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EXHIBIT 10.5
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bsquare corporation
LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
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1. DEFINITIONS AND CONSTRUCTION.................................................. 2
1.1 Definitions............................................................ 2
1.2 Accounting Terms....................................................... 7
2. LOAN AND TERMS OF PAYMENT..................................................... 7
2.1 Credit Extensions...................................................... 7
2.2 Overadvances........................................................... 10
2.3 Interest Rates, Payments, and Calculations............................. 10
2.4 Crediting Payments..................................................... 11
2.5 Fees................................................................... 11
2.6 Additional Costs....................................................... 11
2.7 Term................................................................... 12
3. CONDITIONS OF LOANS........................................................... 12
3.1 Conditions Precedent to Initial Credit Extension....................... 12
3.2 Conditions Precedent to all Credit Extensions.......................... 12
4. CREATION OF SECURITY INTEREST................................................. 13
4.1 Grant of Security Interest............................................. 13
4.2 Delivery of Additional Documentation Required.......................... 13
4.3 Right to Inspect....................................................... 13
5. REPRESENTATIONS AND WARRANTIES................................................ 13
5.1 Due Organization and Qualification..................................... 13
5.2 Due Authorization; No Conflict......................................... 13
5.3 No Prior Encumbrances.................................................. 13
5.4 Bona Fide Eligible Accounts............................................ 13
5.5 Merchantable Inventory................................................. 14
5.6 Name; Location of Chief Executive Office............................... 14
5.7 Litigation............................................................. 14
5.8 No Material Adverse Change in Financial Statements..................... 14
5.9 Solvency............................................................... 14
5.10 Regulatory Compliance.................................................. 14
5.11 Environmental Condition................................................ 14
5.12 Taxes.................................................................. 14
5.13 Subsidiaries........................................................... 14
5.14 Government Consents.................................................... 15
5.15 Full Disclosure........................................................ 15
6. AFFIRMATIVE COVENANTS......................................................... 15
6.1 Good Standing.......................................................... 15
6.2 Government Compliance.................................................. 15
6.3 Financial Statements, Reports, Certificates............................ 15
6.4 Inventory; Returns..................................................... 16
6.5 Taxes.................................................................. 16
6.6 Insurance.............................................................. 16
6.7 Principal Depository................................................... 16
6.8 Quick Ratio............................................................ 16
6.9 Tangible Net Worth..................................................... 16
6.10 Debt Service Coverage:................................................. 16
6.11 Registration of Intellectual Property Rights........................... 17
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6.12 Further Assurances..................................................... 17
7. NEGATIVE COVENANTS............................................................ 17
7.1 Dispositions........................................................... 17
7.2 Change in Business..................................................... 17
7.3 Mergers or Acquisitions................................................ 17
7.4 Indebtedness........................................................... 18
7.5 Encumbrances........................................................... 18
7.6 Distributions.......................................................... 18
7.7 Investments............................................................ 18
7.8 Transactions with Affiliates........................................... 18
7.9 Subordinated Debt...................................................... 18
7.10 Inventory.............................................................. 18
7.11 Compliance............................................................. 18
8. EVENTS OF DEFAULT............................................................. 18
8.1 Payment Default........................................................ 18
8.2 Covenant Default....................................................... 18
8.3 Material Adverse Change................................................ 19
8.4 Attachment............................................................. 19
8.5 Insolvency............................................................. 19
8.6 Other Agreements....................................................... 19
8.7 Judgments.............................................................. 19
8.8 Misrepresentations..................................................... 19
8.9 Guaranty............................................................... 19
9. BANK'S RIGHTS AND REMEDIES.................................................... 20
9.1 Rights and Remedies.................................................... 20
9.2 Power of Attorney...................................................... 21
9.3 Accounts Collection.................................................... 21
9.4 Bank Expenses.......................................................... 21
9.5 Bank's Liability for Collateral........................................ 21
9.6 Remedies Cumulative.................................................... 21
9.7 Demand; Protest........................................................ 22
10. NOTICES ...................................................................... 22
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.................................... 22
12. GENERAL PROVISIONS............................................................ 22
12.1 Successors and Assigns................................................. 22
12.2 Indemnification........................................................ 23
12.3 Time of Essence........................................................ 23
12.4 Severability of Provisions............................................. 23
12.5 Amendments in Writing, Integration..................................... 23
12.6 Counterparts........................................................... 23
12.7 Survival............................................................... 23
13. JUDICIAL REFERENCE............................................................ 23
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This LOAN AND SECURITY AGREEMENT is entered into as of February 11,
1998, by and between IMPERIAL BANK ("Bank") and bsquare corporation
("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following
terms shall have the following definitions:
"Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books relating
to any of the foregoing.
"Advance" or "Advances" means a cash advance under the
Revolving Facility.
"Affiliate" means, with respect to any Person, any
Person that owns or controls directly or indirectly such Person, any Person that
controls or is controlled by or is under common control with such Person, and
each of such Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents (including fees and expenses
of appeal), whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and
records including: ledgers; records concerning Borrower's assets or liabilities,
the Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" means an amount equal to eighty percent
(80%) of Eligible Accounts, as determined by Bank with reference to the most
recent Borrowing Base Certificate delivered by Borrower.
"Business Day" means any day that is not a Saturday,
Sunday, or other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
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"Collateral" means the property described on Exhibit A
attached hereto.
"Committed Revolving Line" means a credit extension of
up to Two Million Dollars ($2,000,000).
"Contingent Obligation" means, as applied to any Person,
any direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"Credit Extension" means each Advance, Letter of Credit,
Term Loan, Exchange Contract or any other extension of credit by Bank for the
benefit of Borrower hereunder.
"Current Assets" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current assets on
the consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date,
all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its Subsidiaries,
as at such date, plus, to the extent not already included therein, all
outstanding Advances made under this Agreement, including all Indebtedness that
is payable upon demand or within one year from the date of determination thereof
unless such Indebtedness is renewable or extendable at the option of Borrower or
any Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Daily Balance" means the amount of the Obligations owed
at the end of a given day.
"Eligible Accounts" means those Accounts that arise in
the ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank's reasonable judgment and upon notification thereof to Borrower in
accordance with the provisions hereof. Unless otherwise agreed to by Bank,
Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay
within ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor,
twenty-five percent (25%) of whose Accounts the account debtor has failed to pay
within ninety (90) days of invoice date;
(c) Accounts with respect to which the account debtor is
an officer, employee, or agent of Borrower;
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(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale, on approval, ▇▇▇▇ and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is
an Affiliate of Borrower;
(f) Accounts with respect to which the account debtor
does not have its principal place of business in the United States, except for
Eligible Foreign Accounts;
(g) Accounts with respect to which the account debtor is
the United States or any department, agency, or instrumentality of the United
States;
(h) Accounts with respect to which Borrower is liable to
the account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor;
(i) Accounts with respect to an account debtor,
including Subsidiaries and Affiliates, whose total obligations to Borrower
exceed twenty-five percent (25%) of all Accounts, to the extent such obligations
exceed the aforementioned percentage; except that the concentration limit for
Accounts owing by Microsoft Corporation shall be forty-five percent (45%), and
except as approved in writing by Bank;
(j) Accounts with respect to which the account debtor
disputes liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute (but
only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(k) Accounts the collection of which Bank reasonably
determines to be doubtful.
"Eligible Foreign Accounts" means Accounts with respect
to which the account debtor does not have its principal place of business in the
United States and (1) that have sales in excess of Five Hundred Million Dollars
($500,000,000) per year; or (2) that Bank approves on a case-by-case basis.
"Equipment" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, software
and related general intangibles, parts and attachments in which Borrower has any
interest.
"ERISA" means the Employment Retirement Income Security
Act of 1974, as amended, and the regulations thereunder.
"Equipment Advance" has the meaning set forth in Section
2.1.4.
"Equipment Line" means a credit extension of up to Five
Hundred Thousand Dollars ($500,000).
"Equipment Maturity Date" means October 30, 2001.
"GAAP" means generally accepted accounting principles as
in effect from time to time.
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"Indebtedness" means (a) all indebtedness for borrowed
money or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced
by or against any person or entity under any provision of the United States
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in
which Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.
"Investment" means any beneficial ownership of
(including stock, partnership interest or other securities) any Person, or any
loan, advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement,
any note or notes executed by Borrower, and any other agreement entered into
between Borrower and Bank in connection with this Agreement, all as amended or
extended from time to time.
"Material Adverse Effect" means a material adverse
effect on (i) the business operations or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan
Documents.
"Negotiable Collateral" means all of Borrower's present
and future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Bank pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
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"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising
under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and
disclosed in the Schedule;
(c) Indebtedness secured by a lien described in clause
(c) of the defined term "Permitted Liens," provided such Indebtedness does not
exceed the lesser of the cost or fair market value of the equipment financed
with such Indebtedness.
(d) Subordinated Debt;
(e) Indebtedness to trade creditors incurred in the
ordinary course of business; and
(f) Other Indebtedness in an outstanding principal
amount not to exceed $200,000.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed
in the Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed
in the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, provided the same have no priority over any of
Bank's security interests;
(c) Liens (i) upon or in any equipment acquired or held
by Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by liens of the type
described in clauses (a) through (c) above, provided that any extension, renewal
or replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation,
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institution, public benefit corporation, firm, joint Stock company, estate,
entity or governmental agency.
"Prime Rate" means the variable rate of interest, per
annum, most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount
thereof shall be determined, the consolidated cash, cash-equivalents, accounts
receivable and investments, with maturities not to exceed 90 days, of Borrower
determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive
Officer, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" means the date immediately
preceding the first anniversary of the date of this Agreement.
"Revolving Facility" means the facility under which
Borrower may request Bank to issue Advances, as specified in Section 2.1 hereof.
"Schedule" means the schedule of exceptions attached
hereto, if any.
"Subordinated Debt" means any debt incurred by Borrower
that is subordinated to the debt owing by Borrower to Bank on terms acceptable
to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in
which (i) any general partnership interest or (ii) more than 50% of the stock of
which by the terms thereof ordinary voting power to elect the Board of
Directors, managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.
"Tangible Net Worth" means at any date as of which the
amount thereof shall be determined, the sum of the capital stock and additional
paid-in capital plus retained earnings (or minus accumulated deficit) of
Borrower and its Subsidiaries minus intangible assets, plus Subordinated Debt,
on a consolidated basis determined in accordance with GAAP.
"Total Liabilities" means at any date as of which the
amount thereof shall be determined, all obligations that should, in accordance
with GAAP be classified as liabilities on the consolidated balance sheet of
Borrower, including in any event all Indebtedness.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
2.1 Credit Extensions.
Borrower promises to pay to the order of Bank, in lawful
money of the United States of America, the aggregate unpaid principal amount of
all Credit Extensions made by Bank to Borrower hereunder. Borrower shall also
pay interest on the unpaid principal amount of such Credit Extensions at rates
in accordance with the terms hereof.
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2.1.1 Revolving Advances.
(a) Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower in an aggregate outstanding
amount not to exceed (i) the Committed Revolving Line or the Borrowing Base,
whichever is less, minus (ii) the face amount of all outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit, and minus (iii) the
Foreign Exchange Reserve. Subject to the terms and conditions of this Agreement,
amounts borrowed pursuant to this Section 2.1.1 may be repaid and reborrowed at
any time prior to the Revolving Maturity Date.
(b) Whenever Borrower desires an Advance, Borrower will
notify Bank by facsimile transmission or telephone no later than 3:00 p.m.
Pacific time, on the Business Day that the Advance is to be made. Each such
notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of Exhibit B hereto. Bank is authorized to make Advances
under this Agreement, based upon instructions received from a Responsible
Officer or a designee of a Responsible Officer, or without instructions if in
Bank's discretion such Advances are necessary to meet Obligations which have
become due and remain unpaid. Bank shall be entitled to rely on any telephonic
notice given by a person who Bank reasonably believes to be a Responsible
Officer or a designee thereof, and Borrower shall indemnify and hold Bank
harmless for any damages or loss suffered by Bank as a result of such reliance.
Bank will credit the amount of Advances made under this Section 2.1.1 to
Borrower's deposit account.
(c) The Committed Revolving Line shall terminate on the
Revolving Maturity Date, at which time all Advances under this Section 2.1.1
shall be immediately due and payable.
2.1.2 Letters of Credit.
(a) Subject to the terms and conditions of this
Agreement, Bank agrees to issue or cause to be issued Letters of Credit for the
account of Borrower in an aggregate outstanding face amount not to exceed (i)
the lesser of the Committed Revolving Line or the Borrowing Base, minus (ii) the
then outstanding principal balance of the Advances, provided that the face
amount of outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve) shall not in any case exceed
Five Hundred Thousand Dollars ($500,000). Each Letter of Credit shall have an
expiry date no later than the Revolving Maturity Date. All Letters of Credit
shall be, in form and substance, acceptable to Bank in its sole discretion and
shall be subject to the terms and conditions of Bank's form of standard
Application and Letter of Credit Agreement.
(b) The obligation of Borrower to immediately reimburse
Bank for drawings made under Letters of Credit shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend, protect and hold Bank harmless from any loss,
cost, expense or liability, including, without limitation, reasonable attorneys'
fees, arising out of or in connection with any Letters of Credit.
(c) Borrower may request that Bank issue a Letter of
Credit payable in a currency other than United States Dollars. If a demand for
payment is made under any such Letter of Credit, Bank shall treat such demand as
an Advance to Borrower of the equivalent of the amount thereof (plus cable
charges) in United States currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other currency for cable transfer
to the country of which it is the currency.
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(d) Upon the issuance of any Letter of Credit payable in
a currency other than United States Dollars, Bank shall create a reserve under
the Committed Revolving Line for Letters of Credit against fluctuations in
currency exchange rates, in an amount equal to ten percent (10%) of the face
amount of such Letter of Credit. The amount of such reserve may be amended by
Bank from time to time to account for fluctuations in the exchange rate. The
availability of funds under the Committed Revolving Line shall be reduced by the
amount of such reserve for so long as such Letter of Credit remains outstanding.
2.1.3 Foreign Exchange Contract; Foreign Exchange Settlements.
(a) Subject to the terms of this Agreement, Borrower may
enter into foreign exchange contracts (the "Exchange Contracts") not to exceed
an aggregate amount of Seventy-Five Thousand Dollars ($75,000) (the "Contract
Limit"), pursuant to which Bank shall sell to or purchase from Borrower foreign
currency on a spot or future basis. Borrower shall not request any Exchange
Contracts at any time it is out of compliance with any of the provisions of this
Agreement. All Exchange Contracts must provide for delivery of settlement on or
before the Revolving Maturity Date. The amount available under the Committed
Revolving Line at any time shall be reduced by the following amounts (the
"Foreign Exchange Reserve") on any given day (the "Determination Date"): (i) on
all outstanding Exchange Contracts on which delivery is to be effected or
settlement allowed more than two (2) Business Days after the Determination Date,
ten percent (10%) of the gross amount of the Exchange Contracts; plus (ii) on
all outstanding Exchange Contracts on which delivery is to be effected or
settlement allowed within two (2) Business Days after the Determination Date,
one hundred percent (100%) of the gross amount of the Exchange Contracts.
(b) Bank may, in its discretion, terminate the Exchange
Contracts at any time (a) that an Event of Default occurs or (b) that there is
no sufficient availability under the Committed Revolving Line and Borrower does
not have available funds in its bank account to satisfy the Foreign Exchange
Reserve. If Bank terminates the Exchange Contracts, and without limitation of
any applicable indemnities, Borrower agrees to reimburse Bank for any and all
fees, costs and expenses relating thereto or arising in connection therewith.
(c) Borrower shall not permit the total gross amount of
all Exchange Contracts on which delivery is to be effected and settlement
allowed in any two (2) Business Day period to be more than Seventy-Five Thousand
Dollars ($75,000) (the "Settlement Limit"), nor shall Borrower permit the total
gross amount of all Exchange Contracts to which Borrower is a party, outstanding
at any one time, to exceed the Contract Limit. Notwithstanding the above,
however, the amount which may be settled in any two (2) Business Day period may
be increased above the Settlement Limit up to, but in no event to exceed, the
amount of the Contract Limit under either of the following circumstances:
(i) if there is sufficient availability under
the Committed Revolving Line in the amount of the Foreign Exchange Reserve as of
each Determination Date, provided that Bank in advance shall reserve the full
amount of the Foreign Exchange Reserve against the Committed Revolving Line; or
(ii) if there is insufficient availability under
the Committed Revolving Line, as to settlements within any two (2) Business Day
period, provided that Bank, in its sole discretion, may: (A) verify good funds
overseas prior to crediting Borrower's deposit account with Bank (in the case of
Borrower's sale of foreign currency); or (B) debit Borrower's deposit account
with Bank prior to delivering foreign currency overseas (in the case of
Borrower's purchase of foreign currency).
