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EXHIBIT 10.7
Loan and Security Agreement
Borrower: Software Technologies Corporation
Address: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Date: October 29, 1999
This Loan and Security Agreement is entered into on the above date between
GREYROCK CAPITAL, a Division of Banc of America Commercial Finance Corporation
(GREYROCK), whose address is ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ and the borrower named above (BORROWER), whose chief executive office is
located at the above address (BORROWER'S ADDRESS). The Schedule to this
Agreement (the SCHEDULE) being signed concurrently is an integral part of this
Agreement. (Definitions of certain terms used in this Agreement are set forth
in Section 8 below.)
1. LOANS.
1.1 LOANS. (a) Revolving Credit Loans. Greyrock will make loans to Borrower
(the REVOLVING CREDIT LOANS), in amounts determined by Greyrock in its good
faith business judgment, up to the amount (the REVOLVING CREDIT LIMIT) shown on
the Schedule, provided no Default or Event of Default has occurred and is
continuing.
(b) Term Loan. Greyrock will make a loan to Borrower (the TERM LOAN), in the
amount (the TERM LOAN LIMIT) shown on the Schedule, provided no Default or
Event of Default has occurred and is continuing.
(c) If at any time or for any reason the outstanding aggregate amount of all
outstanding Revolving Credit Loans, the Term Loan, and all other Obligations
exceeds the amount shown on the Schedule as the Total Credit Limit (the TOTAL
CREDIT LIMIT), Borrower shall immediately pay the amount of the excess to
Greyrock, without notice or demand. The Revolving Credit Loans and the Term
Loan are sometimes collectively referred to herein as the "LOANS."
1.2 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement or in another written agreement signed by
Greyrock and Borrower. Interest shall be payable monthly, on the last day of
the month. Interest may, in Greyrock's discretion, be charged to Borrower's
loan account, and the same shall thereafter bear interest at the same rate as
the other Loans.
1.3 FEES. Borrower shall pay Greyrock the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to Greyrock and
are not refundable.
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of all the
Obligations when due, Borrower hereby grants to Greyrock a security
interest in all of Borrower's interest in the following, whether now
owned or hereafter acquired, and wherever located (collectively, the
Collateral): All Receivables, Inventory, Equipment, Investment Property
and General Intangibles, including, without limitation, all of
Borrower's Deposit Accounts, all money, all collateral in which Greyrock
is granted a security interest pursuant to any other present or future
agreement, all property now or at any time in the future in Greyrock's
possession and all proceeds (including proceeds of any insurance
policies, proceeds of proceeds and claims against third parties), all
products of the foregoing and all books and records related to any of
the foregoing.
Notwithstanding the foregoing, the security interest granted herein
shall not extend to and the term "Collateral" shall not include, any
property, rights or licenses to the extent the granting of a security
interest therein (i) would be contrary to applicable law or (ii) is
prohibited by, or would constitute a default under, any of the
agreements or other documents listed on Exhibit A hereto (but only to
the extent such prohibition is enforceable under applicable law).
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Greyrock to enter into this Agreement and to make Loans,
Borrower represents and warrants to Greyrock as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation, is and
will continue to be, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation; provided that, upon
written notice to Greyrock and subject to Borrower's continuing compliance with
the terms of this Agreement (including, but not limited to, Section 5.9
hereof), Borrower may redomesticate into another state within the United
States. Borrower is and will continue to be qualified and licensed to do
business in all jurisdictions in which any failure to do so could reasonably be
expected to have a material adverse effect on Borrower. The execution, delivery
and performance by Borrower of this Agreement, and all other documents
contemplated hereby (i) have been duly and validly authorized, (ii) are
enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable
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principles and by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to creditors' rights generally), (iii) do not violate Borrower's
articles or certificate of incorporation, or Borrower's by-laws, or any law or
any material agreement or instrument which is binding upon Borrower or its
property, and (iv) do not constitute grounds for acceleration of any material
indebtedness or obligation under any material agreement or instrument which is
binding upon Borrower or its property.
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 the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Greyrock contemporaneous written notice of changing its name
or doing business under any other name. Borrower has complied, and will in the
future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give Greyrock contemporaneous written
notice of opening any additional place of business, changing its chief executive
office, or moving any of the Collateral to a location other than Borrower's
address or one of the locations set forth on the Schedule.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at
all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. Greyrock now has,
and will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Greyrock and the Collateral against all claims
of others. So long as any Loan is outstanding, none of the Collateral now is or
will be affixed to any real property in such a manner, or with such intent, as
to become a fixture. Borrower is not and will not become a lessee under any real
property lease pursuant to which the lessor may obtain any rights in any of the
Collateral and no such lease now prohibits, restrains, impairs or will prohibit,
restrain or impair Borrower's right to remove any Collateral from the leased
premises. Whenever any Collateral is located upon premises in which any third
party has an interest (whether as owner, mortgagee, beneficiary under a deed of
trust, lien or otherwise), Borrower shall, whenever requested by Greyrock, use
its best efforts to cause such third party to execute and deliver to Greyrock,
in form acceptable to Greyrock, such waivers and subordinations as Greyrock
shall specify, so as to ensure that Greyrock's rights in the Collateral are, and
will continue to be, superior to the rights of any such third party. Borrower
will keep in full force and effect, and will comply with all the terms of, any
lease of real property where any of the Collateral now or in the future may be
located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in
good working condition, ordinary wear and tear excepted, and Borrower will not
use the Collateral for any unlawful purpose. Borrower will immediately advise
Greyrock in writing of any material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All quarterly and
annual financial statements now or in the future delivered to Greyrock have
been, and will be, prepared in conformity with generally accepted accounting
principles and now and in the future will completely and fairly reflect the
financial condition of Borrower, at the times and for the periods therein
stated. Between the last date covered by any such statement provided to Greyrock
and the date hereof, there has been no material adverse change in the financial
condition or business of Borrower. Borrower is now and will continue to be
solvent.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all tax returns and reports required by applicable
law, and Borrower has timely paid, and will timely pay, all applicable taxes,
assessments, deposits and contributions now or in the future owed by Borrower.
Borrower may, however, defer payment of any contested taxes, provided that
Borrower (i) in good faith contests Borrower's obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted, (ii)
notifies Greyrock in writing of the commencement of, and any material
development in, the proceedings, and (iii) posts bonds or takes any other steps
required to keep the contested taxes from becoming a lien upon any of the
Collateral. Borrower is unaware of any claims or adjustments proposed for any of
Borrower's prior tax years which could result in additional taxes becoming due
and payable by Borrower. 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, and Borrower has not
and will 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 Borrower, including any
liability to the Pension Benefit Guarantee Corporation or any other governmental
agency. Borrower shall, at all times, maintain a separate payroll account which
shall be used exclusively for payment of payroll and payroll taxes and other
items related directly to payroll.
