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Exhibit 10.16
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LOAN AND SECURITY AGREEMENT
BY AND
BETWEEN
OPTIUM CORPORATION, INC.,
AS BORROWER
AND
SILICON VALLEY BANK,
AS BANK
MAY 25, 2004
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LOAN AND SECURITY AGREEMENT
THIS
LOAN AND SECURITY AGREEMENT (this "Agreement") dated May 25,
2004,
between SILICON VALLEY BANK ("Bank"), whose address is 3003 Tasman
Drive, Santa
Clara, California 95054 and having a loan production office at 5
Radnor Corp.
Center, 100 Matsonford Drive, Suite 555, Radnor, Pennsylvania,
19087 and OPTIUM
CORPORATION, a corporation organized and in good standing in the
State of
Delaware ("Borrower"), whose address is 500 Horizon Drive,
Clalfont,
Pennsylvania, 18914 provides the terms on which Bank will lend to
Borrower and
Borrower will repay Bank. The parties agree as follows:
1. ACCOUNTING
AND OTHER TERMS
Accounting terms not defined in this Agreement will be construed
following
GAAP. Calculations and determinations must be made following GAAP.
The term
"financial statements" includes the notes and schedules. The terms
"including"
and "includes" always mean "including (or includes) without
limitation," in this
or any Loan Document.
2. LOAN AND
TERMS OF PAYMENT
2.1 PROMISE TO
PAY.
Borrower promises to pay Bank the unpaid principal amount of all
Credit
Extensions and interest on the unpaid principal amount of the
Credit Extensions.
2.1.1 REVOLVING ADVANCES.
(a)
Bank will make Advances not exceeding (i) the lesser of (A) the
Committed Revolving Line minus all amounts for services utilized
under the Cash
Management Services Sublimit, (ii) the amount of all outstanding
Letters of
Credit (including drawn but unreimbursed Letters of Credit), and
minus (iii) the
FX Reserve (collectively, the "Sublimit Outstandings") or (B) the
Borrowing
Base, minus the Sublimit Outstandings. Amounts borrowed under this
Section may
be repaid and reborrowed during the term of this Agreement. All
advances shall
be evidenced by the Revolving Promissory Note to be executed and
delivered by
Borrower to Bank on the Closing Date and shall be repaid in
accordance with the
terms of the Revolving Promissory Note.
(b)
To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 3:00 p.m. Eastern time on the Business Day the Advance
is to be
made. Borrower must promptly confirm the notification by delivering
to Bank the
Loan Payment/Advance Request Form attached as EXHIBIT B (the
"Payment/Advance
Form"). Bank will credit Advances to Borrower's deposit account.
Bank may make
Advances under this Agreement based on instructions from a
Responsible Officer
or his or her designee or without instructions if the Advances are
necessary to
meet Obligations which have become due. Bank may rely on any
telephone notice
given by a person whom Bank believes is a Responsible Officer or
designee.
Borrower will indemnify Bank for any loss Bank suffers due to such
reliance.
(c)
The Committed Revolving Line terminates on the Revolving Maturity
Date,
when all Advances are immediately payable.
(d)
Bank's obligation to lend the undisbursed portion of the
Obligations
will terminate if, in Bank's sole discretion, there has been a
material adverse
change in the general affairs, management, results of operation,
condition
(financial or otherwise) or the prospect of repayment of the
Obligations, or
there has been any material adverse deviation by Borrower from the
most recent
business plan of Borrower presented to and accepted by Bank prior
to the
execution of this Agreement.
