1
LOAN AND SECURITY AGREEMENT
dated as of May 3, 1996
by and between
SILICON VALLEY BANK
and
VMARK SOFTWARE, INC.
$5,000,000 Revolving Line of Credit
$5,000,000 Share Repurchase Line of Credit
2
EXHIBITS AND SCHEDULES
----------------------
EXHIBITS
--------
A - Description of Collateral
B-1 - Loan Payment/Revolving Line Advance Telephone Request Form
B-2 - Loan Payment/Repurchase Advance Telephone Request Form
C - Borrowing Base Certificate
D - Compliance Certificate
E-1 - Promissory Note (Revolving Line of Credit)
E-2 - Promissory Note (Share Repurchase Line of Credit)
F-1 - Disbursement Request and Authorization (Revolving Line of
Credit)
F-2 - Disbursement Request and Authorization (Share Repurchase Line of
Credit)
SCHEDULES
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A - Disclosure Schedule
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This LOAN AND SECURITY AGREEMENT (the "Agreement") is entered into as
of May 3, 1996, by and between SILICON VALLEY BANK ("Bank"), a
California-chartered bank with its principal place of business at 3003 Tasman
Drive, Santa Clara, California 95054 with a loan production office located at 40
William Street, Wellesley, Massachusetts 02181 doing business under the name
"Silicon Valley East", and VMARK SOFTWARE, INC. ("Borrower"), a Delaware
corporation. This Agreement amends and restates in full the Letter Agreement
dated April 13, 1993 between Borrower and Bank, as previously amended by Loan
Modification Agreements dated November 4, 1994, December 27, 1994, May 5, 1995
and November 21, 1995, and the Promissory Note of Borrower, dated May 15, 1990,
as previously amended through the date hereof.
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.
"Revolving Line Advance" means an advance under the Revolving
Line of Credit.
"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, 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.
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"Borrowing Base" has the meaning set forth in Section 2.1
hereof.
"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.
"Collateral" means the property described on EXHIBIT A
attached hereto.
"Committed Revolving Line" means Five Million Dollars
($5,000,000).
"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.
"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
Revolving Line Advances, Repurchase Advances and other 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, with respect to any Obligation, the
amount of such Obligation owed at the end of a given day.
"Deferred Revenues" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as deferred revenues
on the consolidated balance sheet of Borrower and its Subsidiaries as at such
date.
"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:
1.1.0.1. ACCOUNTS THAT THE ACCOUNT DEBTOR HAS FAILED TO PAY
WITHIN NINETY (90) DAYS OF INVOICE DATE;
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1.1.0.2. ACCOUNTS WITH RESPECT TO AN ACCOUNT DEBTOR, FIFTY
PERCENT (50%) OF WHOSE ACCOUNTS THE ACCOUNT DEBTOR HAS FAILED TO PAY
WITHIN NINETY (90) DAYS OF INVOICE DATE;
1.1.0.3. ACCOUNTS WITH RESPECT TO WHICH THE ACCOUNT DEBTOR IS
AN OFFICER, EMPLOYEE, OR AGENT OF BORROWER;
1.1.0.4. ACCOUNTS WITH RESPECT TO WHICH GOODS ARE PLACED ON
CONSIGNMENT, GUARANTEED SALE, SALE OR RETURN, SALE ON APPROVAL, BILL
AND HOLD, OR OTHER TERMS BY REASON OF WHICH THE PAYMENT BY THE ACCOUNT
DEBTOR MAY BE CONDITIONAL;
1.1.0.5. ACCOUNTS WITH RESPECT TO WHICH THE ACCOUNT DEBTOR IS
AN AFFILIATE (OTHER THAN BY VIRTUE OF BEING DIRECTLY OR INDIRECTLY
UNDER COMMON OWNERSHIP OR CONTROL WITH BORROWER) OF BORROWER;
1.1.0.6. 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, AND ACCOUNTS ARISING FROM
PRODUCTS SHIPPED TO OR SERVICES PROVIDED TO BRANCHES OR OFFICES LOCATED
IN THE UNITED STATES OF ANY ACCOUNT DEBTOR THAT DOES NOT HAVE ITS
PRINCIPAL PLACE OF BUSINESS IN THE UNITED STATES;
1.1.0.7. ACCOUNTS WITH RESPECT TO WHICH THE ACCOUNT DEBTOR IS
A FEDERAL, STATE, OR LOCAL GOVERNMENTAL ENTITY OR ANY DEPARTMENT,
AGENCY, OR INSTRUMENTALITY THEREOF.
1.1.0.8. 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 AGAINST AMOUNTS OWED TO BORROWER;
1.1.0.9. 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 AS APPROVED IN
WRITING BY BANK;
1.1.0.10. 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
1.1.0.11. 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 that Bank approves on a case-by-case basis.
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"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act
of 1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money
or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"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.
"Letters of Credit" has the meaning set forth in Section 2.1.1
hereof.
"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.
"Notes" means those certain promissory notes of the Borrower,
the forms of which are attached hereto as EXHIBITS E-1 and E-2.
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"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.
"Payment Date" means the monthly date for payment determined
pursuant to Sections 2.1 and 2.2 hereof.
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Bank pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
1.1.0.11.1. INDEBTEDNESS OF BORROWER IN FAVOR OF BANK ARISING
UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT;
1.1.0.11.2. INDEBTEDNESS EXISTING ON THE CLOSING DATE AND
DISCLOSED IN THE SCHEDULE;
1.1.0.11.3. SUBORDINATED DEBT; AND
1.1.0.11.4. INDEBTEDNESS TO TRADE CREDITORS INCURRED IN THE
ORDINARY COURSE OF BUSINESS.
"Permitted Investment" means:
1.1.0.11.4.1. INVESTMENTS EXISTING ON THE CLOSING DATE
DISCLOSED IN THE SCHEDULE; AND
1.1.0.11.4.2. (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
MOODY'S 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:
1.1.0.11.4.2.1. Any Liens existing on the Closing Date and
disclosed in the Schedule or arising under this Agreement or the other
Loan Documents;
1.1.0.11.4.2.2. 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;
1.1.0.11.4.2.3. 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;
1.1.0.11.4.2.4. 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
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encumbered by the existing Lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"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
"Repurchase Advance" means an advance under the Repurchase
Line of Credit.
"Repurchase Line of Credit" means the line of credit
established in Section 2.2 hereof.
"Responsible Officer" means each of the Chief Executive
Officer, the Chief Financial Officer and the Controller of Borrower.
"Revolving Line of Credit" means the revolving line of credit
established in Section 2.1 hereof.
"Revolving Maturity Date" means June 5, 1997.
"Schedule" means the schedule of exceptions attached hereto.
