EXHIBIT 10.8
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LOAN AGREEMENT
Dated as of September 24, 1996
between
COMPS InfoSystems, Inc.,
as Borrower,
and
VENTURE LENDING & LEASING, INC.,
as Lender
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TABLE OF CONTENTS
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Page
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ARTICLE 1 - DEFINITIONS....................................... 1
ARTICLE 2 - THE FACILITIES AND RELATED TERMS AND CONDITIONS... 6
2.1 Term Loan........................................... 6
2.2 Equipment Loans..................................... 7
2.3 Limitations on Loans................................ 7
2.4 Notes Evidencing Loans; Repayment................... 7
2.5 Procedures for Borrowing............................ 8
2.6 Interest............................................ 8
2.7 Interest Rate Calculation........................... 8
2.8 Default Interest.................................... 8
2.9 Prepayment of Loans................................. 9
2.10 Lender's Records.................................... 9
2.11 Security............................................ 9
2.12 Issuance of Warrant to Lender; Commitment Fee....... 10
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES.................... 11
3.1 Due Organization.................................... 11
3.2 Authorization, Validity and Enforceability.......... 11
3.3 Compliance with Applicable Laws..................... 11
3.4 Copyrights, Patents, Trademarks and Licenses........ 11
3.5 No Conflict......................................... 11
3.6 No Litigation, Claims or Proceedings................ 12
3.7 Correctness of Financial Statements................. 12
3.8 No Subsidiaries..................................... 12
3.9 Environmental Matters............................... 12
3.10 No Event of Default................................. 12
3.11 Full Disclosure..................................... 12
ARTICLE 4 - CONDITIONS PRECEDENT.............................. 12
4.1 Conditions to First Loan............................ 12
4.2 Conditions to All Loans............................. 13
4.3 Condition Subsequent................................ 14
ARTICLE 5 - AFFIRMATIVE COVENANTS............................. 14
5.1 Notice to Lender.................................... 14
5.2 Financial Statements................................ 15
5.3 Managerial Assistance from Lender................... 16
5.4 Existence........................................... 16
5.5 Insurance........................................... 16
5.6 Accounting Records.................................. 16
5.7 Compliance With Laws................................ 17
TABLE OF CONTENTS (CONTINUED)
Page
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5.8 Taxes and Other Liabilities......................... 17
5.9 Use of Proceeds..................................... 17
ARTICLE 6 - NEGATIVE COVENANTS................................ 17
6.1 Indebtedness........................................ 17
6.2 Liens. 18
6.3 Dividends........................................... 18
6.4 Changes/Mergers..................................... 18
6.5 Sales of Assets..................................... 18
6.6 Loans/Investments................................... 18
6.7 Transactions With Related Persons................... 19
6.8 Other Business...................................... 19
ARTICLE 7 - EVENTS OF DEFAULT................................. 19
7.1 Events of Default................................... 19
ARTICLE 8 - GENERAL PROVISIONS................................ 20
8.1 Notices............................................. 20
8.2 Binding Effect...................................... 21
8.3 No Waiver........................................... 21
8.4 Rights Cumulative................................... 21
8.5 Unenforceable Provisions............................ 21
8.6 Accounting Terms.................................... 21
8.7 Indemnification; Exculpation........................ 22
8.8 Reimbursement....................................... 22
8.9 Execution in Counterparts........................... 22
8.10 Entire Agreement.................................... 22
8.11 Governing Law and Jurisdiction...................... 22
8.12 Waiver of Jury Trial................................ 23
LIST OF EXHIBITS
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Exhibit "A" Form of Note
Exhibit "B" Form of Borrowing Request
Exhibit "C" Security Agreement
Exhibit "D" Form of Warrant
LIST OF SCHEDULES
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Schedule 3.6 Litigation
Schedule 6.1 Indebtedness
Schedule 6.2 Liens
(ii)
LOAN AGREEMENT
This LOAN AGREEMENT is entered into as of September 24, 1996, between
COMPS INFOSYSTEMS, INC., a Delaware corporation ("Borrower"), and VENTURE
LENDING & LEASING, INC., a Maryland corporation ("VLLI" or "Lender").
WHEREAS, Lender has agreed to make available to Borrower a working
capital term loan, and an equipment acquisition term loan facility upon the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
The definitions appearing in this Agreement or any supplement or
addendum to this Agreement, shall be applicable to both the singular and plural
forms of the defined terms:
"Account Debtor" means the Person obligated upon an Account.
"Accounts" means (i) all rights to the payment of money now owned or
hereafter acquired by Borrower, whether due or to become due and whether or not:
earned by performance, including but not limited to, accounts, chattel paper,
instruments, and general intangibles; and (ii) for purposes of this Agreement
amounts to become payable by existing subscribers to Borrower's database
services with respect to subscriptions which are eligible or scheduled for
renewal within ninety (90) days after any date of determination of Eligible
Accounts.
"Additional Interest" means, with respect to each Loan, an amount of
interest payable thereon, in addition to Basic Interest, payable on the Maturity
Date of such Loan in an amount equal to fifteen percent (15%) of the original
principal amount of such Loan.
"Affiliate" means any Person which directly or indirectly controls, is
controlled by, or is under common control with, Borrower. "Control,"
"controlled by" and "under common control with" means direct or indirect
possession of the power to direct or cause the direction of management or
policies (whether through ownership of voting securities, by contract or
otherwise); provided that control shall be conclusively presumed when any Person
or affiliated group directly or indirectly owns ten (10%) or more of the
securities having ordinary voting power for the election of directors of a
corporation.
"Agreement" means this Loan Agreement as it may be amended or
supplemented from time to time.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. (S)101, et seq.), as amended.
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"Basic Interest" means the fixed rate of interest payable on the
outstanding balance of each Loan at the applicable Designated Rate.
"Borrowing Base" means, with respect to the Term Loan as of date of
determination, an amount at all times equal the lesser of (a) $1,500,000; or (b)
eighty percent (80%) of Borrower's Eligible Accounts.
"Borrowing Date" means the Business Day on which the proceeds of a
Loan are disbursed by Lender.
"Borrowing Request" means a written request from Borrower in
substantially the form of Exhibit "B" hereto, requesting the funding of one or
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more Loans on a particular Borrowing Date.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in New York City or San Francisco are authorized
or required by law to close.
"Closing Date" means the date of this Agreement.
"Collateral" has the meaning ascribed thereto in the Security
Agreement.
"Commitment" means, with respect to each of the Term Loan Facility and
the Equipment Loan Facility, the obligation of Lender to make Loans under each
Facility to Borrower in an aggregate, original principal amount not exceeding
One Million Five Hundred Thousand Dollars ($1,500,000), respectively.
"Default" means an event which with the giving of notice, passage of
time, or both would constitute an Event of Default.
"Default Rate" is defined in Section 2.8.
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"Designated Rate" means a fixed rate of interest per annum applicable
to a Loan equal to eight and 75/100 percent (8.75%).
"Eligible Account" shall mean an Account:
(a) Arising from the sale or lease of goods, or the licensing of
data, or the performance of services by Borrower in the ordinary
course of Borrower's business;
(b) Against which is asserted no defense, counterclaim,
discount, or setoff;
(c) That is an accurate statement of the indebtedness incurred
by the Account Debtor;
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(d) Owned by Borrower free and clear of all liens, rights,
claims, and interests of others except security interests in favor of
Lender;
(e) That does not arise from a sale or lease to or performance
of services for an individual or entity employed by or having common
ownership with Borrower;
(f) That is not in default. An Account shall be deemed in
default upon the occurrence of any of the following:
(i) The Account is not paid or payable within a ninety
(90)-day period starting from the original invoice date;
(ii) The Account Debtor suspends business, becomes
insolvent, or fails to pay its debts generally as they come due;
or
(iii) Any petition is filed by or against the Account Debtor
under the Bankruptcy Reform Act, Title 11 of the United States
Code or under any other law relating to bankruptcy, insolvency,
reorganization or other relief for debtors.