2.1.2 LETTERS OF CREDIT SUBLIMIT.
Bank will issue or
have issued Letters of Credit for Borrower's account not
exceeding (i) the lesser of the Committed Revolving Line or the
Borrowing Base,
minus the Sublimit Outstandings; however, the face amount of
outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit) and
Sublimit
Outstandings may not at any time exceed Five Hundred Thousand
Dollars
($500,000). Each Letter of Credit will have an expiry date of no
later than one
hundred eighty (180) days after the Revolving Maturity Date, but
Borrower's
obligations to reimburse Bank under the Letters of Credit will be
secured by
cash on terms acceptable to Bank at any time after the Revolving
Maturity Date
if the term of this Agreement is not extended by Bank. Borrower
agrees to
execute any further
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documentation in connection with the Letters of Credit as Bank may
reasonably
request. Prior to or simultaneously with the opening of each Letter
of Credit,
Borrower shall pay to Bank, its standard letter of credit fees
(each a "Letter
of Credit Fee" and collectively the "Letter of Credit Fees"). Such
Letter of
Credit Fees shall be paid in advance upon the issuance of the
Letter of Credit
and upon each anniversary thereof, if any. In addition, Borrower
shall pay to
Bank any and all additional issuance, negotiation, processing,
transfer or other
fees to the extent and as and when required by Bank.
2.1.3 FOREIGN EXCHANGE SUBLIMIT.
If
there is availability under the Committed Revolving Line and
the
Borrowing Base, then Borrower may enter in foreign exchange forward
contracts
with the Bank under which Borrower commits to purchase from or sell
to Bank a
set amount of foreign currency more than one business day after the
contract
date (the "FX Forward Contract"). Bank will subtract 10% of each
outstanding FX
Forward Contract from the foreign exchange sublimit which together
with all
Sublimit Outstandings is a maximum of Five Hundred Thousand Dollars
($500,000)
(the "FX Reserve"). The total FX Forward Contracts at any one time
may not
exceed 10 times the amount of the FX Reserve. Bank may terminate
the FX Forward
Contracts if an Event of Default occurs.
2.1.4 CASH MANAGEMENT SERVICES SUBLIMIT.
Borrower may use up to Five Hundred Thousand Dollars ($500,000) for
Bank's
Cash Management Services, which may include merchant services,
direct deposit of
payroll, business credit card, and check cashing services
identified in various
cash management services agreements related to such services (the
"Cash
Management Services"), provided that the aggregate amount of all
Cash management
Services and Sublimit Outstandings can not exceed Five Hundred
Thousand Dollars
($500,000). Such aggregate amounts utilized under the Cash
Management Services
Sublimit will at all times reduce the amount otherwise available to
be borrowed
under the Committed Revolving Line. Any amounts Bank pays on behalf
of Borrower
or any amounts that are not paid by Borrower for any Cash
Management Services
will be treated as Advances under the Committed Revolving Line and
will accrue
interest at the rate for Advances.
2.1.5 EQUIPMENT ADVANCES.
(a)
Through September 30, 2004 (the "Equipment Availability End
Date"),
Bank will make advances ("Equipment Advance" and, collectively,
"Equipment
Advances") not exceeding the Committed Equipment Line. The
Equipment Advances
may only be used to finance Equipment purchased on the date of each
Equipment
Advance and may not exceed one hundred percent (100%) of the
equipment invoice,
excluding taxes, shipping, warranty charges, freight discounts and
installation
expense. Software may constitute up to twenty five percent (25%) of
the
aggregate Equipment Advances. Each Equipment Advance must be for a
minimum of
Fifty Thousand Dollars ($50,000). The number of Equipment Advances
is limited to
six (6).
(b)
Interest accrues from the date of each Equipment Advance at the
rate in
Section 2.3 (a) and is payable monthly. Equipment Advances
outstanding on the
Equipment Availability End Date are payable in thirty (30) equal
monthly
installments of principal, plus accrued interest, beginning on the
first (1st)
day of each month commencing on October 1, 2004 and ending on April
1, 2007 (the
"Equipment Maturity Date"). All Equipment Advances shall be
evidenced by the
Equipment Term Note to be executed and delivered by Borrower to
Bank on the
Closing. Equipment Advances when repaid may not be reborrowed.
(c)
To obtain an Equipment Advance, Borrower must notify Bank (the
notice
is irrevocable) by facsimile no later than 3:00 p.m. Eastern time
one (1)
Business Day before the day on which the Equipment Advance is to be
made. The
notice in the form of EXHIBIT B (Payment/Advance Form) must be
signed by a
Responsible Officer or designee and include a copy of the invoice
for the
Equipment being financed.
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2.2 OVERADVANCES.