(d) In the case of Borrower's purchase of foreign
currency, Borrower in advance shall instruct Bank upon settlement either to
treat the settlement amount as an advance under the Committed Revolving Line, or
to debit Borrower's account for the amount settled.
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(e) Borrower shall execute all standard form
applications and agreements of Bank in connection with the Exchange Contracts
and, without limiting any of the terms of such applications and agreements,
Borrower will pay all standard fees and charges of Bank in connection with the
Exchange Contracts.
(f) Without limiting any of the other terms of this
Agreement or any such standard form applications and agreements of Bank,
Borrower agrees to indemnify Bank and hold it harmless from and against any and
all claims, debts, liabilities, demands, obligations, actions, costs and
expenses (including, without limitation, attorneys' fees of counsel of Bank's
choice), of every nature and description which it may sustain or incur, based
upon, arising out of, or in any way relating to any of the Exchange Contracts or
any transactions relating thereto or contemplated thereby.
2.1.4 Equipment Advances.
(a) Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through October 30, 1998, Bank
agrees to make advances (each an "Equipment Advance" and, collectively, the
"Equipment Advances") to Borrower in an aggregate outstanding amount not to
exceed the Equipment Line. The Equipment Advances shall be used only to purchase
Equipment approved from time to time by Bank purchased on or after ninety (90)
days prior to the date hereof, and shall not exceed eighty percent (80%) of the
invoice amount of such equipment, excluding taxes, shipping, warranty charges,
freight discounts and installation expense. Not more than twenty-five percent
(25%) of the aggregate outstanding Equipment Advances shall be used to finance
the acquisition or licensing of software.
(b) Interest shall accrue from the date of each
Equipment Advance at the rate specified in Section 2.3(a), and shall be payable
monthly for each month through October 1998. Any Equipment Advances that are
outstanding on October 30, 1998 shall be payable in thirty-six (36) equal
monthly installments of principal, plus all accrued interest, beginning on
November 30, 1998, and continuing on the same day of each month thereafter
through October 30, 2001, at which time all amounts due under this Section 2.1.4
and any other amounts due under this Agreement shall be immediately due and
payable. Equipment Advances, once repaid, may not be reborrowed.
(c) When Borrower desires to obtain a Equipment Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific time one (1)
Business Day before the day on which the Equipment Advance is to be made. Such
notice shall be substantially in the form of Exhibit B. The notice shall be
signed by a Responsible Officer or its designee and include a copy of the
invoice for any Equipment to be financed.
2.2 Overadvances. If, at any time or for any reason, the amount
of Obligations owed by Borrower to Bank pursuant to Section 2.1.1 of this
Agreement is greater than the lesser of (i) the Committed Revolving Line or (ii)
the Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount
of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rates.
(i) Advances' Except as set forth in Section
2.3(b), any Advances shall bear interest, on the average daily balance thereof,
at a rate equal to the Prime Rate.
(ii) Equipment Advances. Except as set forth in
Section 2.3(b), any Equipment Advances shall bear interest, on the average daily
balance thereof, at a rate equal to one quarter of a percentage point (0.25%)
above the Prime Rate.
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(b) Default Rate. All Obligations shall bear interest,
from and after the occurrence of an Event of Default, at a rate equal to five
(5) percentage points above the interest rate applicable immediately prior to
the occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and
payable on the last Business Day of each month during the term hereof. Bank
shall, at its option, charge such interest, all Bank Expenses, and all Periodic
Payments against any of Borrower's deposit accounts or against the Committed
Revolving Line, in which case those amounts shall thereafter accrue interest at
the rate then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed
from time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. AU interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon California time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. A Facility Fee equal to Twelve
Thousand Five Hundred Dollars ($12,500), which fee shall be due on the Closing
Date and shall be fully earned and nonrefundable;
(b) Financial Examination and Apraisal Fees. Bank's
customary fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents;
(c) Bank Expenses. Upon the date hereof, all Bank
Expenses incurred through the Closing Date, including reasonable attorneys' fees
and expenses, and, after the date hereof, all Bank Expenses, including
reasonable attorneys' fees and expenses, as and when they become due.
2.6 Additional Costs. In case any change in any law, regulation,
treaty or official directive or the interpretation or application thereof by any
court or any governmental authority charged with the administration thereof or
the compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement:
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the
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transactions contemplated hereby (except for taxes on the overall net income of
Bank imposed by the United States of America or any political subdivision
thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect
to its performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 Term. This Agreement shall become effective on the Closing
Date and, subject to Section 12.7, shall continue in full force and effect for a
term ending on the Equipment Maturity Date. Notwithstanding the foregoing, Bank
shall have the right to terminate its obligation to make Credit Extensions under
this Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank's Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. The
obligation of Bank to make the initial Credit Extension is subject to the
condition precedent that Bank shall have received, in form and substance
satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with
respect to incumbency and resolutions authorizing the execution and delivery of
this Agreement;
(c) financing statement (Form UCC-1);
(d) insurance certificate;
(e) payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof;
(f) an audit of the Collateral, the results of which
shall be satisfactory to Bank; and
(g) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The
obligation of Bank to make each Credit Extension, including the initial Credit
Extension, is further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form
as provided in Section 2.1; and
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(b) the representations and warranties contained in
Section 5 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Credit
Extension as though made at and as of each such date, and no Event of Default
shall have occurred and be continuing, or would result from such Credit
Extension. The making of each Credit Extension shall be deemed to be a
representation and warranty by Borrower on the date of such Credit Extension as
to the accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower grants and pledges to
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
4.2 Delivery of Additional Documentation Required. Borrower
shall from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws of
its state of incorporation and qualified and licensed to do business in, and is
in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible
title to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona
fide existing obligations. The services or property giving rise to such Eligible
Accounts have been rendered or delivered to the account debtor or to the account
debtor's agent for immediate shipment to and unconditional acceptance by the
account debtor. Borrower has not received notice of actual or imminent
Insolvency Proceeding of any account debtor that is included in any Borrowing
Base Certificate as an Eligible Account.
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5.5 Merchantable Inventory. All Inventory is in all material
respects of good and marketable quality, free from all material defects.
5.6 Name; Location of Chief Executive Office. Except as
disclosed in the Schedule, Borrower has not done business under any name other
than that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.
5.7 Litigation. Except as set forth in the Schedule, there are
no actions or proceedings pending by or against Borrower or any Subsidiary
before any court or administrative agency in which an adverse decision could
have a Material Adverse Effect or a material adverse effect on Borrower's
interest or Bank's security interest in the Collateral. Borrower does not have
knowledge of any such pending or threatened actions or proceedings.
5.8 No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.9 Solvency. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has met
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower's failure
to comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.11 Environmental Condition. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or caused to
be filed all tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein.
5.13 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
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5.14 Government Consents. Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower's business as currently
conducted.
5.15 Full Disclosure. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause
each Subsidiary to meet, the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall
deliver to Bank: (a) as soon as available, but in any event within twenty-five
(25) days after the end of each fiscal quarter of Borrower, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during such period, in a form and certified by a Responsible Officer;
(b) as soon as available, but in any event within ninety (90) days after the end
of Borrower's fiscal year, beginning with the year ending December 31, 1997,
audited consolidated financial statements of Borrower prepared in accordance
with GAAP, consistently applied; (c) within five (5) days of filing, copies of
all statements, reports and notices sent or made available generally by Borrower
to its security holders or to any holders of Subordinated Debt and all reports
on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission;
(d) promptly upon receipt of notice thereof, a report of any legal actions
pending or threatened against Borrower or any Subsidiary that could result in
damages or costs to Borrower or any Subsidiary of Fifty Thousand Dollars
($50,000) or more; and (e) such budgets, sales projections, operating plans or
other financial information as Bank may reasonably request from time to time.
Within fifteen (15) days after the last day of each month, Borrower
shall deliver to Bank a Borrowing Base Certificate signed by a Responsible
Officer in substantially the form of Exhibit C hereto, together with aged
listings of accounts receivable and accounts payable.
Borrower shall deliver to Bank with the quarterly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts and appraise Collateral at Borrower's expense, provided that such
audits will be conducted no more often than every six (6) months unless an Event
of Default has occurred and is continuing.
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6.4 Inventory; Returns. Borrower shall keep all Inventory in
good and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on the
same basis and in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary
to make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.
(b) AR such policies of insurance shall be in such form,
with such companies, and in such amounts as reasonably satisfactory to Bank. All
such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Upon Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
depository, investment, and operating accounts with Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last day of
each fiscal quarter, a ratio of Quick Assets to Current Liabilities, of at least
1.00 to 1.00.
6.9 Tangible Net Worth. Borrower shall maintain, as of the last
day of each fiscal quarter, a Tangible Net Worth plus Subordinated Debt of not
less than Two Million Five Hundred Thousand Dollars ($2,500,000).
6.10 Debt Service Coverage. Borrower shall maintain, as of the
last day of each fiscal quarter, a Debt Service Coverage of at least 1.5 to 1.0.
"Debt Service Coverage" means, as of any date of determination, a ratio of (a)
the sum of (i) earnings after tax plus (ii) interest and non-cash (i.e.,
depreciation and amortization) expense, annualized for the preceding fiscal
quarter to (b) the sum of (i) current portion of long term debt and capitalized
leases plus (ii) interest expense.
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6.11 Registration of Intellectual Property Rights.
(a) Borrower shall register or cause to be registered
(to the extent not already registered) with the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, those
intellectual property rights listed on Exhibits A, B and C to the intellectual
Property Security Agreement delivered to Bank by Borrower in connection with
this Agreement within sixty (60) days of the date of this Agreement. Borrower
shall register or cause to be registered with the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, those
additional intellectual property rights developed or acquired by Borrower from
time to time in connection with any product prior to the sale or licensing of
such product to any third party, including without limitation revisions or
additions to the intellectual property rights listed on such Exhibits A, B and
C.
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect Bank's security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents and Copyrights, (ii) use
its best efforts to detect infringements of the Trademarks, Patents and
Copyrights and promptly advise Bank in writing of material infringements
detected and (iii) not allow any Trademarks, Patents or Copyrights to be
abandoned, forfeited or dedicated to the public without the written consent of
Bank, which shall not be unreasonably withheld, unless Bank determines that
reasonable business practices suggest that abandonment is appropriate.
(d) Bank shall have the right, but not the obligation,
to take, at Borrower's sole expense, any actions that Borrower is required under
this Section 6.11 to take but which Borrower fails to take, after fifteen (15)
days' notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.11.
6.12 Further Assurances. At any time and from time to time
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Credit
Extensions, Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than: (i) Transfers
of Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any of
its Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a material change of no more than fifty
percent (50%) in Borrower's ownership. Borrower will not, without thirty (30)
days prior written notification to Bank, relocate its chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any
of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or
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permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable
with respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any
Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock, except that Borrower may pay dividends to its shareholders
in such amounts as are necessary to cover personal tax liabilities of such
shareholders.
7.7 Investments. Directly or indirectly acquire or own, or make
any Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman,
or similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose. Fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, fail
to comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay, when due, any of
the Obligations;
8.2 Covenant Default. If Borrower fails to perform any
obligation under Article 6 or violates any of the covenants contained in Article
7 of this Agreement, or fails or neglects to perform, keep, or observe any other
material term, provision, condition, covenant, or agreement
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contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Bank and as to any default
under such other term, provision, condition, covenant or agreement that can be
cured, has failed to cure such default within ten (10) days after Borrower
receives notice thereof or any officer of Borrower becomes aware thereof;
provided, however, that if the default cannot by its nature be cured within the
ten (10) day period or cannot after diligent attempts by Borrower be cured
within such ten (10) day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed thirty (30) days) to attempt to cure such default,
and within such reasonable time period the failure to have cured such default
shall not be deemed an Event of Default (provided that no Credit Extensions will
be required to be made during such cure period);
8.3 Material Adverse Change. If there occurs a material adverse
change in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in the
Collateral;
8.4 Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
is commenced against Borrower and is not dismissed or stayed within ten (10)
days (provided that no Credit Extensions will be made prior to the dismissal of
such Insolvency Proceeding);
8.6 Other Agreements. If there is an uncured default in any
agreement to which Borrower is a party with a third party or parties resulting
in a right by such third party or parties, whether or not exercised, to
accelerate the maturity of any Indebtedness in an amount in excess of One
Hundred Thousand Dollars ($100,000) or that could have a Material Adverse
Effect;
8.7 Judgments. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least One Hundred
Thousand Dollars ($100,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment); or
8.8 Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
8.9 Guaranty. Any guaranty of all or a portion of the
Obligations ceases for any reason to be in full force and effect, or any
guarantor fails to perform any obligation under any guaranty of all or a portion
of the Obligations, or any material misrepresentation or material misstatement
exists now or hereafter in any warranty or representation set forth in any
guaranty of all
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or a portion of the Obligations or in any certificate delivered to Bank in
connection with such guaranty.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);
(b) Cease advancing money or extending credit to or for
the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(c) Demand that Borrower (i) deposit cash with Bank in
an amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii)
pay in advance all Letters of Credit fees scheduled to be paid or payable over
the remaining term of the Letters of Credit;
(d) Settle or adjust disputes and claims directly with
account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(e) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's owned premises, Borrower hereby grants Bank a
license to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of Bank's rights or remedies provided
herein, at law, in equity, or otherwise;
(f) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Bank is hereby granted a license or other right,
solely pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(h) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as is
commercially reasonable, and apply any proceeds to the Obligations in whatever
manner or order Bank deems appropriate;
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(i) Bank may credit bid and purchase at any public sale;
and
(j) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
▇▇▇▇ of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle, and adjust all claims under and decisions
with respect to Borrower's policies of insurance; and (e) settle and adjust
disputes and claims respecting the accounts directly with account debtors, for
amounts and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. At any time from the date of this
Agreement, Bank may notify any Person owing funds to Borrower of Bank's security
interest in such funds and verify the amount of such Account. Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities within
ten (10) days of when such payment is due, to the extent required under the
terms of this Agreement, then Bank may do any or all of the following: (a) make
payment of the same or any part thereof; (b) set up such reserves under the
Revolving Facility as Bank deems necessary to protect Bank from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies
with reasonable banking practices, Bank shall not in any way or manner be liable
or responsible for: (a) the safekeeping of the Collateral; (b) any loss or
damage thereto occurring or arising in any manner or fashion from any cause; (c)
any diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
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9.7 Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
If to Borrower: bsquare corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
If to Bank: Imperial Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇ ▇▇▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
▇▇▇▇▇, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement shall bind and inure
to the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
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12.2 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance
of all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot
be amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties
made in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 Confidentiality. In handling any confidential information
Bank shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower, (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order, (iv) as may be required in
connection with the examination, audit or similar investigation of Bank and (v)
as Bank may determine in connection with the enforcement of any remedies
hereunder. Confidential information hereunder shall not include information that
either: (a) is in the public domain or in the knowledge or possession of Bank
when disclosed to Bank, or become part of the public domain after disclosure to
Bank through no fault of Bank; or (b) is disclosed to Bank by a third party,
provided Bank does not have actual knowledge that such third party is prohibited
from disclosing such information.