"Share Repurchase Availability Expiration Date" has the
meaning set forth in Section 2.2 hereof.
"Share Repurchase Line" means Five Million Dollars
($5,000,000).
"Shares" means the outstanding shares of Common Stock of
Borrower.
"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 consolidated total assets of Borrower and its
Subsidiaries MINUS, without duplication, (i) the sum of any amounts attributable
to (a) goodwill, (b) intangible items such as unamortized debt discount and
expense, patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) all reserves not already
deducted from assets, AND (ii) Total Liabilities.
"Total Liabilities" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness, but specifically excluding Subordinated
Debt.
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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.. LOANS AND TERMS OF PAYMENT
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2.1. SUBJECT TO AND UPON THE TERMS AND CONDITIONS OF THIS
AGREEMENT, BANK AGREES TO MAKE ADVANCES (EACH A "REVOLVING LINE ADVANCE" AND,
COLLECTIVELY, THE "REVOLVING LINE ADVANCES") TO BORROWER IN AN AGGREGATE AMOUNT
NOT TO EXCEED (I) THE LESSER OF (A) THE COMMITTED REVOLVING LINE OR (B) THE
BORROWING BASE MINUS THE THEN OUTSTANDING PRINCIPAL BALANCE OF ANY REPURCHASE
ADVANCES, MINUS (II) THE FACE AMOUNT OF ALL OUTSTANDING LETTERS OF CREDIT (AS
DEFINED BELOW) (INCLUDING AMOUNTS DUE WITH RESPECT TO DRAWN BUT UNREIMBURSED
LETTERS OF CREDIT). FOR PURPOSES OF THIS AGREEMENT, "BORROWING BASE" SHALL MEAN
AN AMOUNT EQUAL TO EIGHTY PERCENT (80%) OF ELIGIBLE ACCOUNTS. SUBJECT TO THE
TERMS AND CONDITIONS OF THIS AGREEMENT, AMOUNTS BORROWED PURSUANT TO THIS
SECTION 2.1 MAY BE REPAID AND REBORROWED AT ANY TIME DURING THE TERM OF THIS
AGREEMENT.
Whenever Borrower desires an Revolving Line 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 Revolving Line Advance is to be made.
Each such notification shall be promptly confirmed by a Payment/Revolving Line
Advance Form in substantially the form of EXHIBIT B-1 hereto. Bank is authorized
to make Revolving Line Advances under this Agreement, based upon instructions
received from a Responsible Officer, or without instructions if in Bank's
discretion such Revolving Line Advances are necessary to meet Obligations which
have become due and remain unpaid. Bank shall be entitled to rely on any
telephonic notice given by a person who Bank reasonably believes to be a
Responsible Officer, and Borrower shall indemnify and hold Bank harmless for any
damages or loss suffered by Bank as a result of such reliance. Bank will credit
the amount of Revolving Line Advances made under this Section 2.1 to Borrower's
deposit account.
Interest shall accrue from the date of each Revolving Line Advance
(which, for purposes of calculating interest due hereunder, shall include the
amount of any unpaid Obligations of Borrower with respect to any drawn but
unreimbursed Letters of Credit) at the rate specified in Section 2.4 and shall
be payable monthly in accordance with Section 2.4(c) (such date for payment
being a "Payment Date" for purposes hereof).
The Revolving Line of Credit shall terminate on the Revolving Maturity
Date, at which time all Revolving Line Advances under this Section 2.1 and other
amounts due under this Agreement (except as otherwise expressly specified
herein) shall be immediately due and payable.
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2.1.1. LETTERS OF CREDIT
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2.1.1.1. SUBJECT TO THE TERMS AND CONDITIONS OF THIS
AGREEMENT, BORROWER MAY USE THE REVOLVING LINE OF CREDIT FOR LETTERS OF
CREDIT TO BE ISSUED BY BANK FOR THE ACCOUNT OF BORROWER ("LETTERS OF
CREDIT") IN AN AGGREGATE FACE AMOUNT NOT TO EXCEED (i) THE LESSER OF
(a) THE COMMITTED REVOLVING LINE OR (b) THE BORROWING BASE MINUS THE
THEN OUTSTANDING PRINCIPAL BALANCE OF ANY REPURCHASE ADVANCES, MINUS
(ii) THE THEN OUTSTANDING PRINCIPAL BALANCE OF ANY REVOLVING LINE
ADVANCES; PROVIDED, HOWEVER, THAT THE FACE AMOUNT OF OUTSTANDING
LETTERS OF CREDIT (INCLUDING DRAWN BUT UNREIMBURSED LETTERS OF CREDIT
SHALL NOT IN ANY CASE EXCEED TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000). EACH SUCH LETTER OF CREDIT SHALL HAVE AN EXPIRATION DATE NO
LATER THAN FORTY-FIVE (45) DAYS BEFORE THE REVOLVING MATURITY DATE. ALL
SUCH LETTERS OF CREDIT SHALL BE, IN FORM AND SUBSTANCE, ACCEPTABLE TO
BANK IN ITS SOLE DISCRETION AND SHALL BE SUBJECT TO THE TERMS AND
CONDITIONS OF BANK'S FORM OF APPLICATION AND LETTER OF CREDIT
AGREEMENT.
2.1.1.2. 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
AND HOLD BANK HARMLESS FROM ANY LOSS, COST, EXPENSE OR LIABILITY,
INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES, ARISING OUT
OF OR IN CONNECTION WITH ANY LETTERS OF CREDIT.
2.1.2. LETTER OF CREDIT REIMBURSEMENT; RESERVE
---------------------------------------
2.1.2.1. 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.
2.1.2.2. 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
TWENTY PERCENT (20%) OF THE FACE AMOUNT OF SUCH LETTER OF CREDIT. THE
AMOUNT OF SUCH RESERVE MAY BE AMENDED BY BANK FROM TIME TO TIME TO
ACCOUNT FOR FLUCTUATIONS IN THE EXCHANGE RATE. THE AVAILABILITY OF
FUNDS UNDER THE COMMITTED REVOLVING LINE SHALL BE REDUCED BY THE AMOUNT
OF SUCH RESERVE FOR SO LONG AS SUCH LETTER OF CREDIT REMAINS
OUTSTANDING.
