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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
- ---
Act of 1934
For the fiscal quarter ended: March 31, 1997 or
___ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
------------ ------------
Commission file number: 0-21037
SOLOPOINT, INC.
(Exact name of registrant as specified in its charter)
California 77-0337580
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
130B Knowles Drive
Los Gatos, CA 95030
(address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (408) 364-8850
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's class of
common ("Common Stock"), as of the latest practicable date.
CLASS OUTSTANDING AT MARCH 31, 1997
Common Stock - no par value 3,499,780
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SOLOPOINT, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements (unaudited)
<S> <C>
Condensed Statements of Operations 3
three months ended March 31, 1997 and 1996
and the period March 26, 1993 (inception) through March 31, 1997
Condensed Balance Sheet 4
March 31, 1997
Condensed Statements of Cash Flows 5
three months ended March 31, 1997 and 1996
and the period March 26, 1993 (inception) through March 31, 1997
Notes to Condensed Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 10
Signature 11
</TABLE>
2
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PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
SOLOPOINT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 26, 1993
(INCEPTION)
THREE MONTHS ENDED THROUGH
MARCH 31 MARCH 31,
1997 1996 1997
--------------------------- ----------
<S> <C> <C> <C>
Revenues $ 78,554 $ - $ 458,667
Cost of sales 54,482 - 343,532
----------- ----------- -----------
Gross margin 24,072 - 115,135
Costs and expenses:
Research and development 394,357 494,122 3,748,074
Sales and marketing 541,103 186,402 2,163,083
General and administrative 263,548 325,739 2,805,938
----------- ----------- -----------
1,199,008 1,006,263 8,717,095
----------- ----------- -----------
Loss from operations (1,174,936) (1,006,263) (8,601,960)
Interest income, net 33,125 3,281 101,998
----------- ----------- -----------
Net loss $(1,141,811) $(1,002,982) $(8,499,962)
=========== =========== ===========
Net loss per share $ (.33) $ (.51)
=========== ===========
Shares used in computing
net loss per share 3,499,780 1,951,169
=========== ===========
</TABLE>
See accompanying notes.
3
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SOLOPOINT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEET
ASSETS
(Unaudited)
MARCH 31, 1997
--------------
Current assets:
Cash $ 2,810,536
Accounts receivable, net 164,164
Inventories 1,018,441
Other current assets 56,915
-----------
Total current assets 4,050,056
Furniture and equipment, at cost:
Computers and software 235,808
Furniture and fixtures 186,635
Accumulated depreciation and amortization (234,352)
-----------
188,091
Other non-current assets 37,997
-----------
Total assets $ 4,276,144
===========
Current liabilities:
Accounts payable $ 224,036
Accrued compensation 102,467
Other accrued liabilities 7,858
Notes payable, current portion 35,685
-----------
Total current liabilities 370,046
Notes payable, non-current portion 133,475
Shareholders' equity:
Common stock 12,411,641
Deficit accumulated during the development stage (8,533,080)
Notes receivable from shareholders (105,938)
-----------
Total shareholders' equity 3,772,623
-----------
Total liabilities and shareholders' equity $ 4,276,144
===========
See accompanying notes.
4
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SOLOPOINT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 26, 1993
(INCEPTION)
THREE MONTHS ENDED THROUGH
MARCH 31 MARCH 31,
1997 1996 1997
--------------------------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $(1,141,811) $(1,002,982) $(8,499,962)
Adjustments to reconcile net loss to net cash used in
operating activities:
Common stock and preferred stock issued for services - 625 78,700
Preferred stock issued for interest payable - 33,767 49,832
Depreciation and amortization 29,187 21,759 234,461
Changes in operating assets and liabilities (144,244) (61,502) (905,159)
----------- ----------- -----------
Net cash used in operating activities (1,256,868) (1,008,333) (9,042,128)
INVESTING ACTIVITIES
Acquisitions of furniture and equipment (42,020) (3,920) (408,045)
Loan to shareholder - - (35,000)
Payment received from shareholder - 1,500 1,500
Deposits and other assets - - (38,107)
----------- ----------- -----------
Net cash used in investing activities (42,020) (2,420) (479,652)
FINANCING ACTIVITIES
Proceeds from convertible notes payable to shareholders - - 1,120,000
Proceeds from convertible notes payable - - 1,813,000
Proceeds from notes payable - - 191,496
Principal payments on capital lease obligations (10,599) (2,023) (36,733)
Proceeds from note receivable from shareholders 51,562 - 51,562
Proceeds from sale of preferred stock, net of issuance costs - 1,178,657 3,951,622
Issuance of common stock, net of repurchases and
issuance costs 1,636 8,847 5,241,369
----------- ----------- -----------
Net cash provided by financing activities 42,599 1,185,481 12,332,316
----------- ----------- -----------
Net increase (decrease) in cash (1,256,289) 174,728 2,810,536
Cash at beginning of period 4,066,825 331,017 -
----------- ----------- -----------
Cash at end of period $ 2,810,536 $ 505,745 $ 2,810,536
=========== =========== ===========
</TABLE>
See accompanying notes.
5
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SOLOPOINT INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. General The condensed financial statements for the three month periods ended
March 31, 1997 and 1996 are unaudited but reflect all adjustments (consisting
only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim periods. The condensed financial
statements should be read in conjunction with the financial statements and
notes thereto, together with management's discussion and analysis of
financial condition and results of operations, contained in the Company's
Form 10-KSB for the year ended December 31, 1996. The results of operations
for the three month period ended March 31, 1997 are not necessarily
indicative of the results to be expected for the entire fiscal year.
2. Per Share Data Net loss per share is computed using the weighted average
number of shares of common stock outstanding. Common equivalent shares from
redeemable convertible preferred stock (using the if-converted method) and
from stock options and warrants (using the treasury stock method or the
modified treasury stock method where applicable) are not included in the
computation as they are antidilutive. In accordance with Securities and
Exchange Commission Staff Accounting Bulletins, for periods prior to August
6, 1996, the effective date of the Company's initial public offering, common
and common equivalent shares issued by the Company at prices below the public
offering price during the period beginning one year prior to the initial
filing of the registration statement for the Company's initial public
offering have been included in the calculation as if they were outstanding
for all periods prior to the offering (using the treasury stock method and
the initial public offering price).
3. Recently Issued Pronouncements In February 1997, the Financial Accounting
Standards Board issued statement No. 128, Earnings per Share ("FAS 128"),
which is required to be adopted on December 31, 1997. At that time, the
Company will be required to change the method currently used to compute
earnings per share and, if appropriate, restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive
effect of stock options will be excluded. Because the Company has incurred
losses since inception, and expects to incur losses for the remainder of
1997, the implementation of FAS 128 is not expected to have a material impact
on the Company's loss per share.
6
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
- ---------------------
NET REVENUES
Since inception, the Company's focus has been on the design and
development of personal communications management solutions for communications-
dependent individuals. The Company's first product, SmartCenter, is targeted at
mobile, communications-dependent individuals in the Small Office and Home Office
("SOHO") market. The Company introduced its first product, SmartCenter, at the
end of March 1996 and began shipment of its second product, SmartMonitor, at the
end of September 1996. The Company recorded its initial revenues in the quarter
ended June 30, 1996. During the first quarter of 1997 the Company shipped its
third product, SmartScreen. The Company's products currently have a 30-day,
unconditional, money-back guarantee. Revenue is recognized when products are
shipped and the 30-day money-back guarantee period has lapsed. Allowances are
provided for product returns based on estimated future product returns, the
timing of expected new product introductions and other factors. These
allowances are recorded as direct reductions of revenues and accounts
receivable.
Net revenues for the three months ended March 31, 1997, were $78,554.
The Company earned no revenues for the three months ended March 31, 1996. The
increase in net revenues is entirely attributable to shipment of the Company's
three products. Minimal revenue was recorded in the first quarter ended March
31, 1997 from sales of SmartScreen.
COSTS OF GOODS SOLD
Cost of goods sold for the three months ended March 31, 1997 were
$54,482, which was 69% of sales. No goods were sold in the three months ended
March 31, 1996. A key factor contributing to higher than anticipated costs of
goods sold was lower production volume than anticipated.
GROSS MARGIN
Gross margin for the three months ended March 31, 1997, was 31%. No
goods were sold in the three months ended March 31, 1996. The gross margin
for the three months ended March 31, 1997 was lower than expected due to higher
than anticipated cost of goods sold as set forth above.
OPERATING EXPENSES
Research and Development Research and development expenses declined
------------------------
20% in the quarter ended March 31, 1997 to $394,357 as compared with expenses of
$494,122 for the quarter ended March 31, 1996, due to reduced headcount for the
quarter ended March 31, 1997 as well as the establishment of appropriate
inventory reserves during the quarter ended March 31, 1996. The Company
anticipates that research and development expenses will remain relatively
consistent with the first quarter 1997 level for the balance of 1997.
Sales and Marketing Sales and marketing expenses increased 190% in the
-------------------
quarter ended March 31, 1997 to $541,103 as compared to expenses of $186,402 for
the quarter ended March 31, 1996. The significant increase in expenses is
primarily due to an increase in personnel and related costs, participation in
two industry trade shows as well as advertising and marketing efforts to support
the Company's expanded product line which was not in distribution during the
first quarter of 1996. The Company anticipates that sales and marketing expenses
will continue to grow in future quarters, as it increases marketing activities
and efforts to expand distribution of its current and anticipated future
products.
General and Administrative General and administrative expenses
--------------------------
decreased 19% in the quarter ended March 31, 1997 to $263,548 from $325,739 in
the first quarter of 1996. The decrease is primarily due to lower
7
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headcount and related personnel expenses. The Company anticipates that general
and administrative expenses may grow modestly in future quarters of 1997 as it
adds to the infrastructure necessary to accommodate expanded operations and to
support a growing customer base.