If
Borrower's Obligations under Sections 2.1.1, 2.1.2, 2.1.3 and
2.1.4
exceed the lesser of either (i) the Committed Revolving Line or
(ii) the
Borrowing Base, Borrower shall immediately pay Bank the excess.
2.3 INTEREST RATE,
PAYMENTS.
(a)
Interest Rate. (i) Advances accrue interest on the outstanding
principal at a per annum rate of one and three quarters of one
(1.75) percentage
point above the Prime Rate, until such time as Borrower has EBITDA
in excess of
$1.00 as of any quarter end and commencing on the first day of the
first
calendar quarter thereafter at the rate of at one and one quarter
(1.25)
percentage point in excess of the Prime Rate. (ii) Equipment
Advances accrue
interest on the outstanding principal balance at a per annum rate
of two and one
half (2.5) percentage points above the Prime Rate. After and during
the
continuance of an Event of Default, Obligations accrue interest at
five percent
(5%) above the rate effective immediately before the Event of
Default. The
interest rate increases or decreases when the Prime Rate changes.
Interest is
computed on a 360 day year for the actual number of days
elapsed.
(b)
Payments. Interest due on the Committed Revolving Line is payable
on
the fifth (5th) day of each month. Interest due on the Equipment
Advances is
payable on the first (1st) day of each month. Bank may debit any of
Borrower's
deposit accounts including Account Number
__________________________________ for
principal and interest payments owing or any amounts Borrower owes
Bank. Bank
will promptly notify Borrower when it debits Borrower's accounts.
These debits
are not a set-off. Payments received after 12:00 noon Eastern time
are
considered received at the opening of business on the next Business
Day. When a
payment is due on a day that is not a Business Day, the payment is
due the next
Business Day and additional fees or interest accrue.
2.4 FEES.
Borrower will pay:
(a)
FACILITY FEE. A fully earned, nonrefundable fee in the amount
of
Seventeen Thousand Five Hundred Dollars ($17,500).
(b)
BANK EXPENSES. All Bank Expenses (including reasonable attorneys'
fees
and reasonable expenses) incurred through and after the date of
this Agreement,
are payable when due.
3. CONDITIONS OF
LOANS
3.1 CONDITIONS
PRECEDENT TO INITIAL CREDIT EXTENSION.
Bank's obligation to make the initial Credit Extension is subject
to the
condition precedent that it receive the agreements, documents and
fees it
requires.
3.2 CONDITIONS
PRECEDENT TO ALL CREDIT EXTENSIONS.
Bank's obligations to make each Credit Extension, including the
initial
Credit Extension, is subject to the following:
(a)
timely receipt of any Payment/Advance Form; and
(b)
the representations and warranties in Section 5 must be true in
all
material respects on the date of the Payment/Advance Form and on
the effective
date of each Credit Extension and no Event of Default may have
occurred and be
continuing, or result from the Credit Extension. Each Credit
Extension is
Borrower's representation and warranty on that date that the
representations and
warranties of Section 5 remain true in all material respect.
4. CREATION OF
SECURITY INTEREST
4.1 GRANT OF SECURITY
INTEREST.
Borrower grants Bank a continuing security interest in all
presently
existing and later acquired Collateral to secure all Obligations
and performance
of each of Borrower's duties under the Loan Documents. Except for
Permitted
Liens, any security interest will be a first priority security
interest in the
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Collateral. Bank upon the occurrence and during the continuance of
any Event of
Default, may place a "hold" on any deposit account of Borrower
maintained with
Bank. If this Agreement is terminated, Bank's lien and security
interest in the
Collateral will continue until Borrower fully satisfies its
Obligations.
4.2 AUTHORIZATION TO
FILE.
Borrower authorizes Bank to file financing statements without
notice to
Borrower, with all appropriate jurisdictions, as Bank deems
appropriate, in
order to perfect or protect Bank's interest in the Collateral.
5.
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION
AND AUTHORIZATION.
Borrower and each Subsidiary is duly existing and in good standing
in the
State of Delaware and qualified and licensed to do business in, and
in good
standing in, any state in which the conduct of its business or its
ownership of
property requires that it be qualified, except where the failure to
do so could
not reasonably be expected to cause a Material Adverse Change.