13. JUDICIAL REFERENCE.
(a) Other than (i) nonjudicial foreclosure and all
matters in connection therewith regarding security interests in real or personal
property; or (ii) the appointment of a receiver, or the exercise of other
provisional remedies (any and all of which may be initiated pursuant to
applicable law), each controversy, dispute or claim between the parties arising
out of or relating to this Agreement, which controversy, dispute or claim is not
settled in writing within thirty (30) days after
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the "Claim Date" (defined as the date on which a party subject to this Agreement
gives written notice to all other parties that a controversy, dispute or claim
exists), will be settled by a reference proceeding in California in accordance
with the provisions of Section 638 et seq. of the California Code of Civil
Procedure, or their successor section ("CCP"), which shall constitute the
exclusive remedy for the settlement of any controversy, dispute or claim
concerning this Agreement, including whether such controversy, dispute or claim
is subject to the reference proceeding and except as set forth above, the
parties waive their rights to initiate any legal proceedings against each other
in any court or jurisdiction other than the Superior Court in the County where
the Real Property, if any, is located or Los Angeles County if none (the
"Court"). The referee shall be a retired Judge of the Court selected by mutual
agreement of the parties, and if they cannot so agree within forty-five (45)
days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of the Court
(or any subsequently enacted Rule). Each party shall have one peremptory
challenge pursuant to CCP Section 170.6. The referee shall (a) be requested to
set the matter for hearing within sixty (60) days after the date of selection of
the referee and (b) try any and all issues of law or fact and report a statement
of decision upon them, if possible, within ninety (90) days of the Claim Date.
Any decision rendered by the referee will be final, binding and conclusive and
judgment shall be entered pursuant to CCP Section 644 in any court in the State
of California having jurisdiction. Any party may apply for a reference
proceeding at any time after thirty (30) days following notice to any other
party of the nature of the controversy, dispute or claim, by filing a petition
for a hearing and/or trial. All discovery permitted by this Agreement shall be
completed no later than fifteen (15) days before the first hearing date
established by the referee. The referee may extend such period in the event of a
party's refusal to provide requested discovery or unavailability of a witness
due to absence or illness. No party shall be entitled to "priority" in
conducting discovery. Depositions may be taken by either party upon seven (7)
days written notice, and request for production or inspection of documents which
cannot be resolved by the parties shall be submitted to the referee as provided
herein. The Superior Court is empowered to issue temporary and/or provisions
remedies, as appropriate.
(b) Except as expressly set forth in this Agreement, the
referee shall determine the manner in which the reference proceeding is
conducted including the time and place of all hearings, the order of
presentation of evidence, and all other questions that arise with respect to the
course of the reference proceeding. AU proceedings and hearings conducted before
the referee, except for trial, shall be conducted without a court reporter
except that when any party so requests, a court reporter will be used at any
hearing conducted before the referee. The party making such a request shall have
the obligation to arrange for and pay for the court reporter. The costs of the
court reporter at the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all
issues in accordance with existing case law and the statutory laws of the State
of California. The rules of evidence applicable to proceedings at law in the
State of California will be applicable to the reference proceeding. The referee
shall be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the reference proceeding which shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provisions.
(d) In the event that the enabling legislation which
provides for appointment of a referee is repealed (and no successor statute is
enacted), any dispute between the parties that would otherwise be determined by
the reference procedure herein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the
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Court, in accordance with the California Arbitration Act, Section 1280 through
Section 1294.2 of the CCP as amended from time to time. The limitations with
respect to discovery as set forth hereinabove shall apply to any such
arbitration proceedings
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
bsquare corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Title: CEO
------------------------------
IMPERIAL
By: /s/ [SIGNATURE ILLEGIBLE]
---------------------------------
Title: SR. VP
------------------------------
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EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing.
(e) All documents, cash, deposit accounts, securities, financial assets,
investment property, securities accounts, securities entitlements, letters of
credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Borrower's Books relating to any of the foregoing.
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EXHIBIT B
LOAN PAYMENT ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: EMERGING GROWTH INDUSTRIES DATE:___________________
FAX#: (▇▇▇) ▇▇▇-▇▇▇▇ TIME:___________________
FROM: bsquare corporation
-------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:_________________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:_________________________________________________________
PHONE NUMBER:_________________________________________________________________
FROM ACCOUNT #________________________ TO ACCOUNT #_______________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $_______________________________
PRINCIPAL PAYMENT (ONLY) $_______________________________
INTEREST PAYMENT (ONLY) $_______________________________
PRINCIPAL AND INTEREST (PAYMENT) $_______________________________
OTHER INSTRUCTIONS:___________________________________________________________
______________________________________________________________________________
All representations and warranties of Borrower stated in the Loan
Agreement are true, correct and complete in all material respects as of the date
of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
__________________________________ _________________________________
Authorized Requester Phone #
__________________________________ _________________________________
Received By (Bank) Phone #
_____________________________________________
Authorized Signature (Bank)
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EXHIBIT C
BORROWING BASE CERTIFICATE
--------------------------------------------------------------------------------
Borrower: bsquare corporation Lender: Imperial Bank
Commitment Amount: $2,500,000
--------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of $__________
2. Additions (please explain on reverse) $__________
3. TOTAL ACCOUNTS RECEIVABLE $__________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $__________
5. Balance of 25% over 90 day accounts $__________
6. Concentration Limits $__________
7. Foreign Accounts $__________
8. Governmental Accounts $__________
9. Contra Accounts $__________
10. Promotion or Demo Accounts $__________
11. Intercompany/Employee Accounts $__________
12. Other (please explain on reverse) $__________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $__________
14. Eligible Accounts (#3 minus #13) $__________
15. LOAN VALUE OF ACCOUNTS (80% of #14) $__________
BALANCES
16. Maximum Loan Amount $__________
17. Total Funds Available [Lesser of #16 or #15] $__________
18. Present balance owing on Line of Credit $__________
19. Outstanding under Sublimits ( ) $__________
20. RESERVE POSITION (#17 minus #18 and #19) $__________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Imperial Bank.
COMMENTS:
BANK USE ONLY
Rec'd By:______________
Auth. Signer
bsquare corporation Date:__________________
Verified:______________
Auth. Signer
By:_______________________________ Date:__________________
Authorized Signer
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EXHIBIT D
COMPLIANCE CERTIFICATE
TO: IMPERIAL BANK
FROM: bsquare corporation
The undersigned authorized officer of bsquare corporation hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending _________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES' COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Quarterly financial statements Quarterly within 25 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 15 days Yes No
A/R Audit Initial and Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Minimum Quick Ratio 1.0:1.0 ____:1.0 Yes No
Minimum Tangible Net Worth $2,500,000 $_______ Yes No
Maximum Debt Service Coverage 1.50:1.0 ____:1.0 Yes No
BANK USE ONLY
COMMENTS REGARDING EXCEPTIONS: See Attached.
Received by:_____________________
Sincerely, AUTHORIZED SIGNER
__________________________________
SIGNATURE Date:____________________________
__________________________________ Verified:________________________
TITLE AUTHORIZED SIGNER
__________________________________
DATE Date:____________________________
Compliance Status: Yes No
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INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement is entered into as of
February 11, 1998, by and between IMPERIAL SANK ("Bank") and bsquare corporation
("Grantor").
RECITALS
A. Bank has agreed to make certain advances of money and to extend
certain financial accommodation to Grantor (the "Loans") in the amounts and
manner set forth in that certain Loan and Security Agreement by and between Bank
and Grantor dated of even date herewith (as the same may be amended, modified or
supplemented from time to time, the "Loan Agreement"; capitalized terms used
herein are used as defined in the Loan Agreement). Bank is willing to make the
Loans to Grantor, but only upon the condition, among others, that Grantor shall
grant to Bank a security interest in certain Copyrights, Trademarks and Patents
to secure the obligations of Grantor under the Loan Agreement.
B. Pursuant to the terms of the Loan Agreement, Grantor has granted to
Bank a security interest in all of Grantor's right, title and interest, whether
presently existing or hereafter acquired, in, to and under all of the
Collateral.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound, as collateral security
for the prompt and complete payment when due of its obligations under the Loan
Agreement, Grantor hereby represents, warrants, covenants and agrees as follows:
AGREEMENT
To secure its obligations under the Loan Agreement, Grantor grants and
pledges to Bank a security interest in all of Grantor's right, title and
interest in, to and under its Intellectual Property Collateral (including
without limitation those Copyrights, Patents and Trademarks listed on Schedules
A, B and C hereto), and including without limitation all proceeds thereof (such
as, by way of example but not by way of limitation, license royalties and
proceeds of infringement suits), the right to ▇▇▇ for past, present and future
infringements, all rights corresponding thereto throughout the world and all
re-issues, divisions continuations, renewals, extensions and
continuations-in-part thereof.
This security interest is granted in conjunction with the security
interest granted to Bank under the Loan Agreement. The rights and remedies of
Bank with respect to the security interest granted hereby are in addition to
those set forth in the Loan Agreement and the other Loan Documents, and those
which are now or hereafter available to Bank as a matter of law or equity. Each
right, power and remedy of Bank provided for herein or in the Loan Agreement or
any of the Loan Documents, or now or hereafter existing at law or in equity
shall be cumulative and concurrent and shall be in addition to every right,
power or remedy provided for herein and the exercise by Bank of any one or more
of the rights, powers or remedies provided for in this Intellectual Property
Security Agreement, the Loan Agreement or any of the other Loan Documents, or
now or hereafter existing at law or in equity, shall not preclude the
simultaneous or later exercise by any person, including Bank, of any or all
other rights, powers or remedies.
30
33
IN WITNESS WHEREOF, the parties have cause this Intellectual Property
Security Agreement to be duly executed by its officers thereunto duly authorized
as of the first date written above.
GRANTOR:
Address of Grantor: bsquare corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇ By: [SIGNATURE ILLEGIBLE]
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ---------------------------------
Title: CEO
------------------------------
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
BANK:
Address of Bank: IMPERIAL BANK
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇▇ By: [SIGNATURE ILLEGIBLE]
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ---------------------------------
Title: SR. VP
Attn: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇ ------------------------------
2
34
EXHIBIT A
BSQUARE DEVELOPMENT COPYRIGHTS
- BSQUARE FAX EXPRESS (a.k.a., bFAX Express), 1996, 1997 and 1998:
Send-only fax application for Windows CE. Support faxing and previewing
bitmaps, text and Microsoft Pocket Word documents. This application has
been adapted to the H/PC and the P/PC. This application is sold through
reseller channels. The P/PC version is due for release in 1Q98.
- BSQUARE FAX PRO (a.k.a., bFAX Pro): Send and receive fax application for
Windows CE. Supports faxing and previewing of faxes containing multiple
documents to multiple recipients. This product is bundled with certain
H/PCs. This application is sold through reseller channels.
- BSQUARE FAX LITE (a.k.a., bFAX Lite), 1996, 1997 and 1998: A version of
bFAX Pro that has certain features disabled. This product was developed
to provide a free evaluation of bFAX to customers. This product is
distributed free of charge on the Web and by certain H/PC OEMs.
- BSQUARE FAX ENHANCED (a.k.a., bFAX Enhanced): A version of bFAX Pro that
has certain features disabled. This product was developed to bundle with
the Casio Casseopiea A-10 and A-11. This product is no longer in
production.
- BSQUARE MOBILE (a.k.a., bMOBILE, bMOBILE Wireless Internet): This is a
driver and control panel application that allows Windows CE to
communicate with a Motorola Personal Messenger 100C CDPD (cellular
digital packet data) modem. The control panel interface allows for modem
control and monitoring.
- BSQUARE NET (a.k.a., bNET): This is a driver and control panel
application which is very similar to bMOBILE, but extends this
capability to the 3COM Etherlink III (3C589) and the NE2000 ethernet
adapters.
- BSQUARE PRINT (a.k.a., bPRINT): This product enables Windows CE Version
1 to print the same file formats bFAX supports while faxing.
- BSQUARE PRINT PRO (a.k.a., bPRINT Pro): This product enables printing as
does bPRINT, but extends print spooling to any application which
supports printing. It supports printing to IRdA-compliant devices, and
supports printing to various printers not already supported by Windows
CE. It also provides for a print-to-fax capability so that any
application can print to bFAX Pro. It is due for release in 1Q98.
- BSQUARE FIND (a.k.a., bFIND): This is a global search utility for
Windows CE that allow search of all data sources and controls the
execution of application to continue the search. This application is
sold through reseller channels and is also bundled with all
Hewlett-Packard H/PCs.
- BSQUARE TRACK (a.k.a., bTRACK): This is a time, expanse and car mileage
tracking application for Windows CE. It provides a set of desktop APIs
the enable third parties to integrate the expense information into
customer applications and corporate information systems. It has been
adapted to both the H/PC and the P/PC. It is due for release in 2Q98.
35
- BSQUARE READY (a.k.a., ▇▇▇▇▇▇): This is a information management, online
book authoring and reader application. It has two components. The
desktop component sits on the desktop which allows for the authoring of
electronic books. The authoring application contains Wizards that assist
the user to acquire content from the Internet and produce an electronic
book. The client-side application allows users to read electronic books
produced with the desktop application. The reader has a Auto-scrolling
feature which is used for reading books and speeches. The reader
application supports bookmarks, annotations, searching, and indexing. It
is due for release in 2Q98.
- BSQUARE MOBILE NEWS (a.k.a., bMOBILE News, bNEWS): This is a USENET
Newsreader application for Windows CE. It was acquired from AdageUS. All
rights, title and interest are owned by BSQUARE. This application is
sold through reseller channels.
- BSQUARE MOBILE CHAT (a.k.a., bMOBILE Chat, bCHAT). This is an Internet
Relay Chat program for Windows CE. It was acquired from AdageUS. All
rights, title and interest are owned by BSQUARE. This application is
sold through reseller channels.
- BSQUARE FAX APIS (a.k.a., bFAX APIs): These are a set of low-level
application programming interfaces that provide the capability of
integrating faxing capabilities into other software applications. The
purpose of these APIs is to allow 3rd party independent software vendors
to integrate faxing capabilities into their applications. They require
that the end-user license a copy of bFAX Pro to utilize the
functionality. These APIs are currently being used by Odyssey Computing
and Communications Intelligence Corporation.
- BSQUARE IMAGING APIS: These are a set of low-level application
programming interfaces that provide the capability of extending the
imaging capabilities of bFAX, bVIEW and bPRINT. Only BSQUARE uses these
capabilities.
- MIMIC: This a graphical user interface testing framework used by BSQUARE
Development to test applications.
- PACKET DRIVER TECHNOLOGY: This is the basis for bMOBILE and bNET which
enable those drivers to translate PPP (point to point protocol) into
serial-line internet protocol (SLIP) and ethernet, respectively. This
technology could, conceivably, be adapted to various other protocols.
36
BSQUARE INTEGRATION COPYRIGHTS:
- CE XPRESS KITS FOR SC400 (a.k.a., BSQUARE OAK for SC400, BSQUARE Value
Added OAK for SC400): An adaptation of Windows CE to the AMD Elan SC400
Microcontroller. It has been adapted to various board-level devices
using the SC400.
- CE XPRESS KITS FOR VR4300 (a.k.a., BSQUARE OAK for VR4300, BSQUARE
Value Added OAK for VR4300): An adaptation of Windows CE to the NEC
VR4300 MIPS Processor. It has been adapted to NEC Nile 3 Chipset.
- CE XPRESS KITS FOR MEDIAGX (a.k.a., BSQUARE OAK for MediaGX, BSQUARE
Value Added OAK for MediaGX): An adaptation of Windows CE to the Cyrix
MediaGX Processor. It has been adapted to various reference devices
using the MediaGX.
- BSQUARE FIRMWARE: A set of firmware utilities and tools which facilitate
the adaptation of Windows CE to various microprocessors. This includes a
client-side firmware stub called the "brainstem" and a Windows
NT-hosted application capable of interacting with the brainstem. This
firmware provides mechanisms for flashing Windows CE images into a
device, debugging the device, and application programming interfaces
which enable the development of testing software which is source-code
compatible across all devices running the brainstem.
- DECOMPRESSING BOOT LOADER: An OS loader capable of loading a compressed
Windows CE image (using BSQUARE proprietary file format) into volatile
storage which maps the image so that it can execute in place in the
volatile storage.
BSQUARE COPYRIGHTS:
- BSQUARE INTRANET (a.k.a., bWEB): This is BSQUARE Corporation's Intranet
Web Site which contains content necessary for disseminating information
to BSQUARE Employees. This information includes, but is not limited to,
Newsletters, organization structure, procedures, policies and forms, as
well as help desk software.
- BSQUARE HELP (a.k.a., bHELP): A component of bWEB which provides
employees a network administration help desk which allows them to
interact with BSQUARE Network Administrators.
- BSQUARE OPS (a.k.a., bOPS): A component of bWEB, similar to bHELP, which
provides a facilities/operations help desk to operations and facilities
management.
