LOAN AGREEMENT
THIS LOAN AGREEMENT is entered into as of July 29, 1998 (this "LOAN
AGREEMENT") between INTRAWARE, INC., a Delaware corporation (herein called
"BORROWER"), and IMPERIAL BANK (herein called "BANK").
1. COMMITMENT.
A. REVOLVING COMMITMENT. Subject to all the terms and conditions of
this Loan Agreement and prior to the termination of its commitment as
hereinafter provided, Bank hereby agrees to make loans (each a "REVOLVING LOAN")
to Borrower, from time to time and in such amounts as Borrower shall request
pursuant to this SECTION 1.A., up to an aggregate principal amount outstanding
under the Revolving Loan Account (as hereinafter defined) not to exceed the
lesser of: (a) eighty percent (80.0%) of Eligible Accounts (as the same may be
adjusted from time to time as provided for under SECTION 9.B. hereof the
"BORROWING BASE") or (b) $5,000,000.00 (the "REVOLVING COMMITMENT"). If at any
time or for any reason, the outstanding principal amount of the Revolving Loan
Account is greater than the least of: (x) the Borrowing Base or (y) the
Revolving Commitment, Borrower shall immediately pay to Bank, in cash, the
amount of such excess. Any commitment of Bank, pursuant to the terms of this
Loan Agreement, to make Revolving Loans shall expire on the Revolving Loan
Maturity Date (as hereinafter defined), subject to Bank's right to renew said
commitment in its sole and absolute discretion at Borrower's request. Any such
renewal of said commitment shall not be binding upon Bank unless it is in
writing and signed by an officer of Bank. Provided that no Event of Default (as
hereinafter defined) has occurred and is continuing, all or any portion of the
Revolving Loans advanced by Bank which are repaid by Borrower shall be available
for reborrowing in accordance with the terms hereof. Borrower promises to pay
to Bank the entire outstanding unpaid principal balance (and all accrued unpaid
interest thereon) of the Revolving Loan Account on July 29, 1999 ("REVOLVING
LOAN MATURITY DATE").
(1) REVOLVING LOANS. The amount of each Revolving Loan made by
Bank to Borrower hereunder shall be debited to the loan ledger account of
Borrower maintained by Bank for the Revolving Commitment (herein called the
"REVOLVING LOAN ACCOUNT") and Bank shall credit the Revolving Loan Account with
all loan repayments in respect thereof made by Borrower. When Borrower desires
to obtain a Revolving Loan, Borrower shall notify Bank (which notice shall be
signed by an officer of Borrower and shall be irrevocable) in accordance with
SECTION 2 hereof, to be received no later than 3:00 p.m. Pacific time one (1)
Banking Day (as hereinafter defined) before the day on which the Revolving Loan
is to be made. Revolving Loans may only be used for working capital purposes.
(2) INTEREST PAYMENTS ON REVOLVING LOANS. Borrower further
promises to pay to Bank from the date of the advance of the initial Revolving
Loan through the Revolving Loan Maturity Date, on or before the tenth (10th) day
of each month, interest on the average daily unpaid balance of the Revolving
Loan Account during the immediately preceding month at a rate of interest EQUAL
TO one percent (1.0%) per annum in excess of the rate of interest which Bank has
announced as its prime lending rate (the "PRIME RATE"), which shall vary
concurrently with any change in the Prime Rate. Interest shall be computed at
the above rate on the basis of the actual number of days during which the
principal balance of the Revolving Loan Account is outstanding divided by 360,
which shall for interest computation purposes be considered one (1) year.
2. LOAN REQUESTS. Requests for Revolving Loans hereunder shall be in
writing duly executed by Borrower in a form satisfactory to Bank and shall
contain a certification setting forth the matters referred to in SECTION 1,
which shall disclose that Borrower is entitled to the amount of Revolving Loan
being requested. Bank is hereby authorized to charge Borrower's deposit account
with Bank for all principal and interest due and owing Bank under this Loan
Agreement and other fees agreed to by Borrower.
1.
3. DELIVERY OF PAYMENTS. Payment to Bank of all amounts due hereunder
shall be made at its Santa Clara Valley Regional office, or at such other place
as may be designated in writing by Bank from time to time. If any payment date
fall on a day that is not a day that Bank is open for the transaction of
business ("BANKING DAY"), the payment due date shall be extended to the next
Banking Day.
4. LATE CHARGE. If any interest payment, principal payment or principal
balance payment required hereunder is not received by Bank on or before ten (10)
days from the date in which such payment becomes due, Borrower shall pay to
Bank, a late charge EQUAL TO the lesser of (a) five percent (5.0%) of the amount
of such unpaid payment, in addition to said unpaid payment or (b) the maximum
amount permitted to be charged by applicable law, until remitted to Bank;
PROVIDED; HOWEVER, nothing contained in this SECTION 4, shall be construed as
any obligation on the part of Bank to accept payment of any past due payment or
less than the total unpaid principal balance of the Loan Account following the
Revolving Loan Maturity Date. All payments shall be applied first to any late
charges due hereunder, next to accrued interest then payable and the remainder,
if any, to reduce any unpaid principal due under the Loan Account.
5. DEFAULT INTEREST. From and after the Revolving Loan Maturity Date or
such earlier date as all sums owing under the Loan Account becomes due and
payable by acceleration or otherwise, or upon the occurrence and during the
continuance of an Event of Default, at the option of Bank all sums owing under
the Loan Account shall bear interest until paid in full at a rate equal to the
lesser of (a) five percent (5.0%) per annum in excess of the then applicable
interest rate provided for in SECTION 1.A.(2) hereof or (b) the maximum amount
permitted to be charged by applicable law, until all obligations hereunder are
repaid in full or the Event of Default is waived or cured to the satisfaction of
Bank, as applicable.
6. DEFINITIONS. As used in this Loan Agreement and unless otherwise
defined herein, all initially capitalized terms shall have the meanings set
forth on EXHIBIT A attached hereto and incorporated herein by this reference.
7. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Bank: (a) That Borrower is a corporation, duly organized and existing in the
State of its incorporation and the execution, delivery and performance of each
of the Loan Documents are within Borrower's corporate powers, have been duly
authorized and are not in conflict with law or the terms of any charter, by-law
or other incorporation papers, or of any material indenture, agreement or
undertaking to which Borrower is a party or by which Borrower is bound or
affected; (b) Borrower is, and at the time the Collateral becomes subject to
Bank's security interest will be, the true and lawful owner of and has, and at
the time the Collateral becomes subject to Bank's security interest will have,
good and clear title to the Collateral, subject only to Bank's rights therein
and to Permitted Liens; (c) Each Account is, and at the time the Account comes
into existence will be, a true and correct statement of a BONA FIDE indebtedness
incurred by the debtor named therein in the amount of the Account for either
merchandise sold or delivered (or being held subject to Borrower's delivery
instructions) to, or services rendered, performed and accepted by, the account
debtor; (d) That there are and will be no defenses, counterclaims, or setoffs
which may be asserted against the Accounts from time to time represented by
Borrower to be Eligible Accounts, except as permitted in the definition thereof;
(e) Any and all financial information, including information relating to the
Collateral, submitted by Borrower to Bank, whether previously or in the future,
is and will be true and correct; (f) There is no litigation or other proceeding
pending or threatened against or affecting Borrower, and Borrower is not in
default with respect to any order, writ, injunction, decree or demand of any
court or other governmental or regulatory authority; (g) (i) The consolidated
balance sheets of Borrower dated as of February 28, 1998, and the related
consolidated profit and loss statements for the fiscal year then ended, copies
of which have heretofore been delivered to Bank by Borrower, and all other
statements and data submitted in writing by Borrower to Bank in connection with
Borrower's request for credit are true and correct, and said balance sheet and
profit and loss statement accurately present the financial condition of Borrower
as of the date thereof and the results of the operations of Borrower for the
period covered thereby, and have been prepared in accordance with GAAP,
(ii) since such date, there have been no material adverse changes in the
financial condition of Borrower, and
2.
(iii) Borrower has no knowledge of any liabilities, contingent or otherwise,
which are not reflected in said balance sheet, and Borrower has not entered into
any special commitments or substantial contracts which are not reflected in said
balance sheet, other than in the ordinary and normal course of its business,
which may have a Material Adverse Effect upon its financial condition,
operations or business as now conducted; (h) Borrower has no liability for any
material delinquent local, state or federal taxes, and, if Borrower has
contracted with any government agency, it has no liability for renegotiation of
profits; and (i) Borrower, as of the date hereof, possesses all necessary
trademarks, trade names, copyrights, patents, patent rights, and licenses to
conduct its business as now operated, without any known conflict with valid
trademarks, trade names, copyrights, patents, patent rights and license rights
of others (or could obtain such trademarks, trade names, copyrights, patents,
patent rights and licenses without a material adverse effect on its business);
and (j) Borrower and its Subsidiaries (as hereinafter defined) have reviewed the
areas within their operations and business which could be adversely affected by,
and have developed or are developing a program to address on a timely basis, the
Year 2000 Problem and have made related appropriate inquiry of material
suppliers and vendors, and based on such review and program, the Year 2000
Problem will not have a Material Adverse Effect upon its financial condition,
operations or business as now conducted.
8. NEGATIVE COVENANTS. Borrower agrees that so long as any loans,
obligations or liabilities remain outstanding or unpaid to Bank or the
commitment of Bank hereunder is in effect, neither Borrower, nor any of its
subsidiaries ("SUBSIDIARIES") will, without the prior written consent of Bank:
A. Make any substantial change in the character of its business as
now conducted which would have a material adverse effect on its business or its
ability to perform hereunder;
B. Create, incur, assume or permit to exist any Indebtedness other
than loans from Bank except obligations now existing as shown in the financial
statements referenced in SECTION 7.(g)(i), excluding those being refinanced by
Bank, Subordinated Debt and Permitted Indebtedness; or sell or transfer, either
with or without recourse, any accounts or notes receivable or any monies due or
to become due;
C. Create, incur, assume or permit to exist any mortgage, pledge,
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
Permitted Liens and liens in favor of Bank, or execute any financing statements
covering any asset in favor of any person other than Bank;
D. Sell or dispose of any of the Collateral other than to Bank
(other than the disposing of such Collateral in the ordinary and normal course
of its business as now conducted or other assets which are obsolete or otherwise
considered surplus);
E. Make any loans or advances to any Person or other entity other
than in the ordinary and normal course of its business as now conducted
(provided that such loans or advances are not made to any Person or entity which
is controlled by or under common control with Borrower in an amount in excess of
$300,000) or make any investment in the securities of any Person or other entity
other than the United States Government;
F. (1) Purchase or otherwise acquire all or substantially all of the
assets or business of any Person or other entity; or (2) liquidate, dissolve,
merge or consolidate, or commence any proceedings therefore; and
G. Declare or pay any dividend or make any other distribution on any
of its capital stock now outstanding or hereafter issued or purchase, redeem or
retire any of such stock other than in dividends or distributions payable in
Borrower's or any such Subsidiary's capital stock other than (i) repurchases of
equity securities owned by any employee, consultant, officer or director upon
termination of their relationship with the
3.
