1
EXHIBIT 10.10
SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
BORROWER: U.S. OnLine Communications, Inc.
ADDRESS: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
DATE: July 21, 1998
THIS LOAN AND SECURITY AGREEMENT is entered into as of the above date
between SILICON VALLEY BANK ("Silicon"), whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and the borrower named above (the "Borrower"),
whose chief executive office are located at the above address ("Borrower's
Address"). This Agreement replaces that certain Loan and Security Agreement
between U.S. OnLine Communications, L.L.C., U.S. On-Line Cable, L.L.C., and
Silicon, dated as of December 2, 1996, as amended and modified from time to time
(the "Original Agreement"). Borrower is the successor, pursuant to an Asset
Acquisition Agreement dated as of March 27, 1998, to the limited liability
companies identified above, and Borrower has agreed to assume all obligations of
the limited liability companies under the Original Agreement.
1. LOANS.
1.1 Loans. Silicon will make one or more loans to the Borrower (the
"Loans") up to the amounts (the "Credit Limits") shown on the Schedule to this
Agreement (the "Schedule") as the Credit Limit for such loans. The terms of the
Loans are stated in this Agreement and in the Schedule. The terms of the
Schedule are incorporated into this Agreement. The Borrower is responsible for
monitoring the total amount of Loans and other Obligations outstanding from time
to time, and the Borrower shall not permit the amount of any Loan to exceed at
any time the applicable Credit Limit for such Loan. The Borrower shall not
permit the total amount of Loans and all other Obligations to exceed at any time
the aggregate Credit Limit for the Loans. If at any time the total of all
outstanding Loans and all other Obligations exceeds the aggregate Credit Limit,
the Borrower shall immediately pay the amount of the excess to Silicon, without
notice or demand.
1.2 Interest; Debit to Deposit Accounts. All Loans and all other
monetary Obligations shall bear interest at the applicable rates shown on the
Schedule. Interest shall be payable monthly, on the due date shown on the
monthly billing from Silicon to the Borrower. The Borrower hereby requests and
authorizes Silicon to debit any of the Borrower's accounts with Silicon,
including without limitation account no. xxxxxxxxxx, for payments of interest
and principal due on the Loans and all other obligations owing by the Borrower
to Silicon. Silicon shall promptly notify the Borrower of all debits which
Silicon makes against the Borrower's accounts. Any such debit against the
Borrower's accounts shall in no way be deemed a setoff by Silicon.
Page 1 - LOAN AND SECURITY AGREEMENT
2
1.3 Fees. The Borrower shall pay to Silicon at closing a commitment fee
and other fees in the amounts shown on the Schedule. These fees are in addition
to all interest and other sums payable to Silicon and are not refundable.
1.4 Additional Costs. In case of any change (after the date of this
Agreement) 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) which:
(a) subjects Silicon to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by the Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income or net assets or net capital of Silicon imposed by the
United States of America, any state 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, Silicon; or
(c) imposes upon Silicon any other condition with respect to
its performance under this Agreement,
and the result of such change is to increase the cost to Silicon, reduce the
income receivable by Silicon or impose any expense upon Silicon with respect to
the Loans, Silicon shall notify the Borrower thereof. Borrower agrees to pay to
Silicon 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 Silicon of a statement of the amount and setting forth
Silicon's calculation thereof, all in reasonable detail, which statement shall
be deemed true and correct absent manifest error.
2. GRANT OF SECURITY INTEREST.
2.1 Obligations. The term "Obligations" as used in this Agreement means
the following: the obligation to pay all Loans and all interest on the Loans
when due, and to pay and perform when due all other present and future
indebtedness, liabilities, obligations, guarantees, covenants, agreements,
warranties and representations of the Borrower to Silicon, whether joint or
several, monetary or non-monetary, and whether created pursuant to this
Agreement or any other present or future agreement (such as future agreements
relating to letters of credit issued by Silicon) or otherwise. Silicon may, in
its discretion, require that the Borrower pay monetary Obligations in cash to
Silicon, or charge them to the Borrower's Loan account, in which event they
shall bear interest at the rates applicable to the Loan to which such amounts
are charged.