(g) That is not the obligation of an Account Debtor that is the
federal government, any state or political subdivision thereof, unless
Borrower has complied in form and substance satisfactory to Lender with the
Assignment of Claims Act(s) or any successor thereof in effect from time to
time, or other applicable law(s) or regulations;
(h) That is not the obligation of an Account Debtor located in a
foreign country, unless Lender consents in writing and the Account is
insured by the Foreign Credit Insurance Association or covered by a letter
of credit issued or confirmed by a bank located in the United States of
America acceptable to Lender, each such insurance policy or letter of
credit being in form and substance satisfactory to Lender; and
(i) That is otherwise acceptable to Lender.
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authorities, in each case
relating to environmental, health, or safety matters.
"Equipment Loan" means an extension of credit by Lender under Section
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2.2 of this Agreement.
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"Event of Default" means any event described in Article 7.
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"Facility" means each credit accommodation being provided Borrower
under the terms and conditions of this Agreement, which credit accommodations
are the Term Loans and the Equipment Loans, as more fully described in Article
2.
"GAAP" means generally accepted accounting principles and practices
consistent with those principles and practices promulgated or adopted by the
Financial Accounting Standards Board and the Board of the American Institute of
Certified Public Accountants, their respective predecessors and successors.
Each accounting term used but not otherwise expressly defined herein shall have
the meaning given it by GAAP.
"Indebtedness" of any Person means at any date, without duplication
and without regard to whether matured or unmatured, absolute or contingent:
(i) all obligations of such Person for borrowed money; (ii) all obligations of
such Person evidenced by bonds, debentures, notes, or other similar instruments;
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business; (iv) all obligations of such Person as lessee under capital
leases; (v) all obligations of such Person to reimburse or prepay any bank or
other Person in respect of amounts paid under a letter of credit, banker's
acceptance, or similar instrument, whether drawn or undrawn; (vi) all
obligations of such Person to purchase securities which arise out of or in
connection with the sale of the same or substantially similar securities; (vii)
all obligations of such Person to purchase, redeem, or otherwise acquire, for
cash on a present or deferred basis, any capital stock of such Person or any
warrants, rights or options to acquire such capital stock, now or hereafter
outstanding, except to the extent that such obligations remain performable
solely at the option of such Person; (viii) all obligations to repurchase assets
previously sold (including any obligation to repurchase any accounts or chattel
paper under any factoring, receivables purchase, or similar arrangement); (ix)
obligations of such Person under interest rate swap, cap, collar or similar
hedging arrangements; and (x) all obligations of others of any type described in
clause (i) through clause (ix) above guaranteed by such Person.
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"Insolvency Proceeding" means (a) any case, action or proceeding
before any court or other governmental authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors, undertaken under U.S. Federal, state or foreign law, including
the Bankruptcy Code.
"Lien" means any voluntary or involuntary security interest, mortgage,
pledge, claim, charge, encumbrance, title retention agreement, or third party
interest, covering all or any part of the property of Borrower or any other
Person.
"Loan" means any Term Loan or any Equipment Loan.
"Loan Documents" means, individually and collectively, this Agreement,
each Note, the Security Agreement and any other security or pledge agreement(s),
and all other
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contracts, instruments, addenda and documents executed in connection with this
Agreement or the extensions of credit which are the subject of this Agreement.
"Material Adverse Effect" or "Material Adverse Change" means (a) a
material adverse change in, or a material adverse effect upon, the operations,
business, properties, or condition (financial or otherwise) of Borrower; (b) a
material impairment of the ability of Borrower to perform under any Loan
Document; or (c) a material adverse effect upon the legality, validity, binding
effect or enforceability against Borrower of any Loan Document.
"Maturity Date" means, with regard to a Loan, the earlier of (i) its
maturity by reason of acceleration, or (ii) its stated maturity date, which is
the first day of the 49th full month after the Borrowing Date of an Equipment
Loan and the first day of the 37th full month after the Borrowing Date of the a
Term Loan; and is the date on which payment of all outstanding principal and
accrued interest, including Additional Interest, is due.
"Note" means a promissory note substantially in the form of Exhibit
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"A" hereto, executed by Borrower evidencing each Loan.
"Obligations" means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document, owing by Borrower to
Lender, whether direct or indirect (including those acquired by assignment),
absolute or contingent, due or to become due, now existing or hereafter arising.
"Permitted Lien" means
(a) Involuntary Liens which, in the aggregate, would not have a
Material Adverse Effect and which in any event would not exceed One-Hundred
Thousand Dollars ($100,000);
(b) Liens for current taxes or other governmental or regulatory
assessments which are not delinquent, or which are contested in good faith
by the appropriate procedures and for which appropriate reserves are
maintained;
(c) Purchase money security interests on any property held or
acquired by Borrower in the ordinary course of business securing
Indebtedness incurred or assumed for the purpose of financing all or any
part of the cost of acquiring such property; provided, that such Lien
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attaches solely to the property acquired with such Indebtedness and that
the principal amount of such Indebtedness does not exceed one hundred
percent (100%) of the cost of such property; and further provided, that
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such property is not equipment with respect to which a Loan has been made
hereunder.
(d) Liens in favor of Lender;
(e) bankers' liens, rights of setoff and similar Liens incurred
on deposits made in the ordinary course of business;
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(f) materialmen's, mechanics', repairmen's, employees, or other
like Liens arising in the ordinary course of business and which are not
delinquent for more than 45 days or are being contested in good faith by
appropriate proceedings;
(g) any judgment, attachment or similar Lien, unless the
judgment it secures has not been discharged or execution thereof
effectively stayed and bonded against pending appeal within 30 days of the
entry thereof;
(h) licenses or sublicenses of Patents, Patent Licenses,
Trademarks or Trademark Licenses permitted under the Trademark Collateral
Assignment or the Patent Collateral Assignment (all as defined in the
Security Agreement); and .
(i) Liens which have been approved by Lender prior to the
Closing Date and disclosed on Schedule 6.2 to this Agreement.
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"Person" means any individual or entity.
"Qualified Public Offering" means the closing of a firmly underwritten
public offering of Borrower's common stock with aggregate proceeds of not less
than $10,000,000 (prior to underwriting expenses and commissions).
"Related Person" means any Affiliate of Borrower, or any officer,
employee, director or shareholder of Borrower or any Affiliate.
"Security Agreement" means the Security Agreement substantially in the
form of Exhibit "C" hereto, executed by Borrower.
"Term Loan" means an extension of credit by Lender under Section 2.1
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of this Agreement.
"Termination Date" means the earlier of: (a) the date Lender may
terminate making Loans or extending credit pursuant to the rights of Lender
under Article 7, or (b) June 30, 1998.
"UCC" means the Uniform Commercial Code as enacted in the applicable
jurisdiction, in effect on the Closing Date and as amended from time to time.
ARTICLE 2 - THE FACILITIES AND RELATED TERMS AND CONDITIONS
Subject to the terms and conditions of this Agreement, the following
Facilities shall be available to Borrower:
2.1 Term Loan. Subject to the terms and conditions of this Agreement,
Lender agrees to make term loans to Borrower from time to time from the Closing
Date and to the Termination Date in an aggregate principal amount not exceeding
the Commitment, the proceeds of which shall be used by Borrower for working
capital and general corporate purposes.
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The Commitment is not a revolving credit commitment, and Borrower shall not have
the right to repay and reborrow hereunder.
2.2 Equipment Loans. Subject to the terms and conditions of this
Agreement, Lender agrees to make term loans to Borrower from time to time from
the Closing Date and to the Termination Date in an aggregate principal amount
not exceeding the Commitment, the proceeds of which shall be used to finance
Borrower's acquisition or carrying of equipment. The Commitment is not a
revolving credit commitment, and Borrower shall not have the right to repay and
reborrow hereunder.