INTEREST INCOME, NET
Interest income reflects primarily interest on cash balances, which
had been nominal until the completion of the Company's initial public offering
in August 1996. The net proceeds from the initial public offering earned
interest through investment in money market funds. For the quarter ended March
31, 1997 the Company recognized interest income of $39,978 offset by interest
expense of $6,855 as compared with interest income of $3,356 offset by interest
expense of $75 for the same period of the prior year.
PROVISION FOR INCOME TAXES
There was no provision for federal or state income taxes for the three
month period ending March 31, 1997, as the Company incurred a net operating
loss. The Company expects to incur a net operating loss for the year ending
December 31, 1997. As a result, the net operating loss carryforwards will
increase. At December 31, 1996, the Company had federal and state net operating
loss carryforwards of approximately $3,800,000 and $3,700,000, respectively. The
Company also had federal and state research and development tax credit
carryforwards of approximately $80,000 and $50,000, respectively. The net
operating loss carryforwards will expire at various dates beginning in 1998
through 2011, if not utilized. The utilization of the net operating losses and
credits is subject to a substantial annual limitation due to the ownership
change limitations provided by the Internal Revenue Code of 1986 (the "Code")
and similar state provisions. The annual limitation may result in the expiration
of net operating losses and credits before utilization.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash of $2,810,536 as of March 31, 1997 and working
capital of $3,680,010. The Company used cash of $1,256,868 in its operating
activities for the quarter ended March 31, 1997. During the quarter ended March
31, 1997 the Company's principal uses of cash were to fund the Company's working
capital requirements and an increase in inventory levels.
In February 1997, the Company entered into a $1,500,000 Line of Credit
with Silicon Valley Bank. Borrowings under the line of credit will be based on a
percentage of accounts receivable. The Company anticipates that the line of
credit together with existing sources of liquidity will provide adequate cash to
fund its operations for the next twelve months at its anticipated level of
operations. However, the Company may seek additional funding during calendar
1997 and will likely require additional funding after such time. There can be no
assurance that any additional financing will be available on acceptable terms,
or at all, when required by the Company. Failure to obtain funding would have a
material adverse effect on the Company's business, financial condition and
results of operations. As of March 31, 1997 the Company did not have any
significant commitments for capital or other expenditures.
FUTURE OPERATING RESULTS
Since its inception in 1993, the Company has incurred significant
losses, has had substantial negative cash flow, and has realized limited
revenues. At March 31, 1997, the Company had an accumulated deficit of
$8,533,080, and had incurred operating losses of $1,174,936 in the quarter ended
March 31, 1997 and $1,006,263 in the quarter ended March 31, 1996. The Company
expects to continue to incur substantial operating losses at least through its
fiscal year ending December 31, 1997.
The Company anticipates that it will experience significant
fluctuations in operating results in the future. Fluctuations in operating
results may result in volatility in the price of the Company's common stock.
Operating results may fluctuate as a result of many factors, including the
volume and timing of orders received, if any, during the period, the timing of
commercial introduction of future products and enhancements, competitive
8
<PAGE>
products and the impact of price competition on the Company's average selling
prices, product announcements by the Company and its competition and the
Company's level of research and development and sales and marketing activities.
Many of these factors are beyond the Company's control. In addition, due to the
short product life cycles that characterize the personal communications
management market, the Company's failure to introduce competitive new and
enhanced products in a timely manner would have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company's operating and other expenses are relatively fixed in the
short term. As a result, variations in timing of revenues, if any, will cause
significant variations in quarterly results of operations. Notwithstanding the
difficulty in forecasting future sales, the Company generally must undertake its
research and development and sales and marketing activities and other
commitments months or years in advance. Accordingly, any shortfall in product
revenues, if any, in a given quarter may materially adversely affect the
Company's business, financial condition and results of operations due to the
inability to adjust expenses during the quarter to match the level of product
revenues, if any, for the quarter. Once commitments for such expenditures are
undertaken, the Company may be unable to reduce them quickly if product revenues
are less than expected. In addition, the Company's sales expectations are based
entirely on its internal estimates of future demand. Due to these and other
factors, the Company believes that quarter to quarter comparisons of its results
of operations are not necessarily meaningful, and should not be relied upon as
indications of future performance.
This Report on Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such statements include those referring to the
period of time the Company's existing capital resources will meet the Company's
future capital needs, the Company's operating results, the market acceptance of
the products of the Company, its efforts to establish and maintain distribution
partners and the extent of the Company's investment in the marketing and
distribution of its current products and research and development with regard to
future products. Actual events and results could differ materially from those
projected in the forward-looking statements as a result of a variety of factors,
including those risk factors set forth in the preceding two paragraphs,
elsewhere in this report, and in the Company's amended Form SB-2 declared
effective August 6, 1996 and the Company's 1996 Form 10-KSB; especially those
regarding the Company's operating results and future activities and those
regarding the development of the personal communications management market.
9
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PART II. OTHER INFORMATION
- ---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
10.14 - Line of Credit Agreement with Silicon Valley Bank
11.1 - Weighted Average Shares Computation
27 - Financial Data Schedule
b) Reports on Form 8-K
No reports on Form 8-K were filed in the quarter ending March 31, 1997.
10
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May 14, 1997 SOLOPOINT, INC.
by:/s/Edward M. Esber, Jr.
--------------------------
Edward M. Esber, Jr.
CEO, President and CFO
(Duly Authorized Officer and Principal
Financial Officer)
11
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EXHIBIT 10.14
BUSINESS LOAN AGREEMENT
BORROWER: SoloPoint, Inc.
130-B Knowles Drive
Los Gatos, CA 95030
LENDER: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
THIS BUSINESS LOAN AGREEMENT between SoloPoint, lnc. ("Borrower") and Silicon
Valley Bank ("Lender") is made and executed on the following terms and
conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans and other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement All such loans and financial accommodations,
together with all future loans and financial accommodations from Lender to
Borrower, are referred to in this Agreement individually as the "Loan" and
collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement
TERM. This Agreement shall be effective as of February 7, 1997, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement"' means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Business Loan Agreement from
time to time.
Borrower. The word "Borrower" means SoloPoint, Inc.. The word "Borrower" also
includes, as applicable, all subsidiaries and affiliates of Borrower as provided
below in the paragraph titled "Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of I 1980, as amended.
Cash Flow. The words "Cash Flow" mean net income after taxes, and exclusive of
extraordinary gains and income, plus depreciation and amortization.
Collateral. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real or
personal property, whether granted directly or indirectly, whether granted now
or in the future, and whether granted in the form of a security interest,
mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien, charge,
lien or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created by
law, contract, or otherwise.
Debt. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt
ERISA. The word "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation each and all
of the persons or entities granting a Security Interest in any Collateral for
the Indebtedness, including without limitation all Borrowers granting such a
Security Interest Guarantor. The word "Guarantor" means and includes without
limitation each and all of the guarantors, sureties, and accommodation parties
in connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes any and all
Indebtedness of Borrower to Lender, now or hereafter arising or incurred,
including, without limitation, the Indebtedness evidenced by the Note, including
all principal and interest, together with all other indebtedness and costs and
expenses for which Borrower is responsible under this Agreement or under any
Related Documents.
Lender. The word "Lender" means Silicon Valley Bank, its successors and
assigns.
Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's readily marketable securities.
Loan. The word "Loan" or "Loans" means and includes without limitation any and
all commercial loans and financial accommodations from Lender to Borrower,
whether now or hereafter existing, and however evidenced, including without
limitation those loans and financial accommodations described herein or
described on any exhibit or schedule attached to this Agreement from time to
time.
<PAGE>
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note or
notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender, (b) liens for taxes,
assessments, or similar charges either not yet due or being contested in good
faith: (c) liens of materialmen, mechanics, warehousemen, or carriers, or other
like liens arising in the ordinary course of business and securing obligations
which are not yet delinquent: (d) purchase money liens or purchase money
security interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the paragraph of this Agreement
titled "Indebtedness and Liens": (e) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the Lender in
writing: and (f) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of Borrower's assets.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
Security Agreement. The words "Security Agreement' mean and include without
limitation any agreements, promises, covenants, arrangements, understandings or
other agreements, whether created by law, contract, or otherwise, evidencing,
governing, representing, or creating a Security Interest
Security Interest. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever, whether created by law,
contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization Act of
1986 as now or hereafter amended.
Subordinated Debt. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement to
indebtedness owed by Borrower to Lender in form and substance acceptable to
Lender.
Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total assets
excluding all intangible assets i.e., goodwill, trademarks, patents, copyrights,
organizational expenses, and similar intangible items, but including leaseholds
and leasehold improvements) less total Debt
Working Capital. The words "Working Capital" mean Borrower's current assets,
excluding prepaid expenses, less Borrower's current liabilities.
CONDITlONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory to Lender
the following documents for the Loan: (a) the Note, (b) Security Agreements
granting to Lender security interests in the Collateral, (c) Financing
Statements perfecting Lender's Security Interests: (d) evidence of insurance as
required below: and (e) any other documents required under this Agreement or by
Lender or its counsel.
Borrower's Authorization. Borrower shall have provided in form and substance
satisfactory to Lender property certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related Documents,
and such other authorizations and other documents and instruments as Lender or
its counsel, in their sole discretion, may require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in this
Agreement or any Related Document
Representations and Warranties. The representations and warranties set forth
in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of California and is
validly existing and in good standing in all states in which Borrower is doing
business. Borrower has the full power and authority to own its properties and to
transact the businesses in which it is presently engaged or presently proposes
to engage. Borrower also is duly qualified as a foreign corporation and is in
good standing in all states in which the failure to so qualify would have a
material adverse effect on its businesses or financial condition.