Borrower and each
Subsidiary's exact legal name is as set forth on the first page of
this
Agreement. The execution, delivery and performance of the Loan
Documents have
been duly authorized, and do not conflict with Borrower's formation
documents,
nor constitute an event of default under any material agreement by
which
Borrower is bound. Borrower is not in default under any agreement
to which, or
by which it is bound, in which the default could reasonably be
expected to cause
a Material Adverse Change.
5.2 COLLATERAL.
Borrower has good title to the Collateral, free of Liens except
Permitted
Liens. The Accounts are bona fide, existing obligations, and the
service or
property has been performed or delivered to the account debtor or
its agent for
immediate shipment to and unconditional acceptance by the account
debtor.
Borrower has no notice of any actual or imminent Insolvency
Proceeding of any
account debtor whose accounts are an Eligible Account in any
Borrowing Base
Certificate. All Inventory is in all material respects of good and
marketable
quality, free from material defects. Substantially all of the
Equipment financed
under this Agreement will be kept at Borrower's location in
Pennsylvania set
forth in the first paragraph of this Agreement.
5.3 LITIGATION.
There are no actions or proceedings pending or, to the knowledge
of
Borrower's Responsible Officers, threatened by or against Borrower
or any
Subsidiary in which a likely adverse decision could reasonably be
expected to
cause a Material Adverse Change.
5.4 NO MATERIAL
ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All
consolidated financial statements for Borrower, and any
Subsidiary,
delivered to Bank fairly present in all material respects
Borrower's
consolidated financial condition and Borrower's consolidated
results of
operations. There has not been any material deterioration in
Borrower's
consolidated financial condition since the date of the most recent
consolidated
financial statements submitted to Bank.
5.5 SOLVENCY.
The
fair salable value of Borrower's assets (including goodwill
minus
disposition costs) exceeds the fair value of its liabilities; the
Borrower is
not left with unreasonably small capital after the transactions in
this
Agreement or any of the Loan Documents; and Borrower is able to pay
its debts
(including trade debts) as they mature.
5.6 REGULATORY
COMPLIANCE.
Borrower is not an "investment company" or a company "controlled"
by an
"investment company" under the Investment Company Act. Borrower is
not engaged
as one of its important activities in extending credit for margin
stock (under
Regulations T and U of the Federal Reserve Board of
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Governors). Borrower has complied in all material respects with the
Federal Fair
Labor Standards Act. Borrower has not violated any laws, ordinances
or rules,
the violation of which could reasonably be expected to cause a
Material Adverse
Change. None of Borrower's or any Subsidiary's properties or assets
has been
used by Borrower or any Subsidiary or, to the best of Borrower's
knowledge, by
previous Persons, in disposing, producing, storing, treating, or
transporting
any hazardous substance other than in compliance with all
applicable laws.
Borrower and each Subsidiary has timely filed all required tax
returns and paid,
or made adequate provision to pay, all material taxes, except those
being
contested in good faith with adequate reserves under GAAP. Borrower
and each
Subsidiary has obtained all consents, approvals and authorizations
of, made all
declarations or filings with, and given all notices to, all
government
authorities that are necessary to continue its business as
currently conducted,
except where the failure to do so could not reasonably be expected
to cause a
Material Adverse Change.
5.7 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other
equity
securities except for Permitted Investments.
5.8 FULL
DISCLOSURE.
No
written representation, warranty or other statement of Borrower in
any
certificate or written statement given to Bank (taken together with
all such
written certificates and written statements to Bank) contains any
untrue
statement of a material fact or omits to state a material fact
necessary to make
the statements contained in the certificates or statements not
misleading. It
being recognized by Bank that the projections and forecasts
provided by Borrower
in good faith and based upon reasonable assumptions are not viewed
as facts and
that actual results during the period or periods covered by such
projections and
forecasts may differ from the projected and forecasted results.
6. AFFIRMATIVE
COVENANTS
Borrower will do all of the following for so long as Bank has an
obligation
to make any Credit Extension, or there are outstanding
Obligations:
6.1 GOVERNMENT
COMPLIANCE.