Borrower, (ii) repurchase of equity securities with the proceeds of the sale of
other equity securities or Subordinated Debt; (iii) dividends by any Subsidiary
to Borrower; and (iv) dividends, repurchases or other distributions, which after
giving effect to such dividend, repurchase or other distribution, would not have
a material adverse effect on Borrower or its ability to perform hereunder or
leave Borrower with cash and cash equivalents less than the aggregate commitment
of the Bank under this Loan Agreement.
9. AFFIRMATIVE COVENANTS. Borrower affirmatively covenants that so long
as any loans, obligations or liabilities remain outstanding or unpaid to Bank or
the commitment of Bank hereunder is in effect, it will:
A. Furnish Bank from time to time such information as Bank may
reasonably request and inform Bank immediately upon the occurrence of a material
adverse change therein.
B. Notwithstanding any provision of this Agreement to the contrary,
Borrower shall not be required to disclose, permit the inspection, examination,
copying or making extracts of, or discuss, any document, information or other
matter that is prohibited by an intellectual property development agreement
("Intellectual Property Development Agreement") with a third party binding on
the Borrower, provided the agreement was not entered into by the Borrower for
the primary purpose of concealing information from the Bank, and further
provided the agreement was executed prior to the date hereof and Borrower uses
its best efforts to obtain the third party's consent to disclose such
information to Bank. Notwithstanding anything to the contrary, Intellectual
Property Development Agreements shall not include any license agreements in
which the Borrower is the licensee or the licensor.
C. Permit representatives of Bank to conduct an audit of Borrower's
books and records relating to the Collateral and make extracts therefrom, with
results satisfactory to Bank, PROVIDED that Bank shall use its best efforts to
not interfere with the conduct of Borrower's business, and to the extent
possible to arrange for verification of the Accounts directly with the account
debtors obligated thereon or otherwise, all under reasonable procedures
acceptable to Bank and at Borrower's sole expense (not to exceed $2,500 per
audit); PROVIDED FURTHER that, prior to an Event of Default, Borrower shall not
be responsible for the expense of more than one (1) such audit, in any fiscal
year. Borrower hereby acknowledges and agrees that upon completion of any such
audit, Bank shall have the right to adjust the Borrowing Base percentage, in its
sole and reasonable discretion, based on its review of the results of such
Collateral audit;
D. Promptly notify Bank of any attachment or other legal process
levied against any of the Collateral and any information received by Borrower
relative to the Collateral, including the Accounts, the account debtors or other
Persons obligated in connection therewith, which may in any way affect the value
of the Collateral or the rights and remedies of Bank in respect thereto;
E. Reimburse Bank upon demand for any and all documented legal
costs, including reasonable attorneys' fees, and other expenses incurred in
collecting any sums payable by Borrower under the Loan Account or any other
obligation secured hereby, enforcing any term or provision of this Loan
Agreement or otherwise or in the checking, handling and collection of the
Collateral and the preparation and enforcement of any agreement relating
thereto;
F. Notify Bank of each location and of each office of Borrower at
which records of Borrower relating to the Accounts are kept;
G. Provide, maintain and deliver to Bank policies insuring the
Collateral against loss or damage as set forth in the General Security
Agreement;
4.
H. In the event the unpaid balance of the Loan Account shall exceed
the maximum amount of outstanding loans to which Borrower is entitled under
SECTION 1 hereof, as applicable, Borrower shall within three (3) business days
pay to Bank for credit to the Loan Account the amount of such excess;
I. Maintain and preserve all rights, franchises and other authority
adequate and necessary for the conduct of its business and maintain and preserve
its existence in the state of its incorporation and any other state(s) in which
Borrower conducts its business, except with respect to such other state(s),
where the failure to do so would not have a Material Adverse Effect;
J. Maintain public liability, property damage and workers
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses. Borrower shall provide evidence of property
insurance in amounts and types acceptable to Bank, and certificates naming Bank
as a loss payee;
K. Pay and discharge, before the same becomes delinquent and
penalties accrue thereon, all taxes, assessments and governmental charges upon
or against it or any of its properties, and any of its other liabilities at any
time existing, except to the extent and so long as: (1) the same are being
contested in good faith and by appropriate proceedings in such manner as not to
cause any Material Adverse Effect or the loss of any right of redemption from
any sale thereunder; and (2) it shall have set aside on its books reserves
(segregated to the extent required by GAAP);
L. Maintain a standard and modern system of accounting in accordance
with GAAP on a basis consistently maintained; permit Bank's representatives to
have access to, and to examine its properties, books and records at all
reasonable times; provided that Bank shall use its best efforts to not interfere
with the conduct of Borrower's business;
M. Maintain its properties, equipment and facilities in good order
and repair;
N. Maintain its primary banking and operating accounts with Bank or
Imperial Securities Corporation; and
O. Prior to allowing any of Borrower's raw materials, work in
process, finished goods inventory and property, plant and equipment to be
transported to or be held at any contract manufacturer, warehouse or other
location (other than with BONA FIDE distributors and retail accounts), Borrower
shall provide notice to Bank and Borrower shall have complied with such filing
and notice requirements as shall, in Bank's opinion, assure Borrower's and
Bank's priority in such property over creditors of such contract manufacturer,
warehouseman or operator of such other location, including, without limitation,
making filings under California Commercial Code Section 2326, providing notice
under California Commercial Code Section 9114 and making filings and
publications as required under California Civil Code Section 3440.1 and Section
3440.5 All such filings, notices and publications shall be in form and
substance satisfactory to Bank.
P. Borrower shall perform all acts reasonably necessary to ensure
that Borrower, its Subsidiaries and any business in which Borrower holds a
substantial interest becomes Year 2000 Compliant in a timely manner. Such acts
shall include, without limitation, performing a comprehensive review and
assessment of all of Borrower's systems and adopting a detailed plan, with an
itemized budget, for the remediation, monitoring and testing of such systems.
If requested by Bank, Borrower shall immediately deliver a statement to Bank
summarizing the Year 2000 exposure, program or progress of Borrower and its
Subsidiaries or other evidence of Borrower's compliance with the terms of this
Section, certified by an officer of Borrower.
5.
10. FINANCIAL COVENANTS AND INFORMATION. All financial covenants and
financial information referenced herein shall be interpreted and prepared in
accordance with GAAP as used in the United States of America applied on a basis
consistent with previous years. Compliance with the financial covenants shall
be calculated and monitored on a monthly basis, except as shall be expressly
stated to the contrary. Borrower affirmatively covenants that so long as any
loans, obligations or liabilities remain outstanding or unpaid to Bank or any
commitment is outstanding hereunder, it will, on a consolidated basis:
A. At all times, maintain a Minimum Tangible Net Worth of not less
than $5,000,000. As used herein, "TANGIBLE NET WORTH" shall mean all assets,
EXCLUDING any value for goodwill, trademarks, patents, copyrights, organization
expense and other similar intangible items, LESS all liabilities, PLUS
Subordinated Debt;
B. At all times maintain a Minimum Adjusted Quick Ratio of not less
than 1.25:1.00. As used herein "ADJUSTED QUICK RATIO" means ALL unrestricted
cash and cash equivalents PLUS Accounts DIVIDED BY current liabilities LESS
deferred maintenance contract revenue;
C. Measured on a quarterly basis on the last day of each fiscal
quarter, have Maximum Quarterly Losses not in excess of (1) $2,500,000 through
the fiscal quarter ending February 28, 1999 and (2) $1,500,000 for each fiscal
quarter thereafter;
D. As soon as it is available, but not later than thirty (30) days
after and as of the end of each month, deliver to Bank an internally-prepared
financial statement consisting of a balance sheet and profit and loss statement,
prepared in accordance with GAAP, and a Compliance Certificate in the form of
EXHIBIT B attached hereto and incorporated herein by this reference, certified
by an officer of Borrower;
E. As soon as it is available, but not later than ninety (90) days
after the end of Borrower's fiscal year, deliver to Bank unqualified copies of
Borrower's consolidated financial statements together with changes in financial
position audited by an independent certified public accountant selected by
Borrower but reasonably acceptable to Bank;
F. So long as any Revolving Loans remain outstanding and unpaid
under the Revolving Loan Account, as soon as it is available, but not later than
twenty (20) days after and as of the end of each month, deliver to Bank, in such
form and detail as Bank may reasonably require, statements showing aging of the
Accounts and Borrower's accounts payable, together with a Borrowing Base
Certificate in the form of EXHIBIT C attached hereto and incorporated herein by
this reference, certified by an officer of Borrower. Notwithstanding the
foregoing, if Borrower has not provided to Bank the statements described
immediately above for the most recent month then ended, as a condition to any
request for a Revolving Loan, Borrower shall have delivered to Bank said
statements as well as a Borrowing Base Certificate covering the most recent
month then ended at least twenty (20) days prior to the date of Borrower's
request for an advance for said Revolving Loan;
G. Upon the reasonable request of Bank, deliver to Bank current
budgets, sales projections, operating plans and other financial exhibits and
information in form and substance reasonably satisfactory to Bank; and
H. Upon any officer becoming aware, deliver immediately to Bank
written notice of any pending or threatened litigation reasonably likely to
result in, damages against Borrower in an amount in excess of $50,000.00.
11. LOAN FEE. Borrower has paid, and Bank hereby acknowledges receipt of,
in respect of the Revolving Commitment, a loan fee in the amount of Twelve
Thousand Five Hundred Dollars ($12,500.00).
6.