3.9 COMPLIANCE WITH LAW. Unless non-compliance would not materially
adversely affect (i) Borrower's financial condition as reflected in its
financial statements previously delivered to Greyrock, (ii) Borrower's
operations, or (iii) Borrower's business, Borrower has complied, and will
comply, in all material respects, with all provisions of all applicable laws and
regulations, including, but not limited to, those relating to Borrower's
ownership of real or personal property, the conduct and licensing of Borrower's
business, and all environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is not claim,
suit, litigation, proceeding or
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investigation pending or (to best of Borrower's knowledge) threatened by or
against or affecting Borrower in any court or before any governmental agency
(or any basis therefor known to Borrower) which may result, either separately
or in the aggregate, in any material adverse change in the financial condition
or business of Borrower, or in any material impairment in the ability of
Borrower to carry on its business in substantially the same manner as it is now
being conducted. Borrower will promptly inform Greyrock in writing of any
claim, proceeding, litigation or investigation in the future threatened or
instituted by or against Borrower which could reasonably be expected to result
in a liability with respect to any single claim of $50,000 or more, or
involving $100,000 or more in the aggregate.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely
for lawful business purposes.
3.12 YEAR 2000 COMPLIANCE. Borrower has (i) initiated a review and
assessment of all areas within its and each of its subsidiaries' business and
operations (including those affected by suppliers and vendors) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by Borrower or any of its subsidiaries (or its suppliers and
vendors) may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem
on a timely basis, and (iii) to date, implemented that plan in accordance with
that timetable. Borrower reasonably believes that all computer applications
(including those of its suppliers and vendors) that are material to its or any
of its subsidiaries' business and operations will on a timely basis be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure
to do so could not reasonably be expected to have material adverse effect.
Borrower will promptly notify Greyrock in the event Borrower discovers or
determines that any computer application (including those of its suppliers and
vendors) that is material to its or any of its subsidiaries' business and
operations will not be Year 2000 compliant on a timely basis, except to the
extent that such failure could not reasonably be expected to have a material
adverse effect.
4. RECEIVABLES.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to Greyrock as follows: Each Receivable with respect to which Loans
are requested by Borrower shall, on the date each Loan is requested and made,
represent an undisputed, bona fide, existing, unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services, in the ordinary course of Borrower's business.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to Greyrock as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct in all material
respects and all such invoices, instruments and other documents and all of
Borrower's books and records are and shall be genuine and in all material
respects what they purport to be, and all signatories and endorsers have the
capacity to contract. All sales and other transactions underlying or giving rise
to each Receivable shall comply with all applicable laws and governmental rules
and regulations. All signatures and indorsements on all documents, instruments,
and agreements relating to all Receivables are and shall be genuine, and all
such documents, instruments and agreements are and shall be legally enforceable
in accordance with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall
deliver to Greyrock transaction reports and loan requests, schedules of all
Receivables, and schedules of collections, all on Greyrock's standard forms or
as otherwise agreed by the parties; provided, however, that Borrower's failure
to execute and deliver the same shall not affect or limit Greyrock's security
interest and other rights in all of Borrower's Receivables, nor shall Greyrock's
failure to advance or lend against a specific Receivable affect or limit
Greyrock's security interest and other rights therein. Together with each such
schedule or later if requested by Greyrock, Borrower shall furnish Greyrock with
copies (or, at Greyrock's request, originals) of all contracts, orders,
invoices, and other similar documents, and all original shipping instructions,
delivery receipts, bills of lading, and other evidence of delivery, for any
goods the sale or disposition of which gave rise to such Receivables, and
Borrower warrants the genuineness of all of the foregoing. Borrower shall also
furnish to Greyrock an aged accounts receivable trial balance in such form and
at such intervals as Greyrock shall request. In addition, Borrower shall deliver
to Greyrock the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Receivables, immediately upon receipt thereof and in the same form as
received, with all necessary indorsements.
4.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to collect
all Receivables, unless and until a Default or an Event of Default has
occurred. Borrower shall hold all payments on, and proceeds of, Receivables in
trust for Greyrock, and Borrower shall deliver all such payments and proceeds
to Greyrock, within one business day after receipt of the same, in their
original form, duly endorsed, to be applied to the Obligations in such order as
Greyrock shall determine.
4.5 DISPUTES. Borrower shall notify Greyrock promptly of all disputes
or claims relating to Receivables on the regular reports to Greyrock. Borrower
shall not forgive, or settle any Receivable for less than payment in full, or
agree to do any of the foregoing, except that Borrower may do so, provided
that: (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm's length transactions, which are
reported to Greyrock on the regular reports provided to Greyrock; (ii) no
Default or Event of Default has occurred and is continuing; and (iii) taking
into account all such settlements and forgiveness, the total outstanding
Revolving Credit Loans, the Term Loan and other Obligations will not exceed the
Total Credit Limit.
4.6 RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its
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business, Borrower shall promptly determine the reason for such return and
promptly issue a credit memorandum to the Account Debtor in the appropriate
amount (sending a copy to Greyrock). In the event any attempted return occurs
after the occurrence and during the continuance of any Event of Default,
Borrower shall (i) not accept any return without Greyrock's prior written
consent, (ii) hold the returned Inventory in trust for Greyrock, (iii)
segregate all returned Inventory from all of Borrower's other property, and
(iv) immediately notify Greyrock of the return of any Inventory, specifying the
reason for such return, the location and condition of the returned Inventory,
and on Greyrock's request deliver such returned Inventory to Greyrock.
4.7 VERIFICATION. Greyrock may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Receivables, by means of mail, telephone or otherwise, either in the
name of Borrower or Greyrock or such other name as Greyrock may choose, and
Greyrock or its designee may, at any time, notify Account Debtors that it has a
security interest in the Receivables.
4.8 NO LIABILITY. Greyrock shall not under any circumstances be
responsible or liable for any shortage or discrepancy in, damage to, or loss or
destruction of, any goods, the sale or other disposition of which gives rise to
a Receivable, or for any error, act, omission, or delay of any kind occurring
in the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall Greyrock be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Greyrock from liability for
its own gross negligence or willful misconduct.
5. ADDITIONAL DUTIES OF BORROWER.
5.1 INSURANCE. Borrower shall, at all times, insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Greyrock, in such form and amounts as
Greyrock may reasonably require, and Borrower shall provide evidence of such
insurance to Greyrock, so that Greyrock is satisfied that such insurance is, at
all times, in full force and effect. All liability insurance policies of
Borrower shall name Greyrock as an additional insured and all property casualty
and related insurance policies of Borrower shall name Greyrock as an additional
insured and loss payee thereon, and borrower shall cause a lenders loss payee
endorsement in form reasonably acceptable to Greyrock to be delivered to
Greyrock. Upon receipt of the proceeds of any such insurance, Greyrock shall
apply such proceeds in reduction of the Obligations as Greyrock shall determine
in its sole discretion, except that, provided no Default or Event of Default
has occurred and is continuing, Greyrock shall release to Borrower insurance
proceeds with respect to Collateral subject to a casualty loss totaling less
than $100,000, which shall be utilized by Borrower for the replacement of such
Collateral with respect to which the insurance proceeds were paid. Greyrock may
require reasonable assurance that the insurance proceeds so released will be so
used. If Borrower fails to provide or pay for any insurance, Greyrock may, but
is not obligated to, obtain the same at Borrower's expense. Borrower shall
promptly deliver to Greyrock copies of all reports made to insurance companies.
