<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
---------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
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 0-26161
INTERACT COMMERCE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 86-0808340
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
8800 N. GAINEY CENTER DRIVE, SUITE 200, SCOTTSDALE, ARIZONA 85258
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(480) 368-3700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 [ ]
As of April 30, 2000, there were 19,622,839 outstanding shares of Common Stock,
par value $.001 per share, of Interact Commerce Corporation.
<PAGE> 2
INTERACT COMMERCE CORPORATION AND SUBSIDIARIES INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION ............................................................................. 1
ITEM 1. FINANCIAL STATEMENTS ............................................................ 1
INTERACT COMMERCE CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS ............................................ 1
INTERACT COMMERCE CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS .................................. 2
INTERACT COMMERCE CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS .................................. 3
INTERACT COMMERCE CORPORATION AND SUBSIDIARIES NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ............................ 4
NOTE 1. BASIS OF PRESENTATION .................................................. 4
NOTE 2. ACQUISITION ............................................................ 4
NOTE 3. EARNINGS PER SHARE ..................................................... 6
NOTE 4. NEW PRONOUNCEMENTS ..................................................... 6
NOTE 5. SEGMENT INFORMATION .................................................... 6
NOTE 6. SUBSEQUENT EVENT ....................................................... 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS .............................................. 8
OVERVIEW ........................................................................ 8
RESULTS OF OPERATIONS ........................................................... 10
LIQUIDITY AND CAPITAL RESOURCES ................................................. 13
YEAR 2000 COMPLIANCE ............................................................ 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ...................... 15
PART II OTHER INFORMATION ................................................................................. 16
ITEM 1. LEGAL PROCEEDINGS ............................................................... 16
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ....................................... 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ............................. 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................................ 17
SIGNATURES ................................................................................................. 18
</TABLE>
i
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERACT COMMERCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---- ----
ASSETS (Unaudited)
<S> <C> <C>
Current assets: $ 54,566 $ 60,795
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts of 11,819 12,609
$1,123 and $1,064 at March 31, 2000 and at December 31, 1999,
respectively
Due from Symantec Corporation 11,651 5,609
Prepaid expenses and other current assets 2,258 2,953
--------- ---------
Total current assets 80,294 81,966
Property and equipment, net 12,673 9,707
Intangible assets 67,172 72,049
Other assets 1,805 1,161
--------- ---------
$ 161,944 $ 164,883
========= =========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current liabilities:
<S> <C> <C>
Accounts payable $ 5,913 $ 5,287
Accrued expenses 5,491 3,143
Due to Symantec Corporation 3,545 --
Current portion of capital lease obligations 1,021 1,083
Current portion of long-term debt 14,068 11,775
Deferred revenues 9,091 10,800
--------- ---------
Total current liabilities 39,129 32,088
Capital lease obligations, less current portion 2,154 2,264
Long-term debt, less current portion 56,734 55,107
Deferred rental obligation 106 106
Stockholders' equity:
Preferred Stock, authorized 20,000,000 shares, no shares issued or
outstanding at March 31, 2000 or December 31, 1999 -- --
Class A Common Stock, par value $0.001 per share; 50,000,000
shares authorized, 19,567,736 and 19,348,791 shares issued
outstanding at March 31,2000 and December 31, 1999,
respectively 20 19
Additional paid-in capital 103,188 102,816
Accumulated deficit (37,006) (24,883)
Foreign currency translation adjustment (5) --
Unearned compensation (2,376) (2,634)
--------- ---------
Total stockholders' equity 63,821 75,318
--------- ---------
Total liabilities and stockholders' equity $ 161,944 $ 164,883
========= =========
</TABLE>
See accompanying notes
1
<PAGE> 4
INTERACT COMMERCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data; unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
2000 1999
---- ----
<S> <C> <C>
Revenues:
Licenses $ 17,171 $ 4,225
Services 4,597 2,077
-------- --------
Total revenues 21,768 6,302
-------- --------
Costs of revenues:
Licenses 1,973 332
Services 3,732 1,351
-------- --------
Total costs of revenues 5,705 1,683
-------- --------
Gross profit 16,063 4,619
Operating expenses:
Sales and marketing 12,513 3,595
Research and development 5,187 1,286
General and administrative 2,265 587
Amortization of acquisition related intangible assets 5,028 279
-------- --------
Total operating expenses 24,993 5,747
-------- --------
Loss from operations (8,930) (1,128)
Other income (expense):
Interest income 789 106
Interest expense (927) (59)
Accretion of discount on long-term debt (3,055) --
-------- --------
Loss before provision for income taxes (12,123) (1,081)
Provision for income taxes -- --
-------- --------
Net loss $(12,123) $ (1,081)
======== ========
Historic basic and diluted net loss per share $ (0.62) $ (0.31)
======== ========
Pro forma basic and diluted net loss per share $ (0.62) $ (0.08)
======== ========
Weighted average shares used in calculating historic basic and
diluted net loss per share 19,444 3,443
======== ========
Weighted average shares used in calculating pro forma basic and
diluted net loss per share 19,444 13,488
======== ========
</TABLE>
See accompanying notes.
2
<PAGE> 5
INTERACT COMMERCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
2000 1999
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $(12,123) $ (1,081)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation, including amortization of leased assets 1,017 343
Amortization of acquisition related intangible assets 5,028 279
Noncash interest and accretion of debt discount 3,920 --
Provision for losses on accounts receivable 770 245
Amortization of unearned compensation 108 115
Changes in operating assets and liabilities, net of effects
from acquisitions:
Accounts receivable 19 (1,783)
Due to/from Symantec Corporation (2,497) --
Prepaid expenses and other current assets 694 (784)
Accounts payable 626 537
Accrued expenses 2,348 145
Deferred revenue (1,709) 743
-------- --------
Net cash used in operating activities (1,799) (1,241)
-------- --------
INVESTING ACTIVITIES
Purchases of property and equipment (3,983) (588)
Increase in other assets (644) --
-------- --------
Net cash used in investing activities (4,627) (588)
FINANCING ACTIVITIES
Repayment of bank term loan -- (98)
Principal payments under capital lease obligations (172) (141)
Proceeds from exercise of common stock options 374 45
-------- --------
Net cash provided by (used in) financing activities 202 (194)
-------- --------
Net decrease in cash and cash equivalents (6,224) (2,023)
Effect of exchange rate changes on cash (5) --
Cash and cash equivalents, beginning of period 60,795 11,377
-------- --------
Cash and cash equivalents, end of period $ 54,566 $ 9,354
======== ========
Supplemental Cash Flow Information
Assets acquired under capital lease obligations $ -- $ 22
======== ========
Cash paid for interest $ 33 $ 59
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 6
INTERACT COMMERCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
Interact Commerce Corporation ("the Company") is a leading provider of
front office and e-commerce software for individuals, small businesses and
mid-market companies. The Company's products create interactive selling
networks that streamline prospect and customer interactions and dynamically
connect mobile sales, internal telesales, third-party reseller, marketing and
support organizations. Prior to April 26, 2000, the Company was known as
SalesLogix Corporation.