12. DEFAULT AND REMEDIES. The occurrence of any one or more of the
following shall constitute an "EVENT OF DEFAULT": (a) Default be made in the
payment of any obligation by Borrower under any Loan Document and such failure
shall continue for three (3) days; (b) Except for any failure to pay as
described in clause (a) above, breach be made in any warranty, statement,
promise, term or condition, contained herein or in any other Loan Document and
the same shall not have been cured to the satisfaction of Bank within fifteen
(15) days after Borrower shall have become aware thereof, whether by written
notice from Bank, or otherwise, (except that no cure period shall exist for
breaches in respect of Borrower's obligations under SECTION 8, SUBSECTIONS 9.B.,
9.F., 9.G., 9.I. and 9.O., SUBSECTIONS 10.A., 10.B., 10.C., 10.D., 10.E. and
10.F. of this Loan Agreement, and SECTIONS 1 and 2 of the General Security
Agreement); (c) Any statement, warranty or representation made by Borrower at
any time proves false; (d) Borrower defaults in the repayment of any principal
of or the payment of any interest on any indebtedness exceeding in the aggregate
principal amount $50,000.00 or breaches or violates any term or provision of any
promissory note, loan agreement, mortgage, indenture or other evidence of such
indebtedness pursuant to which amounts outstanding in the aggregate exceed
$50,000.00 and such failure continues beyond any applicable grace period if the
effect of such breach is to permit the acceleration of such indebtedness,
provided the note holder or obligee has not waived the default, and such failure
shall not have been cured to Bank's satisfaction within fifteen (15) calendar
days after Borrower shall become aware thereof, whether by written notice from
Bank or otherwise, or there has in fact been an acceleration of such
indebtedness; (e) Borrower becomes insolvent or makes an assignment for the
benefit of creditors; (f) Any proceeding be commenced by Borrower under any
bankruptcy, reorganization, arrangement, readjustment of debt or moratorium law
or statute or, any such a proceeding is commenced against Borrower and is not
dismissed or stayed within ten (10) days (PROVIDED THAT no Loans will be made
prior to the dismissal of such proceeding); (g) Any money judgment, writ of
attachment, garnishment, execution or other legal process be entered against
Borrower or issued against any material property of Borrower which is not fully
covered by insurance (subject to reasonable deductibles) and remains unvacated,
unbonded, unstayed or unpaid or undischarged for more than fifteen (15) days
(whether or not consecutive) or in any event later than five (5) days prior to
the date of any proposed sale thereunder, or if any assessment for taxes against
Borrower other than against any of its real property, is made by the Federal or
State government or any department thereof; or (h) Any change in Borrower's
financial condition, prospects or operations which has a Material Adverse
Effect. Upon the occurrence and during the continuance of an Event of Default,
Bank may, at its option and without demand first made and without notice to
Borrower, do any one or more of the following: (i) Terminate its obligation to
make loans to Borrower as provided in SECTION 1 hereof; (ii) Declare all sums
secured hereby immediately due and payable; (iii) Immediately take possession of
the Collateral wherever it may be found, using all legally permissible means to
do so, or require Borrower to assemble the Collateral and make it available to
Bank at a place designated by Bank which is reasonably convenient to Borrower
and Bank, and Borrower waives all claims for damages due to or arising from or
connected with any such taking; (iv) Proceed in the foreclosure of Bank's
security interest and sale of the Collateral in any manner permitted by law, or
provided for herein; (v) Sell, lease or otherwise dispose of the Collateral at
public or private sale, with or without having the Collateral at the place of
sale, and upon terms and in such manner as Bank may determine, and Bank may
purchase same at any such sale; (vi) Retain the Collateral in full satisfaction
of the obligations secured thereby to the extent permitted under the Uniform
Commercial Code; or (vii) Exercise any remedies of a secured party under the
Uniform Commercial Code. Prior to any such disposition, Bank may, at its
option, cause any of the Collateral to be repaired or reconditioned in such
manner and to such extent as Bank may deem advisable, and any sums expended
therefor by Bank shall be repaid by Borrower and secured hereby. Bank shall
have the right to enforce one or more remedies hereunder successively or
concurrently, and any such action shall not estop or prevent Bank from pursuing
any further remedy that it may have hereunder or by law. If a sufficient sum is
not realized from any such disposition of the Collateral to pay all obligations
secured by this Loan Agreement, Borrower hereby promises and agrees to pay Bank
any deficiency.
13. RECORDS RETENTION. Borrower authorizes Bank to destroy all invoices,
delivery receipts, reports and other types of documents and records submitted to
Bank in connection with the transactions contemplated herein at any time
subsequent to four (4) months from the time such items are delivered to Bank.
7.
14. ATTORNEYS' FEES. Borrower agrees to reimburse Bank for its reasonable
attorneys' fees and expenses incurred in connection with the negotiation,
preparation, execution and delivery of the Loan Documents.
15. GOVERNING LAW; JUDICIAL REFERENCE.
A. GOVERNING LAW. This Agreement shall be deemed to have been made
in the State of California and the validity, construction, interpretation, and
enforcement hereof, and the rights of the parties hereto, shall be determined
under, governed by, and construed in accordance with the internal laws of the
State of California, without regard to principles of conflicts of law.
B. JUDICIAL REFERENCE.
(1) Other than (a) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (b) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Loan Agreement or the other Loan Documents, which controversy,
dispute or claim is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to this Loan
Agreement gives written notice to all other parties that a controversy, dispute
or claim exists), will be settled by a reference proceeding in California in
accordance with the provisions of Section 638 ET SEQ. of the California Code of
Civil Procedure, or their successor section ("CCP"), which shall constitute the
exclusive remedy for the settlement of any controversy, dispute or claim
concerning this Loan Agreement, including whether such controversy, dispute or
claim is subject to the reference proceeding and except as set forth above, the
parties waive their rights to initiate any legal proceedings against each other
in any court or jurisdiction other than the Superior Court in the County where
the real property, if any, is located or Santa Clara County, if none (the
"COURT"). The referee shall be a retired Judge of the Court selected by mutual
agreement of the parties, and if they cannot so agree within forty-five (45)
days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his/her representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of Court (or
any subsequently enacted Rule). Each party shall have one peremptory challenge
pursuant to CCP Section 170.6. The referee shall (x) be requested to set the
matter for hearing within sixty (60) days after the date of selection of the
referee and (y) try any and all issues of law or fact and report a statement of
decision upon them, if possible, within ninety (90) days of the Claim Date. Any
decision rendered by the referee will be final, binding and conclusive and
judgement shall be entered pursuant to CCP Section 644 in any court in the State
of California having jurisdiction. Any party may apply for a reference
proceeding at any time after thirty (30) days following notice to any other
party of the nature of the controversy, dispute or claim, by filing a petition
for a hearing and/or trial. All discovery permitted by this Loan Agreement
shall be completed no later than fifteen (15) days before the first hearing date
established by the referee. The referee may extend such period in the event of
a party's refusal to provide requested discovery for any reason whatsoever,
including, without limitation, legal objections raised to such discovery or
unavailability of a witness due to absence or illness. No party shall be
entitled to "priority" in conducting discovery. Depositions may be taken by
either party upon seven (7) days written notice, and request for production or
inspection of documents shall be responded to within ten (10) days after
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided
herein, the Superior Court is empowered to issue temporary and/or provisional
remedies, as appropriate.
(2) Except as expressly set forth in this Loan Agreement, the
referee shall determine the manner in which the reference proceeding is
conducted including the time and place of all hearings, the order of
presentation of evidence, and all other questions that arise with respect to the
course of the reference proceeding. All proceedings and hearings conducted
before the referee, except for trial, shall be conducted without a court
reporter except that when any party so requests, a court reporter will be used
at any hearing
8.
conducted before the referee. The party making such a request shall have the
obligation to arrange for and pay for the court reporter. The costs of the
court reporter at the trial shall be borne equally by the parties.
(3) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the
close of the reference proceeding that shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
(4) In the event that the enabling legislation which provides
for appointment of a referee is repealed (and no successor statute is enacted),
any dispute between the parties that would otherwise be determined by the
reference procedure herein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the Court,
in accordance with the California Arbitration Act, Section 1280 through Section
1294.2 of the CCP as amended from time to time. The limitations with respect to
discovery as set forth hereinabove shall apply to any such arbitration
proceeding.
16. MISCELLANEOUS PROVISIONS.
A. Nothing herein shall in any way limit the effect of the
conditions set forth in any other security or other agreement executed by
Borrower, but each and every condition hereof shall be in addition thereto.
B. No failure or delay on the part of Bank, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof.
C. All rights and remedies existing under this Loan Agreement or any
other Loan Document are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
D. All headings and captions in this Loan Agreement and any related
documents are for convenience only and shall not have any substantive effect.
9.
E. This Loan Agreement may be executed in any number of
counterparts, each of which when so delivered shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. Each
such agreement shall become effective upon the execution of a counterpart hereof
or thereof by each of the parties hereto and telephonic notification that such
executed counterparts has been received by Borrower and Bank.
BANK: BORROWER:
IMPERIAL BANK INTRAWARE, INC.,
a Delaware corporation
By: /s/ Sunita Patel By: /s/ Donald M. Freed
-------------------------------- --------------------------------
Sunita R. Patel Donald Freed
Assistant Vice President Executive Vice President and
Chief Financial Officer
LIST OF EXHIBITS AND SCHEDULES
EXHIBIT A: Definitions
SCHEDULE 1 TO EXHIBIT A: List of Specific Permitted Indebtedness
SCHEDULE 2 TO EXHIBIT A: List of Specific Permitted Liens
EXHIBIT B: Compliance Certificate
EXHIBIT C: Borrowing Base Certificate
10.
EXHIBIT A
DEFINITIONS
"ACCOUNTS" means any right to payment for goods sold or leased, or to be
sold or to be leased, or for services rendered or to be rendered no matter how
evidenced, including accounts receivable, contract rights, chattel paper,
instruments, purchase orders, notes, drafts, acceptances, general intangibles
and other forms of obligations and receivables.
"CAPITAL LEASE" means, as to any Person, any lease of any Property by such
Person as lessee that is, or should be in accordance with Financing Accounting
Standards Board Statement No. 13, classified and accounted for as a "CAPITAL
LEASE" on the balance sheet of such Person prepared in accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, with respect to any Capital Lease, the
amount of the obligation of the lessee thereunder that, in accordance with GAAP,
would appear on a balance sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed in a note to such balance sheet.
"COLLATERAL" means any and all personal property of Borrower which is
assigned or hereafter is assigned to Bank as security or in which Bank now has
or hereafter acquires a security interest hereunder (including, without
limitation, the Accounts), or pursuant to the terms of the General Security
Agreement, the IP Security Agreement or otherwise.
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, letter of credit or other obligation of another, including,
without limitation, any such obligation directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business), co-made or discounted or sold with recourse by that Person, or in
respect of which that Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation for which that Person is in
effect liable through any agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation (whether in the
form of loans, advances, capital stock purchases, capital contributions or
otherwise), or to maintain the solvency of the obligor of such obligation, or to
make payment for any products, materials or supplies or for any transportation,
services or lease regardless of the non-delivery or non-furnishing thereof, in
any such case if the purpose or intent of such agreement is to provide assurance
that such obligation will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof. The amount of
any Contingent Obligation of any Person shall be deemed to be an amount equal to
the maximum amount of such Person's liability with respect to the stated or
determinable amount of the primary obligation for which such Contingent
Obligation is incurred or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder).
"ELIGIBLE ACCOUNTS" means such of Borrower's Accounts as Bank in its
reasonable discretion shall determine are eligible from time to time; PROVIDED,
HOWEVER, that in no event shall Eligible Accounts include the following unless
otherwise agreed to in writing by Bank:
(1) all Accounts under which payment is not received within 90 days
from the applicable invoice date;
Exhibit A
Page 1 of 5
(2) all Accounts against which the account debtor or any other Person
obligated to make payment thereon asserts any defense, offset, counterclaim
or other right to avoid or reduce the liability represented by the
Accounts;
(3) any Accounts if the account debtor or any other Person liable in
connection therewith is insolvent, subject to bankruptcy or receivership
proceedings or has made an assignment for the benefit of creditors or whose
credit standing is unacceptable to Bank and Bank has so notified Borrower;
(4) Accounts with respect to which the account debtor is an officer,
director, shareholder, employee or Subsidiary;
(5) Accounts due from an account debtor if more than fifty percent
(50%) of the aggregate amount of Accounts of such account debtor have at
that time remained unpaid for more than ninety (90) days from the
applicable invoice date;
(6) Accounts with respect to international transactions unless either
(a) such Accounts are insured or covered by a letter of credit in a manner
and form acceptable to the Bank or (b) Bank shall have otherwise permitted
in writing in its sole and absolute direction;
(7) salesperson's accounts for promotional purposes;
(8) the amount by which the aggregate of all Accounts of an account
debtor exceeds twenty-five percent (25.0%) of the total accounts receivable
balance;
(9) Accounts where the account debtor is a seller to borrower, to the
extent that a potential offset exists; and
(10) Accounts where the account debtor is a federal governmental
entity, federal agency or instrumentality thereof.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 12.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by the significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GENERAL SECURITY AGREEMENT" means that certain General Security Agreement
dated of even date herewith, made by Borrower in favor of Bank.