5.2 REPORTS. Borrower, at its expense, shall provide Greyrock with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sale projections, operating plans and
other financial documentation), as Greyrock shall from time to time reasonably
specify.
5.3 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on
one business day's notice, Greyrock, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records. Greyrock shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit, but Greyrock 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
foregoing inspections and audits shall be at Borrower's expense and the charge
therefor shall be $600 per person per day (or such higher amount as shall
represent Greyrock's then current standard charge for the same), plus reasonable
out-of-pockets expenses. Borrower shall not be charged more than $3,000 per
audit (plus reasonable out-of-pockets expenses), nor shall audits be done more
frequently than four times per calendar year, provided that the foregoing limits
shall not apply after the occurrence and during the continuance of a Default or
Event of Default, nor shall they restrict Greyrock's right to conduct audits at
its own expense (whether or not a Default or Event of Default has occurred).
Borrower will not enter into any agreement with any accounting firm, service
bureau or third party to store Borrower's books or records at any location other
than Borrower's Address, without first obtaining Greyrock's written consent,
which may be conditioned upon such accounting firm, service bureau or other
third party agreeing to give Greyrock the same rights with respect to access to
books and records and related rights as Greyrock has under this Agreement.
5.4 REMITTANCE OF PROCEEDS. All proceeds arising from the sale or other
disposition of any Collateral shall be delivered, in kind, by Borrower to
Greyrock in the original form in which received by Borrower not later than the
following business day after receipt by Borrower, to be applied to the
Obligations in such order as Greyrock shall determine; provided that, if no
Default or Event of Default has occurred and is continuing, and if no term loan
is outstanding hereunder, then Borrower shall not be obligated to remit to
Greyrock the proceeds of the sale of Equipment which is sold in the ordinary
course of business, in a good-faith arm's length transaction. Except for the
proceeds of the sale of Equipment as set forth above, Borrower shall not
commingle proceeds of Collateral with any of Borrower's other funds or property,
and shall hold such proceeds separate and apart from such other funds and
property and in an express trust for Greyrock. Nothing in this Section limits
the restrictions on disposition of Collateral set forth elsewhere in this
Agreement.
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule,
Borrower shall not without Greyrock's prior written consent, do any of the
following: (i) merge or consolidate with another corporation or entity, except
in a transaction in which (a) the shareholders of Borrower hold at least 50% of
the common stock and all other
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capital stock of the surviving corporation immediately after such merger or
consolidation (b) Borrower is the surviving corporation and (c) no Default or
Event of Default shall exist either immediately prior to or after giving effect
to the transaction; (ii) acquire any assets, except in the ordinary course of
business; (iii) enter into any transaction outside the ordinary course of
business consisting of a transaction or a series of transactions involving the
payment of an aggregate amount in excess of $500,000, provided that no Default
or Event of Default shall exist either immediately prior to or after giving
effect to the transaction; (iv) sell or transfer any Collateral, except that,
provided no Default or Event of Default has occurred and is continuing,
Borrower may (a) sell finished Inventory in the ordinary course of Borrower's
business, (b) sell Equipment in the ordinary course of business, in good-faith
arm's length transactions, (c) sell or transfer non-exclusive (or exclusive in
a particular field of use or geographic area or with respect to a particular
software module) licenses and similar arrangements for the use of property of
Borrower in the ordinary course of business, (d) sell or transfer worn-out or
obsolete Equipment, (e) sell or transfer any property of Borrower otherwise
permitted in this Agreement, and (f) in addition to the foregoing, sell or
transfer property of Borrower having a value not exceeding $500,000 in the
aggregate in any fiscal year; (v) store any Inventory or other Collateral with
any warehouseman or other third party; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii)
make any loans of any money or other assets, except (a) advances to suppliers
if created, acquired or made in the ordinary course of business in an aggregate
amount not to exceed $250,000, (b) travel advances, and other employee loans
and advances in the ordinary course of business and employee relocation loans
in an amount not to exceed $500,000, (c) loans to employees, officers and
directors for the purpose of purchasing equity securities of Borrower in an
aggregate amount not to exceed $100,000 at any time outstanding, (d) other
loans to officers and employees approved by the Board of Directors of Borrower
in an aggregate amount not to exceed $100,000 at any time outstanding, (e)
other loans and extensions of credit not otherwise permitted hereunder in an
aggregate amount not to exceed $100,000 at any time outstanding, and (f) loans
to Borrowers's subsidiaries in the ordinary course of business consistent with
past practices, and provided, further, that no Default or Event of Default
shall exist either immediately prior to or after giving effect to the making of
any of the foregoing advances, loans or other extensions of credit; (viii)
incur any debts, outside the ordinary course of business, which would have a
material, adverse effect on Borrower or on the prospect of repayment of the
Obligations; (ix) guarantee or otherwise become liable with respect to the
obligations of another party or entity, except by endorsements of instruments of
items of payment for deposit to the general account of Borrower or which are
transmitted or turned over to Greyrock on account of the Obligations in the
ordinary course of business and except for guarantees of the obligations of
subsidiaries; (x) pay or declare any dividends on Borrower's stock (except for
dividends payable solely in stock of Borrower); (xi) redeem, retire, purchase
or otherwise acquire, directly or indirectly, any of Borrower's stock, except
that Borrower may repurchase stock owned by employees, directors and consultants
of Borrower pursuant to terms of employment, consulting or other stock
restriction agreements at such time as any such employee, director or
consultant terminates his or her affiliation with Borrower, provided that no
Default or Event of Default shall exist either immediately prior to or after
giving effect to any such repurchase, and provided that the aggregate purchase
price so paid in any fiscal year shall not exceed $300,000; (xii) make any
change in Borrower's capital structure which would have a material adverse
effect on Borrower or on the prospect of repayment of the Obligations; or
(xiii) dissolve or elect to dissolve; or (xiv) agree to do any of the foregoing.
The provisions of this Section 5.5 shall not prohibit (i) issuance by Borrower
of common stock upon exercise of stock options, (ii) sale of shares of
Borrower's capital stock for cash, (iii) issuance of convertible debentures
subordinate in all respects to the Obligations pursuant to subordination
provisions acceptable to Greyrock in its discretion, (iv) sale by Borrower of
worn out or obsolete equipment, (v) indebtedness for borrowed money existing
on the date of this Agreement to the extent listed and described on Exhibit B
hereto, (vi) Borrower from incurring indebtedness for or with respect to capital
leases or for the financing of capital assets incurred in the ordinary course of
business so long as the aggregate amount of indebtedness permitted by this
clause (vi) shall not exceed $1,000,000 in any fiscal year, (vii) indebtedness
of Borrower to subsidiaries incurred in the ordinary course of business and
consistent with past practices, or (viii) extension, refinancings,
modifications, amendments and restatements of any of the items of permitted
indebtedness set forth in the above, provided that the amount thereof is not
increased and the terms thereof are not modified to impose more burdensome
terms upon Borrower, outside of the ordinary course of Borrower's business.
5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding
be instituted by or against Greyrock with respect to any Collateral or in any
manner relating to Borrower, Borrower shall, without expense to Greyrock, make
available Borrower and its officers, employees and agents, and Borrower's books
and records, without charge, to the extent that Greyrock may deem them
reasonably necessary in order to prosecute or defend any such suit or
proceeding.