The accompanying unaudited condensed consolidated financial statements of
the Company have been prepared on substantially the same basis as the Company's
audited annual consolidated financial statements and, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of its financial position,
results of operations and cash flows. The results of operations for the three
months ended March 31, 2000, are not necessarily indicative of the results to be
expected for the year ending December 31, 2000. Certain information and footnote
disclosures normally contained in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
These condensed consolidated financial statements should be read in conjunction
with the Notes to Consolidated Financial Statements contained in our Annual
Report on Form 10-K filed with the Securities and Exchange Commission.
NOTE 2. ACQUISITIONS
On December 31, 1999, the Company acquired the ACT! product line and
related business from Symantec Corporation pursuant to an agreement dated
December 6, 1999, as amended and closed on December 31, 1999. Under the terms of
the agreement, we acquired an exclusive, worldwide license to ACT! and an option
to purchase the product line at the end of the four year license term for an
aggregate purchase price of $60.0 million in cash, plus 623,247 shares of
SalesLogix common stock valued at $20.0 million. The Company is accounting for
the transaction using the purchase method of accounting. Amounts due to Symantec
are based on a contractual formula and are subject to maximums of $5.0 million
per quarter in 2000, $4.25 million per quarter in 2001, $2.75 million per
quarter in 2002, and $2.25 million per quarter in 2003. The maximum quarterly
payment amounts total $57.0 million, and the Company believes the limits will be
reached in each quarter during the four year term of the agreement. The final
payment is equal to $60.0 million less amounts previously paid. The cash portion
of the purchase price has been discounted at 22.4% to reflect the Company's
incremental borrowing rate in a simultaneous third party borrowing transaction.
The Company has also assumed certain deferred revenue obligations for which
Symantec will provide reimbursement.
4
<PAGE> 7
NOTE 3. EARNINGS PER SHARE
Earnings per share is computed in accordance with SFAS No. 128,
"Earnings per Share" as well as Staff Accounting Bulletin No. 98, which covers
the determination of and accounting for "cheap stock" in periods prior to an
initial public offering. Basic earnings per share is computed using the weighted
average number of common shares. Diluted earnings per share is computed using
the weighted average number of common share equivalents outstanding during the
period. Dilutive common share equivalents consist of stock options and warrants
using the treasury method and dilutive convertible securities using the
if-converted method.
Pro forma net loss per share presented in the consolidated statements
of operations has been computed as described above, but also gives effect to the
conversion of all outstanding shares of convertible preferred stock into common
stock upon the closing of the Company's initial public offering (determined
using the if-converted method).
NOTE 4. NEW PRONOUNCEMENTS
In June 1998, Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133).
The Company adopted SFAS 133 on January 1, 2000. SFAS 133 requires the Company
to recognize all derivatives on the balance sheet at fair value. The adoption of
SFAS 133 did not have a significant effect on its results of operations or
financial position.
NOTE 5. SEGMENT INFORMATION
Prior to January 1, 2000, the Company operated as a single business
segment. Beginning on January 1, 2000, the Company manages its business as two
segments, software and Internet. The software segment includes the Company's
traditional SalesLogix products for sales, support, and configuration and the
ACT! software products acquired on December 31, 1999. The Internet segment
includes the Company's new Interact.com business. The Company evaluates
performance based on profit or loss before charges for amortization of
acquisition related intangible assets and net interest costs. Segment
information is as follows for the three months ended March 31, 2000.
<TABLE>
<CAPTION>
Segment
Revenues Profit (Loss)
-------------------------------------
(in thousands)
------------- -------------------
<S> <C> <C>
Software $21,768 $428
Internet -- (4,330)
------------- -------------------
Total $21,768 (3,902)
============= ===================
</TABLE>
Total segment profit (loss) reconciles to consolidated loss before taxes for the
three months ended March 31, 2000 as follows:
<TABLE>
<S> <C>
Total segment profit (loss) $ (3,902)
Amounts not allocated to segments:
Amortization of acquisition related
intangible assets (5,028)
Interest income 789
Interest expense (3,982)
-----------------
Net loss $ (12,123)
=================
</TABLE>
6
<PAGE> 8
The Company licenses and markets its products through direct and
indirect channels North America (United States and Canada), EMEA (Europe, Middle
East, and Africa) and Asia-Pacific (Australia and Asia). Information regarding
revenues in different geographic regions is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
2000 1999
---- ----
(in thousands)
<S> <C> <C>
North America $18,289 $ 5,422
International 3,479 880
------- -------
Total revenues $21,768 $ 6,302
======= =======
</TABLE>
NOTE 6. SUBSEQUENT EVENT
On April 27, 2000, the Company entered into a $4,000,000 revolving line
of credit agreement with a bank. Borrowings under the line will bear interest at
the bank's prime rate plus .50% and are secured by substantially all of the
Company's assets.
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements in this Form 10-Q contain forward-looking statements
based upon current expectations that involve risks and uncertainties, such as
our plans, objectives, expectations and intentions. Forward-looking statements
can be identified by their use of such verbs as "expects," "anticipates," and
"believes" or similar verbs or conjugations of such verbs. If any of our
assumptions on which the statements are based prove incorrect or should
unanticipated circumstances arise, our actual results could differ materially
from those anticipated by such forward-looking statements. In addition, our
actual results and the timing of events could differ materially from those
anticipated in these forward-looking statements as a result of a number of
factors, including those set forth under "Risk Factors," "Business" and
elsewhere in our Securities and Exchange Commission filings, including our
Annual Report on Form 10-K for the year ended December 31, 1999.
OVERVIEW
Interact Commerce Corporation ("the Company") is the leading provider
of applications and services that streamline selling processes for individuals
and enable collaborative selling networks for companies, customers and partners.
These solutions manage interactions between sellers and customers, such as
inquiries coming in over the web, online orders, outbound calls, support,
e-mails, letters, and customer meetings. By integrating personal computer (PC)
and wireless device-based applications seamlessly with Internet services,
without forcing redundant data entry in Internet portals or eliminating the
ability to work offline, interactive selling communities that are familiar and
easy to use are created. These interactive selling networks dynamically share
information between community members; connect their e-business sales and
customer management applications with valuable Internet content and services;
and automatically manage selling transactions.
Prior to April 26, 2000, the Company was known as SalesLogix
Corporation. The Company was incorporated in September 1995 and commenced
operations in January 1996. From January 1996 until April 1997, our operating
activities related primarily to research and development and the initial
development of our independent business partner channel. In April 1997, we
released the first commercial version of SalesLogix, our client-server based
sales automation solution.