"INDEBTEDNESS" means, as to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money, including, without limitation,
all of such indebtedness outstanding under this Loan Agreement and any of the
other Loan Documents, (b) all Capital Lease Obligations of such Person, (c) to
the extent of the outstanding indebtedness thereunder, any obligation of such
Person representing an extension of credit to such Person, whether or not for
borrowed money, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than (i) trade or other accounts payable in
the ordinary course of business in accordance with customary industry terms and
(ii) deferred franchise fees), (e) all Contingent Obligations, (f) any
obligation of such Person of the nature described in clauses (a), (b), (c), (d)
or (e) above, that is secured by a Lien
Exhibit A
Page 2 of 5
on assets of such Person and which is non-recourse to the credit of such Person,
but only to the extent of the fair market value of the assets so subject to the
Lien, (g) obligations of such Person arising under acceptance facilities or
under facilities for the discount of accounts receivable of such Person, (h) any
obligation of such Person to reimburse the issuer of any letter of credit issued
for the account of such Person upon which a draw has been made, and (i) any
lease having the effect of indebtedness, whether or not the same shall be
treated as such on the balance sheet of Borrower under GAAP.
"IP SECURITY AGREEMENT" means that certain Collateral Assignment as
Collateral, Patent Mortgage and Security Agreement dated of even date herewith,
made by Borrower in favor of Bank.
"LIEN" means any mortgage, pledge, security interest, lien or other charge
or encumbrance, including the lien or retained security title of a conditional
vendor, upon or with respect to any property or assets.
"LOAN ACCOUNT" means the Revolving Loan Account.
"LOAN DOCUMENTS" means this Loan Agreement, the General Security Agreement,
the IP Security Agreement and that certain Agreement to Provide Insurance (Real
or Personal Property) dated of even date herewith, each as executed by Borrower
in favor of Bank, together with all other documents entered into or delivered
pursuant to any of the foregoing, in each case as originally executed or as the
same may from time to time be modified, amended, supplemented or restated.
"MATERIAL ADVERSE EFFECT" means any set of circumstances or events which
(a) has or could reasonably be expected to have any material adverse effect upon
the validity or enforceability of any material provision of any Loan Document,
(b) is or could reasonably be expected to be material and adverse to the
condition (financial or otherwise) or business operations of Borrower,
(c) materially impairs or could reasonably be expected to materially impair the
ability of Borrower, to perform its material Obligations, (d) materially impairs
or could reasonably be expected to materially impair the value or priority of
Bank's security interest in any Collateral or (e) materially impairs or could
reasonably be expected to materially impair the ability of Bank to enforce any
of its legal remedies pursuant to the Loan Documents.
"PERMITTED INDEBTEDNESS" means the following:
(1) indebtedness of Borrower or Indebtedness and Contingent
Obligations of its Subsidiaries in favor of Bank arising under this Loan
Agreement and the other Loan Documents;
(2) the existing Indebtedness and Contingent Obligations disclosed
on SCHEDULE 1 attached hereto and incorporated herein by this reference;
PROVIDED that the principal amount thereof is not increased and the terms
thereof are not modified to impose more burdensome terms upon Borrower or
any of its Subsidiaries;
(3) the Subordinated Debt;
(4) extensions, renewals or refinancings of Indebtedness permitted
under this Loan Agreement, other than clause (3) immediately above;
(5) accrued dividends on the preferred stock of Borrower;
(6) interest rate and currency hedging agreements;
Exhibit A
Page 3 of 5
(7) guaranties of any Subsidiary's suppliers in connection with the
purchase of supplies in the ordinary course of business;
(8) guaranties of lease obligations incurred in the ordinary course
of business and to the extent otherwise permitted hereunder;
(9) Contingent Obligations constituting Permitted Liens; and
(10) the indebtedness referred to in clause (3)(a) of the definition
of Permitted Liens.
"PERMITTED LIENS" means the following:
(1) liens and security interests existing as of this date and
disclosed in SCHEDULE 2 attached hereto and incorporated herein by this
reference;
(2) liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith
by appropriate proceedings;
(3) liens and security interests (a) upon or in any equipment
acquired or held by Borrower to secure the purchase price of such equipment
or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment and in an amount not greater than the
purchase price thereof or (b) existing on such equipment at the time of its
acquisition, PROVIDED that the lien and security interest is confined
solely to the property so acquired and improvements thereon, and the
proceeds of such equipment;
(4) liens consisting of leases or subleases and licenses and
sublicenses granted to others in the ordinary course of Borrower's business
not interfering in any material respect with the business of Borrower and
any interest or title of a lessor or licensor under any lease or license,
as applicable;
(5) liens securing claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons or entities
imposed without action of such parties, PROVIDED that the payment thereof
is not yet required;
(6) liens incurred or deposits made in the ordinary course of
Borrower's business in connection with worker's compensation, unemployment
insurance, social security and other like laws;
(7) liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(8) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances affecting real property not interfering in any material
respect with the ordinary conduct of Borrower's business;
(9) liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(10) liens that are not prior to Bank's security interest which
constitute rights of set-off of a customary nature;
Exhibit A
Page 4 of 5
(11) any interest or title of a lessor in equipment subject to any
Capitalized Lease otherwise permitted hereunder; and
(12) any liens arising from the filing of any financing statements
relating to true leases otherwise permitted hereunder.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, firm, joint stock
company, estate, entity or governmental agency.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.
"SUBORDINATED DEBT" means indebtedness of Borrower, the repayment of
principal of which is fully subordinated in time and right of payment to the
Loans, and has been approved in Bank's sole and absolute discretion and in
writing.
"YEAR 2000 COMPLIANT" means, in regard to Borrower or any Person, that all
software, hardware, firmware, equipment, goods or systems utilized by or
material to the business operations or financial condition of Borrower or such
Person, will properly perform date sensitive functions before, during and after
the year 2000.
"YEAR 2000 PROBLEM" means the risk that any computer applications used by
Borrower and its Subsidiaries may be unable to recognize and properly perform
date-sensitive functions involving certain dates prior to and any date on or
after December 31, 1999.
Exhibit A
Page 5 of 5
SCHEDULE 1 TO EXHIBIT A
SPECIFIC PERMITTED INDEBTEDNESS
Schedule 1 to Exhibit A
Page 1 of 1
SCHEDULE 2 TO EXHIBIT A
SPECIFIC PERMITTED LIENS
Schedule 2 to Exhibit A
Page 1 of 1
EXHIBIT B
COMPLIANCE CERTIFICATE
The consolidated financial statements dated as of __________________________ of
INTRAWARE, INC., a Delaware corporation ("BORROWER") attached hereto and
submitted to IMPERIAL BANK ("BANK") pursuant to that certain Loan Agreement
dated as of July 29, 1998, entered into between Borrower and Bank (the "LOAN
AGREEMENT"), are in compliance with all financial covenants (unless otherwise
noted below) as specified in SECTION 10 therein, as follows:
--------------------------------------------------------------------------------
COVENANT: ACTUAL:
A. MINIMUM TANGIBLE NET WORTH OF:
$5,000,000
--------------------------------------------------------------------------------
B. MINIMUM QUICK RATIO:
1.25:.00
--------------------------------------------------------------------------------
C. MAXIMUM QUARTERLY LOSSES NOT IN EXCESS OF:
$2,500,000 (through the FQ ending 2/28/99)
$1,500,000 (each FQ thereafter)
--------------------------------------------------------------------------------
Exceptions: (if none, so state):
--------------------------------------------------------------------------------
The undersigned authorized officer of Borrower hereby certifies that Borrower is
in complete compliance with the terms and conditions of the Loan Agreement for
the period ending _____________________, ____, and as of the date of this
Compliance Certificate the representations and warranties stated therein are
true, accurate and complete as of the date hereof (except as to those
representations and warranties which specifically reference a particular date
and except as noted above).
The undersigned further certifies that s/he knows of no pending conditions which
may cause an Event of Default (as defined in the Loan Agreement) to exist in the
next thirty (30) days. The required support documents for this certification
are attached and prepared in accordance with GAAP consistently applied.
Date: INTRAWARE INC.,
------------------------- a Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Exhibit B
Page 1 of 1
EXHIBIT C
BORROWING BASE CERTIFICATE
(To be provided and attached by Bank)
Exhibit C
GENERAL SECURITY AGREEMENT
THIS GENERAL SECURITY AGREEMENT is executed on July 29, 1998 (this
"SECURITY AGREEMENT"), by INTRAWARE, INC., a Delaware corporation (hereinafter
called "GRANTOR"). In consideration of financial accommodations given, to be
given or continued, Grantor hereby grants to IMPERIAL BANK (hereinafter called
"BANK") a security interest in (a) all property (i) delivered to Bank by
Grantor, (ii) which shall be in Bank's possession or control in any matter or
for any purpose, (iii) described below or (iv) now owned or hereafter acquired
by Grantor of the type or class described below and/or in any exhibit or
supplementary schedule hereto, or in any financing statement filed by Bank and
executed by or on behalf of Grantor; and (b) the proceeds, increase and products
of such property, all accessions thereto, and all property which Grantor may
receive on account of such collateral (collectively referred to as "COLLATERAL")
to secure payment and performance of all of Grantor's present or future debts or
obligations to Bank, whether absolute or contingent (hereafter referred to as
"DEBT"). See EXHIBIT A attached hereto and incorporated herein by this
reference for a description of the Collateral (it being understood that,
notwithstanding the foregoing, the Collateral shall not include (a) any
equipment leased or financed from third parties to the extent the contracts
evidencing such lease or financing prohibit the granting by Grantor of any
security interest therein (together with accessions, attachments, improvements,
replacements and proceeds thereof), and (b) any rights of Grantor under any
license or contract if, and to the extent, the granting of a security interest
therein in favor of Bank would violate the terms of such license or contract
only to the extent and for so long as such prohibition is in effect.) The
Collateral which is not in Bank's possession will be located at the locations
set forth on EXHIBIT B attached hereto and incorporated herein by this
reference. Unless otherwise defined herein, initially capitalized terms used
herein shall have the meanings given them (A) in the California Uniform
Commercial Code, (B) as defined in that certain Loan Agreement dated as of the
date hereof entered into by and among Grantor and Bank (as the same may be
modified, amended, supplemented, restated or superceded from time to time, the
"LOAN AGREEMENT") or (C) as defined in EXHIBIT A attached hereto.