5.7 NOTIFICATION OF CHANGES. Borrower will promptly notify Greyrock in
writing of any change in its officers or directors, the opening of any new bank
account or other deposit account, and any material adverse change in the
business or financial affairs of Borrower.
5.8 INVESTMENT PROPERTY. Upon the request of Greyrock, Borrower shall
deliver to Greyrock all certificated securities included in Investment Property,
with all necessary indorsements, and obtain such account control agreements with
securities intermediaries and take such other action with respect to any
Investment Property, as Greyrock shall request, in form and substance
satisfactory to Greyrock. Borrower shall have the right to retain all Investment
Property payments and distributions, unless and until a Default or an Event of
Default has occurred and is continuing. If a Default or an Event of Default
exists, Borrower shall hold all payments on, and proceeds of, and distributions
with respect to, Investment Property in trust for Greyrock, and Borrower shall
deliver all such payments, proceeds and distributions to
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Greyrock, immediately upon receipt, in their original form, duly endorsed, to be
applied to the Obligations in such order as Greyrock shall determine. Upon the
request of Greyrock, any such distributions and payments with respect to any
Investment Property held in any securities account shall be held and retained in
such securities account as part of the Collateral.
5.9 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
Greyrock, to execute all documents and take all actions, as Greyrock may deem
reasonably necessary or useful in order to perfect and maintain Greyrock's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
5.10 INDEMNITY. Borrower hereby agrees to indemnify Greyrock and hold
Greyrock harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, costs and expenses
(including attorneys' fees), of every nature, character and description, which
Greyrock may sustain or incur based upon or arising out of any of the
Obligations, any actual or alleged failure to collect and pay over any
withholding or other tax relating to Borrower or its employees, any relationship
or agreement between Greyrock and Borrower, any actual or alleged failure of
Greyrock to comply with any writ of attachment or other legal process relating
to Borrower or any of its property, or any other matter, cause or thing
whatsoever occurred, done, omitted or suffered to be done by Greyrock relating
to Borrower or the Obligations (except any such amounts sustained or incurred as
the result of the gross negligence or willful misconduct of Greyrock or any of
its directors, officers, employees, agents, attorneys, or any other person
affiliated with or representing Greyrock). Notwithstanding any provision in this
Agreement to the contrary, the indemnity agreement set forth in this Section
shall survive any termination of this Agreement and shall for all purposes
continue in full force and effect.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the MATURITY DATE); provided that the
Maturity Date with respect to the Revolving Credit Loans shall automatically be
extended, and this Agreement shall automatically and continuously renew solely
to the extent relating to the Revolving Credit Loans, for successive additional
terms of one year each, unless one party gives written notice to the other, not
less than sixty days prior to the next Maturity Date, that such party elects to
terminate this Agreement effective on the next Maturity Date.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three business days after
written notice of termination is given to Greyrock; or (ii) by Greyrock at any
time after the occurrence and during the continuation of an Event of Default,
without notice, effective immediately.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, 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.
Without limiting the generality of the foregoing, if on the Maturity Date, or on
any earlier effective date of termination, there are any outstanding letters of
credit issued based upon an application, guarantee, indemnity or similar
agreement on the part of Greyrock, then on such date Borrower shall provide to
Greyrock cash collateral in an amount equal to 110% of the face amount of all
such letters of credit plus all interest, fees and costs due or (in Greyrock's
estimation) likely to become due in connection therewith, to secure all of the
Obligations relating to said letters of credit, pursuant to Greyrock's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Greyrock'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, without limiting the fact that Loans are subject to the discretion of
Greyrock, Greyrock 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 Greyrock, nor shall any such termination relieve Borrower of any
Obligation to Greyrock, until all of the Obligations have been paid and
performed in full. Upon payment and performance in full of all the Obligations
and termination of this Agreement, Greyrock shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be reasonably required to terminate Greyrock's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an EVENT OF DEFAULT under this Agreement, and Borrower shall give
Greyrock immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Greyrock by Borrower or
any of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect; or (b) Borrower shall fail to pay
when due any Loan or any interest thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any time shall exceed
the Total Credit Limit and Borrower shall not have paid such excess amount
within one business day of such due date pursuant to Section 1.1 hereof; or (d)
Borrower shall fail to perform any non-monetary Obligation which by its nature
cannot be cured; or (e) Borrower shall fail to perform any other non-monetary
Obligation, which failure is not cured within 20 business days after the date
performance is due; or (f) any levy, assessment, attachment, seizure, lien or
encumbrance (other than a Permitted Lien) is made on all or any part of the
Collateral which is not cured within 10 days after the occurrence of the same;
or (g) any default or event of default occurs under any obligation secured by a
Permitted Lien, which is not cured within any applicable cure period or waived
in writing by the holder of the Permitted Lien, provided that such default or
event of default shall not only constitute an Event of Default hereunder if
notice of such default or event of default is given to Borrower or if the holder
of such Permitted Lien commences enforcement thereof; or (h) Borrower breaches
any material contract or obligation, which has or may reasonably be expected to
have a material adverse effect on Borrower's business or financial condition; or
(i) dissolution, termination of existence, insolvency or business failure of
borrower or any Guarantor; or appointment of a receiver, trustee or custodian,
for all or
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any part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower or any Guarantor 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 (j) the commencement of any proceeding against Borrower or
any Guarantor 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 45 days after the date commenced; or (k) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing; or (l) revocation or
termination of, or limitation or denial of liability upon, any pledge of any
certificate of deposit, securities or other property or asset pledged by any
third party to secure any or all of the Obligations, or any attempt to do any of
the foregoing, or commencement of proceedings by or against any such third party
under any bankruptcy or insolvency law; or (m) Borrower makes any payment on
account of any indebtedness or obligation which has been subordinated to the
Obligations other than as permitted in the applicable subordination agreement,
or if any Person who has subordinated such indebtedness or obligations
terminates or in any way limits or terminates its subordination agreement; or
(n) there shall be a change in the record or beneficial ownership of an
aggregate of more than 20% of the outstanding shares of stock of Borrower
(excluding any changes resulting from a public offering of equity securities or
the public trading of equity securities), in one or more transactions, compared
to the ownership of outstanding shares of stock of Borrower in effect on the
date hereof, without the prior written consent of Greyrock; or (o) Borrower
shall generally not pay its debts as they become due, or Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law. Greyrock may cease making any Loans hereunder during any of the above cure
periods, and thereafter if an Event of Default has occurred.