In December 1997, we acquired Opis Corporation, a company engaged in
the development, marketing, and selling of customer support software primarily
to mid-sized organizations. We paid $801,559 in cash, issued 1,228,654 shares of
Series D convertible preferred stock and granted options to purchase 96,836
shares of Series D convertible preferred stock. The transaction was recorded
under the purchase method of accounting and the results of operations of Opis
and the fair value of the assets acquired and liabilities assumed were included
in our consolidated financial statements beginning on the acquisition date. In
connection with this acquisition, we recorded $5.9 million in capitalized
technology and other intangible assets that are being amortized over periods of
up to five years.
In April 1999, we acquired Enact Incorporated in a merger transaction.
Enact was a privately-held provider of sales configuration software for managing
product catalogs and marketing encyclopedias and generating proposals, quotes
and orders. In connection with the Enact acquisition, we issued 609,424 shares
of our common stock, of which 201,893 shares are restricted subject to three
year monthly vesting based upon the continued employment of officers of Enact.
We paid $4.2 million in cash for merger consideration, plus transaction expenses
and repayment of Enact's debt. We also entered into employment agreements with
officers of Enact in connection with the acquisition. The transaction was
recorded under the purchase method of accounting and the results of operations
of Enact and the fair value of the assets acquired and liabilities assumed are
included in our consolidated financial statements
8
<PAGE> 10
beginning on April 30, 1999. In connection with this acquisition, we recorded
approximately $8.8 million in capitalized technology and other intangible assets
that will be amortized over three years, and expensed approximately $900,000 of
in-process research and development based upon an independent appraisal.
Through December 31, 1999, we derived revenues principally from the
sale of software licenses for our SalesLogix line of products and related fees
for maintenance, technical support, consulting and training services. We market
and sell our products primarily through our business partners and to a lesser
extent through our direct sales force. We expect that a substantial majority of
our license revenues will continue to be generated from sales to our business
partners. The contractual arrangements we enter into with our business partners
provide for license fees payable to us based upon a percentage of our list
price.
We sell our SalesLogix line of products under perpetual licenses and
recognize license revenues when all of the following conditions are met: an
executed license agreement, unconditional purchase order or contract has been
received; the product has been delivered to the customer; collection of the
receivable is deemed probable; and the fee is fixed or determinable based upon
vendor specific objective elements of the arrangements. Maintenance and
technical support revenues are recognized ratably over the contract term,
typically one year. Revenues for consulting and training services are recognized
as such services are provided.
On December 31, 1999, we acquired the ACT! product line and related
business from Symantec Corporation pursuant to an agreement dated December 6,
1999, as amended and closed on December 31, 1999. Under the terms of the
agreement, we acquired an exclusive, worldwide license to ACT! and an option to
purchase the product line at the end of the four year license term for an
aggregate purchase price of $60.0 million in cash, plus 623,247 shares of
SalesLogix common stock valued at $20.0 million. The transaction was recorded
under the purchase method of accounting and the results of operations of ACT!
and the fair value of the assets acquired and liabilities assumed are included
in our consolidated financial statements beginning on December 31, 1999. In
connection with this acquisition, we recorded approximately $61.9 million in
capitalized technology and other intangible assets that will be amortized over
four years. The cash portion of the purchase price has been discounted at 22.4%
to reflect the Company's borrowing rate in a simultaneous third party
transaction.
ACT! is a shrink-wrapped product that is sold through a two-tier retail
distribution channel. We recognize ACT! revenue upon persuasive evidence of an
arrangement, delivery of software to the customer, determination that there are
no significant post-delivery obligations, and a probable collection of a fixed
or determinable fee. Product revenue related to all distribution channel
inventory in excess of defined in inventory levels in such channels will be
deferred. Revenue related to significant post-contract support agreements
(generally product maintenance and upgrade insurance) will be deferred and
recognized over the period of the arrangement.
On December 31, 1999, we received net proceeds of $25.9 million from
the sale of senior subordinated debt. We paid a 1% commitment fee on the
subordinated debt and issued warrants to purchase 841,107 shares of our common
stock at $28.75 per share to the lenders. The fair value of these warrants,
determined using the Black Scholes method, as well as the commitment fee, have
been recorded as a discount to the debt and will be amortized to interest
expense using the interest method over the term of the loan. The first two
interest payments may be made "in kind" by increasing the principal balance by
the amount of interest due. The effective interest rate on the subordinated
debt, including amortization of this discount, is 22.4%.
In December 1999, we announced the development of Interact.com. When
released, Interact.com will provide fully Web-enabled interaction between
Interact and our ACT! and SalesLogix applications. The combination will offer
relevant e-business services in-context of application used for contact,
9
<PAGE> 11
account, and opportunity management. We believe these combinations enable
interactive selling network solutions for individuals, organizations of any
size, and vertical communities.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of total revenue,
statement of operations data for the periods indicated. We believe that
period-to-period comparisons of our operating results are not indicative of
results for any future period.
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
----------------------------
THREE MONTHS ENDED
MARCH 31,
---------
2000 1999
---- ----
<S> <C> <C>
Revenues:
Licenses 78.9% 67.0%
Services 21.1% 33.0%
--------- ---------
Total revenues 100.0% 100.0%
Costs of revenues:
Licenses 9.1% 5.3%
Services 17.1% 21.4%
--------- ---------
Total costs of revenues 26.2% 26.7%
--------- ---------
Gross profit 73.8% 73.3%
Operating expenses:
Sales and marketing 57.5% 57.1%
Research and development 23.8% 20.4%
General and administrative 10.4% 9.3%
Amortization of acquisition related intangible assets
23.1% 4.4%
--------- ---------
Total operating expenses 114.8% 91.2%
--------- ---------
Loss from operations (41.0)% (17.9)%
Interest and other income (expense), net (14.7)% 0.7%
--------- ---------
Net loss (55.7)% (17.2)%
========= =========
</TABLE>
Revenues
Total revenues increased from $6.3 million in the three months ended
March 31, 1999 to $21.8 million in the three months ended March 31, 2000, an
increase of 245%. No customer accounted for more than 10% of revenues in the
three months ended March 31, 1999 or 2000. Our revenues outside of North America
increased from approximately $880,000 in the three months ended March 31, 1999
to approximately $3.5 million in the three months ended March 31, 2000.
License Revenues. Our license revenues increased from $4.2 million in
the three months ended March 31, 1999 to $17.2 million in the three months ended
March 31, 2000, an increase of 306%. License revenues for the three months ended
March 31, 2000 include ACT! revenues since December 31, 1999, the date of
closing. The increase in license revenues was due primarily to the acquisition
of ACT!