Grantor hereby represents, warrants and agrees:
1. Grantor will immediately pay (a) Bank's costs of collecting the Debt,
of protecting, insuring or realizing on Collateral, and any expenditure of Bank
pursuant hereto, including attorneys' fees and expenses, with interest at the
rate of twenty-four percent (24%) per year, or the rate applicable to the Debt,
whichever is less, from the date of expenditure, and (b) any deficiency after
realization of Collateral.
2. Grantor will use the proceeds of any loan that becomes Debt hereunder
for the purpose indicated on the application therefor, and, will promptly
contract to purchase and pay the purchase price of any property which becomes
Collateral hereunder from the proceeds of any loan made for that purpose in the
event Bank and Grantor agree to a separate equipment line of credit.
3. As to all Collateral in Grantor's possession or the possession of its
contract manufacturers (unless specifically otherwise agreed to by Bank in
writing), Grantor will:
(a) Have or has possession of the Collateral at the location
disclosed to Bank and will not remove the Collateral from said location, except
in the ordinary course of Borrower's business, provided Grantor shall give Bank
prompt written notice thereof and take any actions reasonably requested by Bank
to perfect its security interest.
(b) Keep the Collateral separate and identifiable.
1.
(c) Maintain the Collateral in good and saleable condition, repair it
if necessary, ordinary wear and tear excepted, use it lawfully and only as
permitted by insurance policies, and permit Bank to inspect the Collateral at
any reasonable time in accordance with the terms of the Loan Agreement.
(d) Not sell, contract to sell, lease, encumber or transfer the
Collateral (other than the disposition of such inventory Collateral in the
ordinary course of Borrower's business and other assets which are obsolete or
otherwise considered surplus) until the Debt has been paid or performed in full,
even though Bank has a security interest in the proceeds of such Collateral.
4. As to Collateral which is inventory and accounts, Grantor:
(a) May, until notice from Bank after the occurrence and during the
continuance of an Event of Default, sell, lease or otherwise dispose of
inventory Collateral in the ordinary course of business only, and collect the
cash proceeds thereof.
(b) Will, upon notice from Bank after the occurrence and during the
continuance of an Event of Default, deposit all cash proceeds as received in a
demand deposit account with Bank, containing only such proceeds and deliver
statements identifying units of inventory disposed of, accounts which gave rise
to proceeds, and all acquisitions and returns of inventory as required by Bank.
(c) Will receive in trust after the occurrence and during the
continuance of an Event of Default, schedule on forms satisfactory to Bank and,
upon notice from Bank, deliver to Bank all non-cash proceeds other than
inventory received in trade.
(d) So long as there does not exist an Event of Default, may obtain
release of Bank's interest in individual units of inventory upon request
therefore, payment to Bank of the release price of such units shown on any
Collateral schedule supplementary hereto, and compliance herewith as to proceeds
thereof.
5. As to Collateral which are Accounts, Chattel Paper, General
Intangibles and Proceeds described in SECTION 4(c) above, Grantor warrants,
represents and agrees:
(a) All such Collateral is genuine, enforceable in accordance with
its terms and conditions precedent (except as disclosed to and accepted by Bank
in writing), and is supported by consecutively numbered invoices to, or rights
against, the debtors thereon. Grantor will supply Bank with duplicate invoices
or other evidence of Grantor's rights on Bank's request.
(b) All persons appearing to be obligated on such Collateral have
authority and capacity to contract.
(c) To the best of Grantor's knowledge (without independent
investigation), all Chattel Paper is in compliance with applicable law as to
form, content and manner of preparation and execution and has been properly
registered, recorded, and/or filed to protect Grantor's interest thereunder.
(d) If an account debtor shall also be indebted to Grantor on another
obligation, any payment made by such account debtor not specifically designated
by an account debtor to be applied on any particular obligation shall be
considered to be a payment on the account in which Bank has a security interest.
Should any remittance include a payment not on an account, it shall be delivered
to Bank and, if no Event of Default has occurred, Bank shall pay Grantor the
amount of such payment.
2.
(e) Grantor agrees that following the occurrence and during the
continuance of an Event of Default, Grantor shall not compromise, settle or
adjust any Account or renew or extend the time of payment thereof without Bank's
prior written consent.
(f) Until Bank exercises its rights to collect the Accounts pursuant
to SECTION 11 hereof, Grantor will collect with diligence all Grantor's
Accounts. Any collection of Accounts by Grantor, whether in the form of cash,
checks, notes, or other instruments for the payment of money (properly endorsed
or assigned where required to enable Bank to collect same), shall be in trust
for Bank, provided that Grantor shall not be required to remit the same to Bank
unless Bank believes, in its sole discretion, such remittance is necessary to
protect Bank's security interest or an Event of Default has occurred. If an
Event of Default has occurred and is continuing, Grantor shall keep all such
collections separate and apart from all other funds and property so as to be
capable of identification as the property of Bank and deliver said collections
daily to Bank in the identical form received. The proceeds of such collections
when received by Bank may be applied by Bank directly to the payment of the
applicable Loan Account or to any other obligation secured hereby. Any credit
given by Bank upon receipt of said proceeds shall be conditional credit subject
to collection. Returned items at Bank's option may be charged to Grantor's
deposit account with Bank. All collections of the Accounts shall be set forth
on an itemized schedule, showing the name of the account debtor, the amount of
each payment and such other information as Bank may request.
(g) Until Bank exercises its rights to collect the Accounts pursuant
to SECTION 11 hereof, Grantor may continue its present policies with respect to
returned merchandise and adjustments. However, Grantor shall immediately notify
Bank of all cases involving repossessions, and material loss or damage of or to
merchandise represented by the Accounts.
6. Grantor owns all of the Collateral absolutely and no other person has
or claims any interest in any of the Collateral, except for Permitted Liens and
as disclosed to and accepted by Bank in writing. Grantor will defend any
proceeding which may affect Bank's security interest in any of the Collateral,
and will indemnify and hold Bank free and harmless from all costs and expenses
of Bank's defense.
7. Grantor will pay when due all existing or future charges, liens or
encumbrances on and all taxes and assessments (except for taxes not yet due and
payable or which are contested in good faith and for which Grantor has set aside
adequate reserves) now or hereafter imposed on or affecting the Collateral and,
if the Collateral is in Grantor's possession, the realty on which the Collateral
is located.
8. Grantor will insure the Collateral with Bank as loss payee in form and
amounts with companies, and against risks and liability satisfactory to Bank (to
the extent customarily maintained by businesses similar to Borrower's), and
hereby assigns such policies to Bank, agrees to deliver them to Bank at Banks
request, and authorizes Bank to make any claim thereunder, to cancel the
insurance upon Grantor's default, and to receive payment of and endorse any
instrument in payment of any loss or return premium. If Grantor should fail to
deliver the required insurance policy or policies to Bank, Bank may, at
Grantor's cost and expense, without any duty to do so, get and pay for insurance
naming as the insured, at Bank's option, either both Grantor and Bank, or only
Bank, and the cost thereof shall be secured by this Security Agreement, and
shall be repayable as provided in SECTION 1 above.
9. Grantor will give Bank any information it reasonably requires in
accordance with the terms of the Loan Documents. All information at any time
supplied to Bank by Grantor (including, but not limited to, the value and
condition of Collateral, financial statements, financing statements, and
statements made in documentary Collateral) shall be true and correct in all
material respects, and Grantor will notify Bank of any adverse change in such
information. Grantor will promptly notify Bank of any change of Grantor's
residence, chief executive office or mailing address.
3.
10. At any time and from time to time, upon the written request of Bank,
and at the sole expense of Grantor, Grantor shall promptly and duly execute and
deliver any and all such further instruments and documents and take such further
action as Bank may reasonably deem desirable to obtain the full benefits of this
Security Agreement and of the rights and powers herein granted, including,
without limitation, (a) using its best efforts to secure all consents and
approvals necessary or appropriate for the grant of a security interest to Bank
in any Contract or License held by Grantor or in which Grantor has any rights
not heretofore assigned, (b) filing any financing or continuation statements
under the UCC with respect to the security interests granted hereby, (c) filing
or cooperating with Bank in filing any forms or other documents required to be
filed with the United States Patent and Trademark Office, United States
Copyright Office, or any filings in any foreign jurisdiction or under any
international treaty, required to secure or protect Bank's interest in the
Collateral, (d) in the event Bank, in its reasonable discretion, is concerned
about its security interest, transferring Collateral to Bank's possession (if a
security interest in such Collateral can be perfected by possession),
(e) placing the interest of Bank as lienholder on the certificate of title (or
other evidence of ownership) of any vehicle owned by Grantor or in or with
respect to which Grantor holds a beneficial interest and (f) using reasonable
efforts to obtain waivers of liens from landlords and mortgagees. Grantor also
hereby authorizes Bank to file any such financing or continuation statement
without the signature of Grantor. If any amount payable under or in connection
with any of the Collateral is or shall become evidenced by any Instrument, such
Instrument, other than checks and notes received in the ordinary course of
business, shall be duly endorsed in a manner satisfactory to Bank and delivered
to Bank promptly upon Grantor's receipt thereof.
11. Upon the occurrence and during the continuation of an Event of
Default, Bank may, without prior notice to Grantor, collect the Collateral and
may give notice of assignment of Accounts to any and all account debtors and
Grantor does hereby make, constitute and appoint Bank its irrevocable, true and
lawful attorney-in-fact with power to do any act which Grantor is obligated
hereby to do, to exercise such rights as Grantor may exercise, to use such
equipment as Grantor might use, to enter Grantor's premises to give notice of
Bank's security interest, and to collect Collateral and proceeds and to execute
and file in Grantor's name any financing statements and amendments thereto
required to perfect Bank's security interest hereunder, all to protect and
preserve the Collateral and Bank's rights hereunder. Without limiting the
generality of the foregoing, upon and during the continuance of an Event of
Default, Bank may:
(a) Endorse the name of Grantor, collect and receive delivery or
payment of Instruments and Documents constituting Collateral.
(b) Demand, sue for, give acquittances for, make extension agreements
with respect to or affecting Collateral, exchange it for other Collateral,
release persons liable thereon or take security for the payment thereof, and
compromise, prosecute or defend any action, claim, proceeding or other disputes
in connection therewith.
(c) Use or operate Collateral for the purpose of preserving
Collateral or its value and for preserving or liquidating Collateral.