2.2 Collateral. As security for all Obligations, Borrower hereby grants
Silicon a continuing security interest in all of Borrower's assets, including
but not limited to all of the Borrower's interest in the types of property
described below, whether now owned or hereafter acquired, and wherever located
(collectively, the "Collateral"): (a) all accounts, contract rights, chattel
paper, letters of credit, documents, securities, money, and instruments, and all
other obligations now or in the future owing to the Borrower; (b) all inventory,
goods, merchandise, materials, raw materials, work in process, finished
Page 2 - LOAN AND SECURITY AGREEMENT
3
goods, farm products, advertising, packaging and shipping materials, supplies,
and all other tangible personal property which is held for sale or lease or
furnished under contracts of service or consumed in the Borrower's business, and
all warehouse receipts and other documents; (c) all equipment, including without
limitation all machinery, fixtures, trade fixtures, vehicles, furnishings,
furniture, materials, tools, machine tools, office equipment, computers and
peripheral devices, appliances, apparatus, parts, dies, and jigs; (d) all
general intangibles including, but not limited to, deposit accounts, goodwill,
names, trade names, trademarks and the goodwill of the business symbolized
thereby, trademark applications, trade secrets, drawings, blueprints, customer
lists, patents, patent applications, copyrights, copyright applications,
security deposits, loan commitment fees, federal, state and local tax refunds
and claims, all rights in all litigation presently or hereafter pending for any
cause or claim (whether in contract, tort or otherwise), and all judgments now
or hereafter arising therefrom, all rights to purchase or sell real or personal
property, all rights as a licensor or licensee of any kind, all royalties,
licenses, processes, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation
credit, liability, property and other insurance), and all other rights,
privileges and franchises of every kind; (e) all books and records, whether
stored on computers or otherwise maintained; (f) all of the Borrower's cash; and
(g) all substitutions, additions and accessions to any of the foregoing, and all
products, proceeds and insurance proceeds of the foregoing, and all guaranties
of and security for the foregoing; and all books and records relating to any of
the foregoing. Silicon's security interest in any present or future technology
(including patents, trade secrets, and other technology) shall be subject to any
licenses or rights now or in the future granted by the Borrower to any third
parties, or by third parties to the Borrower in the ordinary course of the
Borrower's business; provided that if the Borrower proposes to sell, license or
grant any other rights with respect to any technology in a transaction that, in
substance, conveys a major part of the economic value of that technology,
Silicon shall first be requested to release its security interest, and Silicon
may withhold such release in its discretion. The Borrower shall not, either
directly or through any agent, employee, licensee or designee, (a) file an
application for the registration of any patent, trademark, or copyright with the
U.S. Patent and Trademark Office, the U.S. Copyright Office, or any similar
office or agency in any other country, state, or any political subdivision (the
"Offices"), or (b) file any assignment of any patent, trademark, or copyright
which the Borrower may acquire from a third party with any one of the Offices
unless the Borrower shall, on or prior to the date of such filing, notify
Silicon of such filing, and, upon request of Silicon, execute and deliver any
and all assignments, agreements, instruments, documents and papers as Silicon
may request to evidence Silicon's interest in such patents, trademarks, or
copyrights, as the case may be, including the goodwill and general intangibles
of the Borrower relating thereto or represented thereby. The Borrower authorizes
Silicon to amend any applicable notice of security interest or assignment
executed pursuant to Section 4.9 of this Agreement without first obtaining the
Borrower's approval of or signature to such amendment and to record such
assignment with one or more of the Offices, on terms and conditions consistent
with this Agreement.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
Borrower represents and warrants to Silicon as follows, and Borrower
covenants that the following representations shall continue to be true, and that
each Borrower shall comply with all of the following covenants:
3.1 Existence and Authority. Borrower is and shall continue to be duly
incorporated and validly existing under the laws of the state of its formation,
as identified on the copy of the Borrower's Certificate of Incorporation
delivered to Silicon. The Borrower is and shall continue to be qualified and
Page 3 - LOAN AND SECURITY AGREEMENT
4
licensed to do business in all jurisdictions in which any failure to do so would
have a material adverse effect on the Borrower. The execution, delivery and
performance by the Borrower of this Agreement, and all other documents executed
by the Borrower in connection with the Loans have been duly and validly
authorized, are enforceable against the Borrower in accordance with their terms,
and do not violate any law or any provision of, and are not grounds for
acceleration of any indebtedness under the Borrower's Certificate of
Incorporation, Bylaws or any other agreement or instrument that is binding upon
the Borrower.
3.2 Name, Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on an Exhibit to the
Schedule are all prior names of the Borrower and all of the Borrower's present
and prior trade names. Borrower shall give Silicon 15 days' prior written notice
before changing its name or doing business under any other name. The Borrower
has complied, and shall in the future comply, with all laws relating to the
conduct of business under a fictitious business name.
3.3 Place of Business; Location of Collateral. The Austin, Texas
address set forth in the heading to this Agreement is the chief executive office
for U.S. OnLine Communications, Inc. In addition, the Borrower has places of
business only at, and Collateral of the Borrower is located only at, the
locations set forth on the Schedule. Borrower shall give Silicon at least 15
days' prior written notice before changing its chief executive office or moving
Collateral (other than inventory sold or otherwise disposed of in the ordinary
course of business) to any location outside of the states identified on the
Schedule. The Borrower shall supplement the Schedule by informing Silicon in
writing on a quarterly basis as to the location of Collateral not listed on the
Schedule.
3.4 Title to Collateral; Permitted Liens. The Borrower is now, and
shall at all times in the future be, the sole owner of all the Collateral,
except for items of equipment that are leased by the Borrower. The Collateral
now is and shall remain free and clear of any and all liens, charges, security
interests, encumbrances and adverse claims, except for the following ("Permitted
Liens"): (a) purchase money security interests in specific items of equipment,
other than equipment financed by the Loans; (b) leases of specific items of
equipment; (c) liens for taxes not yet payable and mechanics', materialmens' and
other similar liens which arise by operation of law for obligations which are
not yet payable; (d) additional security interests and liens consented to in
writing by Silicon in its sole discretion; and (e) security interests being
terminated substantially concurrently with this Agreement. Notwithstanding the
foregoing clause (c), Borrower may challenge the validity of liens described in
clause (c), pursuant to proceedings diligently pursued in good faith, provided
that the Borrower shall establish adequate reserves for the satisfaction and
discharge of such liens in the event such proceedings are determined adversely
to Borrower. Silicon shall have the right to require, as a condition to its
consent under subparagraph (d) above, that the holder of the additional security
interest or lien sign an intercreditor agreement on terms satisfactory to
Silicon in its sole discretion, acknowledge that the holder's security interest
is subordinate to Silicon's security interest. Silicon now has, and shall
continue to have, a first priority, perfected and enforceable security interest
in all of the Collateral. The Collateral shall not be subject to any other liens
or security interests of any type except for the Permitted Liens. The Borrower
shall at all times defend Silicon and the Collateral against all claims of
others. None of the Collateral (other than cable, wiring, conduit or leasehold
improvements) now is or shall be affixed to any real property in such a manner,
or with such intent, as to become a fixture. Notwithstanding anything to the
contrary in this Section 3.4, the unregistered trademark "U.S. OnLine
Communications and design" and unregistered copyright for the "CTM Software"
(each as described in the Intellectual Property Security
Page 4 - LOAN AND SECURITY AGREEMENT
5
Agreement), shall be as follows: Borrower represents that to the best of its
knowledge, it is the sole owner of such trademark and copyright, and shall use
commercially reasonable efforts to save and protect such rights free and clear
of any and all liens, charges, security interests, encumbrances and adverse
claims other than Permitted Liens.