10
<PAGE> 12
Excluding ACT!, the increase was due primarily to increases in the size
and productivity of our business partner network, increased market awareness and
acceptance of our products and the growth of our direct sales force. License
revenues represented 67.0% and 78.9% of our total revenues for the three months
ended March 31, 1999 and 2000, respectively.
Service Revenues. Service revenues include fees for maintenance,
technical support, consulting and training services. Our service revenues
increased from $2.1 million in the three months ended March 31, 1999 to $4.6
million in the three months ended March 31, 2000, an increase of 121%. Service
revenues for the three months ended March 31, 2000 include ACT! revenues since
December 31, 1999, the date of closing. The increase in service revenues was due
primarily to the acquisition of ACT! The increase in service revenues excluding
ACT! resulted primarily from the increase in the number of licenses sold as well
as renewals of existing maintenance and technical support contracts from our
growing installed base of customers. Customers are required to enter into
one-year support and maintenance contracts at the time of initial license
purchase and have the option to renew for additional one-year periods
thereafter. Our service revenues represented 33.0% and 21.1% of our total
revenues for the three months ended March 31, 1999 and 2000, respectively.
Costs of Revenues
Cost of License Revenues. Cost of license revenues includes the cost of
media, product packaging, documentation and other production costs and
third-party royalties. Total cost of license revenues increased from $332,000 in
the three months ended March 31, 1999 to $2.0 million in the three months ended
March 31, 2000, representing 7.9% and 11.5% of license revenues in the
respective periods.
Cost of license revenues increased primarily as a result of the
acquisition of ACT! Excluding ACT!, cost of license revenues increased due to
product royalties for third-party technology, primarily report writing software,
embedded in our products and, to a lesser extent, due to increases in overall
license sales. ACT! cost of license revenue is higher as a percentage of license
revenue than costs of license for the SalesLogix product line for the three
months ended March 31, 200 due to higher manufacturing and packaging costs of
ACT!, and we expect this trend to continue.
Cost of Service Revenues. Cost of service revenues consists primarily
of the cost of providing technical support, training and consulting services to
customers and business partners. Total cost of service revenues increased from
$1.4 million in the three months ended March 31, 1999 to $3.7 million in the
three months ended March 31, 2000, representing 65.0% and 81.2% of service
revenues in the respective periods.
The absolute dollar increases in cost of service revenue were primarily
attributable to hiring and training of additional personnel to support our
growing customer base and business partner network and the cost of establishing
and maintaining a new telephone support center for the ACT! product line. The
increase as a percentage of service revenues primarily reflects the high fixed
costs of the ACT! telephone support center.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of
personnel-related expenses, costs related to the recruitment and support of our
business partner channel and marketing and promotional costs to increase brand
awareness in the marketplace and to generate leads for our sales channels. Sales
and marketing expenses increased from $3.6 million in the three months ended
March 31,
11
<PAGE> 13
1999 to $12.5 million in the three months ended March 31, 2000, an increase of
248%. The increase reflected the hiring of additional sales and marketing
personnel, expanded advertising and other promotional activities and increased
sales commissions and bonuses related to increased license revenues, and the
incremental advertising, promotions, and headcount costs associated with the
acquisition of the ACT! product line. Sales and marketing expenses represented
57.1% and 57.5% of our total revenues for the three months ended March 31, 1999
and 2000, respectively. We anticipate that we will continue to invest
significantly in sales and marketing and that these expenses will increase in
absolute dollars.
Research and Development. Research and development expenses consist
primarily of personnel-related costs for software developers, quality assurance
and product documentation personnel and payments to outside contractors.
Research and development expenses increased from $1.3 million in the three
months ended March 31, 1999 to $5.2 million in the three months ended March 31,
2000, an increase of 303%. This increase was primarily due to additional
research and development personnel hired in connection with the ACT! product
line acquisition, research and development efforts for the new Interact.com
business that is currently under development, and an increase in the number of
software developers, quality assurance personnel and outside developers to
support our product development, testing and documentation activities related to
the development and release upgrades to our SalesLogix and ACT! lines of
software products. Research and development expenses represented 20.4% and 23.8%
of our total revenues for the three months ended March 31, 1999 and 2000,
respectively. We anticipate that we will continue to invest significantly in
research and development and that these expenses will increase in absolute
dollars.
General and Administrative. General and administrative expenses consist
primarily of salaries and related expenses for executive, finance and
administrative personnel, as well as outside professional fees. General and
administrative expenses increased from $587,000 in the three months ended March
31, 1999 to $2.3 million in the three months ended March 31, 2000, an increase
of 286%. This increase was primarily due to increased staffing and related
expenses necessary to manage and support the expansion of our operations,
additional headcount added to support the ACT! products and Interact.com
business, and the additional costs associated with being a publicly-held
company. General and administrative expenses represented 9.3% and 10.4% of our
total revenues for the three months ended March 31, 1999 and 2000, respectively.
We believe that general and administrative expenses will continue to increase in
absolute dollars as a result of the anticipated expansion of our administrative
staff to support our new lines of business and our rapid international
expansion.
Amortization of Acquisition-Related Intangible Assets. Amortization of
acquisition-related intangible assets consists primarily of the amortization of
specifically identifiable intangible assets and goodwill. Amortization of
acquisition-related intangible assets increased from $279,000 in the three
months ended March 31, 1999 to $5.0 million in the three months ended March 31,
2000. The increase was primarily due to the increase in acquisition-related
intangible assets related to the acquisitions of ACT! in December 1999 and Enact
in April 1999.
Interest Expense. Interest expense increased from $59,000 in the three
months ended March 31, 1999 to $4.0 million in the three months ended March 31,
2000 primarily due to interest expense on the Company's subordinated debt and
the accretion of the discounts on the senior subordinated debt and the amounts
due for the purchase of ACT!
Interest Income. Interest income consists primarily of amounts earned
on our cash and short-term investments balances. Interest income increased from
$106,000 for the three months ended March 31, 1999 to $789,000 for the three
months ended March 31, 2000, primarily due to earnings on the net proceeds of
our initial public offering and concurrent private placement in May 1999 and the
senior subordinated debt in December 1999.
12
<PAGE> 14
Income Taxes. As of December 31, 1999, we had net operating loss
carryforwards for federal and state income tax reporting purposes of
approximately $15.0 million. The federal carryforwards expire at various dates
beginning in 2011. The Internal Revenue Code contains provisions that limit the
use in any future period of net operating loss and tax credit carryforwards upon
the occurrence of special events, including a significant change in ownership
interest. We had deferred tax assets, including net operating loss and tax
credit carryforwards, totaling approximately $7.5 million as of December 31,
1999. A valuation allowance has been recorded for the entire net deferred tax
asset balance as a result of uncertainties regarding its utilization.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, we had cash and cash equivalents of $54.6
million, an decrease of $6.2 million from December 31, 1999. Our working capital
at March 31, 2000 was $41.2 million, compared to $49.9 million at December 31,
1999.