12. Discharge of Grantor except for full payment, or any extension,
forbearance, change of rate of interest, or acceptance, release or substitution
of Collateral or any impairment or suspension of Bank's rights against Grantor,
or any transfer of Grantor's interest to another shall not affect the liability
of Grantor hereunder. Until the Debt shall have been paid or performed in full,
Bank's rights shall continue even if the Debt is deemed unenforceable. Grantor
hereby waives: (a) any right to require Bank to proceed against Grantor before
any other, or to pursue any other remedy; (b) presentment, protest and notice of
protest, demand and notice of nonpayment, demand or performance, notice of sale,
and advertisement of sale; (c) any right to the benefit of or to direct the
application of any Collateral until the Debt shall have been paid or performed
in full; and (d) any right of subrogation to Bank until the Debt shall have been
paid or performed in full.
4.
13. Upon and during the continuance of an Event of Default, at Bank's
option, without demand or notice, all or any part of the Debt shall immediately
become due and payable. Bank shall have all rights given by law, and may sell,
in one or more sales, Collateral in any county where Bank has an office. Bank
may purchase at such sale. Sales for cash or on credit to a wholesaler,
retailer or user of the Collateral, or at public or private auction, are all to
be considered commercially reasonable. Bank may require Grantor to assemble the
Collateral and make it available to Bank at the entrance to the location where
the Collateral is stored, or at a place designated by Bank.
14. Bank's acceptance of partial or delinquent payments or the failure of
Bank to exercise any right or remedy shall not waive any obligation of Grantor
or right of Bank to modify this Security Agreement, or waive any other similar
default.
15. Upon the transfer of all or any part of the Debt, Bank may transfer
all or any part of the Collateral. Bank may deliver all or any part of the
Collateral to any Grantor at any time. Any such transfer or delivery shall
discharge Bank from all liability and responsibility with respect to such
Collateral transferred or delivered. This Security Agreement benefits Bank's
successors and assigns and binds Grantor's heirs, legatees, personal
representatives, successors and assigns. Time is of the essence. This Security
Agreement, the other Loan Documents and the exhibit(s) attached hereto contain
the entire security agreement between Bank and Grantor. Grantor will execute
any additional agreements, assignments or documents reasonably required by Bank
to carry this Security Agreement into effect.
16. If one or more Grantors sign this Security Agreement, their liability
hereunder shall be joint and several. Any Grantor who is married hereby agrees
that recourse may be had against his or her separate property for the Debt.
17. This Security Agreement shall be governed by and construed in
accordance with the laws of the State of California, to the jurisdiction of
whose courts Grantor hereby agrees to submit. Grantor agrees that service of
process may be accomplished by any means authorized by California law. All
words used herein in the singular shall be considered to have been used in the
plural where the context and construction so require.
18. Grantor hereby acknowledges receiving a copy of this Security
Agreement and waives all rights to receive from Bank a copy of any financing
statement or financing change statement filed, or any verification statement
received, at any time in respect of this Security Agreement.
GRANTOR
INTRAWARE, INC.,
a Delaware corporation
By: /s/ Donald Freed
-----------------------------------
Donald Freed
Executive Vice President and
Chief Financial Officer
5.
EXHIBIT A
DESCRIPTION OF COLLATERAL
A. COLLATERAL. This Exhibit A covers all right, title and interest of
Grantor in, to and under all of the following, wherever located and whether now
owned or hereafter owned or acquired (collectively, the "Collateral"):
(a) All Accounts of Grantor;
(b) All Chattel Paper of Grantor;
(c) All Contracts of Grantor;
(d) All Deposit Accounts of Grantor;
(e) All Documents of Grantor;
(f) All Equipment of Grantor;
(g) All Fixtures of Grantor;
(h) All General Intangibles of Grantor;
(i) All Instruments of Grantor;
(j) All Inventory of Grantor;
(k) All Investment Property of Grantor;
(l) All Licenses of Grantor;
(m) All property of Grantor held by Bank or any other party for whom
Bank is acting as agent hereunder, including, without limitation, all property
of every description now or hereafter in the possession or custody of or in
transit to Bank or such other party for any purpose, including, without
limitation, safekeeping, collection or pledge, for the account of Grantor, or as
to which Grantor may have any right or power;
(n) All other goods and personal property of Grantor whether tangible
or intangible and whether now or hereafter owned or existing, leased, consigned
by or to, or acquired by, Grantor and wherever located; and
(o) To the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for, and rents,
profits and products of each of the foregoing (it being understood that,
notwithstanding the foregoing, the Collateral shall not include (a) any
equipment leased from or financed by third parties to the extent the contracts
evidencing such lease or financing prohibit the granting by Grantor of any
security interest therein (together with accessions,
Exhibit A
Page 1 of 5
attachments, improvements, replacements and proceeds thereof), and (b) any
rights of Grantor under any license or contract if, and to the extent, the
granting of a security interest therein in favor of Bank would violate the terms
of such license or contract only to the extent and for so long as such
prohibition is in effect.)
B. DEFINED TERMS. Unless otherwise defined herein, the following terms
shall have the following meanings (such meanings being equally applicable to
both the singular and plural forms of the terms defined):
"ACCOUNTS" means any "account," as such term is defined in Section 9106 of
the UCC, now owned or hereafter acquired by Grantor and, in any event, shall
include, without limitation, all accounts receivable, book debts and other forms
of obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments) now owned or hereafter received or acquired by or
belonging or owing to Grantor (including, without limitation, under any trade
name, style or division thereof) whether arising out of goods sold or services
rendered by Grantor or from any other transaction, whether or not the same
involves the sale of goods or services by Grantor (including, without
limitation, any such obligation which may be characterized as an account or
contract right under the UCC) and all of Grantor's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, and all of Grantor's rights to any goods represented by any of the
foregoing (including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned, reclaimed
or repossessed goods), and all monies due or to become due to Grantor under all
purchase orders and contracts for the sale of goods or the performance of
services or both by Grantor (whether or not yet earned by performance on the
part of Grantor or in connection with any other transaction), now in existence
or hereafter occurring, including, without limitation, the right to receive the
proceeds of said purchase orders and contracts, and all collateral security and
guarantees of any kind given by any person or entity with respect to any of the
foregoing.
"CHATTEL PAPER" means any "chattel paper," as such term is defined in
Section 9105(1)(b) of the UCC, now owned or hereafter acquired by Grantor.
"CONTRACTS" means all contracts, undertakings, franchise agreements or other
agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Grantor may now or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.
"COPYRIGHT LICENSE" means all of the following now owned or hereafter
acquired by Grantor: any agreement granting any right in or to any Copyright or
Copyright registration (whether Grantor is the licensee or the licensor
thereunder) including, without limitation, licenses pursuant to which Grantor
has obtained the exclusive right to use a copyright owned by a third party.
"COPYRIGHTS" means all of the following in which Grantor now holds or
hereafter acquires any interest: (i) all copyrights, whether registered or
unregistered, held pursuant to the laws of the United States, any state thereof
or of any other country; (ii) registrations, applications and recordings in the
United States Copyright Office or in any similar office or agency of the United
States, any state thereof or any other country or political subdivision thereof;
(iii) any continuations, renewals or extensions thereof; (iv) any registrations
to be issued in any pending applications; (v) prior versions of works covered by
copyright and all works based upon, derived from, or incorporating such works;
(vi) income, royalties, damages, claims, and payments now and hereafter due and
payable with respect to copyrights including, without limitation, damages and
payments for past, present, or
Exhibit A
Page 2 of 5
future infringement; (vii) rights to sue for past, present and future
infringements of copyright; and (viii) any other rights corresponding to any of
the foregoing rights throughout the world.
"DEPOSIT ACCOUNT" means any "deposit account" as such term is defined in
Section 9105(e) of the UCC, and should include, without limitation, any demand,
time, savings passbook or like account, now or hereafter maintained by or for
the benefit of Grantor, or in which Grantor now holds or hereafter acquires any
interest, with a bank, savings and loan association, credit union or like
organization (including Bank) and all funds and amounts therein, whether or not
restricted or designated for a particular purpose.
"DOCUMENTS" means any "documents," as such term is defined in Section
9105(1)(f) of the UCC, now owned or hereafter acquired by Grantor.
"EQUIPMENT" means any "equipment," as such term is defined in Section
9109(2) of the UCC, now or hereafter owned or acquired by Grantor and, in any
event, shall include, without limitation, all machinery, equipment, furnishings,
vehicles, computers and other electronic data-processing and any other office
equipment of any nature whatsoever, any and all additions, substitutions and
replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto.
"FIXTURES" means "fixtures," as such term is defined in Section 9313(1)(a)
of the UCC, now or hereafter owned or acquired by Grantor and, in any event,
shall include, without limitation, regardless of where located, all of the
fixtures, systems, machinery, apparatus, equipment and fittings of every kind
and nature whatsoever and all appurtenances and additions thereto and
substitutions or replacements thereof, now or hereafter attached or affixed to
or constituting a part of, or located in or upon, real property wherever
located, including, without limitation, all heating, electrical, mechanical,
lighting, lifting, plumbing, ventilating, air-conditioning and air cooling,
refrigerating, food preparation, incinerating and power, loading and unloading,
signs, escalators, elevators, boilers, communications, switchboards, sprinkler
and other fire prevention and extinguishing fixtures, systems, machinery,
apparatus and equipment, and all engines, motors, dynamos, machinery, pipes,
pumps, tanks, conduits and ducts constituting a part of any of the foregoing,
together with all right, title and interest of Grantor in and to all extensions,
improvements, betterments, renewals, substitutes, and replacements of, and all
additions and appurtenances to any of the foregoing property, and all
conversions of the security constituted thereby, immediately upon any
acquisition or release thereof or any such conversion, as the case may be.
"GENERAL INTANGIBLES" means any "general intangibles," as such term is
defined in Section 9106 of the UCC, now owned or hereafter acquired by Grantor
and, in any event, shall include, without limitation, all right, title and
interest which Grantor may now or hereafter have in or under any Contract, all
Intellectual Property, interests in partnerships, joint ventures and other
business associations, Licenses, permits, goodwill (including, without
limitation, the goodwill associated with any Trademark, Trademark registration
or Trademark licensed under any Trademark License), claims in or under insurance
policies, including unearned premiums, uncertificated securities, deposit
accounts, rights to receive tax refunds and other payments and rights of
indemnification.
"INSTRUMENTS" means any "instrument," as such term is defined in Section
9105(1)(i) of the UCC now owned or hereafter acquired by Grantor, including,
without limitation, all notes, certificated securities, and other evidences of
indebtedness, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.
Exhibit A
Page 3 of 5
"INTELLECTUAL PROPERTY" means all Copyrights, Patents, Trademarks, trade
secrets, customer lists, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
recipes, experience, processes, models, drawings, materials and records.
"INVENTORY" means any "inventory," as such term is defined in Section
9109(4) of the UCC, wherever located, now or hereafter owned or acquired by,
Grantor and, in any event, shall include, without limitation, all inventory,
merchandise, goods and other personal property which are held by or on behalf of
Grantor for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in Grantor's business, or
the processing, packaging, promotion, delivery or shipping of the same, and all
furnished goods whether or not such inventory is listed on any schedules,
assignments or reports furnished to Bank from time to time and whether or not
the same is in transit or in the constructive, actual or exclusive occupancy or
possession of Grantor or is held by Grantor or by others for Grantor's account,
including, without limitation, all goods covered by purchase orders and
contracts with suppliers and all goods billed and held by suppliers and all
inventory which may be located on premises of Grantor or of any carriers,
forwarding agents, truckers, warehousemen, vendors, selling agents or other
persons.