- BSQUARE WORLD WIDE WEB SITE (a.k.a., ▇▇▇.▇▇▇▇▇▇▇.▇▇▇): BSQUARE's
Corporate Homepage.
- BSQUARE Marketing Collateral: This includes all brochures and the like
for marketing BSQUARE Corporation's business divisions.
37
EXHIBIT C
TRADEMARKS
- BSQUARE: Registered in US Class 42 #2,105,093 Class 9 application
#75/157,017, application in Canada #827,659
- BSQUARE VIEW: application in US #75/157,019, application in Canada
#826,625
- BVIEW: Registered in Canada #TMA485,548, application in US #75/157,018
- BFAX: application in US #75/157,020, application in Canada #826,626
- BFIND, BMOBILE, BTRACK, ▇▇▇▇▇▇, BPRINT: applications pending in US
- CE XPRESS: application pending in US
38
AGREEMENT TO PROVIDE INSURANCE
TO: IMPERIAL BANK Date: February 11, 1998
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Borrower: bsquare corporation
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
In consideration of a loan in the amount of $2,500,000, secured by all
tangible personal property including inventory and equipment.
I/We agree to obtain adequate insurance coverage to remain in force
during the term of the loan.
I/We also agree to advise the below named agent to add Imperial Bank as
loss payee on the new or existing insurance policy, and to furnish Bank at above
address with a copy of said policy/endorsements and any subsequent renewal
policies.
I/We understand that the policy must contain:
1. Fire and extended coverage in an amount sufficient to cover:
(a) The amount of the loan, OR
(b) All existing encumbrances, whichever is greater,
But not in excess of the replacement value of the improvements on the
real property.
2. Lender's "Loss Payable" Endorsement Form 438 BFU in favor of Imperial
Bank, or any other form acceptable to Bank.
INSURANCE INFORMATION
Insurance Co. /Agent Telephone No.:
Agent's Address:
Signature of Obligor: /s/ [Signature Illegible]
________________________________________
Signature of Obligor:________________________________________
________________________________________________________________________________
FOR BANK USE ONLY
INSURANCE VERIFICATION: Date:___________
Person Spoken to:_______________________
Policy Number:__________________________
Effective Form:_________ To:____________
Verified By:____________________________
39
ISSUE DATE (02/11/09)
▇▇▇▇▇ EVIDENCE OF PROPERTY INSURANCE
--------------------------------------------------------------------------------
THIS IS EVIDENCE THAT INSURANCE AS IDENTIFIED BELOW HAS BEEN ISSUED, IS IN
FORCE, AND CONVEYS ALL THE RIGHTS AND PRIVILEGES AFFORDED UNDER THE POLICY
--------------------------------------------------------------------------------
PRODUCER COMPANY
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇, INC. FIDELITY & GUARANTY INSURANCE COMPANY
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Code Sub-Code
Agency Customer ID#
--------------------------------------------------------------------------------
INSURED LOAN NUMBER POLICY NUMBER
BSQUARE CORPORATION N/A 1MP 30137731800
▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ EFF. DATE EXP. DATE CONTINUOUS
6/16/97 06/16/98 UNTIL
THIS REPLACES PRIOR EVIDENCE TERMINATED IF
DATED:________________ CHECKED __
--------------------------------------------------------------------------------
PROPERTY INFORMATION
LOCATION/DESCRIPTION
BLANKET LIEN ON BUSINESS PERSONAL PROPERTY.
COVERAGE INFORMATION
--------------------------------------------------------------------------------
Coverages/Perils/Forms Amount of Ins. Deductible
Blanket Business Personal Property $ 1,550,000 $250
Causes of Loss - Special Form
Replacement Cost/Agreed Value
REMARKS (INCLUDING SPECIAL CONDITIONS)
IMPERIAL BANK IS INCLUDED AS LOSS PAYEE PER ENDORSEMENT 438BFU ATTACHED.
CANCELLATION
The Policy is subject to the premiums, forms, and rules in effect for policy
period. Should the Policy be terminated, the Company will give the additional
interest identified below 45 days written notice, and will send notification of
any changes to the policy that would affect that interest, in accordance with
the Policy provisions or as required by law.
CONDITIONAL INTEREST
IMPERIAL BANK __Mortgagee __Additional Insured
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇ X Loss ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Loan #N/A
ATTENTION: LENDING SERVICES
-------------------------------------
Authorized Representative
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ CORPORATION
40
LENDERS'S LOSS PAYABLE ENDORSEMENT
1. Loss or damage, if any, under this policy shall be paid to
IMPERIAL BANK, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: Lending Services
its successors and assigns, hereinafter referred to as "the Lender," in
whatever form or capacity its interests may appear and whether said interest be
vested in said Lender in its individual or in its disclosed or undisclosed
fiduciary or representative capacity, or otherwise, or vested in a nominee or
trustee of said Lender.
2. The insurance under this policy, or any rider or endorsement attached
thereto, as to the interest only of the Lender, its successors and assigns,
shall not be invalidated nor suspended: (a) by any error, omission, or change
respecting the ownership, description, possession or location of the subject of
the insurance or the interest therein, or the title thereto; (b) by the
commencement of foreclosure proceedings or the giving of notice of sale of any
of the property covered by this policy by virtue of any mortgage or trust
deed; (c) by any breach of warranty, act, omission, neglect, or non-compliance
with any of the provisions of this policy, including any and all riders now or
hereafter thereto, by the named insured, the borrower, mortgagor, trustor,
vendee, owner, tenant, warehouseman, custodian, occupant, or by the agents of
either or any of them or by the happening of any event permitted by them or
either of them, or their agents, or which they failed to prevent, whether
occurring before or after the attachment of this endorsement, or whether before
or after a loss, which under the provisions of this policy of insurance or of
any rider or endorsement attached thereto would invalidate or suspend the
insurance as to the named insured, excluding herefrom, however, any act or
omissions of the lender while exercising active control and management of the
property.
3. In the event of failure of the insured to pay any premium or additional
premium which shall be or become due under the terms of this policy or on
account of any change in occupancy or increase in hazard not permitted by this
policy, this Company agrees to give written notice to the Lender of such
non-payment of premium after sixty (60) days from and within one hundred and
twenty (120) days after due date of such premium and it is a condition of the
continuance of the rights of the Lender hereunder that the Lender when so
notified in writing by this Company of the failure of the insured to pay such
premium shall pay or cause to be paid the premium due within ten (10) days
following receipt of the Company's demand in writing therefor. If the Lender
shall decline to pay said premium or additional premium, the rights of the
Lender under this Lender's Loss Payable Endorsement shall not be terminated
before ten (10) days after receipt of said written notice by the Lender.
4. Whenever this Company shall pay to the Lender any sum for loss or damage
under this policy and shall claim that as to the insured no liability therefore
exists, this Company, at its option, may pay to the Lender the whole principal
sum and interest and other indebtedness due or to become due from the insured,
whether secured or unsecured, (with refund of all interest not accrued), and
this Company, to the extent of such payment, shall thereupon receive a full
assignment and transfer, without recourse, of the debt and all rights and
securities held as collateral thereto.
If there be any other insurance upon the within described property, this
Company shall be liable under this policy as to the Lender for the proportion
of such loss or damage that the sum hereby insured bears to the entire
insurance of similar character on said property under policies held by, payable
to and expressly consented to by the Lender. Any Contribution Clause included
in any Fallen Building Clause Waiver or any Extended Coverage Endorsement
attached to this contract of insurance is hereby nullified, and also any
Contribution Clause in any other endorsement or rider attached to this contract
of insurance is hereby nullified except Contribution Clauses for the compliance
with which the insured has received reduction in the rate charged or has
received extension of the coverage to include hazards other than fire and
compliance with such Contribution Clause is made a part of the consideration
for insuring such other hazards. The Lender upon the payment to it of the full
amount of its claim, will subrogate this Company (pro rata with all other
insurers contributing to said payment) to all of the Lender's rights of
contribution under said other insurance.
6. This Company reserves the right to cancel this policy at any time, as
provided by its terms, but in such case this policy shall continue in force for
the benefit of the Lender for ten (10) days after written notice of such
cancellation is received by the Lender and shall then cease.
7. This policy shall remain in full force and effect as to the interest of
the Lender for a period of ten (10) days after its expiration unless an
acceptable policy in renewal thereof with loss thereunder payable to the Lender
in accordance with the terms of this Lender's Loss Payable Endorsement, shall
have been issued by some insurance company and accepted by the Lender.
8. Should legal title to and beneficial ownership of any of the property
covered under this policy become vested in the Lender or its agents, insurance
under this policy shall continue for the term thereof for the benefit of the
Lender but, in such event, any privileges granted by this Lender's Loss Payable
Endorsement which are not also granted the insured under the terms and
conditions of this policy and/or under other riders or endorsements attached
thereto shall not apply to the insurance hereunder as respects such property.
9. All notices herein provided to be given by the Company to the Lender in
connection with this policy and this Lender's Loss Payable Endorsement shall be
mailed to or delivered to the Lender at its office or branch at ____________
or, if not be specified, at its head office at ____________.
Attached to Policy No. 1MP 30137731800 of FIDELITY & GUARANTY INSURANCE COMPANY
Issued to BSQUARE CORPORATION
Agency at SEATTLE, WASHINGTON Date: February 11, 1998
/s/ [Signature Illegible]
--------------------------
▇▇▇▇▇▇, ▇▇▇▇▇ & PEEK, INC.
41
IMPERIAL BANK
Member FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
Borrower: WAVTRACE, INC., fica Date: December 9, 1997
American Wireless Corporation
$ paid to you directly by Cashiers Check No.
$1,750,000.00 credited to deposit Account No. ▇▇-▇▇▇-▇▇▇ (when
advances are requested from the Facility A Commitment).
$ paid on Loan(s) No.
$ amounts paid to Bank for:
Amounts paid to others on your behalf:
$ to ____________ Title Insurance Company
$ to Public Officials
$ to
$ to
$ to
$ to
$1,750,000.00 SUBTOTAL (LOAN AMOUNT)
LESS $ Prepaid Finance Charge (Loan fee)
$1,750,000.00 TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Imperial Bank to disburse the loan proceeds as stated above.
WAVTRACE, INC.,
a Washington corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Executive Officer
42
IMPERIAL BANK
Member FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
NAME(S): bsquare corporation Date: February 11, 1998
$ paid to you directly by Cashiers Check No.
$ credited to deposit account No. 0036001283 when
Advances are requested
$ paid on Loan(s) No.
$ amounts paid to Bank for
Amounts paid on your behalf:
$ to Accounts receivable audit
$ 500 to Imperial Bank documentation fee
$2,232 to ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & Freidenrich fees and expenses
$2,732 TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Imperial Bank to disburse the loan proceeds or automatically
debit from Borrower's Account No. 0036001283 as stated above.
$____________ Disburse From Loan Proceeds
$____________ Debit From Account
(Check One. Payments will be disbursed from loan proceeds unless directed
otherwise.)
/s/ [Signature Illegible]
--------------------------------- ---------------------------------
Signature Signature
43
[▇▇▇▇ ▇▇▇▇ ▇▇▇▇ - ▇▇▇▇▇▇▇▇▇▇▇ LLP LETTERHEAD]
February 12, 1998
1090371-903300
Imperial Bank
Attn: ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ - ▇▇▇▇▇ ▇▇▇. ▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
STATEMENT
Re: bsquare corporation
Professional Services Rendered from October 24, 1997 through February 11, 1998:
Fees $1,900
Costs
UCC Searches $142
Other 190
----
332
Total $2,232
PLEASE SEND PAYMENT ATTN: ▇▇▇▇ ▇. ▇▇▇▇
44
--------------------------------------------------------------------------------
IMPERIAL BANK
California's Business Banks AUTOMATIC DEBIT AUTHORIZATION
Member FDIC
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
To: Imperial Bank
Re: Loan #________________
You are hereby authorized and instructed to charge account No. 0036001283 in
the name of bsquare corporation for principal and interest payments due on
above referenced loan as set forth below and credit the loan referenced above.
[X] Debit each interest payment as it becomes due according to the terms
of the note and any renewals or amendments thereof.
[ ] Debit each principal payment as it becomes due according to the terms
of the note and any renewals or amendments thereof.
This Authorization is to remain in full force and effect until revoked in
writing.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Borrower Signature Date
/s/ [Signature Illegible] 2-24-98
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
45
--------------------------------------------------------------------------------
[IMPERIAL BANK LOGO]
AUTOMATIC DEBIT AUTHORIZATION
--------------------------------------------------------------------------------
To: IMPERIAL BANK
Re: LOAN #______________________
You are hereby authorized and instructed to charge account No. 0036001283 in
the name of BSQUARE CORPORATION for principal and interest payments due on
above referenced loan as set forth below and credit the loan referenced above.
[X] Debit each interest payment as it becomes due according to the
terms of the note and any renewals or amendments thereof.
[X] Debit each principal payment as it becomes due according to the terms
of the note and any renewals or amendments thereof.
This Authorization is to remain in full force and effect until revoked in
writing.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Borrower Signature Date
/s/ [Signature Illegible] 2/24/98
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
46
This UCC-1 FINANCING STATEMENT is presented for filing pursuant to the
WASHINGTON UNIFORM COMMERCIAL CODE, chapter 62A.9 RCW, to perfect a security
interest in the below named collateral.
PLEASE TYPE FORM FILING FEE: $12.00.
------------------------------------------------------------------------------------------------------------------------------------
1. DEBTOR(S) (see instruction #2) | 2. FOR OFFICE USE ONLY -- DO NOT WRITE IN THIS BOS
|
[ ] PERSONAL (Last, first, middle name and address) |
|
[x] BUSINESS (legal business name and address) |
|
BSQUARE CORPORATION |
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇ |
▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ |
|
|
|
TRADE NAME, DBA, AKA: |
|
------------------------------------------------------------------------------------------------------------------------------------
2. SECURED PARTY(IES) (name and address) | 4. ASSIGNEE(S) of SECURED PARTY(IES) if applicable
| (name and address)
|
IMPERIAL BANK |
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇ |
|
------------------------------------------------------------------------------------------------------------------------------------
5. SECURED PARTY CONTACT PERSON:_________________________________________________ Phone: ______________________
------------------------------------------------------------------------------------------------------------------------------------
6. CHECK ONLY IF APPLICABLE: (For definitions of TRANSMITTING UTILITY AND PRODUCTS OF COLLATERAL, see instruction sheet)
[ ] Debtor is a Transmitting Utility [ ] Products of Collateral are also covered
------------------------------------------------------------------------------------------------------------------------------------
7. THIS FINANCING STATEMENT covers the following collateral: (Attach additional 8-1/2" x 11" sheet(s) if needed.)
See Exhibit A attached hereto for Collateral Description.
------------------------------------------------------------------------------------------------------------------------------------
|
8. RETURN ACKNOWLEDGMENT COPY TO: (name and address) | 9. FILE WITH:
| UNIFORM COMMERCIAL CODE
IMPERIAL BANK | DEPARTMENT OF LICENSING
▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇ ▇▇▇ | ▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ | ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
| (▇▇▇) ▇▇▇-▇▇▇▇
|
| MAKE CHECKS PAYABLE TO THE
| DEPARTMENT OF LICENSING
|
|-------------------------------------------
| 10. FOR OFFICE USE ONLY IMAGES TO | |
| BE FILMED | |
------------------------------------------------------------------------------------------------------------------------------------
11. If collateral is described below, this statement may be signed by the Secured Party instead of the Debtor. Please check the
appropriate box, complete the adjacent lines and box 13, if collateral is:
------------------------------------------------------------------------------------------------------------------------------------
a. [ ] already subject to a security interest in another
jurisdiction when it was brought into this state
or when the debtor's location was changed to this state.
(complete adjacent lines 1 and 2) 1._____________________________________________
ORIGINAL FILING NUMBER
b. [ ] proceeds of the original collateral described above in
which a security interest was perfected. 2._____________________________________________
(complete adjacent lines 1, 2 and 3) FILING OFFICE WHERE FILED
c. [ ] listed on a filing which has lapsed. 3._____________________________________________
(complete adjacent lines 1 and 2) FORMER NAME OR DEBTOR(S)
d. [ ] acquired after a change of name, identity, or corporate structure
of the debtor(s). (complete adjacent lines 1, 2 and 3)
------------------------------------------------------------------------------------------------------------------------------------
|
12. DEBTOR NAME(S) AND SIGNATURE(S): | 13. SECURED PARTY NAME(S) AND SIGNATURE(S) ARE REQUIRED IF
| ▇▇▇ ▇▇ HAS BEEN COMPLETED.
|
BSQUARE CORPORATION | 1.