Our operating activities resulted in net cash outflows of $1.2 million
in the three months ended March 31, 1999, compared to $1.8 million in the three
months ended March 31, 2000. The operating cash outflows resulted primarily from
significant investments in sales, marketing and product development, which led
to operating losses.
Cash used in investing activities was $588,000 in the three months
ended March 31, 1999 and $4.6 million in the three months ended March 31, 2000,
resulting primarily from the purchase of capital equipment.
Cash used in financing activities totaled $194,000 in the three months
ended March 31, 1999 compared to cash provided by financing activities of
$202,000 in the three months ended March 31, 2000, resulting primarily from
payments on capital equipment leases offset by proceeds from the exercise of
stock options.
We currently anticipate that we will continue to experience significant
growth in our operating expenses for the foreseeable future as we strive to:
- implement our new e-business strategy;
- integrate and expand the ACT! products;
- enter new markets and increase penetration of existing markets
for our products and services;
- introduce new products and product enhancements;
- increase our product development, sales, marketing and
customer support activities;
- develop and expand our network of business partners and direct
sales force; and
- expand our international operations.
13
<PAGE> 15
Such operating expenses will consume a material amount of our cash
resources. We believe that our existing cash and cash equivalents will be
sufficient to meet our anticipated cash needs for working capital and capital
expenditures through December 31, 2000.
We require substantial capital to fund our business, particularly to
finance international expansion and accounts receivable, and for capital
expenditures and potential acquisitions. Our future capital requirements will
depend on many factors, including the rate of revenue growth, the timing and
extent of spending to support product development efforts and expansion of sales
and marketing, the timing of introductions of new products and enhancements to
existing products and market acceptance of our products. As a result, we could
be required to raise substantial additional capital. To the extent that we raise
additional capital through the sale of equity or convertible debt securities,
the issuance of these securities could result in dilution to our existing
stockholders. If additional funds are raised through the issuance of debt
securities, the debt would have rights, preferences and privileges senior to
holders of common stock and the terms of the debt could impose restrictions on
our operations. We cannot assure you that such additional capital, if required,
will be available on acceptable terms, or at all. If we are unable to obtain the
necessary additional capital, we may be required to reduce the scope of our
planned product development and sales and marketing efforts, which would
materially adversely affect our business, financial condition and operating
results.
Our e-business strategy depends in part upon maintaining the demand
for the existing ACT! products and capturing a significant percentage of the
ACT! user base as subscribers to our new Interact.com subscription products. If
we are not successful in maintaining revenues from the ACT! products and
customer base, or in transitioning the ACT! user base to our Web-based services,
our financing needs may accelerate. Accordingly, we may seek additional
financing through a private placement of debt and/or equity securities, and/or a
secondary public offering of our common stock as early as in the second quarter
of 2000, market and other conditions permitting. Although we believe that such
financing alternatives will be available, there is no assurance that financing
will be available on reasonable business terms or terms acceptable to us, or
that market conditions will permit any secondary public offering on terms
acceptable to us. In addition, issuing additional equity securities will dilute
current stockholders' percentage ownership, and incurring substantial debt may
impose restrictions that could disrupt our ongoing business and increase our
expenses. If we are unable to obtain sufficient financing on terms acceptable to
us or at all, our business, financial condition and operating results would be
materially adversely affected.
YEAR 2000 COMPLIANCE
We believe that the current versions of our internally developed
software products, as well as our management and information systems, are Year
2000 compliant. When the century changed, we experienced no significant
disruption of our business operations and no significant product failures as a
result of Year 2000 compliance issues or otherwise. The costs we incurred in
connection with remediating our systems during 1999 were immaterial. At this
time, we are not aware of any material defects resulting from Year 2000 issues,
either with our products, our internal systems, or the products and services of
third parties on which we rely. Nevertheless, some Year 2000 problems may not
appear until several months after January 1, 2000. As a result, we may still
face claims for undiscovered Year 2000 errors in our own products or for Year
2000 issues arising from third-party products that we integrate into our
products or with which our products and systems exchange data. In addition, if
our suppliers or distributors encounter Year 2000 problems, our ability to
deliver our products and services could be disrupted.
14
<PAGE> 16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary exposure to market risk arises from foreign currency
exchange risk associated with our international operations and foreign currency
exchange risk associated with our U.S. sales made in foreign currency. We do not
currently use, nor have we historically used, derivative financial instruments
to manage or reduce market risk.
Beginning January 1, 2000 the functional currencies for our European,
German, and Australian operations are Pounds Sterling, Euro, and Australian
dollars, respectively. As such, there is potential market risk exposure for our
future earnings due to changes in exchange rates. Given the relatively short
duration of our international monetary assets and liabilities, the relative
stability of these currencies compared to the U.S. dollar, and the relative size
of our international operations, we consider this exposure to be minimal. We
believe that a 10% change in exchange rates would not have a significant impact
on our future earnings.
Our cash equivalents are exposed to financial market risk, including
changes in interest rates. We typically do not attempt to reduce or eliminate
our market exposures on these investment securities because of their short-term
duration. We believe that the fair value of our investment portfolio or related
income would not be significantly impacted by either a 100 basis point increase
or decrease in interest rates due mainly to the short-term nature of the major
portion of our investment portfolio.
15
<PAGE> 17
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to certain legal proceedings and claims that
arise in the conduct of its business. In the opinion of management, the amount
of liability, if any, as a result of these claims and proceedings is not likely
to have a material effect on the financial condition or results of operations of
the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) Sales of Unregistered Securities During the Quarter
During the quarter ended March 31, 2000, Interact issued and sold (i)
10,820 unregistered shares of its common stock to former employees of Opis
Corporation pursuant to the exercise of options assumed by Interact in
connection with its acquisition of Opis in exchange for an aggregate purchase
price of $13,850, and (ii) 5,834 unregistered shares of its common stock to its
business partners pursuant to the exercise of stock options under its 1998
Business Partner Stock Option Plan in exchange for an aggregate purchase price
of $34,303. The options were granted in consideration of these individuals'
services to Interact or, in the case of former employees of Opis, in
consideration of services rendered to Opis. In issuing these securities Interact
relied on an exemption from registration pursuant to Rule 701 under Section 3(b)
of the Securities Act.
(d) Use of Proceeds
On May 27, 1999, the Company's initial public offering registered on
Form S-1, file number 333-75353, became effective. During the three month period
ending March 31, 2000, the Company used approximately $2.4 million of the net
proceeds from the offering to fund working capital needs, approximately $4.0
million of the net proceeds from the offering to purchase office and computer
equipment, and approximately $200,000 of the net proceeds for payments on
capital lease obligations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Special Meeting of Stockholders was held on April 3, 2000 to act on
the following matters:
1. To approve an amendment to the Company's Fifth Restated
Certificate of Incorporation to change the Company's name from SalesLogix
Corporation to Interact Commerce Corporation. The votes cast for and against
this amendment were 16,529,594 and 9,967 respectively, with 3,552 abstaining,
which was sufficient to approve the amendment.