Authorization. The execution, delivery, and performance of this Agreement and
all Related Documents by Borrower, to the extent to be executed, delivered or
performed by Borrower, have been duly authorized by all necessary action by
Borrower: do not require the consent or approval of any other person, regulatory
authority or governmental body: and do not conflict with, result in a violation
of' or constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other instrument
binding upon Borrower or (b) any law, governmental regulation, court decree, or
order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to Lender
truly and completely disclosed Borrower's financial condition as of the date of
the statement, and there has been no material adverse change in Borrower's
financial condition subsequent to the date of the most recent financial
statement supplied to Lender. Borrower has no material contingent obligations
except as disclosed in such financial statements.
<PAGE>
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously disclosed
in Borrower's financial statements or in writing to Lender and as accepted by
Lender, and except for property tax liens for taxes not presently due and
payable, Borrower owns and has good title to all of Borrower's properties free
and clear of all Security Interests, and has not executed any security documents
or financing statements relating to such properties. All of Borrower's
properties are titled in Borrower's legal name, and Borrower has not used, or
filed a financing statement under, any other name for at least the last five (5)
years.
Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and threatened release," as used in this Agreement, shall
have the same meanings as set forth in the "CERCLA," "SARA," the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et Seq., Chapters 6.5
through 7.7 of Division 20 of the California Health and Safety Code, Section
25100, et seq., or other applicable state or Federal laws, rules, or regulations
adopted pursuant to any of the foregoing. Except as disclosed to and
acknowledged by Lender in writing, Borrower represents and warrants that: (a)
During the period of Borrower's ownership of the properties, there has been no
use, generation, manufacture, storage, treatment, disposal, release or the
threatened release of any hazardous waste or substance by any person on, under,
about or from any of the properties. (b) Borrower has no knowledge of, or reason
to believe that there has been (i) any use, generation, manufacture, storage,
treatment, disposal, release, or threatened release of any hazardous waste or
substance on, under, about or from the properties by any prior owners or
occupants of any of the properties, or (ii) any actual or threatened litigation
or claims of any kind by any person relating to such matters. (c) Neither
Borrower nor any tenant, contractor, agent or other authorized user of any of
the properties shall use, generate, manufacture, store, treat, dispose of, or
release any hazardous waste or substance on, under, about or from any of the
properties: and any such activity shall be conducted in compliance with all
applicable federal, state, and local laws, regulations, and ordinances,
including without limitation those laws, regulations and ordinances described
above. Borrower authorizes Lender and its agents to enter upon the properties to
make such inspections and tests as Lender may deem appropriate to determine
compliance of the properties within this section of the Agreement Any
inspections or tests made by Lender shall be at Borrower's expense and for
Lender's purposes only and shall not be construed to create any responsibility
or liability on the part of Lender to Borrower or to any other person. The
representations and warranties contained herein are based on Borrower's due
diligence in investigating the properties for hazardous waste and hazardous
substances. Borrower hereby (a) releases and waives any future claims against
Lender for indemnity or contribution in the event Borrower becomes liable for
cleanup or other costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims, losses, liabilities, damages,
penalties, and expenses which Lender may directly or indirectly sustain or
suffer. resulting from a breach of this section of the Agreement or as a
consequence of any use, generation, manufacture, storage, disposal, release or
threatened release occurring prior to Borrower's ownership or interest in the
properties, whether or not the same was or should have been known to Borrower.
The provisions of this section of the Agreement. including the obligation to
indemnify, shall survive the payment of the Indebtedness and the termination or
expiration of this Agreement and shall not be affected by Lender's acquisition
of any interest in any of the properties, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may materially
adversely affect Borrower's financial condition or properties, other than
litigation, claims, or other events, if any, that have been disclosed to and
acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith in the ordinary
course of business and for which adequate reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or permitted
the filing or attachment of any Security Interests on or affecting any of the
Collateral directly or indirectly securing repayment of Borrower's Loan and
Note, that would be prior or that may in any way be superior to Lender's
Security Interests and rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements directly or
indirectly securing repayment of Borrower's Loan and Note and all of the Related
Documents are binding upon Borrower as well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in accordance with
their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower may
have any liability complies in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event nor
Prohibited Transaction (as defined in ERISA) has occurred with respect to any
such plan, (ii) Borrower has not withdrawn from any such plan or initiated
steps to do so, (iii) no steps have been taken to terminate any such plan, and
(iv) there are no unfunded liabilities other than those previously disclosed
to Lender in writing.
Investment Company Act. Borrower is not an "investment company" or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
Public Utility Holding Company Act. Borrower is not a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
Regulations G, I and U. Borrower is not engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations G, T and
U of the Board of Governors of the Federal Reserve System).
Location of Borrower's Offices and Records. Borrower's place of business, or
Borrower's Chief executive office, if Borrower has more than one place of
business, is located at 130-B Knowles Drive, Los Gatos, CA 95030. Unless
Borrower has designated otherwise in writing this location is also the office or
offices where Borrower keeps its records concerning the Collateral.
Information. All information heretofore or contemporaneously herewith furnished
by Borrower to Lender for the purposes of or in connection with this Agreement
or any transaction contemplated hereby is, and all formation hereafter furnished
by or on behalf of Borrower to Lender will be true and
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accurate in every material respect on the date as of which such information is
dated or certified; and none of such information is or will be incomplete by
omitting to state any material fact necessary to make such information not
misleading.
Claims and Defenses. There are no defenses or counterclaims, offsets or other
adverse claims, demands or actions of any kind, personal or otherwise, that
Borrower, Grantor, or any Guarantor could assert with respect to the Note, Loan,
Indebtedness, this Agreement, or the Related Documents.
Survival of Representations and WARRANTIES. Borrower understands and agrees
that Lender, without independent investigation, is relying upon the above
representations and warranties in extending Loan Advances to Borrower.
Borrower further agrees that the foregoing representations and warranties
shall be continuing in nature and shall remain in full force and effect until
such time as Borrower's Indebtedness shall be paid in full, or until this
Agreement shall be terminated in the manner provided above, whichever is the
last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings or
similar actions affecting Borrower or any Guarantor which could materially
affect the financial condition of Borrower or the financial condition of any
Guarantor.
Financial Records. Maintain its books and records in accordance with generally
accepted accounting principles, applied on a consistent basis, and permit Lender
to examine and audit Borrower's books and records at all reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but in no
event later than twenty (20) days after the end of each month, Borrower's
balance sheet and profit and loss statement for the period ended, prepared and
certified as correct to the best knowledge and belief by Borrower's chief
financial officer or other officer or person acceptable to Lender.
Furthermore, Borrower shall deliver to Lender within five (5) days upon
becoming available, copies of all statements, reports and notices sent or made
available generally by Borrower to its security holders or to any holders of
Subordinated Debt and all reports on Form 10-K and 10-q filed with the
Securities and Exchange Commission. All financial reports required to be
provided under this Agreement shall be prepared in accordance with generally
accepted accounting principles, applied on a consistent basis, and certified
by Borrower as being true and correct.
Accounts Receivable and Accounts Payable. Provide to Lender not later than
twenty (20) days after and as of the end of each month, with a borrowing base
certificate and aged lists of accounts receivable and accounts payable. Lender
shall conduct an initial audit of Borrower's accounts receivable and a review of
Borrower's selling terms prior to any disbursements under the Note, thereafter,
such audits shall be conducted on a semi-annual basis. Borrower's deposit
account will be debited for the audit expense and a notification will be mailed
to Borrower.
Compliance Certificate. Unless waived in writing by Lender, provide Lender
monthly, within twenty (20) days, and at the time of each disbursement of Loan
proceeds with a certificate executed by Borrower's chief financial officer, or
other officer or person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement are true and correct
as of the date of the certificate and further certifying that, as of the date of
the certificate, no Event of Default exists under this Agreement.
Additional Information. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables, inventory
schedules, budgets, forecasts, tax returns, and other reports with respect to
Borrower's financial condition and business operations as Lender may request
from time to time.
Financial Covenants and Ratios. Borrower shall maintain on a monthly basis, a
minimum quick ratio of 1.50 to 1.00; a minimum Tangible Net Worth of
$1,500,000.00; and a maximum total Debt to Tangible Net Worth ratio of 1.00 to
1.00. Furthermore, Borrower may incur losses, provided such losses shall not
exceed $1,200,000.00 at quarters ending March 31,1997 and June 30, 1997,
$900,000.00 at quarter ending September 30, 1997 and $950,000.00 at quarter
ending December 31, 1997. Except as provided above, all computations made to
determine compliance with the requirements contained in this paragraph shall be
made in accordance with generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true and correct.
Insurance. Maintain fire and other risk insurance, public liability insurance,
and such other insurance as Lender may require with respect to Borrower's
properties and operations, in form, amounts, coverages and with insurance
companies reasonably acceptable to Lender. Borrower, upon request of Lender,
will deliver to Lender from time t6 time the policies or certificates of
insurance in form satisfactory to Lender, including stipulations that coverages
will not be canceled or diminished without at least ten (10) days' prior written
notice to Lender. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any way by
any act, omission or default of Borrower or any other person. In connection with
all policies covering assets in which Lender holds or is offered a security
interest for the Loans, Borrower will provide Lender with such loss payable or
other endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the properties
insured; (e) the then current property values on the basis of which insurance
has been obtained, and the manner of determining those values; and (f) the
expiration date of the policy. In addition, upon request of Lender (however not
more often than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value or
replacement cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any other
party and notify Lender immediately in writing of any default in connection
with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business operations,
unless specifically consented to the contrary by Lender in writing.
Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness
and obligations, including without limitation all assessments, taxes,
governmental changes, levies and liens, of every kind and nature, imposed upon
Borrower or its properties, income, or profits, prior to the date on which
penalties would attach, and all lawful claims that, if unpaid, might become a
lien or charge upon any of Borrower's properties, income, or profits.
<PAGE>
Provided however, Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy, lien or claim so long as (a) the legality of the
same shall be contested in good faith by appropriate proceedings, and (b)
Borrower shall have established on its books adequate reserves with respect to
such contested assessment, tax, charge, levy, lien, or claim in accordance with
generally accepted accounting practices. Borrower, upon demand of Lender, will
furnish to Lender evidence of payment of the assessments, taxes, charges,
levies, liens and claims and will authorize the appropriate governmental
official to deliver to Lender at any time a written statement of any
assessments, taxes, charges, levies, liens and claims against Borrower's
properties, income, or profits.
Performance. Perform and comply with all terms, conditions, and provisions set
forth in this Agreement and in the Related Documents in a timely manner, and
promptly notify Lender if Borrower learns of the occurrence of any event which
constitutes an Event of Default under this Agreement or under any of the Related
Documents.
Operations. Maintain executive and management personnel with substantially the
same qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner and in compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties, charters,
businesses and operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding standards and other
requirements of ERISA and other laws applicable to Borrower's employee benefit
plans.
Environmental Studies. Promptly conduct and complete, at Borrower's expense,
all such investigations, studies, samplings and testings as may be requested
by Lender or any governmental authority relative to any substance defined as
toxic or a hazardous substance under any applicable federal, state, or local
law, rule, regulation, order or directive, or any waste or byproduct thereof,
at or affecting any property or any facility owned, leased or used by
Borrower.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records and
to make copies and memoranda of Borrower's books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any records
it may request, all at Borrower's expense.
Environmental Compliance and Reports. Borrower shall comply in all respects
with all environmental protection federal, state and local laws, statutes,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part of
any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of
a permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower's part in connection with any environmental activity whether or
not there is damage to the environment and/or other- natural resources.
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing statements,
instruments, documents and other agreements as Lender or its attorneys may
reasonably request to evidence and secure the loans and to perfect all Security
Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this Agreement,
create, incur or assume indebtedness for borrowed money, including capital
leases, (b) except as allowed as a Permitted Lien, sell, transfer, mortgage,
assign, pledge, lease, grant a security interest in, or encumber any of
Borrower's assets, or (c) sell with recourse any of Borrower's accounts,
except to Lender.
Continuity of Operations. (a) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (b) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other
entity, change ownership, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, (c) pay any dividends on
Borrower's stock (other than dividends payable in its stock), provided, however
that notwithstanding the foregoing, but only so long as no Event of Default has
occurred and is continuing or would result from the payment of dividends, if
Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue
Code of 1986, as amended),- Borrower may pay cash dividends on its stock to its
shareholders from time to time in amounts necessary to enable the shareholders
to pay income taxes and make estimated income tax payments to satisfy their
liabilities under federal and state law which arise solely from their status as
Shareholders of a Subchapter S Corporation because of their ownership of shares
of stock of Borrower, or (d) purchase or retire any of Borrower's outstanding
shares or after or amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other enterprise or
entity, or (c) incur any obligation as surety or guarantor other than in the
ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; or (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender.
LOAN ADVANCES. Lender, in ITS discretion, will make loans to Borrower, in
amounts determined by Lender, up to the amounts as defined and PERMITTED in this
Agreement and the Related Documents, including, but not limited to, any
Promissory Notes, executed by Borrower (the "Credit Limit") Borrower is
responsible for monitoring the total amount of Loans and Indebtedness
outstanding from time to time, and Borrower shall not permit the same, at any
time to
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exceed the Credit Limit. If at any time the total of all outstanding Loans and
Indebtedness exceeds the Credit Limit, Borrower shall immediately pay the amount
of the excess to Lender, without notice or demand.
BORROWING BASE FORMULA. Funds shall be advanced under the Borrowers line of
credit facility according to a borrowing base formula, as determined by Lender,
defined as follows: the lesser of (a) $1,500,000.00, minus (i) all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit) minus
(ii) the Foreign Exchange Reserve minus (iii) the Cash Management Sublimit or
(b) Eighty percent (80%) of Eligible Accounts Receivable, minus (i) all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit) minus (ii) the Foreign Exchange Reserve minus (iii) the Cash Management
Sublimit. Eligible Accounts Receivable shall be defined as those accounts that
arise in the ordinary course of Borrowers business, including those accounts
outstanding less than 90 days from the date of invoice, but shall exclude
foreign, government, contra and intercompany accounts, and exclude accounts
wherein 50% or more of the account is outstanding more than 90 days from the
date of invoice. Any account which alone exceeds 25% of total accounts will be
ineligible to the extent said account exceeds 25% of total accounts. Lender
shall also deem ineligibie any credit balances which are aged past 90 days, and
accounts generated by the sale of demonstration or promotional equipment The
standards of eligibility shall be fixed from time to time by Lender, in Lenders
reasonable judgment upon notification to Borrower. Lender reserves the right to
exclude any accounts the collection of which Lender reasonably determines to be
doubtful.
LETTERS OF CREDIT. Subject to the terms and conditions of this Agreement,
Lender agrees to issue or cause to be issued Letters of Credit for the account
of Borrower in an aggregate face amount not to exceed (i) the lesser of
$500,000.00 or the Borrowing Base Formula minus (ii) the then outstanding
principal balance of the Note; provided that the face amount of outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit) shall
not in any case exceed Five Hundred Thousand and 00/100 Dollars ($500,000.00).
Each such Letter of Credit shall have an expiry date no later than one hundred
eighty (180) days after the maturity date of the line of credit provided that
Borrowers letter of credit reimbursement obligation shall be secured by cash
on terms acceptable to Lender at any time after the maturity date if the term
of the Agreement is not extended by Lender. All such Letters of Credit shall
be, in form and substance, acceptable to Lender in its sole discretion and
shall be subject to the terms and conditions of Lenders form of application
and Letter of Credit agreement.
Borrower shall indemnify, defend and hold Lender harmless from any loss, cost,
expense or liability, including, without limitation, reasonable attorneys' fees,
arising out of or in connection with any Letters of Credit.
Borrower may request that Lender issue a Letter of Credit payable in a currency
other than United States Dollars. If a demand for payment is made under any such
Letter of Credit, Lender shall treat such demand as an Advance to Borrower of
the equivalent of the amount thereof (plus cable charges) in United States
currency at the then prevailing rate of exchange in San Francisco, California,
for sales of that other currency for cable transfer to the country of which it
is the currency.
Upon the issuance of any Letter of Credit payable in a currency other than
United States Dollars, Lender shall create a reserve (the Letter of Credit
Reserve) under the line of credit for Letters of Credit against fluctuations in
currency exchange rates, in an amount equal to ten percent (10%) of the face
amount of such Letter of Credit. The amount of such reserve may be amended by
Lender from time to time to account for fluctuations in the exchange rate. The
availability of funds under the line of credit shall be reduced by the amount of
such reserve for so long as such Letter of Credit remains outstanding.
FOREIGN EXCHANGE SUBLIMIT. Subject to the terms of this Agreement, as amended
from time to time, Borrower may utilize up to $500,000.00) for spot and future
foreign exchange contracts (the "Exchange Contracts"). Borrower shall not
request an Exchange Contract at any time it is not in compliance with any of the
terms of this Agreement All Exchange Contracts must provide for delivery of
settlement on or before the maturity date of the line of limit available at any
time shall be reduced by the following amounts (the Foreign Exchange Reserve")
on each day (the "Determination Date") (i) on all outstanding Exchange Contracts
on which delivery is to be effected or settlement allowed more than two business
days from the Determination Date, 10% of the gross amount of the Exchange
Contracts; plus (ii) on all outstanding Exchange Contracts on which delivery is
to be effected or settlement allowed within two business days after the
Determination Date, 100% of the gross amount of the Exchange Contracts. In lieu
of the Foreign Exchange Reserve for 100% of the gross amount of any Exchange
Contract, the Borrower may request that Lender debit Borrowers bank account with
Lender for such amount, provided Borrower has immediately available funds in
such amounts in its bank account
Lender may, in its discretion, terminate the Exchange Contracts at any time (a)
that an Event of Default occurs or (b) that there is not sufficient availability
under the line of credit and Borrower does not have available funds in its bank
account to satisfy the Foreign Exchange Reserve. If Lender terminates the
Exchange Contracts, and without limitation of the FX Indemnity Provisions (as
refereed to below), Borrower agrees to reimburse Lender for any and all fees,
costs and expenses relating thereto or arising in connection therewith.
Borrower shall not permit the total gross amount of all Exchange Contracts on
which delivery is to be effected and settlement allowed in any two business day
period to be more than $500,000.00 nor shall Borrower permit the total gross
amount of all Exchange Contracts to which Borrower is a party, outstanding at
any one time, to exceed $500,000.00.
Borrower shall execute all standard form applications and agreements of Lender
in connection with the Exchange Contracts, and without limiting any of the terms
of such applications and agreements, Borrower will pay all standard fees and
charges of Lender in connection with the Exchange Contracts.
Without limiting any of the other terms of this Agreement or any such standard
form applications and agreement of Lender, Borrower agrees to indemnity Lender
and hold it harmless, from and against any and all claims, debts, liabilities,
demands, obligations, actions, costs and expenses (including, without
limitation, attorneys' fees of counsel of Lenders choice), of every nature and
description which it may sustain or incur, based upon, arising out of, or in any
way relating to any of the Exchange Contracts or any transactions relating
thereto or contemplated thereby (collectively refereed to as the "FX Indemnity
Provisions").