------------------------------------------------------------- | ------------------------------------------------------
TYPE NAME(S) OF DEBTOR(S) AS IT APPEARS IN BOX 1. | TYPE NAME(S) OF SECURED PARTY(IES) AS IT APPEARS
| IN BOX 3 OR 4.
[Signature Illegible] |
| 2.
------------------------------------------------------------- | ------------------------------------------------------
SIGNATURE(S) OF DEBTOR(S) | SIGNATURE(S) OF SECURED PARTY(IES)
|
| 3.
------------------------------------------------------------- | ------------------------------------------------------
SIGNATURE OF DEBTOR(S) | SIGNATURE(S) OF SECURED PARTY(IES)
|
FORM APPROVED FOR USE IN THE STATE OF WASHINGTON (R/7/93)
WASHINGTON USS-1
47
EXHIBIT A
DEBTOR. BSQUARE CORPORATION
SECURED PARTY: IMPERIAL BANK
The Collateral shall consist of all right, title and interest of Debtor
in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Debtor's custody or possession or in transit
and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and Debtor's
Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Debtor
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Debtor, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Debtor and Debtor's Books relating
to any of the foregoing.
48
Oct. 28, 1997 Page 1
CAL TITLE-SEARCH INC.
UCC Search Report
The following represents a listing of the documentation you requested through a
careful search of effective UCC filings recorded in the Office of the Secretary
of State of Washington, purchased and maintained in computerized form and
available thru our offices. Variations of the Name and Address of the search key
may appear on this report as a result of the search findings and your individual
request for that information. These documents may include but are not limited to
Financing Statements and Tax Liens effective Oct. 13, 1997.
State of Washington UCC Debtor Name Search results performed on the
following Search Key :
Name = BSQUARE
Exp./Term. Liens = No
1. Requested Party not on file.
Because we cannot independently verify the accuracy of the public information
maintained by the responsible government agency, we make no guaranties,
representations, or warranties as to the accuracy or completeness of this
report. Therefore, we accept no liability for errors or omissions
CAL TITLE-SEARCH INC.
(▇▇▇) ▇▇▇-▇▇▇▇
49
Oct. 28, 1997 Page 1
CAL TITLE-SEARCH INC.
UCC Search Report
The following represents a listing of the documentation you requested through a
careful search of effective UCC filings recorded in the Office of the Secretary
of State of Washington, purchased and maintained in computerized form and
available thru our offices. Variations of the Name and Address of the search key
may appear on this report as a result of the search findings and your individual
request for that information. These documents may include but are not limited to
Financing Statements and Tax Liens effective Oct. 13, 1997.
State of Washington UCC Debtor Name Search results performed on the following
Search Key :
Name = BSQUARE CONSULTING
Exp./Term. Liens = No
1. Requested Party not on file.
Because we cannot independently verify the accuracy of the public information
maintained by the responsible government agency, we make no guaranties,
representations, or warranties as to the accuracy or completeness of this
report, Therefore, we accept no liability for errors or omissions.
CAL TITLE-SEARCH INC.
(▇▇▇) ▇▇▇-▇▇▇▇
50
ARTICLES OF CORRECTION
OF
BSQUARE CORPORATION
Pursuant to RCW 23B.01.240, BSQUARE CORPORATION (the "Company"), hereby
makes the following corrections to its Certificate of Amendment to its Articles
of Incorporation as filed with the Office of the Secretary of State of the State
of Washington on January 29, 1998:
FIRST: The Certificate of Designation of the Relative Rights and
Preferences of the Series A Convertible Preferred Stock of BSQUARE CORPORATION
(the "Certificate of Designation"), as filed with the Office of the Secretary of
the State of Washington on January 29, 1998, contained incorrect information and
the Company is hereby submitting for correction the corrected section as set
forth below.
SECOND: The Certificate of Designation incorrectly referenced a
Redemption Agreement, dated as of January 30, 1998:
Section 6. Restrictions and Limitations.
(iv) directly or indirectly redeem, purchase, or otherwise
acquire for consideration any shares of its Common Stock or any other
class of its capital stock except (A) for the redemption of Convertible
Preferred Shares pursuant to and as provided in Sections 2, 4 and 5
hereof, (B) as contemplated by Sections 1.2, 4.6, and 5.2 of that
certain Stock Purchase and Shareholders Agreement, dated as of January
30, 1998 or (C) as contemplated by the Corporation's standard form of
agreement, as approved by the Board of Directors, to be executed by
employees, officers, and consultants of the Corporation upon the grant
to such employees, officers, and consultants of options under the Plan,
IN WITNESS WHEREOF, the Company has caused these Articles of Correction
to be signed by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, its Senior Vice President, as of this 3rd day
of February, 1998.
BSQUARE CORPORATION,
a Washington corporation
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
51
ARTICLES OF AMENDMENT
OF
BSQUARE CONSULTING, INC.
Pursuant to RCW 23B.10.060, the undersigned corporation adopts the
following Articles of Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is bsquare consulting, inc. (the
"Corporation").
SECOND: The Articles of Incorporation are hereby amended as follows:
ARTICLE I
NAME
The name of the corporation is bsquare corporation.
THIRD: The amendment does not provide for an exchange, reclassification,
or cancellation of issued shares.
FOURTH: The foregoing amendment was adopted by the Board of Directors of
the Corporation on June 25, 1997 without shareholder action. Pursuant to RCW
23B.10.020, shareholder action with regard to the amendment of the Articles of
Incorporation of the Corporation is not required.
Dated: June 27, 1997.
bsquare consulting, inc.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
52
ARTICLES OF INCORPORATION
OF
BSQUARE CONSULTING, INC.
The undersigned individuals, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, for the purpose of forming a corporation under the laws OF
the State of Washington, and in pursuance thereof, hereby execute the following
Articles of Incorporation in duplicate form and state as follows:
I. NAME
The name of this corporation shall be:
BSQUARE CONSULTING, INC.
II. AUTHORIZED SHARES
The number of shares this corporation shall be authorized to issue will
be 100,000 shares of a single class.
III. REGISTERED AGENT
The street address of this corporation's initial registered office is
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the name of
its initial registered agent located at the above address is ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Esq.
IV. INCORPORATORS
The names and addresses of the incorporators are set forth below:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇-▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
-1-
53
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
V. PURPOSE
This corporation has the purpose of engaging in any lawful business
activity under the Washington Business Corporation Act but is being formed more
specifically for the purpose of providing computer software consulting services.
VI. POWERS
This corporation shall have the same powers as an individual to do all
things necessary or convenient to carry out its business and affairs, including,
without limitation power:
(1) to ▇▇▇ and be sued, complain and defend in its corporate
name;
(2) to have a corporate seal, which may be altered at will, and
to use it, or a facsimile of it, by impressing or affixing it or in any other
manner reproducing it;
(3) to make and amend bylaws, not inconsistent with these
Articles of Incorporation or with the laws of this state, for managing the
business and regulating the affairs of the corporation;
(4) to purchase, receive, lease, or otherwise acquire, and own,
hold, improve, use, and otherwise deal with, real or personal property, or any
legal or equitable interest in property, wherever located;
(5) to sell, convey, mortgage, pledge, lease, exchange, and
otherwise dispose of all or any part of its property;
(6) to purchase, receive, subscribe for, or otherwise acquire,
own, hold, vote, use, sell, mortgage, lend, pledge, or otherwise dispose of, and
deal in and with shares or other interests in, or obligations of, any person;
-2-
54
(7) to make contracts, incur liabilities, borrow money, issue
notes, bonds, and other obligations (which may be convertible into or include
the option to purchase other securities of the corporation), and secure any of
its obligations by mortgage or pledge of any of its property, franchises, or
income;
(8) to make guarantees respecting the contracts, securities, or
obligations of any person (including, but not limited to, any shareholder,
affiliated or unaffiliated individual, domestic or foreign corporation,
partnership, association, joint venture or trust) to the extent permitted by the
Washington Business Corporation Act as amended from time to time;
(9) to lend money, invest and reinvest its funds, and receive
and hold real and personal property as security for repayment;
(10) to be a promoter, partner, member, associate, or manager of
any partnership, joint venture, trust, or other entity;
(11) to conduct its business, locate offices, and exercise the
powers granted by this title within or without this state;
(12) to elect, appoint, or hire officers, employees, and other
agents of the corporation, define their duties, fix their compensation, and lend
them money and credit;
(13) to fix the compensation of directors, and lend them money
and credit;
(14) to pay pensions and establish pension plans, pension
trusts, profit sharing plans, share bonus plans, share option plans, and benefit
or incentive plans for any or all of its current or former directors, officers,
employees, and agents;
(15) to make donations for the public welfare or for charitable,
scientific, or educational purposes;
(16) to transact any lawful business that will aid governmental
policy; and
-3-
55
(17) to make payments or donations, or do any other act, not
inconsistent with law, that furthers the business and affairs of the
corporation.
VII. DURATION
This corporation shall have perpetual existence.
VIII. DIRECTORS
The number of directors of this corporation shall be determined in the
manner provided in the Bylaws of the corporation, and may be increased or
decreased from time to time as specified in the Bylaws. There shall always be at
least one (1) director. The initial Board of Directors shall consist of three
(3) directors and the names and addresses of the persons who shall serve as
directors until the first annual meeting of shareholders or until their
successors are elected and qualified, unless they sooner resign or are removed,
are:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇-▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
IX. BYLAWS
The Board of Directors shall adopt initial Bylaws of this corporation
that are not inconsistent with the Washington Business Corporation Act or these
Articles of Incorporation. The Board of Directors shall also have the power to
alter, amend or repeal the Bylaws or to adopt new Bylaws subject to repeal or
change by action of the shareholders.
-4-
56
IN WITNESS WHEREOF, the incorporator hereunto executed this document as
of this 13th day of July, 1994.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Incorporator
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Incorporator
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Incorporator
-5-
57
ARTICLES OF AMENDMENT
OF BSQUARE CONSULTING, INC.
Pursuant to RCW 23B.10.060, the undersigned corporation adopts the
following Articles of Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is bsquare consulting, inc. (the
"Corporation").
SECOND: The Articles of Incorporation are hereby amended by deleting
Article II in its entirety and replacing it with a new Article II to read as
follows:
II. Authorized Shares
2.1 Authorized Capital. The aggregate number of shares which the
Corporation shall have the authority to issue is 60,000,000 shares of stock,
consisting of up to fifty million (50,000,000) shares of Common Stock and up to
ten million (10,000,000) shares of Preferred Stock.
2.2 Issuance of Preferred Stock in Series. The Preferred Stock may be
issued from time to time in one or more series in any manner permitted by law
and the provisions of these Restated Articles of Incorporation, as determined
from time to time by the Board of Directors and stated in the resolution or
resolutions providing for the issuance thereof, prior to the issuance of any
shares thereof. The Board of Directors shall have the authority to fix and
determine and to amend, subject to the provisions hereof, the designations,
powers, preferences and relative, participating, optional or other rights, if
any, and qualifications, limitations or other restrictions of the shares of any
series that is wholly unissued or to be established and the number of shares
constituting any such series. Unless otherwise specifically provided in the
resolution establishing any series, the Board of Directors shall further have
the authority, after the issuance of shares of a series whose number it has
designated, to amend the resolution establishing such series to decrease the
number of shares of that series, but not below the number of shares of such
series then outstanding.
(a) Dividends. The holders of shares of the Preferred Stock
shall be entitled to receive dividends, out of the funds of the corporation
legally available therefor, at the rate and at the time or times as may be
provided by the Board of Directors in designating a particular series of
Preferred Stock. The holders of the Preferred Stock shall not be entitled to
receive any dividends thereon, unless otherwise provided by the Board of
Directors in designating a particular series of Preferred Stock.
(b) Liquidation. In the event of any liquidation, dissolution or
winding up of the affairs of the corporation, whether voluntary or involuntary,
then, before any distribution shall be made to the holders of the Common Stock,
the holders of the Preferred Stock at the time outstanding shall be entitled to
be paid the preferential amount or amounts per share as may be provided by the
Board of Directors in designating a particular series of Preferred Stock, plus
58
dividends accrued thereon to the date of such payment. In designating a
particular series of Preferred Stock, the Board of Directors may also provide
that such series is senior, on a par with or subordinate in order of priority to
any other existing or later issued series of Preferred Stock in respect of
distribution of amounts upon the liquidation, dissolution or winding up of the
affairs of the corporation. The holders of the Preferred Stock shall not be
entitled to receive any distributive amounts upon the liquidation, dissolution
or winding up of the affairs of the corporation, unless otherwise provided by
the Board of Directors in designating a particular series of Preferred Stock.
(c) Conversion. Shares of Preferred Stock may be convertible to
shares of Common Stock at such rate and subject to such adjustments as may be
provided by the Board of Directors in designating a particular series of
Preferred Stock.
(d) Redemption. The Preferred Stock may be redeemable in such
amounts, and at such time or times as may be provided by the Board of Directors
in designating a particular series of Preferred Stock. In any event, such
Preferred Stock may be repurchased by the corporation only to the extent legally
permissible.
(e) Voting Rights. Holders of Preferred Stock shall have such
voting rights as may be provided by the Board of Directors in designating a
particular series of Preferred Stock.
THIRD: The amendment does not provide for an exchange, reclassification,
or cancellation of issued shares.
FOURTH: The foregoing amendment was adopted by the Board of Directors of
the Corporation on April 17, 1997, and was duly approved by the shareholders of
the Corporation on April 17, 1997 in accordance with RCW 23B.10.030 and RCW
23B.10.040, respectively.
Dated: April 17 1997.
bsquare consulting, inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Its: President & CEO
-----------------------------
-2-
59
ARTICLES OF AMENDMENT
OF
bsquare consulting, inc.
Pursuant to RCW 23B.10.060, the undersigned corporation adopts the
following Articles of Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is bsquare consulting, inc. (the
"Corporation").
SECOND: The Articles of Incorporation are hereby amended as follows:
ARTICLE I
NAME
The name of the corporation is bsquare corporation.
THIRD: The amendment does not provide for an exchange, reclassification,
or cancellation of issued shares.
FOURTH: The foregoing amendment was adopted by the Board of Directors of
the Corporation on June 25, 1997 without shareholder action. Pursuant to RCW
23B.10.020, shareholder action with regard to the amendment of the Articles of
Incorporation of the Corporation is not required.
Dated: June 27, 1997.
bsquare consulting, inc.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
60
STATE of WASHINGTON
[LOGO]
SECRETARY of STATE
I, ▇▇▇▇▇ ▇▇▇▇▇, Secretary of State of the State of Washington and custodian of
its seal, hereby issue this
CERTIFICATE OF AMENDMENT
to
BSQUARE CONSULTING, INC.
a Washington Profit corporation. Articles of Amendment were filed for record in
this office on the date indicated below.
UBI Number: ▇▇▇ ▇▇▇ ▇▇▇ Date: April 30,1997
[SEAL]
Given under my hand and the Seal of
the State of Washington at Olympia,
the State Capital
/s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, Secretary of State
61
ARTICLES OF AMENDMENT
OF
BSQUARE CONSULTING, INC.
Pursuant to RCW 23B.10.060, the undersigned corporation adopts the
following Articles of Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is bsquare consulting, inc. (the
"Corporation").
SECOND: The Articles of Incorporation are hereby amended by deleting
Article II in its entirety and replacing it with a new Article II to read as
follows:
II. Authorized Shares
2.1 Authorized Capital. The aggregate number of shares which the
Corporation shall have the authority to issue is 60,000,000 shares of stock,
consisting of up to fifty million (50,000,000) shares of Common Stock and up to
ten million (10,000,000) shares of Preferred Stock.
2.2 Issuance of Preferred Stock in Series. The Preferred Stock may be
issued from time to time in one or more series in any manner permitted by law
and the provisions of these Restated Articles of Incorporation, as determined
from time to time by the Board of Directors and stated in the resolution or
resolutions providing for the issuance thereof, prior to the issuance of any
shares thereof. The Board of Directors shall have the authority to fix and
determine and to amend, subject to the provisions hereof, the designations,
powers, preferences and relative, participating, optional or other rights, if
any, and qualifications, limitations or other restrictions of the shares of any
series that is wholly unissued or to be established and the number of shares
constituting any such series. Unless otherwise specifically provided in the
resolution establishing any series, the Board of Directors shall further have
the authority, after the issuance of shares of a series whose number it has
designated, to amend the resolution establishing such series to decrease the
number of shares of that series, but not below the number of shares of such
series then outstanding.