7.2 Remedies. Upon the occurrence and during the continuance of any Event of
Default, and at any time thereafter, Greyrock, at its option, and without notice
or demand of any kind (all of which are hereby expressly waived by Borrower)
(except that, prior or concurrently with the taking of the first of any of the
following actions, Greyrock shall give Borrower one general written notice
stating that Greyrock is "proceeding to exercise its rights and remedies" or
words to that effect), may do any one or more of the following: (a) Cease making
Loans or otherwise extending credit to Borrower under this Agreement or any
other document or agreement; (b) Accelerate and declare all or any part of the
Obligations to be immediately due, payable, and performable, notwithstanding any
deferred or installment payments allowed by any instrument evidencing or
relating to any Obligation; (c) Take possession of any or all of the Collateral
wherever it may be found, and for that purpose Borrower hereby authorizes
Greyrock without judicial process to enter onto any of Borrower's premises
without interference to search for, take possession of, keep, store, or remove
any of the Collateral, and remain on the premises or cause a custodian to remain
on the premises in exclusive control thereof, without charge for so long as
Greyrock deems it reasonably necessary in order to complete the enforcement of
its rights under this Agreement or any other agreement; provided, however, that
should Greyrock seek to take possession of any of the Collateral by Court
process, Borrower hereby irrevocably waives, to the extent permitted by law; (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 Greyrock retain possession of, and not
dispose of, any such Collateral until after trial or final judgment; (d) Require
Borrower to assemble any or all of the Collateral and make it available to
Greyrock at places designated by Greyrock which are reasonably convenient to
Greyrock and Borrower, and to remove the Collateral to such locations as
Greyrock may deem advisable; (e) Complete the processing, manufacturing or
repair of any Collateral prior to a disposition thereof and, for such purpose
and for the purpose of removal, Greyrock shall have the right to use Borrower's
premises, vehicles, hoists, lifts, cranes, equipment and all other property
without charge; (f) Collect, receive, dispose of and realize upon any Investment
Property, including withdrawal of any and all funds from any securities
accounts; (g) Sell, lease or otherwise dispose of any of the Collateral, in its
condition at the time Greyrock obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Greyrock shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Greyrock deems reasonable, or on Greyrock's premises, or elsewhere and
the Collateral need not be located at the place of disposition. Greyrock may
directly or through any affiliated company purchase or lease any Collateral at
any such public disposition, and if permissible under applicable law, at any
private disposition. Any sale or other disposition of Collateral shall not
relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title or physical condition or otherwise at the time of sale;
(h) Demand payment of, and collect any Receivables and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes Greyrock to endorse or sign Borrower's name on all collections,
receipts, instruments and other documents, to take possession of and open mail
addressed to Borrower and remove therefrom payments made with respect to any
item of the Collateral or proceeds thereof, and, in Greyrock's sole discretion,
to grant extensions of time to pay, compromise claims and settle Receivables,
General Intangibles and the like for less than face value; and (i) Demand and
receive possession of any of Borrower's federal and state income tax returns and
the books and records utilized in the preparation thereof or referring thereto.
Borrower recognizes that Greyrock may be unable to make a public sale of any or
all of the Investment Property, by reasons of prohibitions contained in
applicable securities laws or otherwise, and expressly agrees that a private
sale to a restricted group of purchasers for investment and not with a view to
any distribution thereof shall be considered a
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commercially reasonable sale. All reasonable attorney's fees, expenses, costs,
liabilities and obligations incurred by Greyrock 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.
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
Greyrock agree that a sale or other disposition (collectively, sale) of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Greyrock, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m.; (v) Payment of the purchase price
in cash or by cashier's check or wire transfer is required; (vi) With respect to
any sale of any of the Collateral, Greyrock may (but is not obligated to) direct
any prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. Greyrock shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
7.4 POWER OF ATTORNEY. Upon the occurrence and during the continuance of
any Event of Default, without limiting Greyrock's other rights and remedies,
Borrower grants to Greyrock an irrevocable power of attorney coupled with an
interest, authorizing and permitting Greyrock (acting through any of its
employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise, but Greyrock
agrees to exercise the following powers in a commercially reasonable manner: (a)
Execute on behalf of Borrower any documents that Greyrock may, in its sole
discretion, deem advisable in order to perfect and maintain Greyrock's security
interest in the Collateral, or in order to exercise a right of Borrower or
Greyrock, or in order to fully consummate all the transactions contemplated
under this Agreement, and all other present and future agreements; (b) Execute
on behalf of Borrower any documents exercising, transferring or assigning any
option to purchase, sell or otherwise dispose of or to lease (as lessor or
lessee) any real or personal property which is part of Greyrock's Collateral or
in which Greyrock has an interest; (c) Execute on behalf of Borrower, any
invoices relating to any Receivable, any draft against any Account Debtor and
any notice to any Account Debtor, any proof of claim in bankruptcy, and Notice
of Lien, claim of mechanic's, materialman's or other lien, or assignment or
satisfaction of mechanic's, materialman's or other lien; (d) Take control in any
manner of any cash or non-cash items of payment of proceeds of Collateral;
endorse the name of Borrower upon any instruments, or documents, evidence of
payment or Collateral that may come into Greyrock's possession; (e) Endorse all
checks and other forms of remittances received by Greyrock; (f) Pay, contest or
settle any lien, charge, encumbrance, security interest and adverse claim in or
to any of the Collateral, or any judgment based thereon, or otherwise take any
action to terminate or discharge the same; (g) Grant extensions of time to pay,
compromise claims and settle Receivables and General Intangibles for less than
face value and execute all releases and other documents in connection therewith;
(h) Pay any sums required on account of Borrower's taxes or to secure the
release of any liens therefor, or both; (i) Settle and adjust, and give releases
of, any insurance claim that relates to any of the Collateral and obtain payment
therefor; (j) Instruct any third party having custody or control of any books or
records belonging to, or relating to, Borrower to give Greyrock the same rights
of access and other rights with respect thereto as Greyrock has under this
Agreement; (k) Execute and deliver to any securities intermediary or other
Person any entitlement order, account control agreement or other notice,
document or instrument with respect to any Investment Property, and (l) Take any
action or pay any sum required of Borrower pursuant to this Agreement and any
other present or future agreements. Any and all reasonable sums paid and any and
all reasonable costs, expenses, liabilities, obligations and reasonable
attorney's fees incurred by Greyrock with respect to the foregoing shall be
added to and become part of the Obligations, shall be payable on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations. In no event shall Greyrock's rights under the foregoing
power of attorney or any of Greyrock's other rights under this Agreement be
deemed to indicate that Greyrock is in control of the business, management or
properties of Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale or other disposition of the Collateral shall be applied by Greyrock first
to the reasonable costs, expenses, liabilities, obligations and attorney's fees
incurred by Greyrock 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 Greyrock shall determine in its sole
discretion. Any surplus shall be paid to Borrower or other persons legally
entitled thereto; Borrower shall remain liable to Greyrock for any deficiency.
If Greyrock, in its sole discretion, directly or indirectly enters into a
deferred payment or other credit transaction with any purchaser at any sale of
Collateral, Greyrock shall have the option, exercisable at any time, in its sole
discretion, of either reducing the Obligations by the principal amount of
purchase price or deferring the reduction of the Obligations until the actual
receipt by Greyrock of the cash therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth
in this Agreement, Greyrock shall have all the other rights and remedies
accorded a secured party under the California Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or in
the future entered into between Greyrock and Borrower, and all of such rights
and remedies are cumulative and none is exclusive. Exercise or partial exercise
by Greyrock of one or more of its rights or remedies shall not be deemed an
election, nor bar Greyrock from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Greyrock to exercise any
rights or remedies shall not operate as a waiver thereof, but all rights and
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remedies shall continue in full force and effect until all of the Obligations
have been fully paid and performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
ACCOUNT DEBTOR means the obligor on a Receivable.