3.5 Maintenance of Collateral. The Borrower shall maintain the
Collateral in good working condition. The Borrower shall not use the Collateral
for any unlawful purpose. The Borrower shall immediately advise Silicon in
writing of any material loss or damage to the Collateral.
3.6 Books and Records. The Borrower has maintained and shall maintain
at such Borrower's Address complete and accurate books and records, comprising
an accounting system in accordance with generally accepted accounting
principles.
3.7 Financial Condition and Statements. All financial statements now or
in the future delivered to Silicon have been, and shall be, prepared in
conformity with generally accepted accounting principles and now and in the
future shall completely and accurately reflect the financial condition of the
Borrower, at the times and for the periods therein stated. Since the last date
covered by any such statement, there has been no material adverse change in the
financial condition or business of the Borrower. The Borrower is now and shall
continue to be solvent.
3.8 Tax Returns and Payments; Pension Contributions. The Borrower has
timely filed, and shall timely file, all material tax returns and reports
required by foreign, federal, state and local law. The Borrower has timely paid,
and shall timely pay, all material foreign, federal, state and local taxes,
assessments, deposits and contributions now or in the future owed by the
Borrower. The Borrower may, however, defer payment of any contested taxes,
provided that the Borrower (a) in good faith contests the Borrower's obligation
to pay the taxes by appropriate proceedings promptly and diligently instituted
and conducted, (b) notifies Silicon in writing of the commencement of, and any
material development in, the proceedings, and (c) posts bonds or takes any other
steps required to keep the contested taxes from becoming a lien upon any of the
Collateral. The Borrower is unaware of any claims or adjustments proposed for
any of the Borrower's prior tax years which could result in additional taxes
becoming due and payable by the Borrower. The Borrower has paid, and shall
continue to pay all amounts necessary to fund all present and future pension,
profit sharing and deferred compensation plans in accordance with their terms.
The Borrower has not and shall not withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any such plan which could result in any liability of the
Borrower, including, without limitation, any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
3.9 Compliance with Law. Except as disclosed in the Schedule, the
Borrower has complied, and shall comply, in all material respects, with all
provisions of all material foreign, federal, state and local laws and
regulations relating to the Borrower, including, but not limited to, those
relating to ownership of real or personal property, conduct and licensing of the
Borrower's business, and environmental matters.
3.10 Litigation. Except as disclosed in the Schedule, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of the
Borrower's knowledge) threatened by or against or affecting the Borrower in any
court or before any governmental agency (or any basis therefor known to the
Borrower) which may result, either separately or in the aggregate, in any
material adverse change in
Page 5 - LOAN AND SECURITY AGREEMENT
6
the financial condition or business of the Borrower, or in any material
impairment in the ability of the Borrower to carry on its business in
substantially the same manner as it is now being conducted. The Borrower shall
promptly inform Silicon in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted by or against the Borrower
involving amounts in excess of $100,000.
3.11 Use of Proceeds. All proceeds of all Loans shall be used solely
for lawful business purposes.
3.12 No Patents or Trademarks. The Borrower does not own, and the
Borrower does not have pending any application for the registration of, any
patent or trademark with the U.S. Patent and Trademark Office or any similar
office or agency of any state, of the United States of America or of any foreign
jurisdiction except as disclosed in the Schedule.
3.13 Hazardous Substances. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used in this
Agreement, shall have the same meanings as set forth in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499 ("▇▇▇▇"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. The Borrower represents and warrants that: (a) the Borrower
has no knowledge of (i) any use, generation, manufacture, storage, treatment,
disposal, release, or threatened release of any hazardous waste or substance by
any prior owners or occupants of any of the real properties owned or operated by
the Borrower except in compliance with all applicable federal, state, and local
laws, regulations, and ordinances, including without limitation those laws,
regulations and ordinances described above, or (ii) any actual or threatened
litigation or claims of any kind by any person relating to such matters; (b)
neither the Borrower nor any subtenant, contractor, agent or other user
authorized by Borrower of any of the real properties shall use, generate,
manufacture, store, treat, dispose of, or release any hazardous waste or
substance on, under, or about any of the real properties owned or operated by
the Borrower except in compliance with all applicable federal, state, and local
laws, regulations, and ordinances, including without limitation those laws,
regulations and ordinances described above. Any inspections or tests made by
Silicon shall be for Silicon's purposes only and shall not be construed to
create any responsibility or liability on the part of Silicon to the Borrower or
to any other person. The Borrower hereby (a) releases and waives any future
claims against Silicon for indemnity or contribution in the event the Borrower
becomes liable for cleanup or other costs under any such laws, and (b) agrees to
indemnify and hold harmless Silicon against any and all claims, losses,
liabilities, damages, penalties, and expenses which Silicon may directly or
indirectly sustain or suffer resulting from a breach of this Section of the
Agreement or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior to the Borrower's
ownership or interest in the real properties, whether or not the same was or
should have been known to the Borrower. The provisions of this Section of the
Agreement, including the obligation to indemnify, shall survive the payment of
the obligations and the termination or expiration of this Agreement and shall
not be affected by Silicon's acquisition of any interest in any of the real
properties, whether by foreclosure or otherwise.