(a) Dividends. The holders of shares of the Preferred Stock
shall be entitled to receive dividends, out of the funds of the corporation
legally available therefor, at the rate and at the time or times as may be
provided by the Board of Directors in designating a particular series of
Preferred Stock. The holders of the Preferred Stock shall not be entitled to
receive any dividends thereon, unless otherwise provided by the Board of
Directors in designating a particular series of Preferred Stock.
(b) Liquidation. In the event of any liquidation, dissolution or
winding up of the affairs of the corporation, whether voluntary or involuntary,
then, before any distribution shall be made to the holders of the Common Stock,
the holders of the Preferred Stock at the time outstanding shall be entitled to
be paid the preferential amount or amounts per share as may be provided by the
Board of Directors in designating a particular series of Preferred Stock, plus
62
dividends accrued thereon to the date of such payment. In designating a
particular series of Preferred Stock, the Board of Directors may also provide
that such series is senior, on a par with or subordinate in order of priority to
any other existing or later issued series of Preferred Stock in respect of
distribution of amounts upon the liquidation, dissolution or winding up of the
affairs of the corporation. The holders of the Preferred Stock shall not be
entitled to receive any distributive amounts upon the liquidation, dissolution
or winding up of the affairs of the corporation, unless otherwise provided by
the Board of Directors in designating a particular series of Preferred Stock.
(c) Conversion. Shares of Preferred Stock may be convertible to
shares of Common Stock at such rate and subject to such adjustments as may be
provided by the Board of Directors in designating a particular series of
Preferred Stock.
(d) Redemption. The Preferred Stock may be redeemable in such
amounts, and at such time or times as may be provided by the Board of Directors
in designating a particular series of Preferred Stock. In any event, such
Preferred Stock may be repurchased by the corporation only to the extent legally
permissible.
(e) Voting Rights. Holders of Preferred Stock shall have such
voting rights as may be provided by the Board of Directors in designating a
particular series of Preferred Stock.
THIRD: The amendment does not provide for an exchange, reclassification,
or cancellation of issued shares.
FOURTH: The foregoing amendment was adopted by the Board of Directors of
the Corporation on April 17, 1997, and was duly approved by the shareholders of
the Corporation April 17, 1997 in accordance with RCW 23B.10.030 and RCW
23B.10.040, respectively.
Dated: April 17, 1997.
bsquare consulting, inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Its: President & CEO
-----------------------------
63
[LOGO]
--------------------------------------------------------------------------------
STATE of WASHINGTON SECRETARY of STATE
--------------------------------------------------------------------------------
I, ▇▇▇▇▇ ▇▇▇▇▇, Secretary of State of the State of Washington and custodian of
its seal, hereby issue this
CERTIFICATE OF INCORPORATION
to
BSQUARE CONSULTING, INC.
a Washington Profit corporation. Articles of Incorporation were filed for record
in this office on the date indicated below:
U.B.I. Number: ▇▇▇ ▇▇▇ ▇▇▇ Date: JULY 15, 1994
[SEAL] Given under my hand and the seal of
the State of Washington, at Olympia,
the State Capitol
/s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, Secretary of State
64
ARTICLES OF CORPORATION
OF
BSQUARE CONSULTING, INC.
The undersigned individuals, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, for the purpose of forming a corporation under the laws of
the State of Washington, and in pursuance thereof, hereby execute the following
Articles of Incorporation in duplicate form and state as follows:
I. NAME
The name of this corporation shall be:
BSQUARE CONSULTING, INC.
II. AUTHORIZED SHARES
The number of shares this corporation shall be authorized to issue will
be 100,000 shares of a single class.
III. REGISTERED AGENT
The street address of this corporation's initial registered office is
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the name of
its initial registered agent located at the above address is ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Esq.
IV. INCORPORATORS
The names and addresses of the incorporators are set forth below:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇-▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
65
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
V. PURPOSE
This corporation has the purpose of engaging in any lawful business
activity under the Washington Business Corporation Act but is being formed more
specifically for the purpose of providing computer software consulting services.
VI. POWERS
This corporation shall have the same powers as an individual to do all
things necessary or convenient to carry out its business and affairs, including,
without limitation power:
(1) to ▇▇▇ and be sued, complain and defend in its corporate
name;
(2) to have a corporate seal, which may be altered at will, and
to use it, or a facsimile of it, by impressing or affixing it or in any other
manner reproducing it;
(3) to make and amend bylaws, not inconsistent with these
Articles of Incorporation or with the laws of this state, for managing the
business and regulating the affairs of the corporation;
(4) to purchase, receive, lease, or otherwise acquire, and own,
hold, improve, use, and otherwise deal with, real or personal property, or any
legal or equitable interest in property, wherever located;
(5) to sell, convey, mortgage, pledge, lease, exchange, and
otherwise dispose of all or any part of its property;
(6) to purchase, receive, subscribe for, or otherwise acquire,
own, hold, vote, use, sell, mortgage, lend, pledge, or otherwise dispose of, and
deal in and with shares or other interests in, or obligations of, any person;
-2-
66
(7) to make contracts, incur liabilities, borrow money, issue
notes, bonds, and other obligations (which may be convertible into or include
the option to purchase other securities of the corporation), and secure any of
its obligations by mortgage or pledge of any of its property, franchises, or
income;
(8) to make guarantees respecting the contracts, securities, or
obligations of any person (including, but not limited to, any shareholder,
affiliated or unaffiliated individual, domestic or foreign corporation,
partnership, association, joint venture or trust) to the extent permitted by the
Washington Business Corporation Act as amended from time to time;
(9) to lend money, invest and reinvest its funds, and receive
and hold real and personal property as security for repayment;
(10) to be a promoter, partner, member, associate, or manager of
any partnership, joint venture, trust, or other entity;
(11) to conduct its business, locate offices, and exercise the
powers granted by this title within or without this state;
(12) to elect, appoint, or hire officers, employees, and other
agents of the corporation, define their duties, fix their compensation, and lend
them money and credit;
(13) to fix the compensation of directors, and lend them money
and credit;
(14) to pay pensions and establish pension plans, pension
trusts, profit sharing plans, share bonus plans, share option plans, and benefit
or incentive plans for any or all of its current or former directors, officers,
employees, and agents;
(15) to make donations for the public welfare or for charitable,
scientific, or educational purposes;
(16) to transact any lawful business that will aid governmental
policy; and
-3-
67
(17) to make payments or donations, or do any other act, not
inconsistent with law, that furthers the business and affairs of the
corporation.
VII. DURATION
This corporation shall have perpetual existence.
VII. DIRECTORS
The number of directors of this corporation shall be determined in the
manner provided in the Bylaws of the corporation, and may be increased or
decreased from time to time as specified in the Bylaws. There shall always be at
least one (1) director. The initial Board of Directors shall consist of three
(3) directors and the names and addresses of the persons who shall serve as
directors until the first annual meeting of shareholders or until their
successors are elected and qualified, unless they sooner resign or are removed,
are:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇-▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
IX. BYLAWS
The Board of Directors shall adopt initial Bylaws of this corporation
that are not inconsistent with the Washington Business Corporation Act or these
Articles of Incorporation. The Board of Directors shall also have the power to
alter, amend or repeal the Bylaws or to adopt new Bylaws subject to repeal or
change by action of the shareholders.
-4-
68
IN WITNESS WHEREOF, the incorporator hereunto executed this document as of
this 13th day of July, 1994.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Incorporator
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Incorporator
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Incorporator
-5-
69
[IMPERIAL BANK LETTERHEAD]
October 17, 1997
▇▇▇▇▇ ▇▇▇▇▇▇
Director of Finance
bSquare, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇▇▇:
This letter sets forth a commitment from Imperial Bank ("Bank") to provide to
bSquare, Inc. ("Borrower") the credit described below. The credit facility will
be subject to the terms and conditions of the Bank's definitive loan documents
which will include (but not be limited to) the following in detail:
1. CREDIT FACILITY
A. Line: A $2,000,000 Revolving Line of Credit ("Line") to
support working capital with a $500,000 sublimit for
issuance of trade-related commercial and standby letters
of credit and a $75,000 sublimit to support foreign
exchange contracts. L/Cs and FX contracts to be
negotiated at Bank's standard pricing.
B. Term: A $500,000 Term Loan ("Term Loan") to finance the
purchase of equipment, software, furniture and
acquisitions.
2. MATURITY
A. Line: 364 days from completion of definitive Bank loan
documents.
B. Term Loan: 48 months from completion of definitive Bank loan
documents.
3. TERMS
A. Line: Interest payable monthly, principal plus interest due at
maturity.
B. Term Loan: Available for draws for a period of twelve (12) months
following completion of definitive Bank loan documents.
Interest is payable monthly during draw period followed
by thirty-six (36) equal Monthly payments of principal
plus interest.
70
bSquare, inc.
10/17/97
page 2
4. COLLATERAL
Bank to have a blanket first priority security interest in all assets
perfected by UCC-1 and Security Agreement filings.
5. BORROWING FORMULA
A. Line: Advances will be limited to the lesser of: (i) 80% of
Eligible Accounts, or (ii) the amount available under
the Line. As used herein, "Eligible Accounts" will
include those domestic and pre-approved foreign
accounts receivable of Borrower which are outstanding
less than 90 days from invoice date subject to certain
exclusions for contra, US government and inter-company
accounts. Approved foreign accounts receivable include
foreign companies with sales greater than $500 million
per year. Additional foreign accounts receivable will
be eligible to the extent they are approved in writing
by Bank. Any account which alone exceeds 25% of total
accounts will have the amount in excess of 25% excluded
unless approved in writing by Bank. Any account 25% or
more of which is outstanding over 90 days from invoice
date will be excluded in its entirety.
B. Term Loan: Advances will be at 80% against invoice price (less
tax and freight) of equipment purchased. Advances
against software will be limited to 25% of total
outstandings under the Term Loan at any one time.
Advances to support acquisitions must be approved by
Bank in writing.
6. PRICING
A. Interest Rate:
1) Line: Bank's Prime Rate per annum.
2) Term Loan: Bank's Prime Rate + 0.25 per annum.
B. Facility Fee:
1) Line: 0.50% per annum, of $10,000.
2) Term Loan: 0.25%, or 2,500.
7. COVENANTS
A. Borrower to maintain on a quarterly basis unless otherwise noted:
1) Minimum Quick Ratio(1) of 1.00 to 1.00.
2) Minimum Tangible Net Worth(2) of $2,500,000.
3) Minimum Debt Service(3) of 1.50 to 1.00.
Definitions:
(1) "Quick Ratio" is defined as cash plus accounts receivable divided
by current liabilities.
71
bSquare, inc.
10/17/97
page 3
(2) "Tangible Net Worth" is defined as the financial statement net
worth of the Borrower prepared according to generally accepted
accounting principles less intangible assets, plus indebtedness
fully subordinated to the debt due to the Bank.
(3) "Debt Service" is defined as earnings after tax plus interest
and non-cash expenses annualized for the preceding quarter,
divided by current portion of long term debt and capitalized,
plus interest.
B. Borrower to provide Bank:
1) Unqualified audited financial statements within 90 days after
each fiscal year end beginning with the year ended December 31,
1997.
2) Company prepared quarterly financial statements and Compliance
Certificate within 25 days after the end of each quarter.
3) Monthly agings of accounts receivable and accounts payable with
Borrowing Base Certificate within 15 days after the end of each
month.
C. Other Covenants:
1) Borrower's primary banking and investment accounts to be
maintained at Bank.
2) Without Bank's prior approval, Borrower shall not:
a. Enter into any mergers or acquisitions or major debt
agreements, except for equipment leases.
b. Repurchase stock or pay cash dividends except as required
to cover personal tax liabilities of shareholder's.
c. Hypothecate existing assets.
d. Loan money or guarantee loans of others.
3) Borrower shall notify Bank in writing of any legal action
commenced against it which may result in damages over $50,000.
Borrower shall provide Bank with such notice immediately upon
Borrower's receipt of notice of such legal action.
4) Borrower shall provide Bank proof of insurance on all tangible
corporate assets and a Lender's Loss Payable Clause with Bank as
loss payee.
8. OTHER CONDITIONS
A. Prior to Line disbursement, Bank shall conduct an initial collateral
audit by Bank's designated agent at Borrower's expense, with results
satisfactory to Bank. Thereafter, Bank shall conduct annual
collateral audits by Bank's designated agent at Borrower's expense,
with results satisfactory to Bank.
B. All reasonable expenses of Bank for legal fees, documentation fees,
UCC searches and filing fees, and all other costs involved with
documenting and enforcing the loans, including the expenses of Bank's
outside counsel, shall be borne by the Borrower, whether or not the
Credit Facilities close.
This letter is provided solely for your information and is delivered to you
with the understanding that neither it nor its substance shall be disclosed to
any third person, except those who are in confidential relationship with you,
or where the same is required by law.
72
BSquare, inc.
10/17/97
page 4
If the terms set forth above are acceptable to you, please so indicate by
signing and returning the original of this letter to us, along with the $10,000
in loan fees referred to above. Unless a signed copy of this letter indicating
your acceptance has been returned by no later than October 24, 1997, the terms
herein will expire and be of no further affect. Upon return of this letter and
the payment, the Bank will prepare drafts of definitive loan documents for your
review. If you and the Bank do not enter into definitive loan documents, the
Bank will refund to you the amount of the loan fee payment less the amount of
the Bank's expenses for the foregoing.
This letter is intended to set forth the terms of the credit facility currently
under discussion between us. It is intended that all legal rights and
obligations of the Bank and you would be set forth in the signed definitive
loan documents.
On behalf of the Senior Management of the Bank, we are delighted to propose
making this credit facility available to Borrower and look forward to a long
and mutually rewarding relationship. Please don't hesitate to call if you have
any questions or problems.
Sincerely,
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ II
Senior Vice President/Manager President
Emerging Growth Industries Division Emerging Growth Industries Division
Accepted and agreed to:
BSQUARE, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
Title: Sr. Vice President
--------------------------
Date: 10-22-97
---------------------------
73
bSquare, Inc.
10/17/97
page 5
With return of this letter, please provide us with a copy of your filed
Articles of Incorporation and the following information:
Tax I.D. #: ▇▇-▇▇▇▇▇▇▇
----------
Names and Title of Authorized Corporate Signers:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------- -------------------------------
Name Name
President Sr. Vice President
------------------------------- -------------------------------
Title Title
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------- -------------------------------
Name Name
Sr. Vice President Director of Finance
------------------------------- -------------------------------
Title Title
Number needed to sign: 1
-------
Who will execute docs: ▇▇ ▇▇▇▇▇▇
-------------------------------
Sr. VP & Treasurer
-------------------------------
Name of Corporate Secretary: ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Is Secretary an Authorized signer? Yes X No
--- ---
Automatically Debit Account #▇▇▇▇▇▇▇▇ for interest payments each month.
Disburse loan advances to Account #▇▇▇▇▇▇▇▇ when advances are requested.
74
CORPORATE RESOLUTIONS TO BORROW
--------------------------------------------------------------------------------
Borrower: bsquare corporation
--------------------------------------------------------------------------------
1, the undersigned Secretary or Assistant Secretary of bsquare
corporation (the "Corporation"), HEREBY CERTIFY that the Corporation is
organized and existing under and by virtue of the laws of the State of
Washington.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Certificate of Incorporation and Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation,
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.
BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ PRESIDENT, CEO /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
---------------------- ---------------------- ----------------------
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Imperial Bank ("Bank"),
on such terms as may be agreed upon between the officers, employees, or agents
and Bank, such sum or sums of money as in their judgment should be borrowed,
without limitations including such sums as are specified in that certain Loan
and Security Agreement dated as of February 11, 1998 (the "Loan Agreement")-
EXECUTE NOTES. To execute and deliver to Bank the promissory note or
notes of the Corporation, on Bank's forms, at such rates of interest and on such
terms as may be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of the Corporation to ]Bank, and also to execute and deliver to
Bank one or More renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion of
the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which die Corporation may have an
1
75
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
LETTERS OF CREDIT, FOREIGN EXCHANGE. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the Corporation;
and that the Resolutions are in full force and effect and have not been modified
or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on 2/4, 1998 and attest
that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------------------------------------------
2
76
[IMPERIAL BANK LOGO] SPECIAL LOAN MINUTES REPORT
--------------------------------------------------------------------------------
Banking Office/Department Name/Number Date Total Commitment
Emerging Growth Industry - #3605 October 10, 1997 $2,500,000
--------------------------------------------------------------------------------
Prepared By Assigned Officer
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
BORROWER(S) NAME & CUSTOMER NUMBER(S) LINE NO. CLASS AMOUNT MATURITY OWING RATE
---------------------------------------------------------------------------------------------------------------
bSquare, Inc. (01) OT-N $2,000,000 364 days $ -0- P + 0.0%
Consulting and Training Services $10,000 fee
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇ (02) OT-N $500,000 60 mos. $ -0- P + .25%
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ $2,000 fee
(▇▇▇)▇▇▇-▇▇▇▇
--------------------------------------------------------------------
Guarantor(s) Name and Customer Number(s) Loan Administration Use Only
None.
---------------------------------------------------------------------------------------------------------------
(Direct and Indirect Liability, Including Real Estate, Installment Loans, Letters
of Credit & Charge TOTAL $
APPLICATION, PURPOSE, REPAYMENT, COLLATERAL, AMORTIZATION
(1) Requesting new $2,000,000 Revolving Line of Credit to support working
capital with a $500,000 sublimit for issuance of trade-related commercial
and standby letters of credit and a $75,000 sublimit to support foreign
exchange contracts. L/Cs and FX contract to be negotiated at Bank's
standard pricing. Line will mature 364 days from closing with interest
payment monthly and principal plus interest due at maturity. Advances will
be limited to the lesser of: (i) 80% of Eligible accounts, or (ii) the
amount available under the Line. As used herein, "Eligible Accounts" will
include those domestic and pre-approved foreign accounts receivable of
Borrower which are outstanding less than 90 days from invoice date subject
to certain exclusions for contra, US government and inter-company accounts.
Approved foreign accounts receivable include foreign companies with sales
greater than $500 million per year. Additional foreign accounts receivable
will be eligible to the extent they are approved in writing by Bank. Any
account which alone exceeds 25% of total accounts will have the amount in
excess of 25% excluded unless approved in writing by Bank. Any account 25%
or more of which is outstanding over 90 days from invoice date will be
excluded in its entirety.
(02) Requesting new $500,000 Term Loan to finance the purchase of equipment,
software, furniture and bank approved acquisitions. Available for draws
for a period of twelve (12) months following completion of definitive Bank
loan documents. Interest is payable monthly during draw period followed by
thirty-six (36) equal monthly payments of principal plus interest.
Advances will be at 80% against invoice price (less tax and freight) of
equipment purchased. Advances against software will be limited to 25% of
total outstanding under the Term Loan at any one time. Advances to support
acquisitions must be approved by Bank in writing.
Bank to have a cross-collateralized and cross-defaulted blanket first priority
security interest in all assets perfected by UCC-1 and IP Security Agreement
filings.
[ ] If checked, the maturity date will be extended to using
Unilateral or Bilateral Extension Letter.
-----------------------------------------------------------------------
Month Pl PAS Number Loan Grade
-----------------------------------------------------------------------
Direct Accounting Relationship Borrowing History (Prior 12 Months)
-----------------------------------------------------------------------
Ledger Average High Credit
-----------------------------------------------------------------------
Avg Coll Bal Low Credit
-----------------------------------------------------------------------
Line Balance Days Out Debt
-----------------------------------------------------------------------
Net Account Profit Customer Since
-----------------------------------------------------------------------
CRA Purpose Code Risk Rate SIC Code CRA Income
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Recommended By Date
/s/ [Signature Illegible] 10/10/97
-----------------------------------------------------------------------
Recommended By Date Recommended By Date
x
-----------------------------------------------------------------------
Approved By Date Concur Date
x CLA x CLA
-----------------------------------------------------------------------
Concur Date Concur Date
x CLA x EVP
-----------------------------------------------------------------------
Concur Date Concur Date
x ▇▇▇▇▇▇▇▇ ▇ Director
-----------------------------------------------------------------------
77
IMPERIAL BANK CREDIT SUPPORT COMMENTS & CLARIFICATIONS
--------------------------------------------------------------------------------
BORROWER'S NAME: Date: October 10, 1997
Comments Prepared By: ▇▇▇ ▇▇▇▇▇▇▇, Emerging Growth Industry
Covenants:
PROPOSED ACTUAL AS OF 8/31/97
-------- --------------------
1) Minimum Quick Ratio[1] 0.80 to 1.00 3.17
2) Minimum Tangible Net Worth[2] $2,000,000 $3,176,578
3) Maximum Total Liabilities[3] to
Tangible Net Worth 1.50 to 1.00 0.26
4) Profitability Quarterly $2,635,239 YTD
5) Minimum Debt Service[4] 1.50 to 1.00 n/a
Definitions:
(1) "Quick Ratio" is defined as cash plus accounts receivable divided by
current liabilities less deferred revenue.
(2) "Tangible Net Worth" is defined as the financial statement net worth
of the Borrower prepared according to generally accepted accounting
principles less intangible assets, plus indebtedness fully
subordinated to the debt due to the Bank.
(3) "Total Liabilities" are defined as all the Borrower's liabilities
except for deferred revenue and indebtedness fully subordinated to the
debt due to the Bank.
(4) "Debt Service" is defined as earnings after tax plus interest and
non-cash expenses annualized for the preceding quarter, divided by
current portion of long term debt and capitalized, plus interest.
Reporting:
1) Unqualified audit of financial statements within 90 days after each
fiscal year end beginning with the year ended December 31, 1997.
2) Company prepared quarterly financial statements and Compliance within
25 days after the end of each quarter.
3) Monthly agings of accounts receivable and accounts payable with
Borrowing Base Certificate within 15 days after the end of each month.
Other:
1) Borrower's primary banking and investment accounts to be maintained
at Bank.
2) Proof of insurance naming Bank as loss payee.
Conditions Precedent to Lending:
1) Prior to Line disbursement, Bank shall conduct an initial collateral
audit by Bank's designated agent at Borrower's expense, with results
satisfactory to Bank. Thereafter, Bank shall conduct annual collateral
audits by Bank's designed agent at Borrower's expense, with results
satisfactory to Bank.
2) All reasonable expenses of Bank for legal fees, documentation fee, UCC
searches and filling fees, and all other costs involved with
documenting and enforcing the loans, including the expenses of Bank's
outside counsel, shall be borne by the Borrower, whether or not the
Credit Facilities close.
================================================================================
QUESTIONNAIRE: Answer All of the following questions. Answers which appear in
parentheses () require an explanation in the remarks section
below.
CREDIT CHECKINGS
YES NO DATE OF MOST RECENT CREDIT CHECKINGS _________ DATE OF MOST
RECENT BANK CHECKINGS_________
( ) X 1. Does borrower's previous business record show any
bankruptcies or arrangements with creditors; are there any
suits pending or tax liens existing?
X ( ) 2. Is borrower's trade payment record uniformly prompt or
better?
X ( ) 3. Are bank loans confined to us?
X ( ) 4. Are accounts confined to us?
ADVERSE CHECKINGS SHOULD BE EXPLAINED IN REMARKS SECTION
EXPERIENCE
NA ( ) 1. Have prior loans been handled satisfactorily and
account relationships conducted properly?
NA ( ) 2. Are accounts profitable?
NA ( ) 3. Are Federal payroll and excise taxes paid through
Imperial Bank?
OWNERSHIP
( ) X 1. Has there been a material change in ownership?
( ) X 2. Is borrower either a subsidiary or controlled by
another entity?
( ) X 3. Has there been a major change in management personal?
( ) X 4. Are there questions concerning the ability of management?
X ( ) 5. Is management experienced in this line of business?
================================================================================
REMARKS:
--------------------------------------------------------------------------------
78
[IMPERIAL BANK LOGO]
LOAN SUMMARY
Borrower Name Date Approved
bSquare, Inc.
---------------------------------------------------------------------------------------------------------------------
Banking Office/Department or Real Estate Center Total Commitments Loan Numbers (This Request)
Emerging Growth Industries $2,500,000.
---------------------------------------------------------------------------------------------------------------------
Account Officer Regional Vice President Loan Type(This Request) Loan Amount (This Request)
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, SVP $2,500,000
---------------------------------------------------------------------------------------------------------------------
COMMITMENT OUTSTANDING INTEREST COLLATERAL Financial Information as of
LOAN# AMOUNT AMOUNT RATE TYPE COLLATERAL VALUE (8 Months) (08/31/97)
---------------------------------------------------------------------------------------------------------------------
01 $2,000,000 $0 P+0.0 UCC-1 $ Total Assets $3,989
02 $500,000 $0 P+.25 UCC-1 $ Net Worth $3,177
03 $ $ P+ UCC-1 $ Net Sales $7,577
04 $ $ $ Net Profit $2,635
Other $ $ $ Cash Flow $2,775
Purpose (This Request): (1) To support working capital. (2) To finance the purchase of
equipment, software, furniture and acquisitions. CPLTD $-0-
Source of Repayment (This Request): (1) Turn over of trading assets and liquidation of
corporate assets. (2) Cash flow from operations and liquidation of corporate assets. Current Radio 3.32
Comments Quick Ratio 3.17
Debt/Tangible 0.26
Net Worth
A/P (Days)
A/R (Days)
Inventory (Days)
REAL ESTATE LOAN DETAIL FOR THIS REQUEST
Project Location Loan Term Pricing Yield
@ %AO
Project Type Equity (Cash) Equity (Appraisal)
$ $
Gross Building Area Net Rentable Area Land Area Proforma GSI Vacancy
Sq.ft. Sq.ft. Sq.ft.
Purpose of Loan EGI Expenses NOI
Appraised Value Date % Preleased Cap Rate Value/Sq.Ft.
$
Collateral Position Loan/Value Loan/Sq.Ft. Gross Rent/Sq.Ft./Month
Balance of Senior Liens Participation Amount Debt Coverage Ratio Annual Expenses/Sq.Ft. Loan Constant
$ $ $
Additional Collateral Other Ratios
Comments
79
[IMPERIAL BANK LOGO]
SPECIAL LOAN MINUTES REPORT
========================================================================================================
Banking Office/Department Name/Number Date Total Commitment
Emerging Growth Industry - #3805 October 10, 1997 $2,500,000
--------------------------------------------------------------------------------------------------------
Prepared By Assigned Officer
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
========================================================================================================
BORROWER(S) NAME & CUSTOMER NUMBER(S) LINE NO. CLASS AMOUNT MATURITY OWING RATE
--------------------------------------------------------------------------------------------------------
P+0.0%
bSquare, Inc. (01) OT-N $2,000,000 364 days $-0- $10,000 fee
Consulting and Training Services.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇ (02) OT-N $500,000 60 mos. $-0- P+.25%
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ $2,000 fee
(▇▇▇) ▇▇▇-▇▇▇▇
---------------------------------------------------------
Guarantor(s) Name and Customer Number(s) Loan Administration Use Only
None. APPROVED
COMMERCIAL LOAN ADMINISTRATION
DATE: OCT 20, 1997
-------------------------
---------------------------------------------------------
========================================================================================================
Direct and Indirect Liability, Including Real Estate, Installment Loans,
Letters of Credit & Charge Cards) TOTAL $
========================================================================================================
APPLICATION [ILLEGIBLE], REPAYMENT, COLLATERAL, AMORTIZATION
--------------------------------------------------------------------------------------------------------
(1) Requesting new $2,000,000 Revolving Line of Credit to support working
capital with a $500,000 submit for issuance of trade-related commercial and
standby letters of credit and a $75,000 sublimit to support foreign
exchange contracts. L/Cs and FX contract to be negotiated at Bank's
standard pricing. Line will mature 364 days from closing with interest
payable monthly and principal plus interest due at maturity. Advances will
be limited to the lesser of: (i) 80% of Eligible accounts, or (ii) the
amount available under the Line. As used herein, "Eligible Accounts" will
include those domestic and pre-approved foreign accounts receivable of
Borrower which are outstanding less than 90 days from invoice date subject
to certain exclusions for contra, US government and inter-company accounts.
Approved foreign accounts receivable include foreign companies with sales
greater than $500 million per year. Additional foreign accounts receivable
will be eligible to the extent they are approved in writing by Bank. Any
account which alone exceeds 25% of total accounts will have the amount in
excess of 25% excluded unless approved in writing by Bank. Any account 25%
or more of which is outstanding over 90 days from invoice date will be
excluded in its entirety.
(02) Requesting new $500,000 Term Loan to finance the purchase of equipment,
software, furniture and bank approved acquisitions. Available for draws for
a period of twelve (12) months following completion of definitive Bank loan
documents. Interest is payable monthly during draw period followed by
thirty-six (36) equal monthly payments of principal plus interest. Advances
will be at 80% against invoice price (less tax and freight) of equipment
purchased. Advances against software will be limited to 25% of total
outstandings under the Term Loan at any one time. Advances to support
acquisitions must be approved by Bank in writing.
Bank to have a cross-collateralized and cross-defaulted blanket first priority
security interest in all assets perfected by UCC-1 and IP Security Agreement
filings.
--------------------------------------------------------------------------------------------------------
[ ] If checked, the maturity date will be extended to using Unilateral or Bilateral Extension Letter.
========================================================================================================
Month PI PAS Number Loan Grade Recommended by Date
X [SIG] 10/10/97
========================================================================================================
Recommended By Date Recommended By Date
[ILLEGIBLE] [ILLEGIBLE]
----------------------------------------------
[ILLEGIBLE] High Credit X X
------------------------------------------------------
---------------------------------------------- Approved By Date Concur Date
Avg Coll Bal Low Credit
X [SIG] 10/16/97 CLA X
---------------------------------------------- ------------------------------------------------------
Time Balance Days Out of Debt Concur Date Concur Date
---------------------------------------------- X [SIG] 10/20/97 CLA X
Net Account Profit Customer Since ------------------------------------------------------
80
CREDIT MEMORANDUM
FOR
bsquare CORPORATION
BACKGROUND
bsquare is a S corporation located in Bellevue, Washington which specializes in
consulting services and software development for the Windows CE operating
environment. The company was referred to Imperial by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ who is
currently on a consulting engagement with the company to evaluate and improve
their information systems, evaluate a conversion to a C corporation and ready
the company for a 1997 audit with the intent of raising outside equity in 1998
to assist the company in expanding its software development business.
PRODUCTS/TECHNOLOGY
The company has bootstrapped its growth to date and accumulated retained
earnings of $3.5 million largely through the consulting services it provides to
the major semiconductor manufacturers who retain the company's services to write
the Windows CE software compilers for their next generation processors.
Customers include: AMD, ARM, IBM, Motorola, ▇▇▇▇▇▇▇▇, Hitachi and NEC.
Given bsquare's Windows CE expertise and the accelerated acceptance of CE as an
operating system platform for an ever increasing number of portable devices and
software applications, the company has begun developing applications software
for the handheld PC (HPC) market and systems development tools for use by
hardware and software vendors adapting the CE operating system to the target
platform of their choice.
Market:
The Windows CE platform has established a healthy set of entry-level hardware,
foundation-level software and services from major players of the wireline and
wireless services. One thousand CE developers are claimed to have registered
with Microsoft and over 100 titles have already been announced. Microsoft is
working hard to capture more developers by making public the tools for CE
development and licensing with companies such as bsquare who can provide
enhanced CE development tool kits for the development of embedded applications.
Growth in the CE market place in 1997 has been apparent. Casio alone expects to
sell over 500,000 units by mid 1998, with the majority of the units being
purchased here in the US. Together, Casio and Compaq have shipped more HPCs than
all the hardware and software shipped in the entire life history of Apple's
▇▇▇▇▇▇, which has established CE as a viable OS. Notwithstanding, CE is still
early in its evolution with no reference designs or off-the-shelf Windows CE
motherboards yet available, and with no standard ICs to support the OS except
for RISC CPUs, the expertise and infrastructure provided by systems integrators
and tools developers such as bsquare will become necessary for hardware and
software vendors bringing CE-based products to market.