Borrower will maintain its and all Subsidiaries' legal existence
and good
standing as a Registered Organization in only the State of Delaware
and maintain
qualification in each jurisdiction in which the failure to so
qualify would
reasonably be expected to cause a material adverse effect on
Borrower's business
or operations. Borrower will comply, and have each Subsidiary
comply, with all
laws, ordinances and regulations to which it is subject,
noncompliance with
which could have a material adverse effect on Borrower's business
or operations
or would reasonably be expected to cause a Material Adverse
Change.
6.2 FINANCIAL
STATEMENTS, REPORTS, CERTIFICATES.
(a)
Borrower will deliver to Bank: (i) as soon as available, but no
later
than thirty (30) days after the last day of each month, a company
prepared
consolidated balance sheet and income statement covering Borrower's
consolidated
operations during the period certified by a Responsible Officer and
in a form
acceptable to Bank; (ii) as soon as available, but no later than
one hundred
twenty (120) days after the last day of Borrower's fiscal year,
audited
consolidated financial statements prepared under GAAP, consistently
applied,
together with an unqualified opinion on the financial statements
from an
independent certified public accounting firm reasonably acceptable
to Bank;
(iii) a prompt 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 $100,000 or more; and (iv) budgets, sales
projections,
operating plans or other financial information Bank reasonably
requests.
(b)
Within thirty (30) days after the last day of each month, Borrower
will
deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in
the form of EXHIBIT C. with aged listings of accounts
receivable.
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(c)
Within thirty (30) days after the last day of each month, Borrower
will
deliver to Bank with the monthly financial statements a Compliance
Certificate
signed by a Responsible Officer in the form of EXHIBIT D.
(d)
Allow Bank to audit Borrower's Collateral at Borrower's
expense,
including an initial audit within thirty (30) days of the Closing
Date. Such
audits will be conducted no more often than every twelve (12)
months unless an
Event of Default has occurred and is continuing. Such audits will
be conducted
during normal business hours and prior to an Event of Default,
following
reasonable notice to Borrower.
6.3 INVENTORY;
RETURNS.
Borrower will keep all Inventory in good and marketable condition,
ordinary
wear and tear and damage by fire or other casualty excepted free
from material
defects for which Borrower is responsible. Returns and allowances
between
Borrower and its account debtors will follow Borrower's customary
practices as
they exist at execution of this Agreement. Borrower must promptly
notify Bank of
all returns, recoveries, disputes and claims, that involve more
than $100,000.
6.4 TAXES.
Borrower will make, and cause each Subsidiary to make, timely
payment of
all material federal, state, and local taxes or assessments (other
than taxes
and assessments which Borrower is contesting in good faith, with
adequate
reserves maintained in accordance with GAAP) and will deliver to
Bank, on
demand, appropriate certificates attesting to the payment.
6.5 INSURANCE.
Borrower will keep its business and the Collateral insured for
risks and in
amounts standard for Borrower's industry, and as Bank may
reasonably request.
Insurance policies will be in a form, with companies, and in
amounts that are
satisfactory to Bank in Bank's reasonable discretion. All property
policies will
have a lender's loss payable endorsement showing Bank as an
additional loss
payee and all liability policies will show the Bank as an
additional insured and
provide that the insurer must give Bank at least twenty (20) days
notice before
canceling its policy. At Bank's request, Borrower will deliver
certified copies
of policies and evidence of all premium payments. Proceeds payable
under any
policy will, at Bank's option, be payable to Bank on account of the
Obligations.
6.6 PRIMARY
ACCOUNTS.
Borrower will maintain its primary operating accounts and excess
funds with
Bank.
6.7 FINANCIAL
COVENANTS.
Borrower will maintain as of the last day of each month (unless
otherwise
stated below):
(A)
QUICK RATIO. A ratio of Quick Assets to Current Liabilities of at
least
1.50 to 1.00.
(B)
TANGIBLE NET WORTH. A Tangible Net Worth of at least the sum of
(i)
$10,000,000 plus (ii) sixty percent (60%) of consolidated net
income (without
regard to any loss) from each quarter of the Borrower.