2.3 Limitations on Loans.
(a) Each Equipment Loan shall be in an amount not to exceed one
hundred percent (100%) of the amount paid or payable by Borrower to a non-
affiliated manufacturer, vendor or dealer for an item of equipment as shown
on an invoice therefor (excluding any commissions and any portion of the
payment which relates to the servicing of the equipment and sales taxes
payable by Borrower upon acquisition, and delivery charges).
(b) Lender shall not be obligated to make any Loan if at the
time of or after giving effect to the proposed Loan Lender would no longer
qualify as: (A) a "venture capital operating company" under U.S. Department
of Labor Regulations Section 2510.3-101(d), Title 29 of the Code of Federal
Regulations, as amended; and (B) a "business development company" under the
provisions of federal Investment Company Act of 1940, as amended; and (C) a
"regulated investment company" under the provisions of the Internal Revenue
Code of 1986, as amended.
(c) Each Loan requested by Borrower to be made on a single
Business Day shall be for a principal amount of One Hundred Thousand
Dollars ($100,000) or more, except to the extent the remaining Commitment
is a lesser amount.
2.4 Notes Evidencing Loans; Repayment. Each Loan and Basic Interest
and Additional Interest thereon shall be evidenced by a separate Note payable to
the order of Lender substantially in the form of Exhibit "A" to this Agreement,
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in the principal amount of the Loan. Each Note shall be payable as follows:
Principal and Basic Interest shall be paid in forty-eight (48) (or thirty-six
(36) in the case of the Term Loan only) equal and successive monthly payments,
in advance, beginning on the Borrowing Date and continuing on the first Business
Day of each month thereafter; provided, that the first and last such
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amortization installment payments shall be paid in advance on the Borrowing
date. If the Borrowing Date is not the first day of a month, then the 48 (or 36,
in the case of the Term Loan) month amortization period shall commence on the
first day of the next month following the Borrowing Date, and interest only
shall accrue and be payable for the period from the Borrowing Date to the first
day of the next month. Borrower shall pay to Lender, in advance, on the
Borrowing Date a payment of Basic Interest on the amount of any Loan that is not
made on the first day of the month for interest that will accrue on such Loan
from the Borrowing Date through the last day of the same
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month. The payment of amortization installments of principal of and interest on
a Loan in advance results in a higher effective rate of interest than the stated
Designated Rate applicable to such Loan.
2.5 Procedures for Borrowing.
(a) Borrower shall give Lender at least five (5) Business Days'
prior to a proposed Borrowing Date written notice of any request for
borrowing hereunder (a "Borrowing Request"). Each Borrowing Request shall
be in substantially the form of Exhibit "B" hereto, shall be executed by
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the chief financial officer of Borrower, and shall state how much is
requested, and shall be accompanied by such additional information and
documentation as Lender may deem reasonably necessary to determine whether
the proposed borrowing will comply with the limitations in Section 2.2. In
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the case of each Equipment Loan, the Borrowing Request therefor shall also
certify that all equipment to be financed thereby is, or will upon
acquisition be, owned by Borrower free and clear of all Liens except in
favor of Lender.
(b) No later than 1:00 p.m. Pacific Standard Time on the
Borrowing Date, if Borrower has satisfied the conditions precedent in
Article 4, Lender shall make the Loan available to Borrower in immediately
available funds, less the amount of the broker's fee described in Section
2.5(c) below.
(c) Borrower authorizes and directs Lender, and Lender agrees,
to remit directly to Mr. Doug Wall on each Borrowing Date two percent (2%)
of the proceeds of each Loan, as a broker's fee for the Facilities.
2.6 Interest. Basic Interest on the outstanding principal balance of
the each Loan shall accrue daily at the Designated Rate from the Borrowing Date
until the Maturity Date. On the Maturity Date (whether at stated maturity,
prepayment or acceleration) of a Loan, Borrower shall pay full amount of the
Additional Interest thereon.
2.7 Interest Rate Calculation. Basic Interest, along with charges and
fees under this Agreement and any Loan Document, shall be calculated for actual
days elapsed on the basis of a 360-day year, which results in higher interest,
charge or fee payments than if a 365-day year were used. In no event shall
Borrower be obligated to pay Lender interest, charges or fees at a rate in
excess of the highest rate permitted by applicable law from time to time in
effect.
2.8 Default Interest. Any unpaid payments of principal or
interest with respect to any Loan shall bear interest from their respective
maturities, whether scheduled or accelerated, at the Designated Rate for such
Loan plus five percent (5.00%) per annum, until paid in full, whether before or
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after judgment (the "Default Rate"). Borrower shall pay such interest on demand.
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2.9 Prepayment of Loans.
(a) Mandatory Prepayments of Term Loan. Borrower agrees
that if the outstanding principal balance of the Term Loan on any date
exceeds the Borrowing Base on such date, then Borrower will immediately
prepay the Term Loan in an amount equal to the excess.
(b) Mandatory Prepayments of Equipment Loans. Borrower
shall be required to prepay any Equipment Loan from the net proceeds of any
insurance or condemnation awards paid in respect of the items of equipment
financed with the proceeds of such Loan; provided, that such prepayment
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shall not be required, so long as no Event of Default otherwise exists, (i)
if Borrower uses such net proceeds to purchase replacements of equipment
lost through casualty or condemnation and such replacement equipment is
subject to no Liens other than Lender's, or (ii) with respect to losses of
equipment which in aggregate during any consecutive twelve-month period has
a fair market value or book value, whichever is more, of $75,000 or less.
(c) Prepayments Generally. No Loan may be voluntarily
prepaid except as provided in this subsection (c). Borrower may prepay any
Loan, in whole or in part in minimum payments of $50,000 at any time after
the first anniversary of the Borrowing Date for such Loan; provided that
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any prepayment, whether voluntary or involuntary as a result of
acceleration or otherwise, must be accompanied by payment of: (i) a premium
equal to 2.00% of the amount of principal so prepaid if such prepayment is
made during the 12-month period between the first and second anniversaries,
or a 1.00% premium if such prepayment is made during the 12-month period
between the second and third anniversaries (there being no premium or
penalty payable after the third anniversary of the Borrowing Date of such
Loan); (ii) accrued Basic Interest to the date of such prepayment; and
(iii) all Additional Interest on the Loan so prepaid (or a ratable portion
of such Additional Interest, if less than all of the Loan is prepaid).
Unless otherwise agreed by Lender, any partial prepayment of a Loan shall
be applied in inverse order of maturity to the most remote principal
installment then unpaid on such Loan. No premium or penalty shall be
required in the case of a prepayment of all Loans following Lender's
refusal to fund any portion of the Commitment pursuant to Section 2.3(b) or
Section 4.2(b).
2.10 Lender's Records. Principal, Basic Interest, Additional Interest
and all other sums owed under any Loan Document shall be evidenced by entries in
records maintained by Lender for such purpose. Each payment on and any other
credits with respect to principal, Basic Interest, Additional Interest and all
other sums outstanding under any Loan Document shall be evidenced by entries in
such records. Absent manifest error, Lender's records shall be conclusive
evidence thereof.
2.11 Security. As security for all Obligations to Lender, Borrower
shall grant concurrently to Lender, or ensure that Lender is concurrently
granted, perfected security interests of first priority in all of the Collateral
pursuant to the Security Agreement, subject only to Liens
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disclosed to and approved by Lender prior to the Closing Date. If upon payment
in full of all Obligations in respect of the Term Loan there remain outstanding
Obligations in respect of any Equipment Loans, and if no Event of Default then
exists, then Lender shall release its security interests in all Collateral
except Equipment and Proceeds and Records relating solely to Equipment. If upon
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payment in full of all Obligations in respect of all Equipment Loans there
remain outstanding Obligations in respect of the Term Loan, and if no Event of
Default then exists, then Lender shall release its security interests in all
Collateral comprising Equipment and Proceeds and Records relating solely to
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Equipment.