Page 6 - LOAN AND SECURITY AGREEMENT
7
4. ADDITIONAL DUTIES OF THE BORROWER.
4.1 Financial and Other Covenants. The Borrower shall at all times
comply with the financial and other covenants set forth in the Schedule.
4.2 Overadvance; Proceeds of Accounts. If for any reason the total of
all outstanding Loans and all other Obligations exceeds the total Credit Limit,
as stated in the Schedule, without limiting Silicon's other remedies, during
such time as an Event of Default continues, the Borrower shall remit to Silicon
all checks and other proceeds of the Borrower's accounts and general
intangibles, in the same form as received by the Borrower, within one day after
the Borrower's receipt of the same, to be applied to the Obligations in such
order as Silicon shall determine in its discretion.
4.3 Insurance. The Borrower shall at all times insure all of the
tangible personal property Collateral and carry such other business insurance,
with insurers reasonably acceptable to Silicon, in such form and amounts as
Silicon may reasonably require. All such insurance policies shall name Silicon
as an additional loss payee, and shall contain a lenders loss payee endorsement
in form reasonably acceptable to Silicon. Upon receipt of the proceeds of any
such insurance, Silicon shall apply such proceeds in reduction of the
Obligations as Silicon shall determine in its sole and absolute discretion,
except that, provided no Event of Default has occurred, Silicon shall release to
the Borrower insurance proceeds with respect to equipment totaling less than
$100,000, which shall be utilized by the Borrower for the replacement of the
equipment with respect to which the insurance proceeds were paid. Silicon may
require reasonable assurance that the insurance proceeds so released shall be so
used. If the Borrower fails to provide or pay for any insurance, Silicon may,
but is not obligated to, obtain the same at the Borrower's expense. The Borrower
shall promptly deliver to Silicon copies of all reports made to insurance
companies. Statutory notice regarding insurance:
WARNING
Unless you provide us with evidence of the insurance coverage as
required by our contract or loan agreement, we may purchase insurance at your
expense to protect our interest. This insurance may, but need not, also protect
your interest. If the collateral becomes damaged, the coverage we purchase may
not pay any claim you make or any claim made against you. You may later cancel
this coverage by providing evidence that you have obtained property coverage
elsewhere.
You are responsible for the cost of any insurance purchased by us. The
cost of this insurance may be added to your contract or loan balance. If the
cost is added to your contract or loan balance, the interest rate on the
underlying contract or loan will apply to this added amount. The effective date
of coverage may be the date your prior coverage lapsed or the date you failed to
provide proof of coverage.
This coverage we purchase may be considerably more expensive than
insurance you can obtain on your own and may not satisfy any need for property
damage coverage or any mandatory liability insurance requirements imposed by
applicable law.
4.4 Report. The Borrower shall provide Silicon with such written
reports with respect to the Borrower as Silicon shall from time to time
reasonably specify, including but not limited to the financial reports required
as stated in the Schedule.
Page 7 - LOAN AND SECURITY AGREEMENT
8
4.5 Access to Collateral, Books and Records. At all reasonable times,
and upon one business day notice, Silicon, or its agents, shall have the right
to inspect the Collateral, and the right to audit and copy the Borrower's
accounting books, records, ledgers, journals, or registers and the Borrower's
books and records relating to the Collateral, provided that no prior notice is
required upon the occurrence and continuation of an Event of Default. Silicon
shall take reasonable steps to keep confidential all information obtained in any
such inspection or audit, but Silicon shall have the right to disclose any such
information to its auditors, regulatory agencies and attorneys, and pursuant to
any subpoena or other legal process. The Borrower shall reimburse Silicon for
Silicon's actual costs for conducting two such audits per year, in an amount not
to exceed $5,000 per year. Silicon may debit the Borrower's deposit accounts
with Silicon for the cost of such audits, in which event Silicon shall send
notification thereof to the Borrower.
4.6 Negative Covenants. Except as may be expressly permitted in the
Schedule, the Borrower shall not, without Silicon's prior written consent, do
any of the following: (a) merge or consolidate with another corporation,
partnership or limited liability company, except that Borrower may merge or
consolidate with another corporation, partnership or limited liability company
if the Borrower is the surviving company in the merger and the aggregate value
of the assets acquired in the merger does not exceed 25% of the Borrower's
Tangible Net Worth (as defined in the Schedule) as of the end of the month prior
to the effective date of the merger, and the assets of the entity acquired in
the merger are not subject to any liens or encumbrances, except Permitted Liens;
(b) acquire any assets, including stock of any other entity, outside the
ordinary course of business for an aggregate purchase price (whether paid in
cash, in stock of the Borrower or other consideration) exceeding 25% of the
Borrower's Tangible Net Worth (as defined in the Schedule) as of the end of the
month prior to the effective date of the acquisition; (c) enter into any other
transaction outside the ordinary course of business; (d) sell or transfer any
Collateral, except for the sale of finished inventory in the ordinary course of
the Borrower's business or in connection with the disposition of obsolete or
worn goods, equipment or inventory; (e) make any loans of any money or any other
assets to shareholders, employees or any other person except in the ordinary
course of business; (f) incur any debts (other than indebtedness that is
subordinated to the Obligations pursuant to a written subordination agreement in
form and substance satisfactory to Silicon) that are outside the ordinary course
of business or that would have a material, adverse effect on the Borrower or on
the prospect of repayment of the Obligations; (g) guarantee or otherwise become
liable with respect to the obligations of another party or entity; (h) pay or
declare any distributions to shareholders of the Borrower (except for
distributions payable solely in stock of the Borrower); (i) redeem, retire,
purchase or otherwise acquire, directly or indirectly, any of the stock of the
Borrower other than amounts not to exceed $250,000 in the aggregate per year
pursuant to an equity option plan or other similar agreement for the benefit of
employees of the Borrower; (j) make any change in the Borrower's capital
structure which has a material adverse effect on that Borrower or on the
prospect of repayment of the Obligations; or (k) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section are only
permitted if no Event of Default and no event which (with notice or passage of
time or both) would constitute an Event of Default would occur as a result of
such transaction. Notwithstanding the foregoing, the Borrower shall be permitted
to repay subordinated indebtedness as provided in the Subordination Agreements
executed by the Borrower for the benefit of Silicon.