CASH MANAGEMENT SUBLIMIT. Subject to the terms of this Loan Agreement, as
amended from time to time, Borrower may utilize up to an aggregate amount not to
exceed Five Hundred Thousand and 00/100 Dollars ($500,000.00) for cash
management services which include but are not limited to payroll services,
lockbox, controlled disbursement payables and P.C. banking (the Cash Management
Sublimit). Lender may, in its sole discretion, charge as advances against the
line of credit, any amounts that may become due or owing to Lender in connection
with Cash Management Sublimit. Borrower shall execute all standard form
applications and agreements, including without limitation, the Indemnification
and Pledge Agreement, of Lender in connection with the Cash Management Sublimit
and, without limiting any of the terms of such applications and agreements,
Borrower will pay all standard fees and charges of Lender in connection with the
Cash Management Sublimit.
<PAGE>
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when due on
the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition contained
in this Agreement or in any of the Related Documents, or failure of Borrower
to comply with or to perform any other term, obligation, covenant or condition
contained in any other agreement between Lender and Borrower.
Default in Favor of Third Parties. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrowers property or Borrowers or any
Grantors ability to repay the Loans or perform their respective obligations
under this Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or furnished
to Lender by or on behalf of Borrower or any Grantor under this Agreement or
the Related Documents is false or misleading in any material respect at the
time made or furnished, or becomes false or misleading at any time thereafter.
Detective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time and for
any reason.
Insolvency. The dissolution or termination of Borrowers existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrowers property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any processing under any bankruptcy or
insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower, any creditor of any Grantor against
any collateral securing the Indebtedness, or by any governmental agency. This
includes a garnishment, attachment, or levy on or of any of Borrowers deposit
accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness.
Change In Ownership. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrowers financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
DEFAULT RATE. Following an Event of Default, including failure to pay upon
final maturity, Lender, at its option, may do one or both of the following:
(a) increase the variable interest rate on the Note to five percentage points
(5.000%) over the otherwise effective interest rate payable thereunder, and
(b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the interest rate provided in the Note
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminated (including any
obligation to make Loan Advances or disbursements), and, at Lenders option,
all Indebtedness immediately will become due and payable, all without notice
of any kind to Borrower, except that in the case of an Event of Default of the
type described in the "Insolvency" subsection above, such acceleration shall
be automatic and not optional. In addition, Lender shall have all the rights
and remedies provided in the Related Documents or available at law, in equity,
or otherwise. Except as may be prohibited by applicable law, all of Lenders
rights and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to take
action to perform an obligation of Borrower or of any Grantor shall not affect
Lenders right to declare a default and to exercise its rights arid remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement
Amendments. This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement shall
be effective unless given in writing and signed by the party or parties sought
to be charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the courts of Santa Clam
County, the State of California. Lender and Borrower hereby waive the right of
any jury trial in any action, proceeding, or counterclaim brought by either
Lender or Borrower against the other. (Initial Here _______) This Agreement
shall be governed by and construed in accordance with the laws of the State of
California.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower under this
Agreement shall be joint and several, and all references to Borrower shall mean
each and every Borrower. This means that each of the Borrowers signing below is
responsible for all obligations in this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lenders sale or
transfer, whether now or later, of one or more participation interests in the
Loans to one or more purchasers, whether related or unrelated to Lender. Lender
may provide, without any limitation whatsoever to any one or more purchasers, or
potential purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower hereby
waives any rights to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation interests, as
well as all notices of any repurchase of such participation interests. Borrower
also agrees that the purchasers of any such participation interests will be
considered as the absolute owners of such interests in the Loans and will have
all the rights
<PAGE>
granted under the participation agreement or agreements governing the sale of
such participation interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or against any
purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce Borrowers obligation under the Loans
irrespective of the failure or insolvency of any holder of any interest in the
Loans. Borrower further agrees that the purchaser of any such participation
interests may enforce its interests irrespective of any personal claims or
defenses that Borrower may have against Lender.
Borrower Information. Borrower consents to the release of information on or
about Borrower by Lender in accordance with any court order, law or regulation
and in response to credit inquiries concerning Borrower.
Non-Liability of Lender. The relationship between Borrower and Lender is a
debtor and creditor relationship and not fiduciary in nature, nor is the
relationship to be construed as creating any partnership or joint venture
between Lender and Borrower. Borrower is exercising its own judgment with
respect to Borrowers business. All information supplied to Lender is for Lenders
protection only and no other party is entitled to rely on such information.
There is no duty for Lender to review, inspect, supervise, or inform Borrower of
any matter with respect to Borrowers business. Lender and Borrower intend that
Lender may reasonably rely on all information supplied by Borrower to Lender,
together with all representations and warranties given by Borrower to Lender,
without investigation or confirmation by Lender and that any investigation or
failure to investigate will not diminish Lenders right to so rely.
Notice of Lender's Breach. Borrower must notify Lender in writing of any
breach of this Agreement or the Related Documents by Lender and any other
claim, cause of action or offset against Lender within thirty (30) days after
the occurrence of such breach or after the accrual of such claim, cause of
action or offset. Borrower waives any claim, cause of action or offset for
which notice is not given in accordance with this paragraph. Lender is
entitled to rely on any failure to give such notice.
Borrower Indemnification. Borrower shall indemnify and hold Lender harmless
from and against all claims, costs, expenses, losses, damages, and liabilities
of any kind, including but not limited to attorneys' fees and expenses,
arising out of any matter relating directly or indirectly to the Indebtedness,
whether resulting from internal disputes of the Borrower, disputes between
Borrower and any Guarantor, or whether involving any third parties, or out of
any other matter whatsoever related to this Agreement or the Related
Documents, but excluding any claim or liability which arises as a direct
result of Lenders gross negligence or willful misconduct. This indemnity shall
survive full repayment and satisfaction of the Indebtedness and termination of
this Agreement
Counterparts. This Agreement may be executed in multiple counterparts, each of
which, when so executed, shall be deemed an original, but all such counterparts,
taken together, shall constitute one and the same Agreement
Costs and Expenses. Borrower agrees to pay upon demand all of Lenders
expenses, including without limitation attorneys' fees, incurred in connection
with the preparation, execution, enforcement, modification and collection of
this Agreement or in connection with the Loans made pursuant to this Agreement
Lender may pay someone else to help collect the Loans and to enforce this
Agreement, and Borrower will pay that amount. This includes, subject to any
limits under applicable law, Lenders attorneys' fees and Lenders legal
expenses, whether or not there is a lawsuit including attorneys' fees for
bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all other
sums provided by law.
Notices. All notices required to be given under this Agreement shall be given
in writing, may be sent by telefacsimilie, and shall be effective when
actually delivered or when deposited with a nationally recognized overnight
courier or deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the address shown
above. Any party may change its address for notices under this Agreement by
giving formal written notice to the other parties, specifying that the purpose
of the notice is to change the party's address. To the extent permitted by
applicable law, if there is more than one Borrower, notice to any Borrower
will constitute notice to all Borrowers. For notice purposes, Borrower will
keep Lender informed at all times of Borrowers current address(es).
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity;
however, If the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word "Borrower' as used herein
shall include all subsidiaries and affiliates of Borrower Notwithstanding the
foregoing however, under no circumstances shall this Agreement be construed to
require Lender to make any Loan or other financial accommodation to any
subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on behalf
of Borrower shall bind its successors and assigns and shall inure to the benefit
of Lender, its successors and assigns. Borrower shall not, however, have the
right to assign its rights under this Agreement or any interest therein, without
the prior written consent of Lender.
Survival. All warranties, representations, and covenants made by Borrower in
this Agreement or in any certificate or other instrument delivered by Borrower
to Lender under this Agreement shall be considered to have been relied upon by
Lender and will survive the making of the Loan and delivery to Lender of the
Related Documents, regardless of any investigation made by Lender or on Lenders
behalf.
Time Is of the Essence. Time is of the essence in the performance of this
Agreement
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lenders right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall constitute a
waiver of any of Lenders rights or of any obligations of Borrower or of any
Grantor as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent in subsequent instances where
such consent is required, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
<PAGE>
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
FEBRUARY 7, 1997.
BORROWER:
SoloPoint, Inc.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
LENDER:
Silicon Valley Bank
By: _____________________________________
Authorized Lender
<PAGE>
PROMISSORY NOTE
BORROWER: SoloPoint Inc. Lender: Silicon Valley Bank
130-B KNOWLES DRIVE 3003 TASMAN Drive
LOS GATOS, CA 95030 SANTA CLARA, CA 95054
Principal Amount: 1,500,000.00
Initial Rate: 9.250%
Date of Note: February 7,1997
PROMISE TO PAY. SOLOPOINT INC. ("BORROWER") PROMISES TO PAY TO SILICON VALLEY
SANK ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE
PRINCIPAL AMOUNT OF ONE MILLION FIVE HUNDRED THOUSAND & 00/100 DOLLARS
($1,500,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST ON THE
UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST SHALL BE
CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON FEBRUARY 6,1998. IN ADDITION,
BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID INTEREST
BEGINNING MARCH 6,1997, AND ALL SUBSEQUENT INTEREST payments are due on the
same day of each month after that Interest ON THIS NOTE IS COMPUTED ON A
365/360 SIMPLE INTEREST BASIS; THAT IS, BY applying the rate of the annual
interest rate over a year of 360 days, multiplied by the outstanding principal
balance, multiplied by the actual number of days the principal balance is
outstanding. Borrower will pay tender at tenders address shown above or at
such other place as Lender may designate in writing. Unless otherwise agreed
or required by applicable law, payments wilt toe applied first to accrued
unpaid interest, then to principal, and any remaining amount to any unpaid
collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from tine to time based on changes in an index which is Lenders Prime Rate
(the "Index"). This is the rate Lender charges, or would charge, on so-day
unsecured loans to the most creditworthy corporate customers. This rate may or
may not be the lowest rate available from Lender at any given tine. Lender
will tell Borrower the current index rate upon Borrowers request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each time the prime rate
is adjusted by Silicon Valley Bank. The Index currently Is 8.250% per annum.
