, securities entitlements, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter
acquired; all trade secret rights, including all rights to unpatented
inventions, know-how, operating manuals, license rights and agreements and
confidential information, now owned or hereafter acquired; all mask work or
similar rights available for the protection of semiconductor chips, now owned
or hereafter acquired; all claims for damages by way of any past, present and
future infringement of any of the foregoing; and
(g) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.
Subject to the next sentence, the Collateral shall not include Equipment
that Borrower leases from a third party or Equipment that is financed by a
third party to the extent that contracts evidencing such lease or financing
prohibit the granting of a security interest therein to Bank. The term
"Collateral" shall not include any general intangibles or contract rights of
Borrower (whether owned or held as licensee or lessee, or otherwise) to the
extent that (i) such general intangibles or contract rights are not assignable
or capable of being encumbered as a matter of law or under the terms of the
license, lease or other agreement applicable thereto (but solely to the extent
that such restriction shall be enforceable under applicable law) without the
consent of the licensor or lessor thereof or other applicable party thereto
and (ii) such consent has not been obtained: provided, however, that
-------- -------
"Collateral" shall include, (A) any general intangible or contract right which
is an Account or a proceed of, or otherwise related to the enforcement or
collection of, any Account or goods which are the subject of any Account, and
(B) any and all
proceeds of any general intangibles or contract rights which are otherwise
excluded to the extent that the assignment or encumbrance of such proceeds is
not so restricted, and (C) upon obtaining the consent of any such licensor,
lessor, or other applicable party with respect to any such otherwise excluded
general intangibles, contract rights and Equipment, such general intangibles,
contract rights and Equipment as well as any and all proceeds thereof that
might theretofore have been excluded from the term "Collateral."
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
FAX#: (▇▇▇) ▇▇▇-▇▇▇▇ TIME:
________________________________________________________________________________
FROM: Inktomi Corporation
---------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
-------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
-----------------------------------------------------------
PHONE NUMBER:
-------------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
------------------ ----------------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
PRINCIPAL INCREASE (REVOLVING ADVANCE) $_______________________________
PRINCIPAL INCREASE (TERM ADVANCE)
PRINCIPAL INCREASE (EQUIPMENT ADVANCE) $_______________________________
PRINCIPAL PAYMENT (ONLY)
INTEREST PAYMENT (ONLY)
PRINCIPAL AND INTEREST (PAYMENT)
OTHER INSTRUCTIONS:_____________________________________________________________
________________________________________________________________________________
All representations and warranties of Borrower stated in the Loan and Security
Agreement are true, correct and complete in all material respects as of the date
of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
________________________________________________________________________________
________________________________________________________________________________
BANK USE ONLY
TELEPHONE REQUEST:
-----------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
------------------------------
Authorized Requester Phone #
------------------------------
Received By (Bank) Phone #
-------------------------------------
Authorized Signature (Bank)
________________________________________________________________________________
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: INKTOMI CORPORATION
The undersigned authorized officer of Inktomi Corporation hereby
certifies that in accordance with the terms and conditions of the Amended and
Restated Loan and Security Agreement between Borrower and Bank (the
"Agreement"), (i) Borrower is in complete compliance for the period ending
________ with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true
and correct in all material respects as of the date hereof. Attached herewith
are the required documents supporting the above certification. The Officer
further certifies that these are prepared in accordance with Generally
Accepted Accounting Principles (GAAP) and are consistently applied from one
period to the next except as explained in an accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
10-Q & CC Quarterly within 45 days Yes No
10-K & ▇▇ ▇▇▇ within 120 days Yes No
A/R & A/P Agings Within 20 days of request Yes No
Financial Covenant REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Minimum Quick Ratio 2.0:1.0/1/ _____:1.0 Yes No
Liquidity Ratio/2/ 2.0:1.0 _____:1.0 Yes No
Debt Service Coverage/3/ 1.5:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $15,000,000 $________ Yes No
/1/ Quick Assets excludes Microsoft Accounts that service Microsoft Debt;
Current Liabilities excludes deferred revenues and Microsoft Debt.