AFFILIATE means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person or any Person controlling, controlled by or under
common control with such Person.
AGREEMENT and THIS AGREEMENT means this Loan and Security Agreement and
all modifications and amendments thereto, extensions thereof, and replacements
therefor.
BUSINESS DAY means a day on which Greyrock is open for business.
CODE means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.
COLLATERAL has the meaning set forth in Section 2.1 above.
DEFAULT means any event which with notice or passage of time or both,
would constitute an Event of Default.
DEPOSIT ACCOUNT has the meaning set forth in Section 9105 of the Code.
ELIGIBLE RECEIVABLES means unconditional Receivables arising in the
ordinary course of Borrower's business from the completed sale of goods or
rendition of services, which Greyrock, in its good faith business judgment,
shall deem eligible for borrowing, based on such considerations as Greyrock may
from time to time deem appropriate.
EQUIPMENT means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind of
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
EVENT OF DEFAULT means any of the events set forth in section 7.1 of this
Agreement.
GENERAL INTANGIBLES means all general intangibles of Borrower, whether now
owned or hereafter created or acquired by Borrower, including, without
limitation, all causes in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, 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 claims of Borrower against Greyrock rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including life insurance, key
man insurance, credit insurance, liability insurance, property insurance and
other insurance), tax refunds and claims, computer programs, discs, tapes and
tape files, claims under guaranties, security interests or other security held
by or granted to Borrower, all rights to indemnification and all other
intangible property of every kind and nature (other than Receivables).
GUARANTOR means any Person who has guaranteed any of the Obligations.
INVENTORY means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including all raw materials,
work in process, finished goods and goods in transit), and all materials and
supplies of every kind, nature and description which are or might be used or
consumed in Borrower's business or used in connection with the manufacture,
packing, shipping, advertising, selling of finishing of such goods, merchandise
or other personal property, and all warehouse receipts, documents of title and
other documents representing any of the foregoing.
INVESTMENT PROPERTY means any and all investment property of Borrower,
including all securities, whether certificated or uncertificated, security
entitlements, securities accounts, commodity contracts and commodity accounts,
and all financial assets held in any securities account or otherwise wherever
located, and whether now existing or hereafter acquired or arising.
OBLIGATIONS means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Greyrock, whether evidenced by this Agreement or any
note or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Greyrock in
Borrower's debts owing to others), absolute or contingent, due or to become
due, including, without limitation, all interest, charges, expenses, fees,
attorney's fees, expert witness fees, audit fees, letter of credit fees, loan
fees, termination fees, minimum interest charges and any other sums chargeable
to Borrower under this Agreement or under any other present or future instrument
or agreement between Borrower and Greyrock.
PERMITTED LIENS means the following: (i) purchase money security interests
in specific items of Equipment; (ii) leases of specific items of Equipment;
(iii) liens for taxes, fees, assessments or other governmental charges or
levies, either not delinquent or being contested in good faith by appropriate
proceedings, provided the same have no priority over any of Greyrock's security
interests; (iv) additional security interests and liens which are subordinate
to the security interest in favor of Greyrock and are consented to in writing
by Greyrock (which consent shall not be unreasonably withheld); (v) security
interests being terminated substantially concurrently with this Agreement; (vi)
liens of materialmen, mechanics, warehousemen, carriers, or other similar
liens arising in the ordinary course of business and securing obligations which
are not delinquent for more than 45 days or are
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being contested in good faith by appropriate proceedings; (vii) any judgment,
attachment or similar lien, unless the judgment it secures is not fully covered
by insurance and has not been discharged or execution thereof effectively stayed
and bonded against pending appeal within 30 days of the entry thereof, provided
that if the judgment is not fully covered by insurance or execution thereof has
not been so stayed and bonded, Greyrock shall not be required to make any Loans
or otherwise extend credit to or for the benefit of Borrower; (viii) liens
existing on equipment at the time of its acquisition or lease, provided that the
lien is confined solely to the equipment so acquired and improvements thereon;
(ix) leases or subleases and licenses or sublicenses granted to others in the
ordinary course of business which do not interfere in any material respect with
the business of Borrower; (x) liens which constitute rights of set-off of a
customary nature or bankers' liens on amounts on deposit, whether arising by
contract or by operation of law, in connection with arrangements entered into
with depository institutions in the ordinary course of business; (xi) liens in
existence on the date hereof and listed on Exhibit C hereto; (xii) liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by liens of the type described above in clauses (i) or (ii)
above, provided that any extension, renewal or replacement lien is limited to
the property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; and (xii)
liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. Greyrock will have
the right to require, as a condition to its consent under subparagraph (iv)
above, that the holder of the additional security interest or lien sign an
intercreditor agreement on Greyrock's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Greyrock,
and agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
PERSON means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, government, or
any agency or political division thereof, or any other entity.
PRIME RATE means the variable rate of interest, per annum, most recently
announced by Bank of America, N.A., as its "prime rate" or "reference rate," as
the case may be, irrespective of whether such announced rate is the best rate
available from such financial institution. If the Prime Rate, as defined, is
unavailable, "Prime Rate" shall mean the highest of the prime rates published
in the Wall Street Journal, as the base rate on corporate loans at large U.S.
money center commercial banks.
RECEIVABLES means all of Borrower's now owned and hereafter acquired accounts
(whether or not earned by performance), letters of credit, contract rights,
chattel paper, instruments, documents and all other forms of obligations at any
time owing to Borrower, all guaranties and other security therefor, all
merchandise returned to or repossessed by Borrower, and all rights of stoppage
in transit and all other rights or remedies of an unpaid vendor, lienor or
secured party.
OTHER TERMS. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Greyrock
(including proceeds of Receivables and payment of the Obligations in full) shall
be deemed applied by Greyrock on account of the Obligations upon receipt by
Greyrock of immediately available funds. Greyrock shall not, however, be
required to credit Borrower's account for the amount of any item of payment
which is unsatisfactory to Greyrock in its discretion, and Greyrock may charge
Borrower's Loan account for the amount of any item of payment which is returned
to Greyrock unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the Obligations
may be applied, and in Greyrock's sole discretion reversed and re-applied, to
the Obligations, in such order and manner as Greyrock shall determine in its
sole discretion.
9.3 CHARGES TO ACCOUNT. Greyrock may, in its discretion, require that
Borrower pay monetary Obligations in cash to Greyrock, or charge them to
Borrower's loan account, in which event they will bear interest at the same
rate applicable to the Loans.
9.4 MONTHLY ACCOUNTINGS. Greyrock shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Greyrock), unless
Borrower notifies Greyrock in writing to the contrary within sixty days after
each account is rendered, describing the nature of any alleged errors or
admissions.
9.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to Greyrock or 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. All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered, or at the expiration of
one business day following delivery to the private delivery service, or two
business days following the deposit thereof in the United States mail, which
postage prepaid.
9.6 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.