The Interest rate to be applied to the UNPAID PRINCIPAL BALANCE OF THIS NOTE
WILL BE AT A RATE OF 1.000 PERCENTAGE POINT OVER THE INDEX, RESULTING IN AN
INITIAL RATE OF 9.2S0% PER ANNUM. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by applicable
law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance
charges are earned fully as of the date of the loan and will not be subject to
refund upon early payment (whether voluntary or as a result of default),
except as otherwise required by law. Except for the foregoing, Borrower may
pay without penalty all or a portion of the amount owed earlier than it is
due. Early payments will not, unless agreed to by Lender in writing, relieve
Borrower of Borrower's obligation to continue to make payments of accrued
unpaid interest. Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrowers property or Borrower's ability to repay this Note or perform Borrowers
obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrowers behalf is false or misleading in any material respect either now or at
the time made or furnished, (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrowers property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (I) Any creditor tries
to take any of Borrowers property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrowers accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount Upon Borrowers failure to pay all
amounts declared due pursuant to this section, including failure to pay upon
final maturity, Lender, at its option, may also, fl permitted under applicable
law, do one or both of the following: (a) increase the variable interest rate on
this Note to 6.000 percentage points over the Index, and (b) add any unpaid
accrued Interest to principal and such sum will bear interest therefrom until
paid at the rate provided in this Note (including any increased rate). Lender
may hire or pay someone else to help collect this Note if Borrower does not pay.
Borrower also will pay Lender that amount. This includes, subject to any limits
under applicable law, *,'. tenders attorneys' fees and Lenders legal expenses
whether or not there is a lawsuit, including attorneys" fees and legal expenses
for bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all other sums
provided by law. This Note has been delivered to Lender and accepted by Lender
In the State of California. If there is a lawsuit Borrower agrees upon Lender's
REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF Santa Clam County, the
State of California. Lender and Borrower hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by either Lender or
Borrower against the Other. (Initial Here ______) This Note shall be governed by
and construed in accordance with the laws of the State of California.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note, as well as directions for payment from Borrower's accounts, may be
requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender. The unpaid principal balance ow'ng on this Note
at any time may be evidenced by endorsements on this Note or by Lenders internal
records, including daily computer print-outs. Lender will have no obligation to
advance funds under this Note if: (a) Borrower or any guarantor is in default
under the terms of this Note or any agreement that Borrower or any guarantor has
with Lender, including any agreement made in connection with the signing of this
Note; (b) Borrower or any guarantor ceases doing business or is insolvent; (c)
any guarantor seeks, claims or otherwise attempts to limit, modify or revoke
such guarantor's guarantee of this Note or any other loan with Lender; or (d)
Borrower has applied funds provided pursuant to this Note for purposes other
than those authorized by Lender.
REQUEST TO DEBIT ACCOUNTS. Borrower will regularity deposit funds received
from its business activities in accounts maintained by Borrower at Silicon
Valley Sank. Borrower hereby requests and authorizes Lender to debit any of
Borrowers accounts with Lender, specifically, without limitation, Account
Number ______________________, for payments of principal and interest due on
the loan and any other obligations owing by Borrower to tender. Lender will
notify Borrower of all debits which Lender makes against Borrowers accounts.
Any such debits against Borrower's accounts in no way shall be deemed a set-
off.
BUSINESS LOAN AGREEMENT. This Note is subject to and shall be governed by all
the term and conditions of the Business Loan Agreement of even date herewith,
between Lender and Borrower, as the such agreement may be amended from time to
time, which Business Loan Agreement is incorporated herein by reference.
<PAGE>
PAYMENT OF LOAN FEE. This Note is subject to a loan fee in the amount of Seven
Thousand Five Hundred and 00/100 Dollars ($7,500.00) plus all out-of-pocket
expenses.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs. guarantees or endorses this Note, to the extent allowed by law, waive any
applicable statute of limitations, presentment, demand for payment protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no patty who signs This Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, tall to realize upon or perfect Lender's security
Interest in the collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other
than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
This NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE,
BORROWER:
Solopoint Inc. " .
By: _______________________________
Name
<PAGE>
COMMERCIAL SECURITY AGREEMENT
BORROWER: SoloPoint Inc. Lender: Silicon Valley Bank
130-B KNOWLES DRIVE 3003 TASMAN Drive
LOS GATOS, CA 95030 SANTA CLARA, CA 95054
THIS COMMERCIAL SECURITY AGREEMENT Is entered Into between SoloPoint Inc.
(referred to below as "Grantor"); and Silicon Valley Bank (referred to below as
"Lender"). For valuable consideration, Grantor grants to Lender a security
interest In The Collateral to secure The Indebtedness and agrees That Lender
shall have the rights stated In this Agreement with respect to The Collateral,
In addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. Al references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement' means this Commercial Security Agreement, as
this Commercial Security Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this Commercial
Security Agreement from time to time.
Collateral. The word "Collateral" means the following described property of
Grantor, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
Inventory, Chattel Paper. Accounts, Contract Rights, Deposit Accounts,
Instruments, Documents, Equipment General Intangibles and Fixtures
In addition, the word "Collateral" includes all the following, whether now owned
or hereafter acquired, whether now existing or hereafter arising, and wherever
located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions
for any property described above,
(b) All products and produce of any of the property described in this
Collateral section.
(c) All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, or
other disposition of any of the property described in this
Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property
described in this Collateral section.
(e) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing,
photograph, microfilm, microfiche, or electronic media, together
with all of Grantor's right, title, and interest in and to all
computer software required to utilize, create, maintain, and process
any such records or data on electronic media,
Event of Default. The words "Event of Default' mean and include without
limitation any of the Events of Default set forth below in the section titled
"Events of Default."
Grantor. The word "Grantor" means SoloPoint, Inc., its successors and assigns
Guarantor. The word "Guarantor" means and includes without limitation each and
all of the guarantors, sureties, and accommodation parties in connection with
the Indebtedness.
Indebtedness. The word "Indebtedness" means any and all indebtedness of
Borrower to Lender, now or hereafter arising or Incurred, including, without
limitation, the Indebtedness evidenced by the Note, including all principal
and interest, together with all other indebtedness and costs and expenses for
which Borrower is responsible under this Agreement or under any Related
Documents.
Lender. The word "Lender" means Silicon Valley Bank, its successors and
assigns.
Note. The word "Note" means the notes, loners of credit or credit agreements in
any principal amount from Borrower to Lender, together with all renewals of,
extensions of, modifications of, refinancings of, consolidations of and
substitutions for the notes, letters of credit or credit agreements,
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
RIGHT OF SETOFF. Grantor hereby grants Lender a contractual possessory security
interest in and hereby assigns, conveys, delivers, pledges, and transfers all of
Grantor's right, title and interest in and to Grantor's accounts with Lender
(whether checking, savings, or some other account), including all accounts held
jointly with someone else and all accounts Grantor may open in the future,
excluding, however, all IRA and Keogh accounts, and all trust accounts for which
the grant of a security interest would be prohibited by law. Grantor authorizes
lender, to the extent permitted by applicable law, to charge or setoff all
Indebtedness against any and all such accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
Perfection of Security Interest. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to perfect
and continue Lender's security interest in the Collateral. Upon request of
Lender, Grantor will deliver to Lender any and all of the documents evidencing
or constituting the Collateral, and Grantor will note Lenders Interest upon any
and all chattel paper if not delivered to Lender for possession by Lender.
Grantor hereby appoints Lender as its irrevocable attorney-In-fact for the
purpose of executing any documents necessary to perfect or to continue the
security interest granted in this Agreement Lender may at any time, and without
further authorization from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use as a
financing statement. Grantor will reimburse Lender for all expenses for the
perfection and the continuation of the perfection of Lender's security interest
in the Collateral. Grantor promptly will notify Lender before any change in
Grantor's name Including any change to the assumed business names of Grantor.
This Is a continuing Security Agreement and will continue in effect even Though
all or any part of The Indebtedness Is paid In full and even though for a period
of time Grantor may not be Indebted to Lender.
No Violation. The execution and delivery of this Agreement will not violate any
law or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.
<PAGE>
Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is enforceable
in accordance with its terms, is genuine, and complies with applicable laws
concerning loan, content and manner of preparation and execution, and all
persons appearing to be obligated on the Collateral have authority and capacity
to contract and are in tact obligated as they appear to be on the Collateral.
Location of The Collateral. Grantor, upon request of Lender, will deliver to
Lender in form satisfactorily to Lender a schedule of real properties and
Collateral locations relating to Grantor's operations, Including without
limitation the following: (a) all real property owned or being purchased by
Grantor; (b) all real property being rented or leased by Grantor; (c) all
storage facilities owned, rented, leased, or being used by Grantor; and (d) all
other properties where Collateral is or may be located. Except in the ordinary
course of its business, Grantor shall not remove the Collateral from its
existing locations without the prior written consent of Lender.
Removal of Collateral. Grantor shall keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts, the records
concerning the Collateral) at Grantor's address shown above, or at such other
locations as are acceptable to Lender. Except in the ordinary course of its
business, including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written consent of
Lender. To the extent that the Collateral consists of vehicles, or other titled
property, Grantor shall not take or permit any action which would require
application for certificates of title for the vehicles outside the state of
California, without the prior written consent of Lender.