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2.2. SHARE REPURCHASE ADVANCES
-------------------------
2.2.0.1. AT ANY TIME FROM THE DATE HEREOF THROUGH OCTOBER 29,
1996 (THE "SHARE REPURCHASE AVAILABILITY EXPIRATION DATE"), BORROWER
MAY FROM TIME TO TIME REQUEST ADVANCES (EACH A "REPURCHASE ADVANCE"
AND, COLLECTIVELY, THE "REPURCHASE ADVANCES") FROM BANK IN AN AGGREGATE
AMOUNT NOT TO EXCEED THE LESSER OF (i) THE SHARE REPURCHASE LINE OR
(ii) THE BORROWING BASE MINUS THE THEN OUTSTANDING PRINCIPAL BALANCE OF
ALL REVOLVING LINE ADVANCES AND MINUS THE FACE AMOUNT OF ALL
OUTSTANDING LETTERS OF CREDIT (INCLUDING DRAWN BUT UNREIMBURSED LETTERS
OF CREDIT). ANY REPURCHASE ADVANCE OR REPURCHASE ADVANCES SHALL BE USED
ONLY TO MAKE OPEN-MARKET REPURCHASES OF SHARES AND BORROWER SHALL
DELIVER TO BANK, AT THE TIME OF EACH REPURCHASE ADVANCE REQUEST,
EVIDENCE REASONABLY SATISFACTORY TO BANK IDENTIFYING THE NUMBER AND
AGGREGATE PRICE OF SHARES REPURCHASED, OR TO BE REPURCHASED, WITH THE
PROCEEDS OF ANY SUCH REPURCHASE ADVANCE.
2.2.0.2. INTEREST SHALL ACCRUE FROM THE DATE OF EACH
REPURCHASE ADVANCE AT THE RATE SPECIFIED IN SECTION 2.4 AND SHALL BE
PAYABLE MONTHLY IN ACCORDANCE WITH SECTION 2.4(c). ANY REPURCHASE
ADVANCE OR REPURCHASE ADVANCES THAT ARE OUTSTANDING ON THE SHARE
REPURCHASE AVAILABILITY EXPIRATION DATE WILL BE PAYABLE IN THIRTY-SIX
(36) EQUAL MONTHLY INSTALLMENTS OF PRINCIPAL, PLUS ALL ACCRUED
INTEREST, BEGINNING ON NOVEMBER 28, 1996 AND ON THE SAME DAY OF EACH
MONTH FOLLOWING THE SHARE REPURCHASE AVAILABILITY EXPIRATION DATE.
2.2.0.3. BORROWER MAY BY WRITTEN NOTICE TO BANK RECEIVED ON OR
BEFORE OCTOBER 29, 1996, DEFER THE SHARE REPURCHASE AVAILABILITY
EXPIRATION DATE TO APRIL 28, 1997, IN WHICH CASE ANY REPURCHASE ADVANCE
OR REPURCHASE ADVANCES THAT ARE OUTSTANDING ON SUCH SHARE REPURCHASE
AVAILABILITY EXPIRATION DATE WILL BE PAYABLE IN THIRTY-SIX (36) EQUAL
MONTHLY INSTALLMENTS OF PRINCIPAL, PLUS ALL ACCRUED INTEREST, BEGINNING
ON MAY 28, 1997 AND ON THE SAME DAY OF EACH MONTH FOLLOWING THE SHARE
REPURCHASE AVAILABILITY EXPIRATION DATE. THE MONTHLY DATE FOR PAYMENT
DETERMINED UNDER SUBSECTION (b) OR (c), AS THE CASE MAY BE, OF THIS
SECTION 2.2 SHALL BE THE "PAYMENT DATE" FOR PURPOSES HEREOF.
2.2.0.4. WHENEVER BORROWER DESIRES A REPURCHASE 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
REPURCHASE ADVANCE IS TO BE MADE. EACH SUCH NOTIFICATION SHALL BE
PROMPTLY CONFIRMED BY A PAYMENT/REPURCHASE ADVANCE FORM IN
SUBSTANTIALLY THE FORM OF EXHIBIT B-2 HERETO. BANK IS AUTHORIZED TO
MAKE REPURCHASE ADVANCES UNDER THIS AGREEMENT, BASED UPON INSTRUCTIONS
RECEIVED FROM A RESPONSIBLE OFFICER, OR WITHOUT INSTRUCTIONS IF IN
BANK'S DISCRETION SUCH REPURCHASE ADVANCES ARE NECESSARY TO MEET
OBLIGATIONS WHICH HAVE BECOME DUE AND REMAIN UNPAID. BANK SHALL BE
ENTITLED TO RELY ON ANY TELEPHONIC NOTICE GIVEN BY A PERSON WHO BANK
REASONABLY BELIEVES TO BE A RESPONSIBLE OFFICER, AND BORROWER SHALL
INDEMNIFY AND HOLD BANK HARMLESS FOR ANY DAMAGES OR LOSS SUFFERED BY
BANK AS
12
A RESULT OF SUCH RELIANCE. BANK WILL CREDIT THE AMOUNT OF REPURCHASE
ADVANCES MADE UNDER THIS SECTION 2.2 TO BORROWER'S DEPOSIT ACCOUNT.
2.3. OVERADVANCES. IF, AT ANY TIME OR FOR ANY REASON, THE
AMOUNT OF OBLIGATIONS OWED BY BORROWER TO BANK
2.3.0.1. IN RESPECT OF REVOLVING LINE ADVANCES PURSUANT TO
SECTION 2.1 OF THIS AGREEMENT (TOGETHER WITH OBLIGATIONS IN RESPECT OF
ANY OUTSTANDING LETTERS OF CREDIT, INCLUDING DRAWN BUT UNREIMBURSED
LETTERS OF CREDIT) SHALL EXCEED THE LESSER OF (i) THE COMMITTED
REVOLVING LINE OR (ii) THE BORROWING BASE MINUS THE THEN OUTSTANDING
PRINCIPAL BALANCE OF ANY REPURCHASE ADVANCES; OR
2.3.0.2. IN RESPECT OF REPURCHASE ADVANCES PURSUANT TO SECTION
2.2 OF THIS AGREEMENT SHALL EXCEED THE LESSER OF (i) THE SHARE
REPURCHASE LINE OR (ii) THE BORROWING BASE MINUS THE THEN OUTSTANDING
PRINCIPAL BALANCE OF ALL REVOLVING LINE ADVANCES AND MINUS THE FACE
AMOUNT OF ALL OUTSTANDING LETTERS OF CREDIT (INCLUDING DRAWN BUT
UNREIMBURSED LETTERS OF CREDIT),
then Borrower shall immediately pay to Bank, in cash, an amount such that the
amount of any such Obligations shall no longer exceed the limitations set forth
in subsections (a) or (b) of this Section 2.3, as the case may be.