2. To approve an amendment to the Company's Amended and Restated
1996 Equity Incentive Plan to (a) increase the aggregate number of shares of
Common Stock authorized for issuance under the plan by 1,800,000 shares, from
4,500,000 shares to 6,300,000 shares, and (b) to qualify equity-based
compensation under the plan for the performance-based compensation exception
under Internal Revenue Code Section 162(m). The votes cast for and against this
amendment were 10,878,682 and 4,016,583 respectively, with 4,693 abstaining,
which was sufficient to approve the amendment.
16
<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
NUMBER DESCRIPTION
3.1 Fifth Restated Certificate of Incorporation of the registrant,
incorporated by reference to Exhibit 3.4 to the registrant's
Registration Statement on Form S-1 (No. 333-75353), as
amended.
3.2 Amendment No. 1 to Fifth Restated Certificate of
Incorporation, effective April 24, 2000.
3.3 Second Restated Bylaws of the registrant, incorporated by
reference to Exhibit 3.5 to the registrant's Registration
Statement on Form S-1 (No. 333-75353), as amended.
10.1 Commercial Lease Agreement dated January 19, 2000 between the
registrant and Nova CCOP, Inc.
10.2 Office Lease dated February 3, 2000 between the registrant and
Century San Jose, LLC.
10.3 Credit Agreement dated April 27, 2000 between the registrant
and Imperial Bank.
10.4 Security Agreement dated April 27, 2000 between the registrant
and Imperial Bank.
10.5 Revolving Promissory Note dated April 27, 2000 between the
registrant and Imperial Bank.
10.6 Master Lease Agreement dated February 28, 2000, as amended and
modified, between the registrant and Imperial Bank.
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
On January 13, 2000, the registrant filed a report on Form 8-K
relating to the closing of its acquisition of the ACT! Product Line and related
business from Symantec Corporation pursuant to a Software License Agreement
dated December 6, 1999, as amended and closed on December 31, 1999. On March
15, 2000, the registrant filed a report on Form 8-K/A amending its prior report
on Form 8-K to provide financial information required by Items 7(a) and 7(b) of
Form 8-K.
17
<PAGE> 19
SIGNATURES
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.
INTERACT COMMERCE CORPORATION
Date: May 9, 2000 By: /s/ Gary R. Acord
------------------------------------------------
Gary R. Acord
Vice President, Chief Financial Officer,
Secretary and Treasurer (Principal Financial and
Chief Accounting Officer)
18
<PAGE> 20
EXHIBIT INDEX
NUMBER DESCRIPTION
3.1 Fifth Restated Certificate of Incorporation of the registrant,
incorporated by reference to Exhibit 3.4 to the registrant's
Registration Statement on Form S-1 (No. 333-75353), as
amended.
3.2 Amendment No. 1 to Fifth Restated Certificate of
Incorporation, effective April 24, 2000.
3.3 Second Restated Bylaws of the registrant, incorporated by
reference to Exhibit 3.5 to the registrant's Registration
Statement on Form S-1 (No. 333-75353), as amended.
10.1 Commercial Lease Agreement dated January 19, 2000 between the
registrant and Nova CCOP, Inc.
10.2 Office Lease dated February 3, 2000 between the registrant and
Century San Jose, LLC.
10.3 Credit Agreement dated April 27, 2000 between the registrant
and Imperial Bank.
10.4 Security Agreement dated April 27, 2000 between the registrant
and Imperial Bank.
10.5 Revolving Promissory Note dated April 27, 2000 between the
registrant and Imperial Bank.
10.6 Master Lease Agreement dated February 28, 2000, as amended and
modified, between the registrant and Imperial Bank.
27.1 Financial Data Schedule
19
<PAGE> 1
EXHIBIT 3.2
-----------
CERTIFICATE OF AMENDMENT
OF THE
FIFTH RESTATED
CERTIFICATE OF INCORPORATION
OF
SALESLOGIX CORPORATION
SALESLOGIX CORPORATION, a corporation organized and existing under and
by virtue of the General Corporation Law of the state of Delaware, does hereby
certify:
1. The name of the corporation is SalesLogix Corporation (the
"Corporation"). The Corporation was originally incorporated under the name Quest
Sales Software, Inc. The date the Corporation filed its original Certificate of
Incorporation with the Secretary of State was September 29, 1995.
2. The Fifth Restated Certificate of Incorporation of the
Corporation was filed with the Delaware Secretary of State on June 2, 1999.
3. The Board of Directors of the Corporation, acting in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware, adopted resolutions to amend the Fifth Restated
Certificate of Incorporation of the Corporation by deleting the first paragraph
of Article I and substituting therefor a new first paragraph of Article I in the
following form:
"The name of the corporation is Interact Commerce Corporation."
4. Thereafter, pursuant to a resolution of the Board of
Directors, this Certificate of Amendment was submitted to the stockholders of
the corporation for their approval and was duly adopted in accordance with the
provision of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, SalesLogix Corporation has caused this Certificate
of Amendment to be signed by its President and Chief Executive Officer and
attested to by its Secretary this 19th day of April, 2000.
SALESLOGIX CORPORATION
/s/ Patrick M. Sullivan
-------------------------------------
Patrick M. Sullivan
President and Chief Executive Officer
ATTEST:
/s/ Gary R. Acord
- --------------------------------
Gary R. Acord
Secretary
1
<PAGE> 1
COMMERCIAL LEASE
This lease, made and entered into at Eugene, Oregon, this 19th day of
January by and between
LANDLORD: NOVA CCOP, INC.
and
TENANT: SALES LOGIX CORPORATION
Landlord hereby leases to Tenant the following:
at 400 COUNTRY CLUB ROAD, SUITE 300, Eugene, Oregon, containing approximately
13,645 rentable square feet as shown on the attached is plan. Tenants Proportion
Share for purposes of Section 19 shall be 26.66%. This lease is for a term
commencing MARCH 15, 2000 and continuing through MARCH 14, 2005 at a Monthly
Base Rent as follows:
$ 22,514.25 PER MONTH YEAR 1-3
$ 23,196.50 PER MONTH YEAR 4 -6
Tenant shall have the right to cancel the Lease at 36 months. Tenant must give
Landlord at least 6 months prior written notice of the Intent to cancel. Tenant
shah pay a penalty prior to the cancel dale equal to the unamortized tenant
improvement allowances and commissions.