Transactions Involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not sell,
offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor
is not in default under this Agreement, Grantor may sell inventory, but only in
the ordinary course of its business and only to buyers who qualify as a buyer in
the ordinary course of business. A sale in the ordinary course of Grantor's
business does not include a transfer in partial or total satisfaction of a debt
or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise
permit the Collateral to be subject to any lien, security interest, encumbrance,
or charge, other than the security interest provided for in this Agreement,
without the prior written consent of Lender. This Includes security interests
even if junior in right to the security interests granted under this Agreement.
Unless waived by Lender, all proceeds from any disposition of the Collateral
(for whatever reason) shall be held in trust for Lender and shall not be
commingled with any other funds; provided however, this requirement shall not
constitute consent by Lender to any sale or other disposition. Upon receipt,
Grantor shall immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Agreement. No financing statement covering any of
the Collateral is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.
Collateral Schedules and Locations. Insofar as the Collateral consists of
inventory, Grantor shall deliver to Lender, as often as Lender shall require,
such lists, descriptions, and designations of such Collateral as tender may
require to identify the nature, extent, and location of such Collateral. Such
information shall be submitted for Grantor and each of its subsidiaries or
related companies.
Maintenance and Inspection of Collateral. Grantor shall maintain all tangible
Collateral in good condition and repair. Grantor will not commit or permit
damage to or destruction of the Collateral or any part of the Collateral. Lender
and its designated representatives and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral wherever located.
Grantor shall immediately notify Lender of all cases involving the return,
rejection, repossession, loss or damage of or to any Collateral: of any request
for credit or adjustment or of any other dispute arising with respect to the
Collateral; and generally of all happenings and events affecting the Collateral
or the value or the amount of the Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all taxes, assessments
and liens upon the Collateral, its use pr operation, upon this Agreement, upon
any promissory note or notes evidencing the Indebtedness, or upon any of the
other Related Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as tender's interest in
the Collateral is not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days. Grantor
shall deposit with tender cash, a sufficient corporate surety bend or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, attorneys' fees or other charges
that could accrue as a result of foreclosure or sale of the Collateral. In any
contest Grantor shall defend itself and Lender and shall satisfy any final
adverse judgment before enforcement against the Collateral. Grantor shall name
Lender as an additional obligee under any surety bond furnished in the contest
proceedings.
Compliance With Governmental requirements. Grantor shall comply promptly with
all laws, ordinances, rules and regulations of all governmental authorities, now
or hereafter in effect, applicable to the ownership, production, disposition, or
use of the Collateral. Grantor may contest in good faith any such law, ordinance
or regulation and withhold compliance during any proceeding, including
appropriate appeals, so long as Lender's interest in the Collateral, in tender's
opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien on
the Collateral, used for the generation, manufacture, storage. transportation,
treatment, disposal, release or threatened release of any hazardous waste or
substance, as those terms are defined in the Comprehensive Environmental
Response, Compensation. and Liability Act of 1980, as amended, 42 U.S.C.
Section 9001, et seq. "CERCLA", the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. No. 99-499 "SARA""), the Hazardous Materials
Transportation Act, 49 U.S.C. Section P. 801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5
through 7.7 of Division 20 of the California Health and Safety Code, Section
25100, et seq., or other applicable state or Federal laws, rules, or
regulations adopted pursuant to any of the foregoing. The terms "hazardous
waste" and "hazardous substance" shall also include, without limitation,
petroleum and petroleum by-products or any fraction thereof and asbestos. The
representations and warranties contained herein are based on Grantor's due
diligence in investigating the Collateral for hazardous wastes and substances.
Grantor hereby (a) releases and waives any future claims against Lender for
indemnity or contribution in the event Grantor becomes liable for cleanup or
other costs under any such laws, and (b) agrees to indemnify and hold harmless
Lender against any and all claims and losses resulting from a breach of this
provision of this Agreement. This obligation to indemnify shall survive the
payment of the Indebtedness and the satisfaction of this Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with respect
to the Collateral, in loan, amounts, coverages and basis reasonably acceptable
to Lender and issued by a company or companies reasonably acceptable to
Lender. Grantor, upon request of Lender, will deliver to Lender from time to
time the policies or certificates of insurance in form satisfactory to Lender,
including stipulations that coverages will not be canceled or diminished
without at least ten (10) days' prior written notice to Lender and not
including any disclaimer of the insurer's liability for failure to give such a
notice. Each insurance policy also shall Include an endorsement providing that
coverage in favor of Lender will not be impaired in any way by any act,
omission or default of Grantor or any other person. In connection with all
policies covering assets in which Lender holds or is offered a security
interest, Grantor will provide Lender with such loss payable or other
endorsements as Lender may require. If Grantor at any time falls to obtain or
maintain any insurance as required under this Agreement. Lender may (but shall
not be obligated to) obtain such insurance as Lender deems appropriate.
including if it so chooses "single interest insurance," which will cover only
Lender's interest in the Collateral.
<PAGE>
Application of Insurance Proceeds. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if Grantor
fails to do so within fifteen (15) days of the casualty. All proceeds of any
Insurance on the Collateral, including accrued proceeds thereon, shall be held
by Lender as part of the Collateral. If Lender consents to repair or
replacement of the damaged or destroyed Collateral, Lender shall, upon
satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds
for the reasonable cost of repair or restoration. If Lender does not consent
to repair or replacement of the Collateral, Lender shall retain a sufficient
amount of the proceeds to pay all of the Indebtedness, and shall pay the
balance to Grantor. Any proceeds which have not been disbursed within six (6)
months after their receipt and which Grantor has not committed to the repair
or restoration of the Collateral shall be used to prepay the Indebtedness.
Insurance Reserves. Lender may require Grantor to maintain with Lender reserves
for payment of insurance premiums, which reserves shall be created by monthly
payments from Grantor of a sum estimated by Lender to be sufficient to produce.
at least fifteen (15) days before the premium due date, amounts at least equal
to the insurance premiums to be paid. If fifteen (15) days before payment is
due, the reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender. The reserve funds shall be held by Lender as a general
deposit and shall constitute a non-interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid by Grantor as
they become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance premiums
required to be paid by Grantor. The responsibility for the payment of premiums
shall remain Grantor's sole responsibility.
INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as Lender
may reasonably request including the following: (a) the name of the insurer; (b)
the risks insured; (c) the amount of the policy; (d) the property insured; (e)
the then current value on the basis of which insurance has been obtained and the
manner of determining that value; and (f) the expiration date of the policy. In
addition, Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral,
GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have possession of
the tangible personal property and beneficial use of all the Collateral and
may use it in any lawful manner not inconsistent with this Agreement or the
Related Documents, provided that Grantor's right to possession and beneficial
use shall not apply to any Collateral where possession of the Collateral by
Lender Is required by law to perfect Lenders security interest in such
Collateral. If Lender at any time has possession of any Collateral, whether
before or after an Event of Default, Lender shall be deemed to have exercised
reasonable care In the custody and preservation of the Collateral if Lender
takes such action for that purpose as Grantor shall request or as Lender, in
Lenders sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care, Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior
parties, nor to protect, preserve or maintain any security interest given to
secure the Indebtedness,
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral, Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral, All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the Indebtedness and, at Lenders option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement Default on Indebtedness, Failure of Grantor to make any
payment when due on the Indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in any
of the Related Documents or in any other agreement between Lender and Grantor,
Default In Favor of Third Parties. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrowers property or Borrowers or any
Grantors ability to repay the Loans or perform their respective obligations
under this Agreement or any of the Related Documents,
False Statements. Any warranty, representation or statement made or furnished
to Lender by or on behalf of Grantor under this Agreement, the Note or the
Related Documents is false or misleading in any material respect, either now
or at the time made or furnished.
Defecuve Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect including failure of any collateral
documents to create a valid and perfected security interest or lien) at any time
and for any reason, Insolvency. The dissolution or termination of Grantor's
existence as a going business, the insolvency of Grantor, the appointment of a
receiver for any part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or, forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
the Collateral or any other collateral securing the Indebtedness, This includes
a garnishment of any of Grantor's deposit accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or such Guarantor dies or becomes
incompetent.
Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the California Uniform Commercial Code, In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
Accelerate Indebtedness. Lender may declare the entire Indebtedness, including
any prepayment penalty which Grantor would be required to pay, Immediately due
and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender all or any
portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral, Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender, Lender also
<PAGE>
shall have full power to enter upon the property of Grantor to take possession
of and remove the Collateral. If the Collateral contains other goods not
covered by this Agreement at the time of repossession, Grantor agrees Lender
may take such other goods, provided that Lender makes reasonable efforts to
return them to Grantor after repossession.
Sell The Collateral. Lender shall have full power to sell, lease, transfer, or
otherwise deal with the Collateral or proceeds thereof in its own name or that
of Grantor. Lender may sell the Collateral at public auction or private sale.
Unless the Collateral threatens to decline speedily In value or is of a type
customarily sold on a recognized market, Lender will give Grantor reasonable
notice of the time after which any private sale or any other intended
disposition of the Collateral is to be made. The requirements of reasonable
notice shall be met if such notice Is given at least ten (10) days, or such
lesser time as required by state law, before the time of the sale or
disposition. All expenses relating to the disposition of the Collateral,
including without limitation the expenses of retaking, holding, insuring,
preparing for sale and selling the Collateral, shall become a part of the
Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law, Lender shall have
the following rights and remedies regarding the appointment of a receiver (a)
Lender may have a receiver appointed as a matter of right, (b) the receiver may
be an employee of Lender and may serve without bond, and (c) all fees of the
receiver and his or her attorney shall become part of the Indebtedness secured
by this Agreement and shall be payable on demand, with interest at the Note rate
from date of expenditure until repaid.