2.12 Issuance of Warrant to Lender; Commitment Fee.
(a) Warrant. As additional consideration for the making of the
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Loans under this Agreement, upon the making of, and as a condition to, the
initial Loan, Lender shall be entitled to receive a warrant to purchase a
number of shares of common stock of Borrower ("Warrant Shares") with a
value equal to $375,000, determined on the basis of an initial exercise
price per share of common stock that is the median of (i) $1.17, and (ii)
the per share price of common stock (or other equity securities
exercisable, convertible or exchangeable for common stock) in Borrower's
next round of equity financing subsequent to the Closing Date; provided,
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that if no round of equity financing under the foregoing clause (ii) closes
within eighteen months after the Closing Date, then the applicable initial
exercise price per share shall be 1.76. The warrant issued under this
Agreement shall be in substantially the form attached hereto as Exhibit
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"D"; shall be transferable by Lender, subject to compliance with applicable
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securities laws; shall expire not earlier than seven (7) years after its
date of issuance; and shall include piggy-back registration rights, "net
issuance" provisions, and antidilution protections reasonably satisfactory
to Lender and its counsel.
(b) Commitment Fee. In consideration of Lender's commitments
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hereunder, Borrower shall pay Lender a fee (the "Commitment Feel") in the
amount of $30,000. Lender acknowledges prior receipt of $10,000 of the
Commitment Fee, and Borrower agrees to pay the $20,000 balance not later
than the Borrowing Date of the initial Loan.
(c) Reduction of Warrant and Fee. Notwithstanding anything to
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the contrary in Section 2.12(a) or (b), if Lender has not made Loans in the
aggregate principal amount equal to the aggregate Commitment by June 30,
1998, solely as a result of either the limitation on Lender under Section
2.3(b) or Lender's determination that the condition precedent in Section
4.2(b) has not been satisfied, then the maximum number of shares issuable
under the Warrant shall be reduced proportionately based on the ratio of
the aggregate principal amount of Loans actually funded over the aggregate
Commitment; and VLLI shall refund to Borrower a proportionate amount of the
Commitment Fee.
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ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that as of the Closing Date and each
Borrowing Date:
3.1 Due Organization. Borrower is a corporation duly organized and
validly existing in good standing under the laws of Delaware, and is duly
qualified to conduct business and is in good standing in each other jurisdiction
in which its business is conducted or its properties are located, except where
the failure to be so qualified would not reasonably be expected to have a
Material Adverse Effect.
3.2 Authorization, Validity and Enforceability. The execution,
delivery and performance of all Loan Documents executed by Borrower are within
Borrower's powers, have been duly authorized, and are not in conflict with
Borrower's certificate of incorporation or by-laws, or the terms of any charter
or other organizational document of Borrower, as amended from time to time; and
all such Loan Documents constitute valid and binding obligations of Borrower,
enforceable in accordance with their terms (except as may be limited by
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights in general, and subject to general principles of equity).
3.3 Compliance with Applicable Laws. Borrower has complied with all
licensing, permit and fictitious name requirements necessary to lawfully conduct
the business in which it is engaged, and to any sales, leases or the furnishing
of services by Borrower, including without limitation those requiring consumer
or other disclosures, the noncompliance with which would have a Material Adverse
Effect.
3.4 Copyrights, Patents, Trademarks and Licenses.
(a) Borrower owns or is licensed or otherwise has the right to
use all of the patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other similar rights that are
reasonably necessary for the operation of its business, without conflict
with the rights of any other Person.
(b) To Borrower's knowledge, no slogan or other advertising
device, product, process, method, substance, part or other material now
employed, or now contemplated to be employed, by Borrower infringes upon
any rights held by any other Person.
(c) No claim or litigation regarding any of the foregoing is
pending or, to Borrower's knowledge, threatened, and no patent, invention,
device, application, principle or any statute, law, rule, regulation,
standard or code is pending or proposed which, in either case, could
reasonably be expected to have a Material Adverse Effect.
3.5 No Conflict. The execution, delivery, and performance by Borrower
of all Loan Documents are not in conflict with any law, rule, regulation, order
or directive, or any
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indenture, agreement, or undertaking to which Borrower is a party or by which
Borrower may be bound or affected.
3.6 No Litigation, Claims or Proceedings. There is no litigation, tax
claim, proceeding or dispute pending, or, to the knowledge of Borrower,
threatened against or affecting Borrower or its property, except as set forth in
Schedule 3.6.
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3.7 Correctness of Financial Statements. Borrower's financial
statements which have been delivered to Lender fairly and accurately reflect
Borrower's financial condition as of July 31, 1996; and, since that date there
has been no Material Adverse Change.
3.8 No Subsidiaries. Borrower is not a majority owner of or in a
control relationship with any other business entity.
3.9 Environmental Matters. Borrower has reviewed, or caused to be
reviewed on its behalf, all Environmental Laws applicable to its business
operations and materials handled therein, and as a result thereof has reasonably
concluded that Borrower is in compliance with such Environmental Laws, except to
the extent a failure to be in such compliance could not reasonably be expected
to have a Material Adverse Effect on Borrower's operations, properties or
financial condition.
3.10 No Event of Default. No Default or Event of Default has occurred
and is continuing.
3.11 Full Disclosure. None of the representations or warranties made
by Borrower in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of Borrower
in connection with the Loan Documents (including disclosure materials delivered
by or on behalf of Borrower to Lender prior to the Closing Date), contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or delivered.
ARTICLE 4 - CONDITIONS PRECEDENT
4.1 Conditions to First Loan. The obligation of Lender to make its
first Loan hereunder is, in addition to the conditions precedent specified in
Section 4.2, subject to the fulfillment of the following conditions and to the
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receipt by Lender of the documents described below, duly executed and in form
and substance satisfactory to Lender and its counsel:
(a) Resolutions. A certified copy of the resolutions of the
Board of Directors of Borrower authorizing the execution, delivery and
performance by Borrower of the Loan Documents.
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(b) Incumbency and Signatures. A certificate of the secretary of
Borrower certifying the names of the officer or officers of Borrower
authorized to sign the Loan Documents, together with a sample of the true
signature of each such officer.
(c) Opinion of Counsel. The opinion of Latham & Watkins, counsel
for Borrower, together with any opinions, certificates and other matters on
which such opinion relies.
(d) Articles and By-Laws. Certified copies of the Certificate of
Incorporation and By-Laws of Borrower, as amended through the Closing Date.
(e) The Agreement. A counterpart of this Agreement with all
schedules completed and attached thereto, and disclosing such information
as is acceptable to Lender.
(f) Security Agreement; Financing Statements. A Security
Agreement executed by Borrower, substantially in the form of Exhibit "C",
-----------
together with filing copies (or other evidenced of filing satisfactory to
Lender and its counsel) of such Uniform Commercial Code financing
statements, collateral assignments and termination statements, with respect
to the Collateral (as defined in such Security Agreement) as Lender shall
request.
(g) Patent and Trademark Assignments. Patent and trademark
collateral assignments executed by Borrower, substantially in the forms
attached to Exhibit "C".
-----------
(h) Lien Searches. Uniform Commercial Code lien, judgment,
bankruptcy and tax lien searches of Borrower from the California Secretary
of State, and such other jurisdictions as Lender may reasonably request,
all as of a date reasonably satisfactory to Lender and its counsel.
(i) Good Standing Certificate. A Certificate of Good Standing as
of a date acceptable to Lender with respect to Borrower from the California
Secretary of State.
(j) Warrant. A warrant issued by Borrower to Lender exercisable
for the Warrant Shares, as described in Section 2.12 hereof.
------------
4.2 Conditions to All Loans. The obligation of Lender to make its
initial Loan and each subsequent Loan is subject to the following further
conditions precedent that:
(a) No Default. No Default or Event of Default has occurred and
is continuing or will result from the making of any such Loan, and the
representations and warranties of Borrower contained in Article 3 of this
Agreement are true and correct as of the Borrowing Date of such Loan.
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(b) No Adverse Material Change. No Material Adverse Change shall
have occurred since the date of the most recent financial statements
submitted to Lender.
(c) Note. Borrower shall have delivered an executed Note
evidencing such Loan, in form and substance satisfactory to Lender.