6.8 FURTHER
ASSURANCES.
Borrower will execute any further instruments and take further
action as
Bank reasonably requests to perfect or continue Bank's security
interest in the
Collateral or to effect the purposes of this Agreement.
7. NEGATIVE
COVENANTS
Borrower will not do any of the following without Bank's prior
written
consent, for so long as Bank has an obligation to make Credit
Extensions or
there are any outstanding Obligations:
7.1 DISPOSITIONS.
Convey, sell, lease, transfer or otherwise dispose of
(collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or
any part of
its business or property, EXCEPT for Transfers (i) of Inventory in
the ordinary
course of business; (ii) of non-exclusive licenses of Intellectual
Property and
similar
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arrangements for the use of the property of Borrower or its
Subsidiaries in the
ordinary course of business; or (iii) of worn-out or obsolete
Equipment.
7.2 CHANGES IN
BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any
business other
than the businesses currently engaged in by Borrower or reasonably
related
thereto, or if Eitan Gertel ceases to be actively involved in the
day to day
management of the Borrower for any reason, or any other member of
senior
management ceases to be actively involved in the day to day
management of the
Borrower (and a replacement satisfactory to Bank is not appointed
within sixty
(60) days of such occurrence), or a change in its ownership of
greater than
twenty five percent (25%) (other than by the sale of Borrower's
equity
securities in a public offering or to venture capital investors so
long as
Borrower identifies and advises Bank of the venture capital
investors prior to
the closing of the investment). Borrower will not, without at least
thirty (30)
days prior written notice, change its state of formation, relocate
its chief
executive office or add any new offices or business locations.
7.3 MERGERS OR
ACQUISITIONS.
Merge or consolidate, or permit any of its Subsidiaries to merge
or
consolidate, with any other Person, or acquire, or permit any of
its
Subsidiaries to acquire, all or substantially all of the capital
stock or
property of another Person, without Bank's prior consent, which
consent will not
be unreasonably withheld. A Subsidiary may merge or consolidate
into another
Subsidiary or into Borrower.
7.4 INDEBTEDNESS.
Create, incur, assume, or be liable for any Indebtedness, or permit
any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 ENCUMBRANCE.
Create, incur, or allow any Lien on any of its property, or assign
or
convey any right to receive income, including the sale of any
Accounts, or
permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit
any Collateral not to be subject to the first priority security
interest granted
here, subject to Permitted Liens.
7.6 DISTRIBUTIONS;
INVESTMENTS.
Directly or indirectly acquire or own any Person, or make any
Investment in
any Person, other than Permitted Investments, or permit any of its
Subsidiaries
to do so, without Bank's prior consent, which consent will not be
unreasonably
withheld. Pay any dividends or make any distribution or payment or
redeem,
retire or purchase any capital stock other than the repurchase of
capital stock
from former employees in an aggregate amount not to exceed
$300,000, prior to
the occurrence of an Event of Default.
7.7 TRANSACTIONS WITH
AFFILIATES.
Directly or indirectly enter into or permit to exist any
material
transaction with any Affiliate of Borrower, without Bank's prior
consent, which
consent will not be unreasonably withheld, except for transactions
that are in
the ordinary course of Borrower's business, upon fair and
reasonable terms that
are no less favorable to Borrower than would be obtained in an arms
length
transaction with a nonaffiliated Person.
7.8 SUBORDINATED
DEBT.
Make
or permit any payment on any Subordinated Debt, except under the
terms
of the Subordinated Debt, or amend any provision in any document
relating to the
Subordinated Debt without Bank's prior written consent.
7.9 COMPLIANCE.
Become an "investment company" or a company controlled by an
"investment
company," under the Investment Company Act of 1940 or undertake as
one of its
important activities extending credit to purchase or carry margin
stock, or use
the proceeds of any Credit Extension for that purpose; fail to
meet
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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 other law or
regulation, if the
violation could reasonably be expected to have a material adverse
effect on
Borrower's business or operations or would reasonably be expected
to cause a
Material Adverse Change, or permit any of its Subsidiaries to do
so.