Collect Revenues, Apply Accounts. Lender, either Itself or through a receiver,
may collect the payments, rents, income, and revenues from the Collateral. under
may at any time in its discretion transfer any Collateral into its own name or
that of its nominee and receive the payments, rents, income, and revenues
therefrom and hold the same as security for the Indebtedness or apply it to
payment of the Indebtedness in such order of preference as Lender may determine.
Insofar as the Collateral consists of accounts, general intangibles. insurance
policies, instruments, chattel paper, choses in action, or similar property,
Lender may demand, collect, receipt for, settle, compromise, adjust, sue for,
foreclose, or realize on the Collateral as Lender may determine, whether or not
indebtedness or Collateral is then due. For these purposes, Lender may, on
behalf of and in the name of Grantor, receive, open and dispose of mall
addressed to Grantor: change any address to which mail and payments are to be
sent: and endorse notes, checks, drafts, money orders, documents of title,
instruments and items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, Lender may notify account debtors and
obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on the
Indebtedness due to under after application of all amounts received from the
exercise of the rights provided in this Agreement. Grantor shall be liable for a
deficiency even if the transaction described In this subsection Is a sale of
accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies of a
secured creditor under the provisions of the Uniform Commercial Code, as may be
amended from time to time. In addition, Lender shall have and may exercise any
or all other rights and remedies it may have available at law, in equity, or
otherwise.
Cumulative Remedies. All of Lenders rights and remedies, whether evidenced by
this Agreement or the Related Documents or by any other writing, shall be
cumulative and may be exercised singularly or concurrently. Election by Lender
to pursue any remedy shall not exclude pursuit of any other remedy. and an
election to make expenditures or to take action to perform an obligation of
Grantor under this Agreement, after Grantor's failure to perform, shall not
affect Lenders right to declare a default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are apart of
this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth In this Agreement. No alteration of or amendment to this Agreement shall
be effective unless given in writing and signed by the patty or parties sought
to be charged or bound by the alteration or amendment,
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Grantor agrees upon
Lender's request to submit to the jurisdiction of the counts of Santa Clara
County, the State of California. Lender and Grantor hereby waive the right to
any jury trial in any action, proceeding, or counterclaim brought by either
Lender or Grantor against the other (Initial Here _____) This Agreement shall be
governed by and construed in accordance with the laws of the State of California
Attorneys' Fees: Expenses. Grantor agrees to pay upon demand all of Lenders
costs and expenses, including attorneys' fees and Lender's legal expenses,
incurred in connection with the enforcement of this Agreement. Lender may pay
someone else to help enforce this Agreement and Grantor shall pay the costs and
expenses of such enforcement. Costs and expenses include Lenders attorneys' fees
and legal expenses whether or not there is a lawsuit, including attorneys' fees
and legal expenses for-bankruptcy proceedings (and Including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Grantor also shall pay all court costs and
such additional fees as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
Multiple Panties: Corporate Authority. All obligations of Grantor under this
Agreement shall be joint and several, and all references to Grantor shall mean
each and every Grantor. This means that each of the persons signing below is
responsible for all obligations in this Agreement.
Notices. All notices required to be given under this Agreement shall be given
in writing, may be sent by telefacsimile, and shall be effective when actually
delivered or when deposited with a nationally recognized overnight courier or
deposited In the United States mall, first class, postage prepaid, addressed
to the party to whom the notice Is to be given at the address shown above. Any
party may change its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that the purpose of the notice
is to change the patty's address. To the extent permitted by applicable law,
if there is more than one Grantor, notice to any Grantor will constitute
notice to all Grantors. For notice purposes, Grantor will keep Lender informed
at all times of Grantor's current address(es).
Power of Attorney. Grantor hereby appoints Lender as its true and lawful
attorney-In-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover all
sums of money or other property which may now or hereafter become due, owing or
payable from the Collateral: (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued in payment for
the Collateral; Cc) to settle or compromise any and all claims arising under the
Collateral, and, in the place and stead of Grantor, to execute and deliver its
release and settlement for the claim: and (d) to file any claim or claims or to
take any action or Institute or take part in any proceedings, either In its own
name or in the name of Grantor, or otherwise, which in the discretion of Lender
may seem to be necessary or advisable. This power is given as security for the
Indebtedness, and the authority hereby conferred is and shall be irrevocable and
shall remain in full force and effect until renounced by Lender.
<PAGE>
Preference Payments. Any monies Lender pays because of an asserted preference
claim in Borrower's bankruptcy will become a part of the Indebtedness and, at
Lenders option, shall be payable by Borrower as provided above In the
"EXPENDITURES BY LENDER" paragraph.
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity:
however, If the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement In all other respects shall remain
valid and enforceable.
Successor Interests. Subject to the limitations set forth above on transfer of
the Collateral, this Agreement shall be binding upon and inure to the benefit of
the parties, their successors and assigns.
<PAGE>
Waiver. Lender shall nor be deemed to have waived any rights under this
Agreement unless such waiver Is given in writing and signed by Lender No delay
or omission on the part of Lender In exercising any right shall operate as a
waiver of such right or any other right A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lenders right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waver of any of Lender's rights or of any
of Grantors obligations as to any future transactions. Whenever the consent of
Lender is required under this Agreement the granting of such consent by Lender
in any instance shall not constitute continuing consent to subsequent instances
where such consent is required and In all cases such consent may be granted or
withheld In the sole discretion of Lender.
Waiver of Co-obligor's Rights. If more than one person Is obligated for the
Indebtedness, Borrower irrevocably waives, disclaims and relinquishes all claims
against such other person which Borrower has or would otherwise have by virtue
of payment of the Indebtedness or any part thereof, specifically Including but
not united to all rights of indemnity, contribution or exoneration.
ADDITIONAL PROVISION. If any law Is passed that requires additional action on
the part of Lender, Borrower and/or Grantor shall fully cooperate with Lender in
complying with the law and accordingly, shall reimburse Lender for all costs and
expenses which Lender Incurs In compliance with the law.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED FEBRUARY 7,
1997.
Borrower: SoloPoint, Inc. Lender: Silicon Valley Bank
130-B Knowles Drive 3003 Tasman Drive
Los Gatos, CA 95030 Santa Clara, CA 95054
INSURANCE REQUIREMENTS. SoloPoint, Inc. ('Grantor') understands that insurance
coverage Is required in connection with the extending of a loan or the providing
of other financial accommodations to Grantor by Lender. These requirements are
set forth in the security documents. The following minimum insurance coverages
must be provided on the following described collateral (the "Collateral"):
Collateral: Inventory, Chattel Paper, Accounts, Contract Rights. Deposit
Accounts, Instruments, Documents, Equipment, General Intangibles
and Fixtures.
Type. All risks, including fire, theft and liability.
Amount Full insurable value.
Basis. Replacement value.
Endorsements. Lender's loss payable clause with stipulation that coverage will
not be canceled or diminished without a minimum of ten (10) days'
prior written notice to Lender.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Lender. Grantor understands
that credit may not be denied solely because insurance was not purchased through
Lender.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Lender, on or before
closing, evidence of the required insurance as provided above, with an effective
date of February 7,1997, or earlier. Grantor acknowledges and agrees that if
Grantor fails to provide any required insurance or fails to continue such
insurance in force, Lender may do so at Grantor's expense as provided in the
applicable security document The cost of any such insurance, at the option of
Lender, shall be payable on demand or shall be added to the indebtedness as
provided in the security document. GRANTOR ACKNOWLEDGES THAT IF LENDER SO
PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION
AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN;
HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE
INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor
authorizes Lender to provide to any person (including any insurance agent or
company) all information Lender deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both. GRANTOR
ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO PROVIDE
INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED FEBRUARY 7,1997.
GRANTOR:
SoloPoInt, Inc.
By: _____________________________________________
Name: ______________________________________
FOR LENDER USE ONLY
INSURANCE VERIFICATION
DATE: __________________ - PHONE: _____________________
AGENT'S NAME: __________________________________________________________________
INSURANCE COMPANY: _____________________________________________________________
POLICY NUMBER: _________________________________________________________________
EFFECTIVE DATES: _______________________________________________________________
COMMENTS: ______________________________________________________________________
<PAGE>
EXHIBIT 11.1
SOLOPOINT, INC.
WEIGHTED AVERAGE SHARES COMPUTATION
March 31, 1997
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Weighted average common shares outstanding........... 3,499,780 390,399
Common equivalent shares from stock options,
warrants, and Series A-6 and A-7
preferred stock granted or issued
during the twelve month period (1).................. - 1,050,185
Convertible preferred stock, as if converted......... - 510,585
--------- ---------
3,499,780 1,951,169
========= =========
Calculated as follows:
Series A-6 and A-7 convertible preferred
stock issued during the period September 15,
1995 through September 14, 1996.................... 642,853
Issuance of common stock during the period
September 15, 1995 through September 14, 1996...... 362,062
Options granted during the period September 15,
1995 through September 14, 1996.................... 50,300
---------
1,055,215
Shares assumed repurchased under the
treasury stock method.............................. (5,030)
---------
1,050,185
=========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,810,536
<SECURITIES> 0
<RECEIVABLES> 188,080
<ALLOWANCES> 23,916
<INVENTORY> 1,018,441
<CURRENT-ASSETS> 4,050,056
<PP&E> 422,443
<DEPRECIATION> 234,352
<TOTAL-ASSETS> 4,276,144
<CURRENT-LIABILITIES> 370,046
<BONDS> 0
0
0
<COMMON> 12,411,641
<OTHER-SE> (8,533,080)
<TOTAL-LIABILITY-AND-EQUITY> 4,276,144
<SALES> 78,544
<TOTAL-REVENUES> 78,544
<CGS> 54,482
<TOTAL-COSTS> 1,199,008
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,125
<INCOME-PRETAX> (1,141,811)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,141,811)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,141,811)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> 0
</TABLE>