10
11
GREYROCK CAPITAL LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
9.7 Integration. The Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Greyrock and
supersede all prior and contemporaneous negotiations and oral representations
and agreements, all of which are merged and integrated in this Agreement. There
are no oral understandings, representations or agreements between the parties
which are not set forth in this Agreement or in other written agreements signed
by the parties in connection herewith.
9.8 Waivers. The failure of Greyrock at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and Greyrock shall not waive
or diminish any right of Greyrock later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Greyrock shall be deemed to have been
waived by any act or knowledge of Greyrock or its agents or employees, but only
by a specific written waiver signed by an authorized officer of Greyrock and
delivered to Borrower. 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 Intangible, document or guaranty at any time held
by Greyrock on which Borrower is or may in any way be liable, and notice of any
action taken by Greyrock, unless expressly required to this Agreement.
9.9 Amendment. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Greyrock.
9.10 Time of Essence. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.11 Attorneys Fees and Costs. Borrower shall reimburse Greyrock for
all reasonable attorneys' fees and all filing, recording, search, title
insurance, appraisal, audit, and other reasonable costs incurred by Greyrock,
pursuant to, or in connection with, or relating to this Agreement (whether or
not a lawsuit is filed), including, but not limited to, any reasonably
attorneys' fees and costs Greyrock incurs in order to do the following: prepare
and negotiate this Agreement and the documents relating to this Agreement;
obtain legal advice in connection with this Agreement or Borrower; enforce, or
seek to enforce, any of its rights; prosecute actions against, or defend
actions by, Account Debtors; commence, intervene in, or defend any action or
proceeding; initiate any complaint to be relieved of the automatic stay in
bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party
claim, or other claim; examine, audit, copy, and inspect any of the Collateral
or any of Borrower's books and records; protect, obtain possession of, lease,
dispose of, or otherwise enforce Greyrock's security interest in, the
Collateral; and otherwise represent Greyrock in any litigation relating to
Borrower. If either Greyrock or Borrower files any lawsuit against the other
predicated on a breach of this Agreement, the prevailing party in such action
shall be entitled to recover its reasonable costs and attorneys' fees,
including (but not limited to) reasonable attorneys' fees and costs incurred in
the enforcement of, execution upon or defense of any order, decree, award or
judgment. All attorneys' fees and costs to which Greyrock may be entitled
pursuant to this Paragraph shall immediately become part of 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.
9.12 Benefit of Agreement. The provision of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Greyrock; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Greyrock, and any prohibited
assignment shall be void. No consent by Greyrock to any assignment shall
release Borrower from its liability for the Obligations.
9.13 Joint and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.14 Paragraph Headings; Construction. Paragraph headings are only used
in this Borrower for convenience. Borrower and Greyrock acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Greyrock or Borrower under any
rule of construction or otherwise.
9.16 Governing Law; Jurisdiction; Venue. This Agreement and all acts
and transactions hereunder and all rights and obligations of Greyrock and
Borrower shall be governed by the laws of the State of California. As a
material part of the consideration to Greyrock to enter into this Agreement,
Borrower (i) agrees that all actions and proceedings relating directly or
indirectly to this Agreement shall, at Greyrock option, be litigated in courts
located within California, and that the exclusive venue therefor shall be Los
Angeles County; (ii) consents to the jurisdiction and venue of any such court
and consents to service of process in any such action or proceeding by personal
delivery or any other method permitted by law; and (iii) waives any and all
rights Borrower may have to object to the jurisdiction of any such court, or to
transfer or change the venue of any such action or proceeding.
9.17 Mutual Waiver of Jury Trial. BORROWER AND GREYROCK 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 GREYROCK AND BORROWER, OR ANY
CONDUCT, ACTS OR OMISSIONS OF
11
12
GREYROCK CAPITAL LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
GREYROCK OR BORROWER OR ANY OF THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
ATTORNEYS OR ANY OTHER PERSONS
AFFILIATED WITH GREYROCK OR
BORROWER, IN ALL OF THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE.
BORROWER:
SOFTWARE TECHNOLOGIES
CORPORATION
BY /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
TITLE VP Finance & CFO
-----------------------------
GREYROCK:
GREYROCK CAPITAL
A DIVISION OF BANC OF AMERICA COMMERCIAL
FINANCE CORPORATION
BY /s/
--------------------------------
TITLE
-----------------------------
12
13
EXHIBIT A
TO
LOAN AND SECURITY AGREEMENT
AGREEMENTS PROHIBITING GRANT OF SECURITY INTERESTS IN COLLATERAL
(a) LinkSoft Technologies, Inc., Software License Agreement, dated December
14, 1996, including Volume Purchase Agreement and Credit Agreement each
dated December 14, 1996.
(b) LinkSoft Technologies, Inc., Software License Agreement, dated March 30,
1998, including Volume Purchase Addendum dated March 4, 1999.
(c) Intersolv, Inc., Distributor License Agreement, dated August 8, 1997,
including Amendment No. 1 dated April 13, 1998.
(d) Intelligent Search Technology, Ltd., OEM License Agreement, dated August
10, 1999.
14
EXHIBIT B
TO
LOAN AND SECURITY AGREEMENT
PERMITTED INDEBTEDNESS
The Company is a party to the following agreements related to indebtedness
for borrowed money:
(a) The Company is a party to the following equipment and operating
leases:
See Attachment A.
(b) The Company is a party to the following leases for real property
greater than one year in length:
(i) The Company is party to a seventy two (72) month lease agreement,
as amended as of August 5, 1998, with ▇▇▇▇▇/▇▇▇▇▇▇/Occidental 1
dated June 6, 1997. Pursuant to such lease, the Company leases
property located at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
for $45,563 per month through November 30, 1998, and $63,280 for
the next 25 months. The remaining months are paid at a monthly
rate of $69,307.
(ii) The Company is negotiating a lease for up to approximately 10,000
square feet of office space in El Segundo, California.
-2-
15
EXHIBIT C
TO
LOAN AND SECURITY AGREEMENT
PERMITTED LIENS
1. LIENS AND ENCUMBRANCES
(a) The Company has granted certain liens and security interests to Imperial
Bank pursuant to the terms of the Security and Loan Agreement dated August
11, 1998, addenda and related notes thereto. Such Security and Loan
Agreement currently prohibits certain repurchases of the Company's stock,
including the redemption of the Shares contemplated by the Restated
Articles of Incorporation.
(b) The Company has granted certain liens and security interests to certain
equipment lessors under the terms of the respective equipment leases listed
below.
(c) The Company is a party to the following equipment and operating leases:
See Attachment A.
(d) The Company is a party to the following leases for real property greater
than one year in length:
(i) The Company is party to a seventy two (72) month lease agreement, as
amended as of August 5, 1998, with ▇▇▇▇▇/▇▇▇▇▇▇/Occidental I dated
June 6, 1997. Pursuant to such lease, the Company leases property
located at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ for $45,563 per
month through November 30, 1998, and $63,280 for the next 25 months.
The remaining months are paid at a monthly rate of $69,307.
(ii) The Company is negotiating a lease for up to approximately 10,000
square feet of office space in El Segundo, California.