7.10 REGISTRATION OF COPYRIGHTS.
Borrower will not register any Copyrights without giving Bank prior
written
notice.
8. EVENTS OF
DEFAULT
Any
one of the following is an Event of Default:
8.1 PAYMENT
DEFAULT.
If
Borrower fails to pay any of the Obligations within 3 days of the
date
due when due;
8.2 COVENANT
DEFAULT.
(a)
If Borrower fails to perform any obligation under Section 6.7
or
violates any of the covenants contained in Article 7 of this
Agreement, or
(b)
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 the occurrence
thereof; provided,
however, that if the default cannot by its nature be cured within
the ten (10)
day period or cannot after diligent attempts by Borrower be cured
within such
ten (10) day period, and such default is likely to be cured within
a reasonable
time, then Borrower shall have an additional reasonable period
(which shall not
in any case exceed thirty (30) days) to attempt to cure such
default, and within
such reasonable time period the failure to have cured such default
shall not be
deemed an Event of Default (provided that no Credit Extensions will
be 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,
levied
on, or comes into possession of a trustee or receiver and the
attachment,
seizure or levy is not removed in ten (10) days, or if Borrower is
enjoined,
restrained, or prevented by court order from conducting a material
part of its
business or if a judgment or other claim becomes a Lien on a
material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is
filed against
any of Borrower's assets by any government agency and not paid
within ten (10)
days after Borrower receives notice. These are not Events of
Default if stayed
or if a bond is posted pending contest by Borrower (but no Credit
Extensions
will be made during the cure period);
8.5 INSOLVENCY.
If
Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower
and not
dismissed or stayed within 30 days (but no Credit Extensions will
be made before
any Insolvency Proceeding is dismissed);
8.6 OTHER
AGREEMENTS.
If
there is a default in any agreement between Borrower and a third
party
that gives the third party the right to accelerate any Indebtedness
exceeding
$100,000 (which is not cured within any applicable grace period or
otherwise
waived) or that could cause a Material Adverse Change;
8
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8.7 JUDGMENTS.
If a
money judgment(s) in the aggregate of at least $100,000 is
rendered
against Borrower and is unsatisfied and unstayed for 10 days (but
no Credit
Extensions will be made before the judgment is stayed or
satisfied);
8.8
MISREPRESENTATIONS.
If
Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any
warranty or
representation in this Agreement or in any writing delivered to
Bank or to
induce Bank to enter this Agreement or any Loan Document; or
8.9 SUBSIDIARIES.
Any
circumstance described in Sections 8.3, 8.4, 8.5 or 8.7 occurs to
any
Subsidiary of Borrower.
9. BANK'S RIGHTS
AND REMEDIES
9.1 RIGHTS AND
REMEDIES.
When
an Event of Default occurs and continues Bank may, without notice
or
demand, do any or all of the following:
(a)
Declare all Obligations immediately due and payable (but if an
Event of
Default described in Section 8.5 occurs all Obligations are
immediately due and
payable without any action by Bank);
(b)
Stop advancing money or extending credit for Borrower's benefit
under
this Agreement or under any other agreement between Borrower and
Bank;
(c)
Settle or adjust disputes and claims directly with account debtors
for
amounts, on terms and in any order that Bank considers
advisable;
(d)
Make any payments and do any acts it considers necessary or
reasonable
to protect its security interest in the Collateral. Borrower will
assemble the
Collateral if Bank requires and make it available as Bank
designates. Bank may
enter premises where the Collateral is located, take and maintain
possession of
any part of the Collateral, and pay, purchase, contest, or
compromise any Lien
which appears to be prior or superior to its security interest and
pay all
expenses incurred. Borrower grants Bank a license to enter and
occupy any of its
premises, without charge, to exercise any of Bank's rights or
remedies;
(e)
Apply to the Obligations any (i) balances and deposits of Borrower
with
Bank or its Affiliate it holds, or (ii) amount held by Bank owing
to or for the
credit or the account of Borrower;
(f)
Ship, reclaim, recover, store, finish, maintan, repair, prepare
for
sale, advertise for sale, and sell the Collateral. Bank is granted
a
non-exclusive, royalty-free license or othe