4.7 Litigation Cooperation. Should any third-party suit or proceeding
be instituted by or against Silicon with respect to any Collateral or in any
manner relating to the Borrower, the Borrower shall, without expense to Silicon,
make available the Borrower and its officers, employees and agents
Page 8 - LOAN AND SECURITY AGREEMENT
9
and the Borrower's books and records to the extent that Silicon may deem them
reasonably necessary in order to prosecute or defend any such suit or
proceeding.
4.8 Verification. Silicon may, from time to time, following prior
notification to the Borrower, verify directly with the respective account
debtors the amount and other matters relating to the Borrower's accounts, by
means of mail, telephone or otherwise, either in the name of the Borrower or
Silicon or such other name as Silicon may reasonably choose, provided that no
prior notification shall be required following an Event of Default. Silicon
shall not be required to obtain the Borrower's consent prior to any such
verification of accounts, whether or not an Event of Default has occurred.
4.9 Execute Additional Documentation. The Borrower agrees, at its
expense, on request by Silicon, to execute from time to time all documents in
form satisfactory to Silicon, as Silicon may deem reasonably necessary or useful
in order to perfect and maintain Silicon's perfected security interest in the
Collateral, and in order to fully consummate all of the transactions
contemplated by this Agreement.
4.10 Registration of Intellectual Property Rights. The Borrower shall
use commercially reasonable efforts to 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 an exhibit to the Intellectual Property Security
Agreement delivered to Silicon by the Borrower in connection with this Agreement
within thirty (30) days of the date of this Agreement, provided that Borrower
shall not be requested to register the CTM Software copyright. 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
intellectual property rights developed or acquired by Borrower from time to time
in connection with any product prior to the sale or licensing of such product to
any third party, including without limitation revisions or additions to the
intellectual property rights listed on such exhibit to the Intellectual Property
Security Agreement. Borrower shall execute and deliver such additional
instruments and documents from time to time as Silicon shall reasonably request
to perfect Silicon's security interest in such additional intellectual property
rights.
5. TERM.
5.1 Maturity Date. This Agreement shall continue in effect until the
payment in full of the Obligations, provided, however, that the Borrower shall
repay in full each Loan described on the Schedule, with all accrued but unpaid
interest on that Loan, on or before the Maturity Date stated on the Schedule for
such Loan.
5.2 Early Termination. Subject to Section 5.3, this Agreement may be
terminated, without penalty, prior to the Maturity Date as follows: (a) by the
Borrower, effective three business days after written notice of termination is
given to Silicon; or (b) by Silicon at any time after the occurrence of an Event
of Default, without notice, effective immediately.
5.3 Payment of Obligations. On the due dates stated in the Schedule, or
on any earlier effective date of termination, the Borrower shall pay and perform
in full all Obligations, whether evidenced by installment notes or otherwise,
and whether or not all or any part of such Obligations are otherwise then due
and payable. Notwithstanding any termination of this Agreement, all of Silicon's
security interests in all of the Collateral and all of the terms and provisions
of this Agreement shall continue in full force and effect until all Obligations
have been paid and performed in full; provided that,
Page 9 - LOAN AND SECURITY AGREEMENT
10
Silicon may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of Silicon, nor shall any such termination relieve the Borrower of any
Obligation to Silicon, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations, Silicon
shall promptly deliver to the Borrower termination statements, requests for
reconveyances and such other documents as may be required to fully terminate any
of Silicon's security interests.