2.4. INTEREST RATES, PAYMENTS, AND CALCULATIONS
------------------------------------------
2.4.0.1. INTEREST RATE. EXCEPT AS SET FORTH IN SECTION 2.4(b),
(i) ANY REVOLVING LINE ADVANCES (WHICH, FOR PURPOSES OF CALCULATING
INTEREST DUE HEREUNDER, SHALL INCLUDE THE AMOUNT OF ANY UNPAID
OBLIGATIONS OF BORROWER WITH RESPECT TO ANY DRAWN BUT UNREIMBURSED
LETTERS OF CREDIT) SHALL BEAR INTEREST, ON THE AVERAGE DAILY BALANCE
THEREOF, AT A RATE EQUAL TO THE PRIME RATE AND (ii) ANY REPURCHASE
ADVANCES SHALL BEAR INTEREST, ON THE AVERAGE DAILY BALANCE THEREOF, AT
A RATE EQUAL TO THE PRIME RATE PLUS ONE-HALF PERCENT (1/2%).
2.4.0.2. 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.
2.4.0.3. PAYMENTS. INTEREST HEREUNDER SHALL BE DUE AND PAYABLE
ON THE PAYMENT DATE OF EACH MONTH DURING THE TERM HEREOF. BORROWER
HEREBY AUTHORIZES BANK TO DEBIT ANY ACCOUNTS WITH BANK, INCLUDING,
WITHOUT LIMITATION, ACCOUNT NUMBER 700238670, FOR PAYMENTS OF PRINCIPAL
AND INTEREST DUE ON THE OBLIGATIONS AND ANY OTHER AMOUNTS OWING BY
BORROWER TO BANK. BANK WILL NOTIFY BORROWER OF ALL DEBITS WHICH BANK
MAKES AGAINST BORROWER'S ACCOUNTS. ANY SUCH
13
DEBITS AGAINST BORROWER'S ACCOUNTS IN NO WAY SHALL BE DEEMED A SET-OFF.
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.
2.4.0.4. COMPUTATION. IN THE EVENT THE PRIME RATE IS CHANGED
FROM TIME TO TIME HEREAFTER, THE APPLICABLE RATE OF INTEREST HEREUNDER
SHALL BE INCREASED OR DECREASED EFFECTIVE AS OF 12:01 A.M. ON THE DAY
THE PRIME RATE IS CHANGED, BY AN AMOUNT EQUAL TO SUCH CHANGE IN THE
PRIME RATE. ALL INTEREST CHARGEABLE UNDER THE LOAN DOCUMENTS SHALL BE
COMPUTED ON THE BASIS OF A THREE HUNDRED SIXTY (360) DAY YEAR FOR THE
ACTUAL NUMBER OF DAYS ELAPSED.
2.5. 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 PACIFIC 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.
2.6. FEES. BORROWER SHALL PAY TO BANK THE FOLLOWING:
----
2.6.0.1. REVOLVING LINE OF CREDIT FACILITY FEE. IN CONNECTION
WITH THE REVOLVING LINE OF CREDIT, A REVOLVING LINE OF CREDIT FACILITY
FEE EQUAL TO (i) SEVEN THOUSAND FIVE HUNDRED DOLLARS ($7,500), WHICH
SHALL BE DUE ON THE CLOSING DATE AND SHALL BE FULLY EARNED AND
NON-REFUNDABLE PLUS (ii) TWO THOUSAND FIVE HUNDRED DOLLARS ($2,500),
WHICH SHALL BE DUE ON THE FIRST DAY WHEN THE AVERAGE DAILY BALANCE OF
THE REVOLVING LINE OF CREDIT EXCEEDS TWO MILLION FIVE HUNDRED THOUSAND
DOLLARS ($2,500,000);
2.6.0.2. REPURCHASE LINE OF CREDIT FACILITY FEE. IN CONNECTION
WITH THE REPURCHASE LINE OF CREDIT, A REPURCHASE LINE OF CREDIT
FACILITY FEE EQUAL TO TWELVE THOUSAND FIVE HUNDRED DOLLARS ($12,500),
WHICH SHALL BE DUE ON THE CLOSING DATE AND SHALL BE FULLY EARNED AND
NON-REFUNDABLE.
14
2.6.0.3. FINANCIAL EXAMINATION AND APPRAISAL FEES. BANK'S
CUSTOMARY FEES AND OUT-OF-POCKET EXPENSES FOR BANK'S AUDITS OF
BORROWER'S ACCOUNTS, AND FOR EACH APPRAISAL OF COLLATERAL AND FINANCIAL
ANALYSIS AND EXAMINATION OF BORROWER PERFORMED FROM TIME TO TIME BY
BANK OR ITS AGENTS;
2.6.0.4. BANK EXPENSES. UPON DEMAND FROM BANK, INCLUDING,
WITHOUT LIMITATION, UPON THE DATE HEREOF, ALL BANK EXPENSES INCURRED
THROUGH THE DATE HEREOF, 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.
2.7. ADDITIONAL COSTS. IN CASE 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):
2.7.0.1. SUBJECTS BANK TO ANY TAX WITH RESPECT TO PAYMENTS OF
PRINCIPAL OR INTEREST OR ANY OTHER AMOUNTS PAYABLE HEREUNDER BY
BORROWER OR OTHERWISE WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
HEREBY (EXCEPT FOR TAXES ON THE OVERALL NET INCOME OF BANK IMPOSED BY
THE UNITED STATES OF AMERICA OR ANY POLITICAL SUBDIVISION THEREOF);
2.7.0.2. 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
2.7.0.3. 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.
15
2.8. TERM. EXCEPT AS OTHERWISE SET FORTH HEREIN, 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 REVOLVING
MATURITY DATE. NOTWITHSTANDING THE FOREGOING, BANK SHALL HAVE THE RIGHT TO
TERMINATE ITS OBLIGATION TO MAKE REVOLVING LINE ADVANCES OR REPURCHASE ADVANCES
UNDER THIS AGREEMENT IMMEDIATELY AND WITHOUT NOTICE UPON THE OCCURRENCE AND
DURING THE CONTINUANCE OF AN EVENT OF DEFAULT. NOTWITHSTANDING TERMINATION,
BANK'S LIEN ON THE COLLATERAL SHALL REMAIN IN EFFECT FOR SO LONG AS ANY
OBLIGATIONS ARE OUTSTANDING.