(d) Borrowing Request. Borrower shall have delivered to Lender a
Borrowing Request for such Loan.
(e) VCOC Limitation. The making of the Loan will not result in a
violation of the condition applicable to Lender described in Section 2.3
-----------
(b).
---
4.3 Condition Subsequent. Not later than sixty (60) days after the
first Borrowing Date, Borrower shall have delivered or cause to be delivered to
Lender satisfactory results of searches of the records of the U.S. Patent and
Trademark Office reflecting the collateral assignments recorded in favor of
Lender, subject to no prior Liens except those permitted in Section 6.2 hereof.
-----------
ARTICLE 5 - AFFIRMATIVE COVENANTS
During the term of this Agreement and until its performance of all
obligations to Lender, Borrower will:
5.1 Notice to Lender. Promptly give written notice to Lender of:
(a) Any litigation or administrative or regulatory proceeding
affecting Borrower where the amount claimed against Borrower is Fifty
Thousand Dollars ($50,000) or more, or where the granting of the relief
requested would have a Material Adverse Effect.
(b) Any substantial dispute which may exist between Borrower or
any governmental or regulatory authority.
(c) The occurrence of any Event of Default or any event which
with the giving of notice, the passage of time, or both, would constitute
an Event of Default.
(d) Any change in the location of any of Borrower's places of
business at least thirty (30) days in advance of such change, or of the
establishment of any new, or the discontinuance of any existing, place of
business.
(e) Any dispute or default by Borrower or any other party under
any joint venture, partnering, distribution, cross-licensing, strategic
alliance, collaborative research or manufacturing, license or similar
agreement which could reasonably be expected to have a material Adverse
Effect.
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(f) Any other matter which has resulted or might reasonably
result in a Material Adverse Change.
5.2 Financial Statements. Deliver to each Lender or cause to be
delivered to Lender, in form and detail satisfactory to Lender the following
financial information, which Borrower warrants shall be accurate and complete in
all material respects:
(a) Monthly Financial Statements. As soon as available but no
later than thirty (30) days after the end of each month, Borrower's balance
sheet as of the end of such period, and Borrower's income statement for
such period and for that portion of Borrower's financial reporting year
ending with such period, prepared and attested by a responsible financial
officer of Borrower as being complete and correct and fairly presenting
Borrower's financial condition and the results of Borrower's operations.
After a Qualified Public Offering, the foregoing interim financial
statements shall be delivered no later than 45 days after each fiscal
quarter and for the quarter-annual fiscal period then ended.
(b) Year-End Financial Statements. As soon as available but no
later than one hundred twenty (120) days after and as of the end of each
financial reporting year, a complete copy of Borrower's audit report, which
shall include balance sheet, income statement, statement of changes in
equity and statement of cash flows for such year, prepared and certified by
an independent certified public accountant selected by Borrower and
satisfactory to Lender (the "Accountant"). The Accountant's certification
shall not be qualified or limited due to a restricted or limited
examination by the Accountant of any material portion of Borrower's records
or otherwise.
(c) Compliance Certificates. Simultaneously with the delivery of
each set of financial statements referred to in paragraphs (a) and (b)
above, a certificate of the chief financial officer of Borrower: (i)
setting forth in reasonable detail any calculations required to establish
an aging of Accounts, the amount of Eligible Accounts as of the date of
such financial statements, and whether Borrower is in compliance with the
requirements of Sections 2.9(b), 6.1, and 6.2; and (ii) stating whether any
Default or Event of Default exists on the date of such certificate, and if
so, setting forth the details thereof and the action which Borrower is
taking or proposes to take with respect thereto.
(d) Government Required Reports; Press Releases. Promptly after
sending, issuing, making available, or filing, copies of all statements
released to any news media for publication, all reports, proxy statements,
and financial statements that Borrower sends or makes available to its
stockholders, and, not later than five (5) days after actual filing or the
date such filing was first due, all registration statements and reports
that Borrower files or is required to file with the Securities and Exchange
Commission, or any other governmental or regulatory authority.
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(e) Other Information. Such other statements, lists of property
and accounts, budgets, forecasts, reports, or other information as any
Lender may reasonably from time to time request.
5.3 Managerial Assistance from Lender. Permit Lender, as a "venture
capital operating company" to participate in, and influence the conduct of
management of Borrower through the exercise of "management rights," as such
terms are defined in 29 C.F.R. (S) 2510.3-101(d), by:
(a) Permitting Lender to make available to Borrower, at no cost
to Borrower, "significant managerial assistance", as defined in Section
2(a)(47) of the Investment Company Act of 1940, as amended, either in the
form of: (i) consulting arrangements with Lender or any of its officers,
directors, employees or affiliates, (ii) Borrower's allowing Lender to
provide recommendations of prospective candidates for election to
Borrower's Board of Directors, or (iii) Lender, at Borrower's request,
seeking the services of third-party consultants to aid Borrower with
respect to its management and operations;
(b) Permitting Lender to make available consulting and advisory
services to officers of Borrower regarding Borrower's equipment acquisition
and financing plans, and such other matters affecting the business,
financial condition and prospects of Borrower as Lender shall reasonably
deem relevant; and
(c) If Lender reasonably believes that financial or other
developments affecting Borrower have impaired or are likely to impair
Borrower's ability to perform its obligations under this Agreement,
permitting Lender reasonable access to Borrower's management and/or Board
of Directors and opportunity to present Lender's views with respect to such
developments.
5.4 Existence. Maintain and preserve Borrower's existence, present
form of business, and all rights and privileges necessary or desirable in the
normal course of its business; and keep all Borrower's property in good working
order and condition, ordinary wear and tear excepted.
5.5 Insurance. Maintain and keep in force insurance with an insurance
carrier having a policyholder rating of not less than "A" and financial category
rating of Class VII in "Best's Insurance Guide," unless otherwise approved by
Lender and in such amounts and types as is usual in the business carried on by
Borrower. Such insurance policies must be in form and substance satisfactory to
Lender, and shall list Lender as an additional insured or loss payee, as
applicable, on endorsements in form reasonably acceptable to Lender. Borrower
shall furnish to Lender such endorsements, and upon Lender's request, copies of
any or all such policies.
5.6 Accounting Records. Maintain adequate books, accounts and
records, and prepare all financial statements in accordance with GAAP, and in
compliance with the
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regulations of any governmental or regulatory authority having jurisdiction over
Borrower or Borrower's business; and permit employees or agents of Lender at
such reasonable times as Lender may request, at Borrower's expense, to inspect
Borrower's properties, and to examine, and make copies and memoranda of
Borrower's books, accounts and records.
5.7 Compliance With Laws. Comply with all laws (including
Environmental Laws), rules, regulations applicable to, and all orders and
directives of any governmental or regulatory authority having jurisdiction over,
Borrower or Borrower's business, and with all material agreements to which
Borrower is a party, except where the failure to so comply would not have a
Material Adverse Effect.
5.8 Taxes and Other Liabilities. Pay all Borrower's obligations when
due; pay all taxes and other governmental or regulatory assessments before
delinquency or before any penalty attaches thereto, except as may be contested
in good faith by the appropriate procedures and for which Borrower shall
maintain appropriate reserves; and timely file all required tax returns.
5.9 Use of Proceeds. Use the proceeds of Loans only as set forth in
Article 2 of this Agreement; and not directly or indirectly to purchase or carry
any margin stock, as defined from time to time by the Board of Governors of the
Federal Reserve System in Federal Regulation U.