Competition:
There are a number competitors in the market with embedded operating systems,
the most notable of which is Geoworks with their GEOS offering. Among its
competitors, CE boasts the best balance of a hard-core embedded real-time
characteristics and general purpose functionality. Additionally, CE has the
reputation, relationships, financial resources and marketing muscle of Microsoft
behind it.
81
MANAGEMENT:
President & CEO: ▇▇▇▇ ▇▇▇▇▇▇
Senior Vice President: ▇▇ ▇▇▇▇▇▇
Controller: ▇▇▇▇▇ ▇▇▇▇▇▇: Kirske joined bsquare in September, 1997. Previously,
Kirske was Director of Corporate Accounting for Midcom, a provider of long
distance voice and data based telecom services with annual revenues of $150
million. Prior to Midcom, Kirske was the Assistant Controller for Mosaix, a high
growth telecom hardware and software provider with worldwide sales of $70
million;, and Manager, Financial Reporting for Spacelabs Medical Inc., a
manufacturer and distributor of critical care medical equipment and clinical
information systems with worldwide revenues of $250 million. Kirske began her
career with Coopers & ▇▇▇▇▇▇▇ where she spent seven years reached the position
of General Practice Manager before leaving in 1992.
FINANCIAL:
To date, the company's financial statements have been compiled. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
has been retained on a consulting basis to upgrade the company's accounting
system and prepare the company for an audit of 1997. Additionally, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ is consulting the company on the conversion from an S to a C
corporation in anticipation of a equity financing in 1998.
The company limits distributions to only those necessary to cover the tax
liabilities of its partners.
As of the eight months ended August 31, 1997, bsquare posted net income of $2.6
million on revenues of $7.6 million. Approximately 95% of the company's revenues
resulted from consulting services with the balance split between development and
integration. Operating expenses for the period of $5.0 million were primarily
related to salaries which made of $3.5 million, or 46%, of total expenses.
As of August 31, 1997, the company had assets of $4.0 million which were largely
comprised of cash totaling $740.0, accounts receivable totaling $1.8 million and
net property and equipment totaling $1.2 million. bsquare currently has no long
term debt. The company's liabilities are limited to payables and accruals.
Given the concentration of quick assets and absence of debt, the company's
balance sheet is extremely strong as evidenced by a quick ratio of 3.17, TNW of
$3.2 million and D/TN-W of 0.26.
Though the company is currently well capitalized, they plan raise as much as $3
to $5 million in outside equity in 1998 to support growth their development and
integration businesses.
The company has recently hired ▇▇▇▇▇ ▇▇▇▇▇▇ as VP of Finance. Upon her arrival,
the company has began its budgeting process for 1998. Kirske expects the first
pass on the budget to be completed by the end of October leading to a final
budget for next year by mid to late November. Preliminarily, she has indicated
the company will looking for revenue growth to come from integration and
development activities. Additionally, she expects profitability to continue, but
at a reduced rate as a result of investments the company will be making to
support the growth within integration and development.
82
ACCOUNTS RECEIVABLE:
As of September 30, 1997, bsquare had accounts receivable totaling $1.5 million.
Of this amount, $1.4 million, or 88%, are current, and $167.0, or 11% are
within 60 days. Top accounts are as follows:
Medtronic $ 777.0
Philips 288.0
Motorola 142.0
Hitachi 50.0
Advanced RISC Machines 40.0
Microsoft 40.0
--------
TOTAL 1,337.0
========
A collateral audit will be performed prior to advances under the Line.
REFERENCES:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇:
▇▇▇▇▇ ▇▇▇▇▇▇▇ of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ was contacted regarding his firms consulting
engagement at bsquare. He indicated their review of bsquare's books and records
only produced minor adjustments to the company's financial statements which
should lead to a smooth audit of 1997.
▇▇▇▇ ▇▇▇▇▇▇▇▇:
▇▇▇▇ Canin of ▇▇▇▇ ▇▇▇▇▇▇▇▇ was contacted regarding discussions his firm is
having with bsquare on the underwriting of a private placement in 1998. ▇▇▇▇
pointed out that discussions up to this point have been preliminary and as a
result his firm has not yet engaged in extensive due diligence. However, he
indicated that Dain is extremely bullish about CE and feels bsquare is very well
positioned as one of the technical leaders in a rapidly emerging market space.
His firm feels bsquare will be a strong play for their institutional and
mezzanine investors and as a result they will be working very hard to get the
engagement.
83
BSQUARE (B2260000) SIC Code.
Summary Balance Sheet - Actual
Statement Date 12/31/95 12/31/96 06/30/97 08/31/97
Months Covered 12 12 6 8
Audit Method Compiled Compiled Co.Prep'd Co.Prep'd
Accountant
Analyst
-------- -------- --------- ---------
ASSETS
Cash & Equivalents 103 189 927 741
Accts/Notes Rec-Trade (Net) 385 591 1,446 1,843
Other Inventory -- 6 19 15
Operating Current Assets -- 7 71 101
------ ------ ------ ------
TOTAL CURRENT ASSETS 488 793 2,463 2,700
Net Fixed Assets 19 233 921 1,234
Op Non-Current Assets 5 32 55 55
Intangibles - Net 1 -- -- --
------ ------ ------ ------
TOTAL NON-CURRENT ASSETS 25 265 976 1,289
------ ------ ------ ------
TOTAL ASSETS 513 1,058 3,439 3,989
------ ------ ------ ------
LIABILITIES/NET WORTH
Accounts Payable - Trade 8 -- 63 81
Other Accruals 23 133 375 561
Operating Current Liabs 222 -- 286 171
------ ------ ------ ------
TOTAL CURRENT LIABILITIES 253 133 724 813
------ ------ ------ ------
------ ------ ------ ------
TOTAL LIABILITIES 253 133 724 813
Stock 2 17 2 2
Other Equity (498) (1,819) (1,819) (2,188)
Retained Earnings 756 2,727 4,532 5,362
------ ------ ------ ------
TOTAL NET WORTH 260 925 2,715 3,176
------ ------ ------ ------
TOTAL LIABS & NET WORTH 513 1,058 3,439 3,989
====== ====== ====== ======
84
BSQUARE (B2260000) SIC Code.
Summary Income Statement - Actual
Statement Date 12/31/95 12/31/96 06/30/97 08/31197
Months Covered 12 12 6 8
Audit Method Compiled Compiled Co.Prep'd Co.Prep'd
Accountant
Analyst
-------------- -------- -------- --------- ---------
Sales/Revenues 1,596 4,175 4,917 7,579
----- ----- ----- -----
GROSS PROFIT 1,596 4,175 4,917 7,579
S,G & A Expense -- 184 244 369
Operating Expense 886 1,996 2,776 4,438
Depreciation 19 35 98 141
----- ----- ----- -----
TOTAL OPERATING EXP(INC) 905 2,215 3,118 4,948
----- ----- ----- -----
NET OPERATING PROFIT 691 1,960 1,799 2,631
Interest Income 2 11 6 4
NET PROFIT 693 1,971 1,805 2,635
===== ===== ===== =====
85
BSQUARE (B2260000) SIC Code.
Summary FAS 95 Stmt of Cash Flows (Direct)
Statement Date 12/31/95 12/31/96 06/30/97 08/31/97
Months Covered 12 12 6 8
Analyst
-------------- -------- -------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Sales 4,175 4,917 7,579
Chg in Net Receivables (206) (855) (1,252)
------ ------ ------
CASH RECEIVED FROM CUSTOMERS 3,969 4,062 6,327
Chg in Inventories (6) (13) (9)
Chg in Accts Payable-Trade & Othr (8) 63 81
Operating Expenses (2,180) (3,020) (4,807)
Chg in Prepaids/Deferreds (34) (87) (117)
Chg in Accruals 110 242 428
Chg in Other Open Assets and Liabs (222) 286 171
------ ------ ------
CASH PAID TO SUPPLIERS & EMPLOYEES (2,340) (2,529) (4,253)
INTEREST PAID -- -- --
INCOME TAXES PAID -- -- --
INTEREST & DIVIDENDS RECEIVED 11 6 4
MISC CASH RECEIVED(PAID) -- -- --
------ ------ ------
NET CASH PROV BY OPERATIONS 1,640 1,539 2,078
CASH FLOWS FROM INVESTING ACTIVITIES:
Chg in Net Fixed Assets (249) (786) (1,142)
Chg in Net Intangibles 1 --
------ ------ ------
NET CASH USED IN INVESTING (248) (786) (1,142)
CASH FLOWS FROM FINANCING ACTIVITIES:
Chg in Capital(Less Non-Cash) (1,306) (15) (384)
------ ------ ------
NET CASH PROV BY FINANCING (1,306) (15) (384)
------ ------ ------
NET CHANGE IN CASH & EQUIVALENTS 86 738 552
ADD:CASH AND EQUIVALENTS AT BOP 103 189 189
------ ------ ------
CASH AND EQUIVALENTS AT EOP 189 927 741
====== ====== ======
86
BSQUARE (B226000) SIC Code.
Summary Ratios
Statement Date 12/31/95 12/31/96 06/30/97 08/31/97
Months Covered 12 12 6 8
Analyst
-------- -------- -------- --------
LIQUIDITY
Working Capital 235 660 1,739 1,887
Quick Ratio 1.93 5.86 3.28 3.18
Current Ratio 1.93 5.96 3.40 3.32
LEVERAGE / COVERAGE
Net Worth-Actual 260 925 2,715 3,176
Tang Net Worth-Actual 259 925 2,715 3,176
Eff Tang Net Worth-Actual 259 925 2,715 3,176
Debt/Worth 0.97 0.14 0.27 0.26
Debt/Tang Worth 0.98 0.14 0.27 0.26
Debt Less Sub Debt-Liab/Eff Tg Wth 0.98 0.14 0.27 0.26
Total Liabilities Total Assets 0.49 0.13 0.21 0.20
Interest Coverage n/a n/a n/a n/a
Funds Flow Coverage n/a n/a n/a n/a
Funds Flow/Prior Period CPLTD n/a n/a n/a
UCA Cash Flow Coverage n/a n/a n/a
UCA Cash Flow/Prior Period CPLTD n/a n/a n/a
PROFITABILITY
Return on Assets 135.09 186.29 104.97 99.08
Return on Equity 266.54 213.08 132.97 124.45
Gross Margin 100.00 100.00 100.00 100.00
Operating Profit Margin 43.30 46.95 36.59 34.71
Profit Margin 43.42 47.21 36.71 34.77
ACTIVITY
Net Accounts Receivable Days 88.05 51.67 53.67 59.17
Accounts Payable Days 1.83 -- 2.34 2.60
Net Sales/Total Assets 3.11 3.95 2.86 2.85
Net Sales/Working Capital 6.79 6.33 5.65 6.02
Net Sales/Net Worth 6.14 4.51 3.62 3.58
Net Sales/Net Fixed Assets 84.00 17.92 10.68 9.21
Profit Before Tax/Total Assets 135.09 186.29 104.97 99.08
GROWTH (%)
Total Assets Growth 106.24 225.05 277.03
Total Liabilities Growth (47.43) 444.36 511.28
Net Worth Growth 255.77 193.51 243.35
Net Sales Growth 161.59 135.54 172.30
Operating Profit Growth 183.65 83.57 101.35
Net Profit Growth 184.42 83.16 100.53
====== ====== ====== ======
87
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇. #▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Home: ▇▇▇-▇▇▇-▇▇▇▇
Work: ▇▇▇-▇▇▇-▇▇▇▇
Born: March 29, 1957
Education:
Received B.S., Magna Cum Laude, in June of 1980 from East Tennessee State
University. Majored in Computer and Information Science, Minored in Mathematics.
Inducted into Kappa Mu Epsilon Mathematics ▇▇▇▇▇ ▇▇▇▇▇▇▇ in May of 1977.
Attended Code Optimization and Code Generation course taught by Graham,
Hennessy, and ▇▇▇▇▇▇, sponsored by the Stanford Department of Computer Science
in August, 1989.
Attended Optimizing Compilers for RISC and Pipelined Architectures course taught
by ▇. ▇▇▇▇▇▇▇, sponsored by UC Irvine in January of 1990 .
Other courses attended through UC San Diego Extension: Introduction to Neural
Networks, Prolog Programming, Chaos and Fractals.
Experience with:
Languages: Ada, C, C++, PL/I, FORTRAN, Pascal, Prolog
OS: UNIX (Various), Multics, Windows NT
Architectures: ▇▇▇▇▇, ▇▇▇▇, I80960, MC88100, SPARC, MIPS, Cray X-MP, CRAY-2
Employment History:
Digital Equipment Corp. June 1992 to Present
Palo Alto, CA and Bellevue, WA
Software Principal Engineer assigned to the Compiler Group at the DECwest
Engineering facility in Bellevue.
Worked with researchers (including ▇▇▇▇ ▇▇▇▇▇ of Xerox PARC and Ben Zoin of the
University of Colorado) at Digital's Systems Research Center in Palo Alto to
develop a practical garbage collector for C and C++ programs. Implemented a
fully configurable collector for Alpha/OSF systems and released it for internal
use within Digital.
Assumed support and maintenance of a re-targetable code generator for C and C++
compilers targeting Digital Alpha and Intel x86 systems running Windows NT.
Completed pending work on the code generators, implemented C++ exceptions for
Intel x86 targets, and assisted in the productization and field test release of
the compiler.
88
Participated in the adapt of Microsoft's Visual C++ product for Digital's
Alpha/Windows NT systems. Implemented the C++ exception model for this
environment.
Telesoft August 1984 to May ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇
Senior Software Engineer: member of a team engaged in the implementation and
maintenance of a code generator for the Intel I80960 (MC, XA, MX).
Also responsible for the maintenance and enhancement of a code generator for the
Motorola MC88100.
Developed an instruction scheduler for RISC targets using the ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇ heuristics for list scheduling. Scheduler was largely target
independent and was adapted for the MC88100, SPARC, MIPS, and I80960.
Developed an unused subprogram eliminator for MC88100 which was later adapted
for SPARC.
Participated in design, code, and maintenance of components of the code
generators and run-time systems of Telesoft's Cray and SPARC Ada compilers.
Other shorter term assignments have involved maintenance tasks on other
components of the compiler including the middle pass and debugger.
NCR June 1982 to July ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇
Lead Systems Analyst in northeast region for the OEM Systems Division.
Consultant on UNIX and C to VARs who were developing applications software for
the NCR Tower. Organized a team of three support analysts in the northeast
region and coordinated their activities.
Promoted to Tower Product Specialist reporting to national OEM Product Manager
in the Winter of 1983. Responsible for tracking features of the NCR Tower and
its competitors. Principal technical consultant to the OEM Systems Division
national product management group on technical issues relating to UNIX and the
UNIX marketplace.
Softech Sept 1980 to June ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇
Associate Software Engineer, under contract to federal and commercial clients.
Promoted to Software Engineer in the Fall of 1981.
89
Worked on the design and development of an interactive database manager for the
storage and analysis of communications protocol information.
Worked on the development and maintenance of a structured cross-assembler,
linkage editor, and automated configuration control system to be used in the
development of a digital communications switch.
Member of the design team and coauthor of the technical proposal for the
development of a communications Network Control Program (NCP) Generator for a
major computer manufacturer. Team leader of four staff programmers working on
the development of the central component of the NCP Generator.
90
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------------------------------------------
1988 MS Computer Science, University of Wyoming, Laramie
1988-1989 Topologix, Denver Colorado
▇▇▇▇-▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇-▇▇▇▇ Intergraph, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇-▇▇▇▇ Digital Equipment Company, Bellevue, Washington
1994 - Present BSQUARE Corporation, Bellevue, Washington
91
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
- EDUCATION
- BS/MS Computer Science, 1988
- PAST ACCOMPLISHMENTS
- Pioneer in vectorization/parallelization
- Published Author
- Lead developer/manager of Hitachi SH project
- CURRENT FOCUS
- Establishing BSQUARE corporate structure and strategy
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- EDUCATION
- BA in Computer Science, 1984.
- BSQUARE CONTRIBUTIONS
- Founded & managed QA at BSQUARE
- Led the early employee recruiting effort.
- CURRENT FOCUS
- Providing Leadership and Management for BSQUARE QA organization.
8/12/97 BSQUARE CONFIDENTIAL 6