"INVESTMENT PROPERTY" means any "investment property," as such term is
defined in Section 9115(1)(f) of the UCC, now owned or hereafter acquired by
Grantor, including, without limitation, a security, whether certificated or
uncertificated, a security entitlement, a securities account, a commodity
contract or a commodity account.
"LICENSE" means any Copyright License, Patent License, Trademark License or
other license of rights or interests now held or hereafter acquired by Grantor.
"LOAN ACCOUNT" shall have the meaning ascribed to it in the Loan Agreement.
"LOAN DOCUMENTS" shall have the meaning ascribed to it in the Loan
Agreement.
"PATENT LICENSE" means any of the following now owned or hereafter acquired
by Grantor: any written agreement granting any right with respect to any
invention on which a Patent is in existence.
"PATENTS" means all of the following in which Grantor now holds or
hereafter acquires any interest: (a) letters patent of the United States or any
other county, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country or any political subdivision
thereof; (b) all reissues, continuations, continuations-in-part or extensions
thereof; (c) all petty patents, divisionals, and patents of addition; and (d)
all patents to issue in any such applications.
"PROCEEDS" means "proceeds," as such term is defined in Section 9-306(1) of
the UCC and, in any event, shall include, without limitation, (a) any and all
Accounts, Chattel Paper, Instruments, cash or other proceeds payable to Grantor
from time to time in respect of the Collateral, (b) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to Grantor from time to time
with respect to any of the Collateral, (c) any and all payments (in any form
whatsoever) made or due and payable to Grantor from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral above by any governmental body, authority, bureau
or agency (or any person acting under color of governmental authority), (d) any
claim of Grantor against third parties (i) for past, present or future
infringement
Exhibit A
Page 4 of 5
of any Patent or Patent License, (ii) for past, present or future infringement
of any Copyright or Copyright License, (iii) for past, present or future
infringement or dilution of any Trademark or Trademark License or for injury to
the goodwill associated with any Trademark, Trademark registration or Trademark
licensed under any Trademark License, (e) all certificates, dividends, cash,
Instruments and other property received or distributed in respect of or in
exchange for any Investment Property and (f) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral or any
Contract.
"TRADEMARK LICENSE" means any written agreement granting any right in and
to any Trademark or Trademark registration (whether Grantor is the licensee or
the licensor thereunder).
"TRADEMARKS" means any of the following now owned or hereafter acquired by
Grantor: (a) any and all trademarks, trade names, corporate names, company
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature, now existing
or hereafter adopted or acquired, all registrations and recordings thereof, and
any applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
state thereof or any other country or any political subdivision thereof (the
"Marks"), (b) any reissues, extensions or renewals thereof, (c) the goodwill of
the business symbolized by or associated with Marks, (d) income, royalties,
damages and payments now and hereafter due and/or payable with respect to Marks,
including, without limitation, damages, claims and recoveries for past, present
or future infringement, misappropriation, or dilution, and (e) rights to sue for
past, present and future infringements of Marks.
"UCC" means the Uniform Commercial Code as the same may, from time to time,
be in effect in the State of California; PROVIDED, HOWEVER, in the event that,
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Bank's security interest in any collateral is governed
by the Uniform Commercial Code as in effect in a jurisdiction other than the
State of California, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfection of priority and for purposes of definitions
related to such provisions.
Exhibit A
Page 5 of 5
EXHIBIT B
LOCATION OF COLLATERAL NOT IN BANK'S POSSESSION
1. 25 Orinda Way, Orinda, California 94563.
2. PLEASE ADD OTHER ADDRESS LOCATIONS, IF ANY. IF NONE, PLEASE INDICATE
"NONE" BELOW:
Exhibit B
COLLATERAL ASSIGNMENT AS COLLATERAL, PATENT
MORTGAGE AND SECURITY AGREEMENT
THIS COLLATERAL ASSIGNMENT AS COLLATERAL, PATENT MORTGAGE AND SECURITY
AGREEMENT is made as of July 29, 1998 ("SECURITY AGREEMENT"), by and between
INTRAWARE, INC., a Delaware corporation ("DEBTOR"), and IMPERIAL BANK ("BANK").
RECITALS
A. Bank has agreed to lend to Debtor certain funds (the "LOAN"), and
Debtor desires to borrow such funds from Bank pursuant to the terms of a Loan
Agreement dated of even date herewith (as the same may be modified, amended,
supplemented, restated or superceded from time to time, the "LOAN AGREEMENT").
Terms not defined herein shall the meanings ascribed to them in the General
Security Agreement.
B. In order to induce Bank to make the Loan, Debtor has agreed to assign
as collateral certain intangible property to Bank for purposes of securing the
obligations of Debtor to Bank.
NOW, THEREFORE, the parties hereto agree as follows:
1. COLLATERAL ASSIGNMENT, PATENT MORTGAGE AND GRANT OF SECURITY INTEREST.
As collateral security for the prompt and complete payment and performance of
all of Debtor's present or future indebtedness, obligations and liabilities to
Bank, including, without limitation, such indebtedness, obligations and
liabilities under the Loan Agreement and the other documents executed in
connection therewith (as the same may be modified, amended, supplemented,
restated or superceded from time to time, collectively, the "LOAN DOCUMENTS"),
Debtor hereby assigns as collateral, transfers, conveys and grants a security
interest and mortgage to Bank, as security, in and to Debtor's entire right,
title and interest in, to and under the following, now or hereafter existing,
created, acquired or held by Debtor (all of which shall collectively be called
the "COLLATERAL"):
(a) Any and all copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret, including, without limitation, those set forth on
EXHIBIT A attached hereto and incorporated herein by this reference
(collectively, the "COPYRIGHTS").
(b) Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products;
(c) Any and all design rights which may be available to Debtor;
(d) All patents, patent applications and like protections including,
without limitation, improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same, including, without limitation,
those set forth on EXHIBIT B attached hereto and incorporated herein by this
reference (collectively, the "PATENTS");
(e) Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of
1.
Debtor connected with and symbolized by such trademarks, including, without
limitation, those set forth on EXHIBIT C attached hereto and incorporated herein
by this reference (collectively, the "TRADEMARKS");
(f) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to sue for and collect such damages for said use or infringement of
the intellectual property rights identified above;
(g) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(h) All amendments, renewals and extensions of any of the Copyrights,
Patents or Trademarks; and
(i) All proceeds and products of the foregoing, including, without
limitation, all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
THE INTEREST IN THE COLLATERAL BEING ASSIGNED HEREUNDER SHALL NOT BE
CONSTRUED AS A CURRENT ASSIGNMENT, BUT AS A CONTINGENT ASSIGNMENT TO SECURE ALL
OF DEBTOR'S PRESENT OR FUTURE INDEBTEDNESS, OBLIGATIONS AND LIABILITIES TO BANK,
INCLUDING, WITHOUT LIMITATION, SUCH INDEBTEDNESS, OBLIGATIONS AND LIABILITIES
UNDER THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS.
2. AUTHORIZATION AND REQUEST. Debtor authorizes and requests that the
Register of Copyrights and the Commissioner of Patents and Trademarks record
this Security Agreement.
3. COVENANTS AND WARRANTIES. Debtor represents, warrants, covenants and
agrees as follows:
(a) Debtor is now the sole owner of the Collateral, except for
non-exclusive licenses granted by Debtor to its customers in the ordinary and
normal course of business as now conducted;
(b) Performance of this Security Agreement does not conflict with or
result in a breach of any agreement to which Debtor is a party or by which
Debtor is bound, except to the extent that certain intellectual property
agreements prohibit the assignment of the rights thereunder to a third party
without the licensor's or other party's consent and this Security Agreement
constitutes as assignment;
(c) During the term of this Security Agreement, Debtor will not sell,
transfer, assign or otherwise encumber any interest in the Collateral, except
for (i) non-exclusive licenses granted by Debtor in the ordinary and normal
course of its business as now conducted or as set forth in this Security
Agreement and (ii) subject to Debtor's execution of appropriate documents, in
form acceptable to Bank, to perfect or continue the perfection of Bank's
interest in the Collateral, transfers to affiliates of Debtor;
(d) To its knowledge, each of the Patents is valid and enforceable,
and no part of the Collateral has been judged invalid or unenforceable, in whole
or in part, and no claim has been made that any part of the Collateral violates
the rights of any third party;
(e) Debtor shall promptly advise Bank of any material changes in the
composition of the Collateral, including but not limited to any subsequent
ownership right of Debtor in or to any Copyright, Patent or Trademark not
specified in this Security Agreement;
2.
(f) Debtor shall (i) protect, defend and maintain the validity and
enforceability of the Copyrights, Patents and Trademarks, (ii) use its best
efforts to detect infringements of the Copyrights, Patents and Trademarks and
promptly advise Bank in writing of material infringements detected and (iii) not
allow any Copyrights, Patents or Trademarks to be abandoned, forfeited or
dedicated to the public without the written consent of Bank, which shall not be
unreasonably withheld, unless Debtor determines that reasonable business
practices suggest that abandonment is appropriate;
(g) Debtor shall promptly register the most recent version of
Debtor's material Copyrights, if not so already registered, as Bank may
reasonably request from time to time based on its review of the Quarterly Report
(as hereinafter defined) and shall, from time to time, execute and file such
other instruments, and take such further actions as Bank may reasonably request
from time to time to perfect or continue the perfection of Bank's interest in
the Collateral;
(h) This Security Agreement creates, and in the case of after
acquired Collateral, this Security Agreement will create at the time Debtor
first has rights in such after acquired Collateral, in favor of Bank a valid and
perfected first priority security interest in the Collateral in the United
States securing the payment and performance of all present or future
indebtedness, obligations and liabilities of Debtor to Bank, including, without
limitation, such indebtedness, obligations and liabilities under the Loan
Agreement and the other Loan Documents, upon making the filings referred to in
SECTION 3(i) below, subject only to Permitted Liens (as defined in the Loan
Agreement);
(i) To its knowledge, except for, and upon, the filings with, as
applicable, (1) the United States Patent and Trademark office with respect to
the Patents and Trademarks, (2) the Register of Copyrights with respect to the
Copyrights and (3) the UCC Division of the California Secretary of State,
necessary to perfect the security interests and assignment as collateral created
hereunder, and except as has been already made or obtained, no authorization,
approval or other action by, and no notice to or filing with, any United States
governmental authority or United States regulatory body is required either (a)
for the grant by Debtor of the security interest granted hereby or for the
execution, delivery or performance of this Security Agreement by Debtor in the
United States or (b) for the perfection in the United States or the exercise by
Bank of its rights and remedies hereunder;
(j) All information heretofore, herein or hereafter supplied to Bank
by or on behalf of Debtor with respect to the Collateral is accurate and
complete in all material respects;
(k) Debtor shall not enter into any agreement that would materially
impair or conflict with Debtor's obligations hereunder without Bank's prior
written consent, which consent shall not be unreasonably withheld. Debtor shall
not permit the inclusion in any material contract to which it becomes a party of
any provisions that could or might in any way prevent the creation of a security
interest in Debtor's rights and interests in any property included within the
definition of the Collateral acquired under such contracts, except that certain
contracts may contain anti-assignment provisions that could in effect prohibit
the creation of a security interest in such contracts; and
(l) Upon any executive officer of Debtor obtaining actual knowledge
thereof, Debtor will promptly notify Bank in writing of any event that
materially adversely affects the value of any Collateral, the ability of Debtor
to dispose of any Collateral or the rights and remedies of Bank in relation
thereto, including the levy of any legal process against any of the Collateral.