ARTICLE 6 - NEGATIVE COVENANTS
During the term of this Agreement and until the performance of all
obligations to Lender, Borrower will not:
6.1 Indebtedness. Be indebted for borrowed money, the deferred
purchase price of property, or leases which would be capitalized in accordance
with GAAP; or become liable as a surety, guarantor, accommodation party or
otherwise for or upon the obligation of any other Person, except:
(a) Indebtedness incurred for the acquisition of supplies or
inventory on normal trade credit; unsecured indebtedness for money borrowed
for working capital or general corporate purposes from a commercial bank or
institutional lender up to $500,000.00 in aggregate principal amount
outstanding at any time; and other indebtedness incurred pursuant to one or
more transactions permitted under Section 6.4;
-----------
(b) Indebtedness not to exceed Two Hundred Fifty Thousand
Dollars ($250,000) in aggregate principal amount outstanding at any time
secured by purchase money security interests permitted by Section 6.2(c);
--------------
(c) Indebtedness of Borrower under this Agreement;
(d) Up to $750,000 of Indebtedness, singly or in the aggregate,
in connection with one or more business acquisitions permitted hereunder;
and
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(e) Any Indebtedness approved by Lender prior to the Closing
Date and disclosed on Schedule 6.1 to this Agreement.
------------
6.2 Liens. Create, incur, assume or permit to exist any Lien, or
grant any other Person a negative pledge, on any of Borrower's property, except
Permitted Liens. Borrower and Lender agree that this covenant is not intended to
constitute a lien, deed of trust, equitable mortgage, or security interest of
any kind on any of Borrower's real property, and this Agreement shall not be
recorded or recordable. Notwithstanding the foregoing, however, violation of
this covenant by Borrower shall constitute an Event of Default.
6.3 Dividends. Except after a Qualified Public Offering, pay any
dividends or purchase, redeem or otherwise acquire or make any other
distribution with respect to any of Borrower's capital stock, except dividends
or other distributions solely of capital stock of Borrower, and except for
dividend rights of Summit Ventures III, L.P. under that certain Investor Rights
Agreement dated as of October 14, 1994.
6.4 Changes/Mergers. Without the prior written consent of Lender
(which consent shall not be unreasonably withheld and shall be deemed given if
Lender shall have failed to notify Borrower of its withholding of consent for 30
or more days after Borrower's request therefor), liquidate or dissolve, or enter
into any consolidation, merger, partnership, joint venture or other combination
except for joint ventures, strategic alliances, licensing and similar
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arrangements customary in Borrower's industry for businesses in the development
stage of Borrower and which do not require Borrower to assume or otherwise
become liable for the obligations of any third party not directly related to or
arising out of such arrangement or, without the prior written consent of Lender,
require Borrower to transfer ownership of assets to such joint venture or other
entity; prepay any subordinated debt, debt for borrowed money, or debt secured
by any Permitted Lien, or enter into or modify any agreement as a result of
which the terms of payment of any such debt are waived or modified.
6.5 Sales of Assets. Sell, transfer, lease or otherwise dispose of
any of Borrower's assets except for fair consideration and in the ordinary
course of its business; or enter into any sale or leaseback agreement covering
any of Borrower's fixed or capital assets.
6.6 Loans/Investments. Make or suffer to exist any loans, guaranties,
advances, or investments, except:
(a) Accounts receivable in the ordinary course of Borrower's
business;
(b) Investments in domestic certificates of deposit issued by,
and other domestic investments with, financial institutions organized under
the laws of the United States or a state thereof, having one Hundred
Million Dollars ($100,000,000) in capital and a rating of at least
"investment grade" or "A" by Moody's or any successor rating agency;"
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(c) Investments in marketable obligations of the United States
of America and in open market commercial paper given the highest credit
rating by a national credit agency and maturing not more than one year from
the creation thereof;
(d) Loans to a Person or guaranties of Indebtedness of a Person
not to exceed Two Hundred Fifty Thousand Dollars ($250,000) for any one
Person and One Million Dollars ($1,000,000) in aggregate with respect to
all Persons, outstanding at any time; and
(e) Temporary advances to cover incidental expenses to be
incurred in the ordinary course of business.
6.7 Transactions With Related Persons. Directly or indirectly enter
into any transaction with or for the benefit of a Related Person on terms more
favorable to the Related Person than would have been obtainable in an "arms'
length" dealing.
6.8 Other Business. Engage in any material line of business other
than the business Borrower conducts as of the Closing Date.
ARTICLE 7 - EVENTS OF DEFAULT
7.1 Events of Default. Upon the occurrence and during the
continuation of any Default, the obligation of Lender to make any additional
Loan shall be suspended. The occurrence of any of the following shall terminate
any obligation of Lender to make any additional Loan; and shall, at the option
of Lender (1) make all sums of Basic Interest, principal, Additional Interest
and any other amounts owing under any Loan Documents immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor or any other notices or demands, and (2) give Lender
the right to exercise any other right or remedy provided by contract or
applicable law:
(a) Borrower shall fail to make any payment or prepayment of
principal or interest under this Agreement, or to pay any fees or other
charges when due under any Loan Document, and such failure continues for
three (3) Business Days or more after the same first becomes due; or an
Event of Default as defined in any other Loan Document shall have occurred.
(b) Any representation or warranty made, or financial statement,
certificate or other document provided, by Borrower under any Loan Document
shall prove to have been false or misleading in any material respect when
made or deemed made herein.
(c) Borrower shall fail to pay its debts generally as they
become due or shall commence any Insolvency Proceeding with respect to
itself; an involuntary Insolvency Proceeding shall be filed against
Borrower, or a custodian, receiver, trustee, assignee for the benefit of
creditors, or other similar official, shall be appointed to take
possession, custody or control of the properties of Borrower, and such
involuntary
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Insolvency Proceeding, petition or appointment is acquiesced to by Borrower
or is not dismissed within sixty (60) days; or the dissolution or
termination of the business of Borrower.
(d) Borrower shall be in default beyond any applicable period of
grace or cure under any other agreement involving the borrowing of money,
the purchase of property, the advance of credit or any other monetary
liability of any kind to Lender or to any Person which results in the
acceleration of payment of such obligation in an amount in excess of One
Hundred Thousand Dollars ($100,000).
(e) Any governmental or regulatory authority shall take any
judicial or administrative action, or any defined benefit pension plan
maintained by Borrower shall have any unfunded liabilities, any of which,
in the reasonable judgment of Lender, might have a Material Adverse Effect.
(f) Any judgment in excess of One Hundred Thousand Dollars
($100,000) shall be entered against Borrower which remain unsatisfied,
unvacated or unstayed pending appeal for thirty (30) or more days after
entry thereof.
(g) Any Person or two or more Persons acting in concert shall
have acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission) of forty percent (40%) or more of the
outstanding shares of voting stock of Borrower.
(h) Borrower shall fail to perform or observe any covenant
contained in Article 6 of this Agreement.
(i) Borrower shall fail to perform or observe any covenant
contained in this Agreement or any other Loan Document (other than a
covenant which is dealt with specifically elsewhere in this Article 7) and
the breach of such covenant is not cured within 30 days after the sooner to
occur of Borrower's receipt of notice of such breach from Lender or the
date on which such breach first becomes known to any officer of Borrower;
provided, however that if such breach is not capable of being cured within
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such 30-day period and Borrower timely notifies Lender of such fact and
Borrower diligently pursues such cure, then the cure period shall be
extended to the date requested in Borrower's notice but in no event more
than 90 days from the initial breach; provided, further, that such
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additional 60-day opportunity to cure shall not apply in the case of any
failure to perform or observe any covenant which has been the subject of a
prior failure within the preceding 180 days or which is a willful and
knowing breach by Borrower.
ARTICLE 8 - GENERAL PROVISIONS
8.1 Notices. Any notice given by any party under any Loan Document
shall be in writing and personally delivered, sent by overnight courier, or
United States mail, postage prepaid, or sent by facsimile, to be promptly
confirmed in writing, or other authenticated message, charges prepaid, to the
other party's or parties' addresses shown on the signature pages
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hereto. Each party may change the address or facsimile number to which notices,
requests and other communications are to be sent by giving written notice of
such change to each other party. Notice given hand delivery shall be deemed
received on the date delivered; if sent by overnight courier, on the next
business day after delivery to the courier service; if by first class mail, on
the third business day after deposit in the U.S. Mail; and if by telecopy, on
the date of transmission.