3.. CONDITIONS OF LOANS
-------------------
3.1. CONDITIONS PRECEDENT TO INITIAL REVOLVING LINE
ADVANCE OR REPURCHASE ADVANCE. THE OBLIGATION OF BANK TO MAKE THE INITIAL
REVOLVING LINE ADVANCE OR INITIAL REPURCHASE ADVANCE IS SUBJECT TO THE CONDITION
PRECEDENT THAT BANK SHALL HAVE RECEIVED, IN FORM AND SUBSTANCE SATISFACTORY TO
BANK, THE FOLLOWING:
3.1.0.1. THIS AGREEMENT;
3.1.0.2. THE NOTES AND ANY OTHER LOAN DOCUMENTS;
3.1.0.3. A CERTIFICATE OF THE SECRETARY OF BORROWER WITH
RESPECT TO INCUMBENCY AND RESOLUTIONS AUTHORIZING THE EXECUTION AND
DELIVERY OF THIS AGREEMENT;
3.1.0.4. AN OPINION OF BORROWER'S COUNSEL;
3.1.0.5. FINANCING STATEMENTS (FORMS UCC-1);
3.1.0.6. FAVORABLE RESULTS OF AN AUDIT OF BORROWER'S ACCOUNTS;
3.1.0.7. PAYMENT OF THE FEES AND BANK EXPENSES THEN DUE
SPECIFIED IN SECTION 2.6 HEREOF; AND
3.1.0.8. SUCH OTHER DOCUMENTS, AND COMPLETION OF SUCH OTHER
MATTERS, AS BANK MAY REASONABLY DEEM NECESSARY OR APPROPRIATE.
3.2. CONDITIONS PRECEDENT TO ALL REVOLVING LINE ADVANCES
AND REPURCHASE ADVANCES. THE OBLIGATION OF BANK TO MAKE EACH REVOLVING LINE
ADVANCE OR REPURCHASE ADVANCE, INCLUDING THE INITIAL REVOLVING LINE ADVANCE OR
REPURCHASE ADVANCE, IS FURTHER SUBJECT TO THE FOLLOWING CONDITIONS:
16
3.2.0.1. TIMELY RECEIPT BY BANK OF THE PAYMENT/REVOLVING LINE
ADVANCE FORM OR PAYMENT/REPURCHASE ADVANCE FORM AS PROVIDED IN SECTIONS
2.1 AND 2.2 RESPECTIVELY; AND
3.2.0.2. 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/REVOLVING LINE ADVANCE FORM AND ON THE
EFFECTIVE DATE OF EACH REVOLVING LINE ADVANCE OR REPURCHASE ADVANCE 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 REVOLVING
LINE ADVANCE OR REPURCHASE ADVANCE. THE MAKING OF EACH REVOLVING LINE
ADVANCE OR REPURCHASE ADVANCE SHALL BE DEEMED TO BE A REPRESENTATION
AND WARRANTY BY BORROWER ON THE DATE OF SUCH REVOLVING LINE ADVANCE OR
REPURCHASE ADVANCE 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. BORROWER ACKNOWLEDGES THAT BANK MAY PLACE A "HOLD" ON ANY DEPOSIT
ACCOUNT PLEDGED AS COLLATERAL TO SECURE THE OBLIGATIONS.
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.
17
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 PROPERTY GIVING RISE TO SUCH ELIGIBLE
ACCOUNTS HAS BEEN 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.
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.
18
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
19
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.
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
an Revolving Line Advance or Repurchase Advance 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
20
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 MONTH OR, IF THERE ARE NO
OBLIGATIONS THEN OUTSTANDING, WITHIN FORTY-FIVE (45) DAYS AFTER THE END OF EACH
QUARTER, A BORROWER-PREPARED CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT
COVERING BORROWER'S CONSOLIDATED OPERATIONS DURING SUCH PERIOD, CERTIFIED BY AN
OFFICER OF BORROWER REASONABLY ACCEPTABLE TO BANK; (b) AS SOON AS AVAILABLE, BUT
IN ANY EVENT WITHIN NINETY (90) DAYS AFTER THE END OF BORROWER'S FISCAL YEAR,
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF BORROWER PREPARED IN ACCORDANCE
WITH GAAP, CONSISTENTLY APPLIED, TOGETHER WITH AN UNQUALIFIED OPINION ON SUCH
FINANCIAL STATEMENTS OF AN INDEPENDENT CERTIFIED PUBLIC ACCOUNTING FIRM
REASONABLY ACCEPTABLE TO BANK; (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 ONE HUNDRED THOUSAND DOLLARS ($100,000)
OR MORE; AND (e) SUCH BUDGETS, SALES PROJECTIONS, OPERATING PLANS OR OTHER
FINANCIAL INFORMATION AS BANK MAY REASONABLY REQUEST FROM TIME TO TIME.
Within twenty-five (25) 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.
Within forty-five (45) days after the last day of each quarter, 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 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.
21
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
---------
6.6.0.1. BORROWER, AT ITS EXPENSE, SHALL KEEP ITS PROPERTIES
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.
6.6.0.2. ALL SUCH POLICIES OF INSURANCE SHALL BE IN SUCH FORM,
WITH SUCH COMPANIES, AND IN SUCH AMOUNTS AS REASONABLY SATISFACTORY TO
BANK. BORROWER SHALL DELIVER TO BANK CERTIFIED COPIES OF SUCH POLICIES
OF INSURANCE AND EVIDENCE OF THE PAYMENTS OF ALL PREMIUMS THEREFOR.
6.7. PRINCIPAL DEPOSITORY; COMPENSATING BALANCE. BORROWER
SHALL MAINTAIN ITS PRINCIPAL DEPOSITORY AND OPERATING ACCOUNTS WITH BANK. IN
CONNECTION WITH THE REPURCHASE LINE OF CREDIT, BORROWER SHALL MAINTAIN AN
AVERAGE DAILY BALANCE OF AT LEAST TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000)
IN A NON-INTEREST-PAYING ACCOUNT WITH BANK; PROVIDED, HOWEVER, THAT THE
AFORESAID MINIMUM AVERAGE DAILY BALANCE SHALL BE INCREASED TO THREE HUNDRED
22
SEVENTY-FIVE THOUSAND DOLLARS ($375,000) IN THE EVENT THAT BORROWER EXERCISES
ITS OPTION UNDER SECTION 2.2(c) HEREOF TO EXTEND THE AVAILABILITY OF THE
REPURCHASE LINE OF CREDIT PAST THE ORIGINAL SHARE REPURCHASE AVAILABILITY
EXPIRATION DATE.
6.8. QUICK RATIO. BORROWER SHALL MAINTAIN, AS OF THE LAST
DAY OF EACH CALENDAR MONTH, OR AS OF THE LAST DAY OF EACH QUARTER IF THERE ARE
NO OBLIGATIONS OUTSTANDING, A RATIO OF QUICK ASSETS TO CURRENT LIABILITIES (NET
OF CURRENT DEFERRED REVENUES) OF AT LEAST 2.0 TO 1.0.
6.9. TANGIBLE NET WORTH. BORROWER SHALL MAINTAIN, AS OF
THE LAST DAY OF EACH CALENDAR MONTH, OR AS OF THE LAST DAY OF EACH QUARTER IF
THERE ARE NO OBLIGATIONS OUTSTANDING, A TANGIBLE NET WORTH OF NOT LESS THAN
TWENTY MILLION DOLLARS ($20,000,000).