6. EVENTS OF DEFAULT AND REMEDIES.
6.1 Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and the Borrower
shall give Silicon immediate written notice thereof: (a) any warranty,
representation, statement, report or certificate made or delivered to Silicon by
the Borrower or any of the Borrower's officers or employees, now or in the
future, shall be untrue or misleading in any material respect; or (b) the
Borrower shall fail to pay when due any Loan or any interest thereon or any
other monetary Obligation; or (c) the total outstanding balance of any Loan
exceeds the applicable Credit Limit, or the total Loans and other Obligations
outstanding at any time exceed the aggregate Credit Limit for all Loans; or (d)
the Borrower shall fail to comply with any of the financial covenants set forth
in the Schedule or shall fail to perform any other non-monetary Obligation which
by its nature cannot be cured; or (e) the Borrower shall fail to pay or perform
any other non-monetary Obligation, under this Agreement or any other agreement
or document relating to the Loans; or (f) any levy, assessment, attachment,
seizure, lien or encumbrance is made on all or any part of the Collateral; or
(g) dissolution, termination of existence, insolvency or business failure of the
Borrower, or appointment of a receiver, trustee or custodian for all or any part
of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by the Borrower under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect;
or (h) the commencement of any proceeding against the Borrower or any guarantor
of any of the Obligations under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 60 days after the date commenced; or (i) revocation or
termination of, or limitation of liability upon, any guaranty of the
Obligations; or (j) commencement of proceedings by any guarantor of any of the
Obligations under any bankruptcy or insolvency law; or (k) the Borrower makes
any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations, unless such payment is permitted in the
applicable subordination agreement, or if any person who has subordinated such
indebtedness or obligations terminates or in any way limits his subordination
agreement; or (l) the Borrower shall generally not pay its debts as they become
due, except for customary cash management practices; or (m) the Borrower shall
conceal, remove or transfer any part of its property, with intent to hinder,
delay or defraud its creditors, or make or suffer any transfer of any of its
property which may be fraudulent under any bankruptcy, fraudulent conveyance or
similar law; or (n) either the Borrower or any other party thereto shall breach
any subordination agreement executed in connection with the Loans; or (o) if
there occurs (i) a material adverse change in the business, operations or
condition (financial or otherwise) of Borrower, or (ii) a material impairment of
the prospect of repayment of any portion of the Obligations, or (iii) a material
impairment of the value or priority of Silicon's security interests in the
Collateral. If any of the foregoing defaults, other than a failure to pay money
and breach of a financial covenant (other than the Maximum Senior Funded Debt
covenant) set forth in the Schedule, is curable, it may be cured (and no Event
of Default shall have occurred) if the Borrower cures the default within fifteen
days (or within five business days in the case of a cure of a default in the
Maximum Senior
Page 10 - LOAN AND SECURITY AGREEMENT
11
Funded Debt covenant set forth in the Schedule, or sixty days in the case of
clause (h) of this Section 6.1). Silicon may cease making any Loans hereunder
during the above cure periods, and thereafter if an Event of Default has
occurred.
6.2 Remedies. Upon the occurrence of any Event of Default and the
expiration of any applicable cure period under Section 6.1, and at any time
thereafter, Silicon, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by the Borrower), may do any one or
more of the following: (a) cease making Loans or otherwise extending credit to
the Borrower under this Agreement or any other document or agreement; (b)
accelerate and declare all or any part of the Obligations to be immediately due,
payable, and performable, notwithstanding any deferred or installment payments
allowed by any instrument evidencing or relating to any Obligation; (c) take
possession of any or all of the Collateral wherever it may be found, and for
that purpose the Borrower hereby authorizes Silicon without judicial process to
enter onto any of the Borrower's premises without interference to search for,
take possession of, keep, store, or remove any of the Collateral, and remain on
the premises or cause a custodian to remain on the premises in exclusive control
thereof without charge for so long as Silicon deems it reasonably necessary in
order to complete the enforcement of its rights under this Agreement or any
other agreement; provided, however, that should Silicon seek to take possession
of any or all of the Collateral by Court process, the Borrower hereby
irrevocably waives: (i) any bond and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession; (ii) any demand for possession prior to the commencement of any suit
or action to recover possession thereof; and (iii) any requirement that Silicon
retain possession of and not dispose of any such Collateral until after trial or
final judgment; (d) require the Borrower to assemble any or all of the
Collateral and make it available to Silicon at places designated by Silicon
which are reasonably convenient to Silicon and the Borrower, and to remove the
Collateral to such locations as Silicon may deem advisable; (e) require the
Borrower to deliver to Silicon, in kind, all checks and other payments received
with respect to all accounts and general intangibles, together with any
necessary indorsements, within one day after the date received by the Borrower;
(f) complete the processing, manufacturing or repair of any Collateral prior to
a disposition thereof and, for such purpose and for the purpose of removal,
Silicon shall have the right to use the Borrower's premises, vehicles, hoists,
lifts, cranes, equipment and all other property without charge; (g) sell, lease
or otherwise dispose of any of the Collateral in its condition at the time
Silicon obtains possession of it or after further manufacturing, processing or
repair, at any one or more public and/or private sales, in lots or in bulk, for
cash, exchange or other property, or on credit, and to adjourn any such sale
from time to time without notice other than oral announcement at the time
scheduled for sale; Silicon shall have the right to conduct such disposition on
the Borrower's premises without charge, for such time or times as Silicon deems
reasonable, or on Silicon's premises, or elsewhere and the Collateral need not
be located at the place of disposition; Silicon may directly or through any
affiliated company purchase or lease any Collateral at any such public
disposition, and if permissible under applicable law, at any private
disposition; any sale or other disposition of Collateral shall not relieve the
Borrower of any liability the Borrower may have if any Collateral is defective
as to title or physical condition or otherwise at the time of sale; (h) demand
payment of, and collect any accounts and general intangibles comprising
Collateral and, in connection therewith, the Borrower irrevocably authorizes
Silicon to endorse or sign the Borrower's name on all collections, receipts,
instruments and other documents, to take possession of and open mail addressed
to the Borrower and remove therefrom payments made with respect to any item of
the Collateral or proceeds thereof, and, in Silicon's sole discretion, to grant
extensions of time to pay, compromise claims and settle accounts and the like
for less than face value; (i) offset against any sums in any general, special or
other deposit accounts maintained by the Borrower with Silicon; and (j) demand
and receive
Page 11 - LOAN AND SECURITY AGREEMENT
12
possession of any of the Borrower's federal and state income tax returns and the
books and records utilized in the preparation thereof or referring thereto. All
reasonable fees of professionals (including attorneys' fees), expenses, costs,
liabilities and obligations incurred by Silicon with respect to the foregoing
shall be added to and become part of the Obligations, shall be due on demand,
and shall bear interest at a rate equal to the highest interest rate applicable
to any of the Obligations. Without limiting any of Silicon's rights and
remedies, from and after the occurrence of any Event of Default, the interest
rate applicable to the Obligations shall be increased by an additional two
percent per annum above the rate otherwise applicable.