8.2 Binding Effect. The Loan Documents shall be binding upon and
inure to the benefit of Borrower and Lender and their respective successors and
assigns; provided, however, that Borrower may not assign or transfer Borrower's
rights or obligations under any Loan Document without Lender's prior written
consent. Lender reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Lender's rights and
obligations under the Loan Documents. In connection with any of the foregoing,
Lender may disclose all documents and information which Lender now or hereafter
may have relating to the Loans, Borrower, or its business; provided that any
person who receives such information shall have agreed in writing in advance to
maintain the confidentiality of such information on terms reasonably acceptable
to Borrower.
8.3 No Waiver. Any waiver, consent or approval by Lender of any Event
of Default or breach of any provision, condition, or covenant of any Loan
Document must be in writing and shall be effective only to the extent set forth
in writing. No waiver of any breach or default shall be deemed a waiver of any
later breach or default of the same or any other provision of any Loan Document.
No failure or delay on the part of Lender in exercising any power, right, or
privilege under any Loan Document shall operate as a waiver thereof, and no
single or partial exercise of any such power, right, or privilege shall preclude
any further exercise thereof or the exercise of any other power, right or
privilege. Lender has the right at its sole option to continue to accept
interest and/or principal payments due under the Loan Documents after default,
and such acceptance shall not constitute a waiver of said default or an
extension of the Maturity Date unless Lender agrees otherwise in writing.
8.4 Rights Cumulative. All rights and remedies existing under the
Loan Documents are cumulative to, and not exclusive of, any other rights or
remedies available under contract or applicable law.
8.5 Unenforceable Provisions. Any provision of any Loan Document
executed by Borrower which is prohibited or unenforceable in any jurisdiction,
shall be so only as to such jurisdiction and only to the extent of such
prohibition or unenforceability, but all the remaining provisions of any such
Loan Document shall remain valid and enforceable.
8.6 Accounting Terms. Except as otherwise provided in this Agreement,
accounting terms and financial covenants and information shall be determined and
prepared in accordance with GAAP.
8.7 Indemnification; Exculpation. Borrower shall pay and protect,
defend and indemnify Lender and Lender's employees, officers, directors,
shareholders, affiliates, correspondents, agents and representatives (other than
Lender, collectively "Agents") against,
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and hold Lender and each such Agent harmless from, all claims, actions,
proceedings, liabilities, damages, losses, expenses (including, without
limitation, attorneys' fees and costs) and other amounts incurred by Lender and
each such Agent, arising from (i) the matters contemplated by this Agreement or
any other Loan Documents or (ii) any contention that Borrower has failed to
comply with any law, rule, regulation, order or directive applicable to
Borrower's business; provided, however, that this indemnification shall not
apply to any of the foregoing incurred solely as the result of Lender's or any
Agent's gross negligence or willful misconduct. This indemnification shall
survive the payment and satisfaction of all of Borrower's Obligations to Lender.
8.8 Reimbursement. Borrower shall reimburse Lender for all costs and
expenses, including without limitation reasonable attorneys' fees and
disbursements expended or incurred by Lender in any arbitration, mediation,
judicial reference, legal action or otherwise in connection with (a) the
preparation and negotiation of the Loan Documents, not to exceed $3,000.00, (b)
the amendment, interpretation and enforcement of the Loan Documents, including
without limitation during any workout, attempted workout, and/or in connection
with the rendering of legal advice as to Lender's rights, remedies and
obligations under the Loan Documents, (c) collecting any sum which becomes due
Lender under any Loan Document, (d) any proceeding for declaratory relief, any
counterclaim to any proceeding, or any appeal, or (e) the protection,
preservation or enforcement of any rights of Lender. For the purposes of this
section, attorneys' fees shall include, without limitation, fees incurred in
connection with the following: (1) contempt proceedings; (2) discovery; (3) any
motion, proceeding or other activity of any kind in connection with an
Insolvency Proceeding; (4) garnishment, levy, and debtor and third party
examinations; and (5) postjudgment motions and proceedings of any kind,
including without limitation any activity taken to collect or enforce any
judgment. All of the foregoing costs and expenses shall be payable upon demand
by Lender, and if not paid within forty-five (45) days of presentation of
invoices shall bear interest at the highest applicable Default Rate.
8.9 Execution in Counterparts. This Agreement may be executed in any
number of counterparts which, when taken together, shall constitute but one
agreement.
8.10 Entire Agreement. The Loan Documents are intended by the parties
as the final expression of their agreement and therefore contain the entire
agreement between the parties and supersede all prior understandings or
agreements concerning the subject matter hereof. This Agreement may be amended
only in a writing signed by Borrower and Lender.
8.11 Governing Law and Jurisdiction.
(a) THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF CALIFORNIA OR OF THE UNITED STATES
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FOR THE NORTHERN, CENTRAL OR SOUTHERN DISTRICT OF CALIFORNIA, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF BORROWER AND LENDER
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF BORROWER AND LENDER IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN
RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. BORROWER AND
LENDER EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW.
8.12 Waiver of Jury Trial. BORROWER AND LENDER EACH WAIVES ITS
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. BORROWER AND LENDER EACH AGREES THAT ANY SUCH CLAIM OR
CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING
THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL
BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEMS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
-23-
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement
as of the date set forth in the preamble.
Addresses for Notices: COMPS INFOSYSTEMS, INC.
- ---------------------
COMPS InfoSystems, Inc. By: /s/ Christopher A. Crane
9888 Carroll Centre Road --------------------------
San Diego, CA 92126-4580 Christopher A. Crane,
Attn: Christopher A. Crane, President and CEO President and CEO
Fax No. 619-684-3292
Venture Lending & Leasing, Inc. VENTURE LENDING & LEASING, INC.
2010 North First Street, Suite 310
San Jose, CA 95131 By: /s/ Salvador O. Gutierrez
Attn: Salvador 0. Gutierrez, President --------------------------
Fax No. 408-435-8625 Salvador O. Gutierrez,
President
-24-
EXHIBIT "A"
-----------
See Exhibit 10.12 and Exhibit 10.13 to the Registration Statement on Form
S-1
EXHIBIT "B"
Form of Borrowing Request
-------------------------
_____________, 199___
Venture Lending & Leasing, Inc.
2010 North First Street, Suite 310
San Jose, CA 95131
Re: COMPS InfoSystems, Inc.
-----------------------
Gentlemen:
Reference is made to the Loan Agreement dated as of September 24, 1996
(as it has been and may be amended from time to time, the "Loan Agreement", the
capitalized terms used herein as defined therein), between Venture Lending &
Leasing, Inc. and COMPS InfoSystems, Inc. (the "Company").
The undersigned is the Chief Financial Officer of the Company, and
hereby requests a Loan under the Loan Agreement, and in that connection
certifies as follows:
1. The type of the proposed Loan is [the Term Loan/an Equipment
Loan]. The amount of the proposed Loan is $____________. The Business Day of
the proposed Loan is ___________, 199___.
2. As of this date, no Default or Event of Default has occurred and
is continuing, or will result from the making of the proposed Loan, and the
representations and warranties of the Company contained in Article 3 of the Loan
Agreement are true and correct.
3. No Material Adverse Change has occurred since the date of the most
recent financial statements submitted to you by the Company.
4. As of the date hereof, the aggregate amount of the Company's
Eligible Accounts is $__________, 80% of which exceeds the outstanding principal
balance of the Term Loan [or if the Term Loan balance exceeds 80% of Eligible
Accounts, a prepayment of the Term Loan in the amount of such excess is made
herewith].
The Company shall notify you promptly before the funding of the Loan
if any of the matters to which I have certified above shall not be true and
correct on the Borrowing Date.