Rent is payable in advance on the First (1st) day of each month commencing MARCH
15, 2000. Landlord and Tenant covenant and agree as follows:
1.1 Delivery of Possession.
Should Landlord be unable to deliver possession of the Premises on the
date fixed for the commencement of the term, commencement will be deferred
and Tenant shall owe no rent until notice from Landlord tendering
possession to Tenant If possession Is not so tendered within 90 days
following commencement of the term, then Tenant may elect to cancel this
lease by notice to Landlord within 10 days following expiration of the 90
day period. Landlord shall have no liability to Tenant for delay in
delivering possession, nor shall such delay extend the term of this lease
In any manner unless the parties execute a written extension agreement.
2.1 Rent Payment.
Tenant shall pay the Base Rent for the Premises and any additional rent
provided herein without deduction or offset. Rent for any partial month
during the lease term shall be prorated to reflect the number of days
during the month that Tenant occupies the Premises. Additional rent means
amounts determined under Section 19 of this lease and any other sums
payable by Tenant to Landlord under this lease. Rent not paid when due
shall bear interest at the rate of one percent per month until paid.
Landlord may at Its option impose a late charge of $.05 for each $1 of
rent for rent payments made more than 10 days late In lieu of interest for
the first month of delinquency, without waiving any other remedies
available for default Failure to impose a late charge shall not be a
waiver of Landlords rights hereunder.
3.1 Lease Consideration.
Upon execution of the lease, Tenant has paid the Base Rent for the first
full month of the lease term for which rent is payable and In addition has
paid the sum of $0.00 as lease consideration. Landlord may apply the lease
consideration to pay the cost of performing any obligation which Tenant
fails to perform within the time required by this lease, but such
application by Landlord shall riot be the exclusive remedy for Tenants
default, If the lease consideration is applied by Landlord, Tenant shall
on demand pay the sum necessary to-replenish the lease consideration to
its original amount To the extent not applied by Landlord to mire defaults
by Tenant, the lease consideration shall be applied against the rent
payable for the last month of the term. The lease consideration shall not
be refundable.
4.1 Use.
Tenant shall use the Premises as business for GENERAL OFFICE and for no
other purpose without Landlords written consent In connection with its
use, Tenant shall at Its expense promptly comply and cause the Premises to
comply with all applicable laws, ordinances, rules and regulations of any
public authority and shall not annoy, obstruct, or interfere with the
rights of other tenants of the Building provided that Landlord shall be
responsible for all ADA requirements. Tenant shall create no nuisance nor
allow any objectionable fumes, noise, or vibrations to be emitted from the
Premises. Tenant shall not conduct any activities that will increase
Landlords Insurance rates for any portion of the Building or that will In
any manner degrade or damage the reputation of the Building.
4.2 Equipment.
Tenant shall install in the Premises only such office equipment as is
customary for general office use and shall not overload the floors or
electrical circuits of the Premises or Building or after the plumbing or
Wring of the Premises or Building. Landlord must approve in advance the
location of and manner of installing any wiring or electrical, heat
generating or communication equipment or exception* heavy articles. All
telecommunications equipment, conduit, cables and wiring, additional
dedicated circuits and any additional air conditioning required because of
heat generating equipment or special lighting installed by Tenant shall be
Installed and operated at Tenant's expense. Landlord shall have no
obligation to permit the installation of equipment by any
telecommunications provider whose equipment is not then servicing the
Building.
4.3 Signs.
No signs, awnings, antennas, or other apparatus shall be painted on or
attached to the Building or anything placed on any glass or woodwork of
the Premises or positioned so as to be visible from outside the Premises
without Landlords written approval as to design, size, location, and
color. All signs installed by Tenant shall comply with Landlords standards
for signs and all applicable codes and all signs and
Please Initial
/s/
--------- ------
Page 1 of 8 Landlord Tenant
<PAGE> 2
sign hardware shall be removed upon termination of this lease with the
sign location restored to its former state unless Landlord elects to
retain all or any portion thereof. LANDLORD WILL PROVIDE A LOBBY DIRECTORY
STRIP AND A SPACE ON THE MONUMENTAL SIGN IN THE FRONT OF THE BUILDING.
5.1 Utilities and Services.
Landlord will furnish water and electricity to the Building at all times
and will furnish heat and air conditioning (d the Building Is air
conditioned). Janitorial service Will be provided In accordance with the
regular schedule of the Building, which schedule and service may change
from time to time, but In any event at least five times per week Tenant
shall comply with all government laws or regulations regarding the use or
reduction of use of utilities on the Premises. Interruption of services or
utilities shag not be deemed an eviction or disturbance of Tenants use and
possession of the Premises, render Landlord liable to Tenant for damages,
or relieve Tenant from performance of Tenants obligations under this
lease. Landlord shall take all reasonable steps to correct any
interruptions in service Electrical service furnished will be 110 volts
unless different service already exists in the Premises. Tenant shall
provide its own surge protection for power furnished to computers. TENANT
SHALL HAVE THE RIGHT TO USE HVAC AND ELECTRICAL SERVICES 24 HOURS PER DAY,
7 DAYS PER WEEK
5.2 [RESERVED]
5.3 Security.
Landlord may but shall have no obligation to provide security service or
to adopt security measures regarding the Premises, and Tenant shall
cooperate with all reasonable security measures adopted by Landlord.
Tenant may install a security system within the leased Premises with
Landlord's written consent which will not be unreasonably withheld.
Landlord will be provided with an access code to any security system and
shall riot have any liability for accidentally selling off Tenants
security system. Landlord may modify the type or amount of security
measures or services provided to the Building or the Premises at any time.
TENANT SHALL HAVE THE RIGHT TO INSTALL A CONTROLLED ACCESS SYSTEM FOR THE
LEASE PREMISES.
6.1 Maintenance and Repair.
Landlord shag keep the exterior of the building, including the roof,
parking areas and landscaping and all common areas, clean, well-maintained
and in good condition and repair Landlord shall have no liability for
failure to perform required maintenance and repair unless written notice
of such maintenance or repair Is given by Tenant and Landlord falls to
commence efforts to remedy the problem In a reasonable time and many.
Landlord shall have the right to erect scaffolding arid other apparatus
necessary for the purpose of making repairs. and Landlord shall have no
liability for Interference with Tenants use because of repairs and
Installations so long as Landlord makes reasonable efforts to minimize
such interference. Tenant shag have no claim against Landlord for any
Interruption or reduction of services or interference with Tenants
occupancy so long as Landlord makes reasonable efforts to cure such
interference, and no such Interruption or reduction shall be construed as
a constructive or other eviction of Tenant Repair of damage caused by
negligent or Intentional acts or breach of this lease by Tenant, its
employees or invitees shall be at Tenants expense.