-3-
16
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
----------------------------------------------------
WARRANT TO PURCHASE STOCK
WARRANT TO PURCHASE 175,000 ISSUE DATE: OCTOBER 29, 1999
SHARES OF THE COMMON EXPIRATION DATE: OCTOBER 29, 2004
STOCK OF SOFTWARE TECHNOLOGIES INITIAL EXERCISE PRICE: $2.83 PER SHARE
CORPORATION
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other
good and valuable consideration, GREYROCK CAPITAL, a Division of Banc of
America Commercial Finance Corporation ("Holder") is entitled to purchase the
number of fully paid and non-assessable shares of common stock (the "Shares")
of Software Technologies Corporation, a California corporation (the "Company")
at the initial exercise price per Share (the "Warrant Price") all as set forth
above and as adjusted pursuant to Article 2 of this Warrant, subject to the
provisions and upon the terms and conditions set forth in this Warrant.
ARTICLE 1. EXERCISE.
1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by delivering a
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the
fair market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.3.
1.3 FAIR MARKET VALUE. If the Shares are traded in a public market, the
fair market value of the Shares shall be the average closing prices of the
Shares (or the closing prices of the Company's stock into which the Shares are
convertible) reported for the five business days immediately before Holder
delivers its Notice of Exercise to the Company. If the Shares are not traded in
a public market, the Board of Directors of the Company shall determine fair
market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that
Holder disagrees with such determination, then the Company and Holder shall
promptly agree upon a reputable investment banking firm to undertake such
valuation. If the valuation of such investment banking firm is greater than
that determined by the Board of Directors, then all fees and expenses of such
investment banking firm shall be paid by the Company. In all other
circumstances, such fees and expenses shall be paid by Holder.
1.4 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares so acquired.
1.5 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant,
a new warrant of like tenor.
1.6 REPURCHASE ON SALE, MERGER OR CONSOLIDATION OF THE COMPANY.
1.6.1. "ACQUISITION". For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of
the assets of the Company, or any reorganization, consolidation, or merger of
the Company where the holders of the Company's securities before the
transaction beneficially own less than 50% of the outstanding voting securities
of the surviving entity after the transaction.
1.6.2. ASSUMPTION OF WARRANT. If upon the closing of any Acquisition
the successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.6.3. NONASSUMPTION. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
-1-
17
WARRANT TO PURCHASE STOCK
--------------------------------------------------------------------------------
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides
the outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired,
Holder shall receive, without cost to Holder, the total number and kind of
securities to which Holder would have been entitled had Holder owned the Shares
of record as of the date the dividend or subdivision occurred.
2.2 RECLASSIFICATIONS, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series
as the Shares to common stock pursuant to the terms of the Company's Articles
of Incorporation upon the closing of a registered public offering of the
Company's common stock. The Company or its successor shall promptly issue to
Holder a new Warrant for such new securities or other property. The new Warrant
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 2 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise of the new Warrant. The
provisions of this Section 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares, the Warrant Price shall be proportionately increased.
2.4 ADJUSTMENTS FOR DILUTING ISSUANCES. The Warrant Price and the number
of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of the Shares, shall be subject to adjustment, from time to time in the manner
set forth on Exhibit A.
2.5 NO IMPAIRMENT. The Company shall not, by amendment of its Articles of
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed under this Warrant by the Company, but shall
at all times in good faith assist in carrying out of all the provisions of this
Article 2 and in taking all such action as may be necessary or appropriate to
protect Holder's rights under this Article against impairment. If the Company
takes any action affecting the Shares or its common stock other than as
described above that specifically and adversely affects Holder's rights under
this Warrant, the Warrant Price shall be adjusted downward and the number of
Shares issuable upon exercise of this Warrant shall be adjusted upward in such
a manner that the aggregate Warrant Price of this Warrant is unchanged.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon exercise
or conversion of the Warrant and the number of Shares to be issued shall be
rounded down to the nearest whole Share. If a fractional share interest arises
upon any exercise or conversion of the Warrant, the Company shall eliminate such
fractional share interest by paying Holder amount computed by multiplying the
fractional interest by the fair market value of a full Share.
2.7 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder as follows:
(a) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
(b) The capitalization of the Company at June 30, 1999 was set forth
on Schedule 3.1(b) attached hereto, and on the issue date hereof the Shares
shall represent no less than 0.35% of the Company's common stock on a fully
diluted basis.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a) to
declare any dividend (other than a stock dividend in the nature of a stock
split) or distribution upon its common stock, whether in cash, property, stock,
or other securities and whether or not a regular cash dividend; (b) to offer
for subscription pro rata to the holders of any class or series of its stock
any additional shares of stock of any class or series or other rights; (c) to
effect any reclassification or recapitalization of common stock; or (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up, then, in connection with each such event, the Company
shall give Holder (1) at least 10 days prior written notice of the date on
which a record will be taken for such dividend, distribution, or subscription
rights (and specifying the date on which the holders of common stock will be
entitled thereto) or for determining rights to vote, if any, in respect of the
matters referred to in (c) and (d) above; and (2) in the case of the matters
referred to in (c) and (d) above at least 20 days prior written notice of the
date when the same will take place (and specifying the date on which the
-2-
18
WARRANT TO PURCHASE STOCK
--------------------------------------------------------------------------------
holders of common stock will be entitled to exchange their common stock for
securities or other property deliverable upon the occurrence of such event).
3.3 INFORMATION RIGHTS. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
ARTICLE 4. MISCELLANEOUS.
4.1 TERM: NOTICE OF EXPIRATION. This Warrant is exercisable, in whole or
in part, at any time and from time to time on or before the Expiration Date set
forth above.
4.2 LEGENDS. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the
shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, if reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holders notice of
proposed sale.
4.4 TRANSFER PROCEDURE. Subject to the provisions of Section 4.2 and 4.3,
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
Unless the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
4.5 MARKET STAND-OFF AGREEMENT. Holder agrees not to sell or otherwise
transfer or dispose of any Common Stock (or other securities) of the Company
held by such Holder (other than any securities purchased in the public market or
directly from the underwriters of such offering) during a period of time
determined by the Company and its underwriters (not to exceed 180 days)
following the effective date of the registration statement of the Company filed
under the Securities Act with respect to the Company's initial public offering
(other than any shares sold in such offering), provided that all executive
officers and directors of the Company who then hold Common Stock (or other
securities) of the Company enter into similar agreements in a form satisfactory
to the Company and such underwriter. The Company may impose stop-transfer
instructions with respect to the Common Stock (or other securities) issuable
upon exercise of this Warrant subject to the foregoing restriction until the end
of said period.
4.6 NOTICES. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.7 WAIVER. This Warrant and any term hereof may be changed, waived,
discharged, or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.8 ATTORNEYS' FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.9 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
-3-
19
SOFTWARE TECHNOLOGIES
CORPORATION
By ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
Title VP Finance & CFO
---------------------------
-4-
20
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _______ shares of the Common
Stock of Software Technologies Corporation pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to ________ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
__________________________
(NAME)
__________________________
__________________________
(ADDRESS)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
_______________________________
(Signature)
_______________________________
(Date)
-5-
21
Warrant to Purchase Stock
--------------------------------------------------------------------------------
EXHIBIT A
ANTI-DILUTION PROVISIONS
Per Anti-Dilution Agreement of even date.
-6-