6.3 Standards for Determining Commercial Reasonableness. The Borrower
and Silicon agree that a Sale or other disposition (collectively, "Sale") of any
Collateral which complies with the following standards shall conclusively be
deemed to be commercially reasonable: (a) notice of the Sale is given to the
Borrower at least seven days prior to the Sale, and, in the case of a public
Sale, notice of the Sale is published at least seven days before the Sale in a
newspaper of general circulation in the county where the Sale is to be
conducted; (b) notice of the Sale describes the Collateral in general,
non-specific terms; (c) the Sale is conducted at a place designated by Silicon,
with or without the Collateral being present; (d) the Sale commences at any time
between 8:00 a.m. and 6:00 p.m; (e) payment of the purchase price in cash or by
cashier's check or wire transfer is required; (f) with respect to any Sale of
any of the Collateral, Silicon may (but is not obligated to) direct any
prospective purchaser to ascertain directly from the Borrower any and all
information concerning the same. Silicon may employ other methods of noticing
and selling the Collateral, in its discretion, if they are commercially
reasonable.
6.4 Power of Attorney. Effective only upon the occurrence and during
the continuance of an Event of Default, the Borrower hereby irrevocably appoints
Silicon (and any of Silicon's designated officers, or employees) as the
Borrower's true and lawful attorney to: (a) send requests for verification of
accounts or notify account debtors of Silicon's security interest in the
accounts; (b) endorse the Borrower's name on any checks or other forms of
payment or security that may come into Silicon's possession; (c) sign the
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 the 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 Silicon determines to be
reasonable; provided Silicon may exercise such power of attorney to sign the
name of the Borrower on any of the documents described in Section 4.9 regardless
of whether an Event of Default has occurred. The appointment of Silicon as the
Borrower's attorney in fact, and each and every one of Silicon's rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully repaid and performed and Silicon's obligation to
provide advances hereunder is terminated.
6.5 Application of Proceeds. All proceeds realized as the result of any
sale of the Collateral shall be applied by Silicon first to the costs, expenses,
liabilities, obligations and attorneys' fees incurred by Silicon in the exercise
of its rights under this Agreement, second to the interest due upon any of the
Obligations, and third to the principal of the Obligations, in such order as
Silicon shall determine in its sole discretion. Any surplus shall be paid to the
Borrower or other persons legally entitled thereto; the Borrower shall remain
liable to Silicon for any deficiency. If Silicon, in its sole discretion,
directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale or other disposition of Collateral,
Silicon shall have the option, exercisable at any time, in its sole discretion,
of either reducing the Obligations by the principal amount of purchase price or
deferring the
Page 12 - LOAN AND SECURITY AGREEMENT
13
reduction of the Obligations until the actual receipt by Silicon of the cash
therefor.
6.6 Remedies Cumulative. In addition to the rights and remedies set
forth in this Agreement, Silicon shall have all the other rights and remedies
accorded a secured party under the Uniform Commercial Code of California and
each state in which any Collateral is located, and under all other applicable
laws, and under any other instrument or agreement now or in the future entered
into between Silicon and the Borrower, and all of such rights and remedies are
cumulative and none is exclusive. Exercise or partial exercise by Silicon of one
or more of its rights or remedies shall not be deemed an election, nor bar
Silicon from subsequent exercise or partial exercise of any other rights or
remedies. The failure or delay of Silicon to exercise any rights or remedies
shall not operate as a waiver thereof, but all rights and remedies shall
continue in full force and effect until all of the Obligations have been fully
paid and performed.
7. GENERAL PROVISIONS.
7.1 Notices. All notices to be given under this Agreement shall be in
writing and shall be given personally, by regular first-class mail, by certified
mail return receipt requested, or by facsimile (with a copy by overnight
courier) addressed to Silicon or the Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party. In addition, Borrower shall send a copy of any notice
to Silicon to the following address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Phone: ▇▇▇-▇▇▇-▇▇▇▇; Fax: ▇▇▇-▇▇▇-▇▇▇▇).
All notices shall be deemed to have been given upon delivery in the case of
notices personally delivered to the Borrower or to Silicon, or at the expiration
of three business days following the deposit thereof in the United States mail,
with postage prepaid.
7.2 Severability. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
7.3 Integration. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between the Borrower and Silicon and
supersede all prior and contemporaneous negotiations and oral representations
and agreements (including agreements between Silicon and Borrower's
predecessors, U.S. OnLine Cable, L.L.C. and U.S. OnLine Communications, L.L.C.),
all of which are merged and integrated in this Agreement.
7.4 Waivers. The failure of Silicon at any time or times to require the
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between the Borrower and Silicon shall not
waive or diminish any right of Silicon later to demand and receive strict
compliance therewith. Any waiver of any default shall not waive or affect any
other default, whether prior or subsequent thereto. None of the provisions of
this Agreement or any other agreement now or in the future executed by the
Borrower and delivered to Silicon shall be deemed to have been waived by any act
or knowledge of Silicon or its agents or employees, but only by a specific
written waiver signed by an officer of Silicon and delivered to the Borrower.