6.10. LEVERAGE. BORROWER SHALL MAINTAIN, AS OF THE LAST DAY
OF EACH CALENDAR MONTH, OR AS OF THE LAST DAY OF EACH QUARTER IF THERE ARE NO
OBLIGATIONS OUTSTANDING, A RATIO OF TOTAL LIABILITIES (NET OF DEFERRED REVENUES)
TO TANGIBLE NET WORTH OF NOT MORE THAN 1.25 TO 1.0.
6.11. MINIMUM DEBT SERVICE COVERAGE. SO LONG AS THERE ARE
ANY OBLIGATIONS OUTSTANDING, BORROWER SHALL MAINTAIN, AS OF THE LAST DAY OF EACH
QUARTER, A RATIO OF CASH FLOW TO THE CURRENT PORTION OF LONG-TERM INDEBTEDNESS
(INCLUDING LONG-TERM INDEBTEDNESS OWED TO BANK) OF AT LEAST 1.5 TO 1.0. "CASH
FLOW" IS DEFINED AS NET INCOME (LOSS) FOR SUCH QUARTER DETERMINED ACCORDING TO
GAAP, PLUS (a) INTEREST EXPENSE, (b) TAXES, (c) DEPRECIATION AND (d)
AMORTIZATION DEDUCTED IN DETERMINING NET INCOME, MINUS (i) CAPITAL EXPENDITURES
AND (ii) PLUS OR MINUS DECREASES OR INCREASES IN CAPITALIZED SOFTWARE, AS
APPROPRIATE
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 Revolving Line Advances
or Repurchase Advances, Borrower will not do any of the following:
23
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 IN
BORROWER'S OWNERSHIP, MANAGEMENT OR DIRECTORS. BORROWER WILL NOT, WITHOUT THIRTY
(30) DAYS PRIOR WRITTEN NOTIFICATION TO BANK, RELOCATE ITS CHIEF EXECUTIVE
OFFICE.
7.3. MERGERS OR ACQUISITIONS. MERGE OR CONSOLIDATE, OR
PERMIT ANY OF ITS SUBSIDIARIES TO MERGE OR CONSOLIDATE, WITH OR INTO ANY OTHER
BUSINESS ORGANIZATION, OR ACQUIRE, OR PERMIT ANY OF ITS SUBSIDIARIES TO ACQUIRE,
ALL OR SUBSTANTIALLY ALL OF THE CAPITAL STOCK OR PROPERTY OF ANOTHER PERSON.
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.
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
24
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 REVOLVING LINE ADVANCE OR
REPURCHASE ADVANCE FOR SUCH PURPOSE. FAIL TO MEET THE MINIMUM FUNDING
REQUIREMENTS OF ERISA, PERMIT A REPORTABLE EVENT OR PROHIBITED TRANSACTION, AS
DEFINED IN ERISA, TO OCCUR, FAIL TO COMPLY WITH THE FEDERAL FAIR LABOR STANDARDS
ACT OR VIOLATE ANY LAW OR REGULATION, WHICH VIOLATION COULD HAVE A MATERIAL
ADVERSE EFFECT OR A MATERIAL ADVERSE EFFECT ON THE COLLATERAL OR THE PRIORITY OF
BANK'S LIEN ON THE COLLATERAL, OR PERMIT ANY OF ITS SUBSIDIARIES TO DO ANY OF
THE FOREGOING.
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.
25
8.2. COVENANT DEFAULT
----------------
8.2.0.1. IF BORROWER FAILS TO PERFORM ANY OBLIGATION UNDER
SECTIONS 6.7, 6.8, 6.9, 6.10 AND 6.11 OR VIOLATES ANY OF THE COVENANTS
CONTAINED IN SECTION 7 OF THIS AGREEMENT, OR
8.2.0.2. IF BORROWER FAILS OR NEGLECTS TO PERFORM, KEEP, OR
OBSERVE ANY OTHER MATERIAL TERM, PROVISION, CONDITION, COVENANT, OR
AGREEMENT CONTAINED IN THIS AGREEMENT, IN ANY OF THE LOAN DOCUMENTS, OR
IN ANY OTHER PRESENT OR FUTURE AGREEMENT BETWEEN BORROWER AND BANK AND
AS TO ANY DEFAULT UNDER SUCH OTHER TERM, PROVISION, CONDITION, COVENANT
OR AGREEMENT THAT CAN BE CURED, HAS FAILED TO CURE SUCH DEFAULT WITHIN
TEN (10) DAYS AFTER BORROWER RECEIVES NOTICE THEREOF OR ANY 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 REVOLVING LINE ADVANCE OR REPURCHASE ADVANCES WILL BE REQUIRED
TO BE MADE DURING SUCH CURE PERIOD);
8.3. MATERIAL ADVERSE CHANGE. IF THERE (i) OCCURS A
MATERIAL ADVERSE CHANGE IN THE BUSINESS, OPERATIONS, OR CONDITION (FINANCIAL OR
OTHERWISE) OF THE BORROWER, OR (ii) IS A MATERIAL IMPAIRMENT OF THE PROSPECT OF
REPAYMENT OF ANY PORTION OF THE OBLIGATIONS OR (iii) IS 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
26
(PROVIDED THAT NO REVOLVING LINE ADVANCES OR REPURCHASE ADVANCES
WILL BE REQUIRED TO BE MADE DURING SUCH CURE PERIOD);
8.5. INSOLVENCY. IF BORROWER BECOMES INSOLVENT, OR IF AN
INSOLVENCY PROCEEDING IS COMMENCED BY BORROWER, OR IF AN INSOLVENCY PROCEEDING
IS COMMENCED AGAINST BORROWER AND IS NOT DISMISSED OR STAYED WITHIN TEN (10)
DAYS (PROVIDED THAT NO REVOLVING LINE ADVANCES OR REPURCHASE ADVANCES WILL BE
MADE PRIOR TO THE DISMISSAL OF SUCH INSOLVENCY PROCEEDING);
8.6. OTHER AGREEMENTS. IF THERE IS A DEFAULT IN ANY
AGREEMENT TO WHICH BORROWER IS A PARTY WITH A THIRD PARTY OR PARTIES RESULTING
IN A RIGHT BY SUCH THIRD PARTY OR PARTIES, WHETHER OR NOT EXERCISED, TO
ACCELERATE THE MATURITY OF ANY INDEBTEDNESS IN AN AMOUNT IN EXCESS OF ONE
HUNDRED THOUSAND DOLLARS ($100,000) OR THAT COULD HAVE A MATERIAL ADVERSE
EFFECT;
8.7. SUBORDINATED DEBT. IF BORROWER MAKES ANY PAYMENT ON
ACCOUNT OF SUBORDINATED DEBT, EXCEPT TO THE EXTENT SUCH PAYMENT IS ALLOWED UNDER
ANY SUBORDINATION AGREEMENT ENTERED INTO WITH BANK;
8.8. JUDGMENTS. IF A JUDGMENT OR JUDGMENTS FOR THE PAYMENT
OF MONEY IN AN AMOUNT, INDIVIDUALLY OR IN THE AGGREGATE, OF AT LEAST FIFTY