4. BANK'S RIGHTS. Bank shall have the right, but not the obligation, to
take, at Debtor's sole expense, any actions that Debtor is required under this
Security Agreement to take but which Debtor fails to take, after fifteen (15)
days' notice to Debtor. Debtor shall reimburse and indemnify Bank for all
3.
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this SECTION 4.
5. INSPECTION RIGHTS. Debtor hereby grants to Bank and its employees,
representatives and agents the right to visit, during reasonable hours upon
prior reasonable written notice to Debtor, any of Debtor's plants and facilities
that manufacture, install or store products (or that have done so during the
prior six-month period) that are sold utilizing any of the Collateral, and to
inspect the products and quality control records relating thereto upon
reasonable written notice to Debtor and as often as may be reasonably requested.
6. FURTHER ASSURANCES; ATTORNEY IN FACT.
(a) On a quarterly basis, Debtor agrees to deliver to Bank a report,
in form acceptable to Bank and certified by an officer of Debtor, which lists
all Copyrights, Patents and Trademarks that are material to the operation of
Debtor's business on an on-going basis, and in which Bank does not already have
a perfected security interest (the "QUARTERLY REPORT"); PROVIDED, HOWEVER,
Debtor may provide a general description of the Copyrights by type. Based upon
review of the Quarterly Report, Bank shall, in its reasonable discretion,
identify which Copyrights, Patents and Trademarks it deems material to the
operation of Debtor's business on an on-going basis or the value of the
Collateral.
(b) On a continuing basis, Debtor will make, execute, acknowledge and
deliver, and file and record in the proper filing and recording places in the
United States, all such instruments, including appropriate financing and
continuation statements and collateral agreements and filings with the United
States Patent and Trademark Office and the Register of Copyrights, and take all
such action as may reasonably be necessary or advisable, or as reasonably
requested by Bank, to perfect Bank's security interest in all Copyrights,
Patents and Trademarks, which Bank reasonably identifies pursuant to SECTION
6(a) above as material to the operation of Debtor's business on an on-going
basis or the value of the Collateral, and otherwise to carry out the intent and
purposes of this Security Agreement, or for assuring and confirming to Bank the
grant or perfection of a security interest in all Collateral.
(c) Debtor hereby irrevocably appoints Bank as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor, from time to time in Bank's discretion, to take any action
and to execute any instrument which Bank may reasonably deem necessary or
advisable to accomplish the purposes of this Security Agreement, including (i)
to modify, in its reasonable discretion, this Security Agreement without first
obtaining Debtor's approval of or signature to such modification by amending
Exhibit A, Exhibit B or Exhibit C hereof, as appropriate, to include reference
to any material right, title or interest in any Copyrights, Patents or
Trademarks acquired by Debtor after the execution hereof or to delete any
reference to any right, title or interest in any Copyrights, Patents or
Trademarks in which Debtor no longer has or claims any right, title or interest,
(ii) to file, in its reasonable discretion, one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of Debtor where permitted by law and (iii)
after the occurrence and during the continuance of an Event of Default, to
transfer the Collateral into the name of Bank or a third party to the extent
permitted under the California Uniform Commercial Code.
4.
7. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "EVENT OF DEFAULT" under this Security Agreement:
(a) An Event of Default (as defined in the Loan Agreement) occurs
under the Loan Agreement or any of the other Loan Documents (as defined in the
Loan Agreement); or
(b) Debtor breaches any warranty or agreement in any material respect
made by Debtor in this Security Agreement and, as to any breach that is capable
of cure, Debtor fails to cure such breach within fifteen (15) days of the
occurrence of such breach if notice thereof has been given to Debtor.
8. REMEDIES. Upon the occurrence and during the continuance of an Event
of Default, Bank shall have the right to exercise all the remedies of a secured
party under the California Uniform Commercial Code, including, without
limitation, the right to require Debtor to assemble the Collateral and any
tangible property in which Bank has a security interest and to make it available
to Bank at a place designated by Bank. Bank shall have a nonexclusive, royalty
free license to use the Copyrights, Patents and Trademarks to the extent
reasonably necessary to permit Bank to exercise its rights and remedies upon the
occurrence and during the continuance of an Event of Default. Debtor will pay
any expenses (including reasonable attorneys' fees) incurred by Bank in
connection with the exercise of any of Bank's rights hereunder, including,
without limitation, any expense incurred in disposing of the Collateral. All of
Bank's rights and remedies with respect to the Collateral shall be cumulative.
9. INDEMNITY. Debtor agrees to defend, indemnify and hold harmless Bank
and its officers, employees, and agents against: (a) all obligations, demands,
claims, and liabilities claimed or asserted by any other party in connection
with the transactions contemplated by this Security Agreement and (b) all losses
or expenses in any way suffered, incurred, or paid by Bank as a result of or in
any way arising out of, following or consequential to transactions between Bank
and Debtor, whether under this Security Agreement or otherwise (including,
without limitation, reasonable attorneys' fees and reasonable expenses), except
for losses arising from or out of Bank's gross negligence or willful misconduct.
10. REASSIGNMENT. At such time as Debtor shall completely satisfy all of
the obligations secured hereunder, Bank shall execute and deliver to Debtor all
deeds, assignments as collateral and other instruments as may be necessary or
proper to revest in Debtor full title to the property assigned as collateral
hereunder, subject to any disposition thereof which may have been made by Bank
pursuant hereto.
11. NO FAILURE OR DELAY. No failure or delay on the part of Bank, in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof.
12. ATTORNEYS' FEES. If any action relating to this Security Agreement is
brought by either party hereto against the other party, the prevailing party
shall be entitled to recover reasonable attorneys' fees, costs and
disbursements.
13. AMENDMENTS. This Security Agreement may be amended only by a written
instrument signed by both parties hereto.
14. COUNTERPARTS. This Security Agreement may be executed in any number
of counterparts, each of which when so delivered shall be deemed an original,
but all such counterparts shall constitute but one and the same instrument.
Each such Security Agreement shall become effective upon
5.
the execution of a counterpart hereof or thereof by each of the parties hereto
and telephonic notification that such executed counterparts has been received by
Debtor and Bank.
15. JUDICIAL REFERENCE. The terms and provisions of SECTION 15 of the
Loan Agreement are incorporated herein by this reference and made a part hereof.
16. GOVERNING LAW; JURISDICTION; JURY WAIVER. This Security Agreement
shall be governed by, and construed in accordance with, the internal laws of the
State of California, without regard to principles of conflicts of law. Debtor
and Bank consent to the exclusive jurisdiction of any state or federal court
located in Santa Clara County, California. DEBTOR AND BANK EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS SECURITY AGREEMENT AND ANY OTHER LOAN DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.
17. CONFLICT. In the event of a conflict between any term and/or
provision contained in this Security Agreement with any term and/or provision
contained in the General Security Agreement (as defined in the Loan Agreement),
the term and/or provision of this Security Agreement shall govern.
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement on the day and year first above written.
BANK DEBTOR
IMPERIAL BANK INTRAWARE, INC.,
a Delaware corporation
By: /s/ Sunita R. Patel By: /s/ Donald Freed
---------------------------- --------------------------------
Sunita R. Patel Donald Freed
Assistant Vice President Executive Vice President and
Chief Financial Officer
ADDRESS OF BANK ADDRESS OF DEBTOR
226 Airport Parkway 25 Orinda Way
San Jose, California 95110 Orinda, California 94563
Attention: Donald Freed
WITH A COPY TO:
2460 Sand Hill Road, Suite 102
Menlo Park, California 94025
Attention: Sunita Patel
6.
EXHIBIT A
COPYRIGHTS
1. REGISTERED: List titles below or indicate "None"
see attached
2. UNREGISTERED: List titles below or indicate "None"
see attached
3. APPLICATIONS IN PROCESS: List titles, applicable dates, application
numbers, etc. below or indicate "None"
see attached
Exhibit A
Page 1 of 1
EXHIBIT B
U.S. PATENTS AND PATENT APPLICATIONS
(List titles below or indicate "None")
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PATENT PENDING TITLE ISSUE FILING
NO. APPLICATION NO. DATE DATE
--------------------------------------------------------------------------------
see attached
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Exhibit B
Page 1 of 1
EXHIBIT C
U.S. TRADEMARKS AND TRADEMARK APPLICATIONS
(List marks below or indicate "None")
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
REGISTRATION PENDING MARK REGISTRATION FILING
NO. APPLICATION DATE DATE
NO.
--------------------------------------------------------------------------------
see attached
--------------------------------------------------------------------------------
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UNREGISTERED TRADEMARKS: List marks below or indicate "None."
Exhibit C
Page 1 of 1
6. The corporation owns the following domestic and foreign registered and
applied for trademarks, tradenames and service marks:
Trademarks, Tradenames, or Service Marks Registration or Application No.
---------------------------------------- -------------------------------
Intraware Trademark Application in the
European Community pending
VirtualExpress Trademark Application
in US S/N's: 75/429,571
7. The corporation owns the following domestic and foreign copyrights and
copyright registrations:
Description of Copyright Registration or Application No.
------------------------ -------------------------------
Compariscope Content TX 4-716-466
effective 5/8/98
8. The corporation anticipates that it may apply to register the following
domestic or foreign patents within the next year:
Brief Description of Patent
---------------------------
None
9. The corporation anticipates that it may apply to register the following
domestic or foreign trademarks, tradenames or service marks within the next
year:
Trademarks, Tradenames or Service Marks
---------------------------------------
Trademarks - Radarscope U.S.
SubscribNet - Foreign (European Community)
Compariscope - Foreign (European Community)
10. The corporation anticipates that it may apply to register the following
domestic or foreign copyrights and copyright registrations within the next
year:
Description of Copyright
------------------------
Quarterly Copyrights of Compariscope
11. The corporation's federal employer I.D. number is: 68-0389976
-----------------------
2.
6. continued
Compariscope Trademark Application in US S/N's: 75/429, 528
SubscribNews Trademark Application in US S/N's: 75/429, 171
ExtraDocs Trademark Application in US S/N's: 75/429, 148
IntraLease Trademark Application in US 75/359,462
intraware.shop Trademark Application in US pending
SubscribNet 75/247,313