The Borrower waives demand, protest, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, account, general
Page 13 - LOAN AND SECURITY AGREEMENT
14
intangible, document or guaranty at any time held by Silicon on which the
Borrower is or may in any way be liable, and notice of any action taken by
Silicon, unless expressly required by this Agreement.
7.5 No Liability for Ordinary Negligence. Neither Silicon, nor any of
its directors, officers, employees, agents, attorneys or any other person
affiliated with or representing Silicon shall be liable for any claims, demands,
losses or damages, of any kind whatsoever, made, claimed, incurred or suffered
by the Borrower or any other party claiming through or on behalf of Borrower
through the ordinary negligence of Silicon, or any of its directors, officers,
employees, agents, attorneys or any other person affiliated with or representing
Silicon.
7.6 Amendment. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by the Borrower and a duly
authorized officer of Silicon.
7.7 Time of Essence. Time is of the essence in the performance by the
Borrower of each and every obligation under this Agreement.
7.8 Attorneys' Fees and Costs. The Borrower shall reimburse Silicon for
all reasonable attorneys' fees and fees of other professionals, and all filing,
recording, search, title insurance, appraisal, audit, and other reasonable costs
incurred by Silicon, pursuant to, or in connection with, or relating to this
Agreement (whether or not a lawsuit is filed), including, but not limited to,
any reasonable attorneys' fees and costs Silicon incurs in order to do the
following: prepare and negotiate this Agreement and the documents relating to
this Agreement; obtain legal advice in connection with this Agreement; enforce,
or seek to enforce, any of its rights; prosecute actions against, or defend
actions by, account debtors; commence, intervene in, or defend any action or
proceeding (including any appeal or review); initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of the Borrower's books and
records; or protect, obtain possession of, lease, dispose of, or otherwise
enforce Silicon's security interest in, the Collateral and otherwise represent
Silicon in any litigation relating to the Borrower. If either Silicon or the
Borrower files any lawsuit against the other predicated on a breach of this
Agreement, the prevailing party in such action shall be entitled to recover its
reasonable costs and professionals' fees, including (but not limited to)
reasonable attorneys' fees and costs incurred in the enforcement of, execution
upon or defense of any order, decree, award or judgment, and in any appeal or
review by an appellate court. All fees and costs to which Silicon may be
entitled pursuant to this Section shall immediately become part of the
Borrower's Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.
7.9 Benefit of Agreement. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of the parties hereto; provided,
however, that the Borrower may not assign or transfer any of its rights under
this Agreement without the prior written consent of Silicon, and any prohibited
assignment shall be void. No consent by Silicon to any assignment shall release
the Borrower from its liability for the Obligations. The Borrower agrees and
consents to Silicon's sale or transfer, whether now or later, of one or more
participation interests in the Loans to one or more purchasers, whether related
or unrelated to Silicon. Silicon may provide, without any limitation whatsoever,
to any one or more purchasers, or potential purchasers, any information or
knowledge Silicon may have about the Borrower or about any other matter relating
to the Loans and the Borrower hereby waives any rights to privacy it may have
with
Page 14 - LOAN AND SECURITY AGREEMENT
15
respect to such matters, provided, however, that Silicon shall instruct the
recipient of such information to abide by the confidentiality provisions of
Section 4.5. The Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any repurchase of such
participation interests. The Borrower also agrees that the purchasers of any
such participation interests shall be considered as the absolute owners of such
interests in the Loans and shall have all the rights granted under the
participation agreement or agreements governing the sale of such participation
interests. Notwithstanding the foregoing, the Borrower shall not have any
obligation to deal with or send notices to more than a single lender or agent as
a result of the sale of such participation interest.
7.10 Section Headings; Construction. Section headings are only used in
this Agreement for convenience. The Borrower acknowledges that the headings may
not describe completely the subject matter of the applicable section, and the
headings shall not be used in any manner to construe, limit, define or interpret
any term or provision of this Agreement. This Agreement has been fully reviewed
and negotiated between the parties and no uncertainty or ambiguity in any term
or provision of this Agreement shall be construed strictly against Silicon or
the Borrower under any rule of construction or otherwise.
7.11 Mutual Waiver of Jury Trial. THE BORROWER AND SILICON EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND THE BORROWER, OR ANY CONDUCT, ACTS
OR OMISSIONS OF SILICON OR THE BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR THE
BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
7.12 Governing Law; Jurisdiction; Venue. This Agreement and all acts
and transactions hereunder and all rights and obligations of Silicon and the
Borrower shall be governed by, and construed in accordance with, the laws of the
State of California. Any undefined term used in this Agreement that is defined
in the California Uniform Commercial Code shall have the meaning assigned to
that term in the California Uniform Commercial Code. As a material part of the
consideration to Silicon to enter into this Agreement, the Borrower (i) agrees
that all actions and proceedings relating directly or indirectly hereto shall at
Silicon's option, be litigated in courts located within California, and that the
exclusive venue therefor shall be, at Silicon's option, the County of Santa
▇▇▇▇▇, State of California; (ii) consents to the jurisdiction and venue of any
such court and consents to service of process in any such action or proceeding
by personal delivery or any other method permitted by law; and (iii) waives any
and all rights the Borrower may have to object to the jurisdiction of any such
court, or to transfer or change the venue of any such action or proceeding.
BORROWER:
U.S ONLINE COMMUNICATIONS, INC.
By:
---------------------------------
Title:
------------------------------
Page 15 - LOAN AND SECURITY AGREEMENT
16
SILICON:
SILICON VALLEY BANK
By:
---------------------------------
Title:
------------------------------
Page 16 - LOAN AND SECURITY AGREEMENT