/2/ Converts to Debt Service Coverage upon two consecutive quarters of DSC of at
least 1.50:1.0.
/3/ Tested after conversion of Liquidity Ratio.
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
__________________________________
BANK USE ONLY
SIGNATURE
Received by:_____________________
AUTHORIZED SIGNER
TITLE
Date:____________________________
DATE Verified:________________________
AUTHORIZED SIGNER
Date:____________________________
Compliance Status: Yes No
__________________________________
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: Inktomi Corporation Bank: Silicon Valley Bank
LOAN TYPE. This is a variable rate, revolving line of credit of up to
$2,500,000, a previously advanced term facility of $2,000,000, a previously
advanced equipment facility of $1,750,000, an equipment facility of up to
$2,000,000, and an equipment facility of up to $5,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working
Capital and purchase of Equipment.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line Equipment Line
-------------- --------------
Amount paid to Borrower directly: $___________ $___________
Undisbursed Funds $___________ $___________
Principal $___________ $___________
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Prepaid Finance Charges Paid in Cash: $________
$25,000 Loan Fees
Other Charges Paid in Cash: $________
$TBD UCC Search Fees
$TBD UCC Filing Fees
$TBD Patent Filing Fees
$TBD Trademark Filing Fees
$TBD Copyright Filing Fees
$TBD Outside Counsel Fees and Expenses (Estimate)
Total Charges Paid in Cash $________
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct
from Borrower's account numbered ______________ the amount of any loan payment.
If the funds in the account are insufficient to cover any payment, Bank shall
not be obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF SEPTEMBER 2, 1998.
BORROWER:
Inktomi Corporation
Authorized Officer
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: Inktomi Corporation BANK: Silicon Valley Bank
INSURANCE REQUIREMENTS. Inktomi Corporation ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or the
providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be canceled or diminished
without a minimum of twenty (20) days' prior
written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of September 2, 1998, or earlier. Grantor acknowledges and agrees
that if Grantor fails to provide any required insurance or fails to continue
such insurance in force, Bank may do so at Grantor's expense as provided in the
Amended and Restated Loan and Security Agreement. The cost of such insurance, at
the option of Bank, shall be payable on demand or shall be added to the
indebtedness as provided in the security document. GRANTOR ACKNOWLEDGES THAT IF
BANK SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED
PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE
LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN
ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER 2,
1998.
GRANTOR: Inktomi Corporation
x
Authorized Officer
================================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:
================================================================================
CORPORATE RESOLUTIONS TO BORROW
BORROWER: INKTOMI CORPORATION
I, the undersigned Secretary or Assistant Secretary of Inktomi
Corporation (the "Corporation"), HEREBY CERTIFY that the Corporation is
organized and existing under and by virtue of the laws of the State of
California.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Articles of Incorporation and Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation,
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
------------------------------------------------------------------
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Amended and Restated Loan and Security Agreement dated as of September
2, 1998 (the "Loan Agreement").
EXECUTE NOTES. To execute and deliver to Bank the promissory note or
notes of the Corporation, on Bank's forms, at such rates of interest and on such
terms as may be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of the Corporation to Bank, and also to execute and deliver to Bank
one or more renewals, extensions, modifications, refinancings, consolidations,
or substitutions for one or more of the notes, or any portion of the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to
receive cash for the same or to cause such proceeds to be credited to the
account of the Corporation with Bank, or to cause such other disposition of the
proceeds derived therefrom as they may deem advisable.
LETTERS OF CREDIT; FOREIGN EXCHANGE. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
FURTHER ACTS. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances thereunder, and
in all cases, to do and perform such other acts and things, to pay any and all
fees and costs, and to execute and deliver such other documents and agreements
as they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the Corporation;
and that the Resolutions are in full force and effect and have not been modified
or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on September 2, 1998 and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X
Attachment 1 - Articles of Incorporation
Attachment 2 - Bylaws