Very truly yours,
-------------------------------
Chief Financial Officer
EXHIBIT "C"
See Exhibit 10.9 to the Registration Statement on Form S-1
EXHIBIT "D"
See Exhibit 10.7 to Registration Statement on Form S-1
Schedule 3.6
------------
Litigation
----------
Schedule 3.6
Arbitration
-----------
COMPS InfoSystems, Inc. vs. Andrew Blount and DOES 1 - 20. San Diego Superior
- ---------------------------------------------------------
Court No. 00697714. This action was commenced on March 5, 1996. The complaint
alleges that Andrew Blount, a former employee, has engaged in unfair
competition, has misappropriated trade secrets, has intentionally interfered
with contractual relations and prospective economic advantage of the Company,
has breached his fiduciary duty, has violated Labor Code section 2860, and had
breached a contract and the covenant of good faith and fair dealing with the
Company. At the same time, the Company sought and obtained a temporary
restraining order against Mr. Blount regarding his conduct, and later, sought
and obtained a preliminary injunction.
The defendant filed a counterclaim against the company, claiming defamation of
character and unfair competition. The defendant's request for a preliminary
injunction regarding these complaints was denied.
Recently, the defendant's counsel has filed a petition to be relieved from
representing the defendant. The petition has been filed because the defendant
has breached his agreement with his attorney by failing to remit payment to him.
The Court has ordered the matter into binding arbitration in accord with the
arbitration agreement signed by the parties. The Company plans to seek a
settlement payment from the defendant prior to arbitration. Failing this, the
Company has already reserved in its projections sufficient monies to cover the
arbitration expenses.
In the Company's opinion, the outcome of the complaints should have no material
effect on the Company or the Company's financial condition because, to date, the
Court has looked favorably upon each of the Company's motions and issued
injunctions against the defendant, while the court denied the injunction against
the Company regarding the defendant's complaints.
Schedule 6.1
------------
Permitted Indebtedness
----------------------
Schedule 6.1
------------
Permitted Indebtedness
----------------------
EQUIPMENT LEASES
- ----------------
1. Avnet/AT&T Capital Corporation
Lease No. 424755
Term: 60 months
Start: 10/25/94
Equipment: HP 9000 Computer
Original Loan: $32,121.40
2. Canon Financial Service
Lease No. 001-0050913-001
Term: 60 Months
Start: 09/20/94
Equipment: 3 Canon Copiers
Original Loan: $20,628.00
3. Canon Financial Service
Lease No. 001-0058622-001
Term: 60 Months
Start: 04/05/95
Equipment: 1 Canon Copier
Original Loan: $7,824.00
4. Ford Motor Corp.
Acct. No. FN A321 335R
Term: 48 months
Start: 01/26/94
Vehicle: FORD Escort 1993
Original Loan: $12,305.65
5. G.E. Capital
Lease No. 6519146-001
Term: 60 Months
Start: 5/16/94
Equipment: Executone Telephone Equipment
Original Loan: $64,805.00
6. Orix USA Corporation
Lease No. 33938
Term: 36 Months
Start: 01/15/95
Equipment: Gupta Software
Original Loan: $80,296.96
Schedule 6.1
------------
Permitted Indebtedness
----------------------
7. Sybase Financial Services, Inc.
Agreement # 509662
Term: 36 months
Start: 7/15/94
Equipment: Sybase Software
Original Loan: $26,160.00
8. Sybase Financial Services, Inc.
Agreement #515973
Term: 36 months
Start: 10/21/94
Equipment: Sybase Software
Original Loan: $29,255.00
9. Tokai Financial
Lease No. 24150393
Term: 60 Months
Start: 01/10/95
Equipment: Haworth Systems Furniture
Original Loan: $111,576.68
10. Xerox Corporation
Contract No. 958325383
Term: 24 months
Start: 12/94
Equipment: Xerox 5090 Copier
Original Loan: $12,780.00
11. Xerox Corporation
Contract # 903429
Term: 24 months
Start: 12/94
Equipment: Xerox 5065 Copier
Original Loan: $6,957.00
12. Xerox Corporation
Contract # 903395
Term: 24 months
Start: 12/94
Equipment: Xerox 5065 Copier
Original Loan: $6,957.00
Schedule 6.1
------------
Permitted Indebtedness
----------------------
13. Xerox Corporation
Contract # 958903379
Term: 24 months
Start: 12/94
Equipment: Xerox 5046 Copier
Original Loan: $2,418.00
14. Xerox Corporation
Contract # Not Available as of 9/30/96
Term: 72 months from start of contract
Start: Quarter 4, 1996
Equipment: Xerox Docutech or 5390 Copier
Original Loan: Not more than $300,000.00
NOTES PAYABLE
- -------------
Notes Payable to Bank
- ---------------------
1. Union Bank
7807 Girard Avenue
La Jolla, CA 92037
Randall T. Vogan, Commercial Loan Officer
a. Union Bank Note 002000001 Remaining Balance at 9/30/96: $ 3,432.61
b. Union Bank Note 002000002 Remaining Balance at 9/30/96: $ 20,536.18
c. Union Bank Note 002000003 Remaining Balance at 9/30/96: $ 13,135.11
2. Bank: Silicon Valley Bank
5414 Oberlin Drive
San Diego, CA 92121
John W. Otterson, Vice President
Facility up to $750,000.00
Note payable to TRW REDI under Purchase Agreement dated August 31, 1995 between
COMPS InfoSystems, Inc. and TRW REDI Property Data.
Total Note Payable to TRW REDI $750,000.00
Due in six annual installments of $125,000.00
Schedule 6.2
------------
Permitted Liens
---------------
Schedule 6.2
------------
Permitted Liens
---------------
1. Secured Party: Avnet Leasing/AT&T Capital Corporation.
Debtor: Business Real Estate Information Corp.
Financing Statement: - Any and all financing statements and/or liens filed in
any state.
2. Secured Party: Canon Financial Services
Debtor: Business Real Estate Information Corp.
Financing Statement: - Any and all financing statements and/or liens filed in
any state.
3. Secured Party: Camadon, Inc.
Debtor: COMPS InfoSystems, Inc.
Financing Statement: - Any and all financing statements and/or liens filed in
any state.
4. Secured Party: Ford Motor Corporation
Debtor: Business Real Estate Information Corp.
Financing Statement: - Any and all financing statements and/or liens filed in
any state.
5. Secured Party: G.E. Capital Corporation
Debtor: Business Real Estate Information Corp.
Financing Statement: - Any and all financing statements and/or liens filed in
any state.
6. Secured Party: ORIX USA Corporation
Debtor: COMPS InfoSystems, Inc.
Financing Statement: - File No. 9503460597 filed with California Secretary of
State
7. Secured Party: Silicon Valley Bank
Debtor: COMPS InfoSystems, Inc.
Financing Statement: - Any present and all future financing statements and/or
liens filed in any state.
8. Secured Party: Sybase Financial Services, Inc.
Debtor: Business Real Estate Information Corp.
Financing Statement: Any and all financing statements and/or liens filed in
any state.
9. Secured Party: Master Lease Division of Tokai Financial Services, Inc.
Debtor: COMPS InfoSystems, Inc.
Financing Statement: - File No. 9510760241 filed with California Secretary of
State
Schedule 6.2
------------
Permitted Liens
---------------
10. Secured Party: TRW REDI Property Data
Debtor: COMPS InfoSystems, Inc.
Financing Statement: - Any present and all future financing statements and/or
liens filed in any state.
11. Secured Party: Union Bank - La Jolla Office
Debtor: Business Real Estate Information Corp.
Financing Statement: - File No. 94145123, filed with California Secretary of
State
12. Secured Party: Union Bank - La Jolla Office
Debtor: Business Real Estate Information Corp.
Financing Statement: - Any and all financing statements and/or liens filed in
any state.
13. Secured Party: Union Bank - La Jolla Office
Debtor: COMPS InfoSystems, Inc.
Financing Statement: - Any and all financing statements and/or liens filed in
any state.
14. Secured Party: Xerox Corporation
Debtor: Business Real Estate Information Corp.
Financing Statement: - Any and all financing statements and/or liens filed in
any state.
15. Secured Party: Xerox Corporation
Debtor: COMPS InfoSystems, Inc.
Financing Statement: - Any present and all future financing statements and/or
liens filed in any state.