THOUSAND DOLLARS ($50,000) SHALL BE RENDERED AGAINST BORROWER AND SHALL REMAIN
UNSATISFIED AND UNSTAYED FOR A PERIOD OF TEN (10) DAYS (PROVIDED THAT NO
REVOLVING LINE ADVANCES OR REPURCHASE ADVANCES WILL BE MADE PRIOR TO THE
SATISFACTION OR STAY OF SUCH JUDGMENT); OR
8.9. MISREPRESENTATIONS. IF ANY MATERIAL MISREPRESENTATION
OR MATERIAL MISSTATEMENT EXISTS NOW OR HEREAFTER IN ANY WARRANTY OR
REPRESENTATION SET FORTH HEREIN OR IN ANY CERTIFICATE DELIVERED TO BANK BY ANY
RESPONSIBLE OFFICER PURSUANT TO THIS AGREEMENT OR TO INDUCE BANK TO ENTER INTO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
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:
27
9.1.0.1. 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);
9.1.0.2. 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;
9.1.0.3. SETTLE OR ADJUST DISPUTES AND CLAIMS DIRECTLY WITH
ACCOUNT DEBTORS FOR AMOUNTS, UPON TERMS AND IN WHATEVER ORDER THAT BANK
REASONABLY CONSIDERS ADVISABLE;
9.1.0.4. 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, FOR UP TO ONE HUNDRED TWENTY (120) DAYS IN
ORDER TO EXERCISE ANY OF BANK'S RIGHTS OR REMEDIES PROVIDED HEREIN, AT
LAW, IN EQUITY, OR OTHERWISE;
9.1.0.5. 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;
9.1.0.6. 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;
28
9.1.0.7. SELL THE COLLATERAL AT EITHER A PUBLIC OR PRIVATE
SALE, OR BOTH, BY WAY OF ONE OR MORE CONTRACTS OR TRANSACTIONS, FOR
CASH OR ON TERMS, IN SUCH MANNER AND AT SUCH PLACES (INCLUDING
BORROWER'S PREMISES) AS BANK DETERMINES IS COMMERCIALLY REASONABLE;
9.1.0.8. BANK MAY CREDIT BID AND PURCHASE AT ANY PUBLIC SALE;
AND
9.1.0.9. 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
BILL 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, AS
REQUIRED UNDER THE TERMS OF THIS AGREEMENT, THEN BANK MAY DO ANY OR ALL OF THE
FOLLOWING: (a) MAKE PAYMENT OF THE SAME OR ANY PART THEREOF; (b) SET UP SUCH
RESERVES UNDER THE COMMITTED REVOLVING LINE AS BANK DEEMS NECESSARY TO
29
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.
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.
30
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: Vmark Software, Inc.
50 Washington Street
Westborough, Massachusetts 01581
Attn: Charles Kane
FAX: (508) 389-8767
If to Bank: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, California 95054
Attn: Greg Linvill
FAX: (408) 496-2429
With copies to: Silicon Valley East
40 William Street
Wellesley, Massachusetts 02181
Attn: Timothy O'Loughlin
Vice President
FAX: (617) 431-9906
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attn: Dennis J. White, Esq.
FAX: (617) 338-2880
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.
31
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 COMMONWEALTH OF MASSACHUSETTS, 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 COMMONWEALTH OF MASSACHUSETTS, BUT IF FOR ANY REASON THE BANK IS DENIED
ACCESS TO SUCH COURTS, THEN IN SUCH EVENT THE STATE AND FEDERAL COURTS LOCATED
IN THE COUNTY OF SANTA CLARA, 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.
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.
32
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, PROVIDED THAT SO LONG AS THE OBLIGATIONS SET FORTH IN THE FIRST
SENTENCE OF THIS SECTION 12.7 HAVE BEEN SATISFIED, AND BANK HAS NO COMMITMENT TO
MAKE ANY REVOLVING LINE ADVANCES OR REPURCHASE ADVANCES OR TO MAKE ANY OTHER
LOANS TO BORROWER, BANK SHALL RELEASE ALL SECURITY INTERESTS GRANTED HEREUNDER
AND REDELIVER ALL COLLATERAL HELD BY IT IN ACCORDANCE WITH APPLICABLE LAW.
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 AND (iv) AS MAY BE REQUIRED
IN CONNECTION WITH THE EXAMINATION, AUDIT OR SIMILAR INVESTIGATION OF BANK.
CONFIDENTIAL INFORMATION HEREUNDER SHALL NOT INCLUDE INFORMATION THAT EITHER:
(a) IS IN THE PUBLIC DOMAIN OR IN THE KNOWLEDGE OR POSSESSION OF BANK WHEN
DISCLOSED TO BANK, OR BECOMES PART OF THE PUBLIC DOMAIN AFTER DISCLOSURE TO BANK
THROUGH NO FAULT OF BANK; OR
33
(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.
12.9. COUNTERSIGNATURE. THIS AGREEMENT SHALL BECOME
EFFECTIVE ONLY WHEN IT SHALL HAVE BEEN EXECUTED BY BORROWER AND BANK, PROVIDED,
HOWEVER, IN NO EVENT SHALL THIS AGREEMENT BECOME EFFECTIVE UNTIL SIGNED BY AN
OFFICER OF THE BANK IN CALIFORNIA.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
VMARK SOFTWARE, INC.
By:
Name:
Title:
SILICON VALLEY BANK, doing business
as SILICON VALLEY EAST
By:
Name: TIMOTHY O'LOUGHLIN
--------------------------------
Title: VICE PRESIDENT
-------------------------------
SILICON VALLEY BANK
By:
Name:
Title:
(signed in Santa Clara County, California)
34
EXHIBIT 13.
DESCRIPTION OF COLLATERAL
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
13.1. ALL ACCOUNTS, INCLUDING 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;
13.2. ALL DOCUMENTS, CASH, DEPOSIT ACCOUNTS, SECURITIES, LETTERS OF
CREDIT, CERTIFICATES OF DEPOSIT, INSTRUMENTS AND CHATTEL PAPER NOW OWNED OR
HEREAFTER ACQUIRED AND BORROWER'S BOOKS RELATING TO THE FOREGOING; AND
13.3. ANY AND ALL CLAIMS, RIGHTS AND INTERESTS IN ANY OF THE ABOVE AND
ALL SUBSTITUTIONS FOR, ADDITIONS AND ACCESSIONS TO AND PROCEEDS THEREOF.
35
EXHIBIT 14-1.
LOAN PAYMENT/REVOLVING LINE ADVANCE TELEPHONE REQUEST FORM
(REVOLVING LINE OF CREDIT)
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
FAX#: TIME:
- --------------------------------------------------------------------------------
FROM:
- --------------------------------------------------------------------------------
VMARK SOFTWARE, INC.
- --------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
PHONE NUMBER:
FROM ACCOUNT # TO ACCOUNT #
-----------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
- ------------------------------------------------------------------------
PRINCIPAL INCREASE (REVOLVING LINE ADVANCE) $
PRINCIPAL PAYMENT (ONLY) $
INTEREST PAYMENT (ONLY) $
PRINCIPAL AND INTEREST (PAYMENT) $
OTHER INSTRUCTIONS:
All representations and warranties of Borrower stated in the Loan and
Security Agreement are true, correct and complete in all material respects as of
the date of the telephone request for any Revolving Line 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.
36
- --------------------------------------------------------------------------------
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)
37
- --------------------------------------------------------------------------------
EXHIBIT B-2
LOAN PAYMENT/REPURCHASE ADVANCE TELEPHONE REQUEST FORM
(SHARE REPURCHASE LINE OF CREDIT)
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
FAX#: TIME:
FROM:
- --------------------------------------------------------------------------------
VMARK SOFTWARE, INC.
- -------------------
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 (REPURCHASE ADVANCE) $
PRINCIPAL PAYMENT (ONLY) $
INTEREST PAYMENT (ONLY) $
PRINCIPAL AND INTEREST (PAYMENT) $
OTHER INSTRUCTIONS:
All representations and warranties of Borrower stated in the Loan and
Security Agreement are true, correct and complete in all material respects as of
the date of the telephone request for any Repurchase 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.
38
- --------------------------------------------------------------------------------
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)
39
EXHIBIT 15.
BORROWING BASE CERTIFICATE
Borrower: Vmark Software, Inc.
Bank: Silicon Valley Bank
Commitment Amount: 0$10,000,000 ($5,000,000 Revolving Line of Credit)
($5,000,000 Share Repurchase Line of Credit)
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 50% 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 $10,000,000
17. Total Funds Available [Lesser of #16 or #15] $
18. Outstanding under Revolving Line of Credit
(including amount of any outstanding Letters
of Credit or drawn but unreimbursed Letters of
Credit) $
19. Outstanding under Share Repurchase Line of Credit $
20. RESERVE POSITION (#17 MINUS sum of #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 Silicon Valley Bank.
COMMENTS:
VMARK SOFTWARE, INC.
- -------------------
By:
Authorized Signer
40
EXHIBIT 16.
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: VMARK SOFTWARE, INC.
The undersigned authorized officer ("Officer") of Vmark Software, Inc.
("Borrower") hereby certifies that in accordance with the terms and conditions
of the Loan and Security Agreement (the "Agreement") between Borrower and
Silicon Valley Bank ("Bank"), (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.
The Officer expressly acknowledges that no borrowings may be requested by the
Borrower at any time or date of determination that Borrower is not in compliance
with any of the terms of the Agreement, and that such compliance is determined
not just at the date this certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
- ------------------------------------------------------------------------------------
Quarterly financial statements Quarterly within 45 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
BBC and A/R Agings Monthly within 25 days Yes No
A/R Audit Initial and Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
- ------------------------------------------------------------------------------------
Maintain on a Monthly Basis:
Minimum Quick Ratio 2.0:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $20,000,000 $________ Yes No
Maximum Leverage
(Total Liabilities [less Deferred
Revenues]/Tangible Net Worth) 1.25:1.0 _____:1.0 Yes No
Maintain on a Quarterly Basis:
Minimum Debt Service Coverage
(Cash Flow/Current Portion of
Long Term Indebtedness) 1.50:1.0 _____:1.0 Yes No
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
SIGNATURE
TITLE:
DATE:
41
EXHIBIT 17.-1.
PROMISSORY NOTE
(REVOLVING LINE OF CREDIT)
42
EXHIBIT E-2
PROMISSORY NOTE
(SHARE REPURCHASE LINE OF CREDIT)
43
EXHIBIT F-1
DISBURSEMENT REQUEST AND AUTHORIZATION
(REVOLVING LINE OF CREDIT)
BORROWER: Vmark Software, Inc. BANK: Silicon Valley Bank
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $5,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: _______________.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
REVOLVING LINE
--------------
Amount paid to Borrower directly $
Undisbursed Funds $
Principal $
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as
agreed the following charges:
Prepaid Finance Charges Paid in Cash: $
$________ Loan Fee
$________ Accounts Receivables Audit
Other Charges Paid in Cash: $
$_______ UCC Search Fees
$_______ UCC Filing Fees
$_______ Outside Counsel Fees and Expenses (Estimate)
Total Charges Paid in Cash $
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered 700238670 the amount of any loan payment. If the
funds in the account are insufficient to cover any payment, Bank shall not be
obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK.
THIS AUTHORIZATION IS DATED AS OF , 19___.
BORROWER:
Authorized Officer
44
EXHIBIT F-2
DISBURSEMENT REQUEST AND AUTHORIZATION
(SHARE REPURCHASE LINE OF CREDIT)
BORROWER: Vmark Software, Inc. BANK: Silicon Valley Bank
LOAN TYPE. This is a Variable Rate Line of Credit of a principal amount up to
$5,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: _______________.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
REVOLVING LINE
--------------
Amount paid to Borrower directly $
Undisbursed Funds $
Principal $
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as
agreed the following charges:
Prepaid Finance Charges Paid in Cash: $
$_______ Loan Fee
$_______ Accounts Receivables Audit
Other Charges Paid in Cash: $
$_______ UCC Search Fees
$_______ UCC Filing Fees
$_______ Outside Counsel Fees and Expenses (Estimate)
Total Charges Paid in Cash $
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered 700238670 the amount of any loan payment. If the
funds in the account are insufficient to cover any payment, Bank shall not be
obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK.
THIS AUTHORIZATION IS DATED AS OF , 19___.
BORROWER:
Authorized Officer
45
SCHEDULE A
DISCLOSURE SCHEDULE
[IF BORROWER'S RESPONSE IS "NONE", PLEASE INITIAL HERE:___________]