6.2 Alterations.
Tenant shag not make any alterations, additions, or improvements to the
Premises, change the color of the Interior, or install any wall or floor
covering without Landlords prior written consent which may be withheld in
Landlords sole discretion. Any such Improvements, alterations, wiring,
cables or conduit installed by Tenant shag at once become part of the
Premises and belong to Landlord except for removable machinery and
unattached movable made fixtures. Landlord may at its option require that
Tenant move any improvements, alterations, with, cables or conduit
installed by or for Tenant and restore the Premises to the original
condition upon termination of this lease, but only 9 Landlord conditions
its approval on the removal of such alterations, or Improvements. Landlord
shall have the right to approve the contact or used by Tenant for any work
in the Premises, and to post notices of nonresponsibility in connection
with work being performed by Tenant in the Premises. Work by Tenant shag
comply with all laws then applicable to the Premises.
7.1 Indemnity.
Tenant shall not allow any liens to attach to the Building or Tenants
Interest in the Premises as a result of Its activities. Tenant shall
Indemnify and defend Landlord and Its managing agents from any claim,
liability, damage, or loss occurring on the Premises, wising out of any
activity by Tenant, its agents. Or invitees or resulting from Tenants
failure to comply with any term of this lease. Neither the Landlord nor
Its managing agent shall have any liability to Tenant because of loss or
damage to Tenants property or for death or bodily injury caused by the
acts or omissions of other Tenants of the Building; or by third parties
(including criminal acts).
7.2 Insurance.
Tenant shall carry liability Insurance with limb of not less than One
Million Dollars ($1,000,000) combined single limit bodily Injury and prop"
damage which Insurance shall have an endorsement naming Landlord and
Landlords managing agent, if any, as an additional Insured. Cover the
liability insured under paragraph 7.1 of this lease and be In form and
with companies reasonably acceptable to Owner. Prior to occupancy, tenant
shall furnish a certificate evidencing such insurance which shall state
that the coverage shall not be canceled or materially changed without 10
days with" notice 10 Landlord and Landlord's managing agent, 9 any. A
renewal certificate shall be furnished at least 10 days prior to
expiration of any policy.
8.1 Fire or Casualty.
"Major Damage" means damage by fire or other casualty to the Building or
the Premises which causes the Premises or any substantial portion of the
Building to be unusable, or which will cost more than 25 percent of the
pre-damage value of the Building to repair, or which is riot covered by
insurance and will cost In excess of $50,000 to repair. In case of Major
Damage either Tenant or Landlord may elect to
Please Initial
/s/
--------- ------
Page 2 of 8 Landlord Tenant
<PAGE> 3
terminate this lease by notice in writing to the other within 30 days
after such date. If this lease is not terminated following Major Damage,
or if damage occurs which is not Major Damage, Landlord shall promptly
restore the Premises to the condition existing just prior to the damage.
Tenant shall promptly restore all damage to tenant Improvements or
alterations Installed by Tenant or pay the cost of such restoration to
Landlord if Landlord elects to do the restoration of such Improvements.
Rent shall be reduced from the date of damage until the date restoration
work being performed by Landlord Is substantially complete, with the
reduction to be In proportion to the area of the Premises not usable by
Tenant.
8.2 Waiver of Subrogation.
Tenant shall be responsible for insuring its personal property and trade
fixtures located on the Premises and any alterations or tenant
Improvements it has made to the Premises. Neither Landlord, Its managing
agent nor Tenant shall be liable to the other for any kiss or damage
caused by water damage, sprinkler leakage, or any of the risks that are or
could be covered by a special all risk property Insurance policy, or for
any business Interruption, and there shag be no subrogated claim by one
party's Insurance carrier against the other party arising out of any such
loss. The waiver is binding only if it does not Invalidate the insurance
coverage of either party hereto.
9.1 Eminent Domain.
If an condemning authority takes title by eminent domain or by agreement
in lieu thereof to the entire Building or a portion sufficient to render
the Premises unsuitable for Tenants use then either party may elect to
terminate this lease effective on the date that possession Is taken by the
condemning authority. If not so terminated, rent shall be reduced for the
remainder of the term In an amount proportionate to the reduction in area
of the Premises caused by the taking, except that Tenant may process its
own claim for its property or lost profits. All condemnation proceeds
shall belong to Landlord, and Tenant shall have no claim against Landlord
or the condemnation award because of the taking.
10.1 Assignment and Subletting.
This lease shall bind and inure to the benefit of the parties, their
respective heirs, successors, and assigns, provided that Tenant shall not
assign its interest under this lease or sublet all or any portion of the
Premises without first obtaining Landlords consent In writing. This
provision shaft apply to all transfers by operation of law including but
not limited to mergers and changes in control of Tenant, except as
provided below. No assignment shall relieve Tenant of its obligation to
pay rent or perform other obligations required by this lease, and no
consent to one assignment or subletting shall be a consent to any further
assignment or subletting. Landlord shall not unreasonably withhold its
consent to any assignment or subletting provided proposed Tenant Is
compatible with Landlords normal standards for the Building. If Tenant
proposes a subletting or assignment to which Landlord is required to
consent under this paragraph, Landlord shall have the option of
terminating this lease and dealing directly with the proposed subtenant or
assignee, or any third party. If an assignment or subletting Is permitted,
one-half-of any cash profit, of the net value of any other consideration
received by Tenant as a result of such transaction shall be paid to
Landlord promptly following Its receipt by Tenant. Tenant shall pay any
costs Incurred by Landlord in connection with a request for assignment or
subletting, including reasonable attorneys fees. TENANT SHALL HAVE THE
RIGHT TO ASSIGN THE LEASE OR SUBLET ALL OR A PORTION OF THE PREMISES TO
THE FOLLOWING ENTITIES WITHOUT LANDLORDS APPROVAL; (i) OR TO A SUCCESSOR
TO TENANTS BUSINESS IF SUCH SUCCESSION TAKES PLACE BY A MERGER,
CONSOLIDATION, REORGANIZATION, ACTIVE LEGISLATURE OR OTHERWISE, OR (ii)
ANY AFFILIATE OF TENANT WITH AN ACCEPTABLE CREDIT STANDARD.
11.1 Default
Any of the following shall constitute a default by Tenant under this
lease:
(a) Tenants failure to pay rent or any other charge under this lease
within 10 days after written notice Is due, or failure to comply with any
other term or condition within 20 days following written notice from
Landlord specifying the noncompliance. If such noncompliance cannot be
cured within the 20-day period, this provision shall be satisfied If
Tenant commences correction within such period and thereafter proceeds in
good faith and with reasonable diligence to effect compliance as soon as
possible. Time is of the essence of this lease.
(b) Tenants insolvency, business failure or assignment for the benefit of
its creditors. Tenants commencement of proceedings under any provision of
any bankruptcy or insolvency law or failure to obtain dismissal of any
petition Ned against it under such laws within the time required to
answer, or the appointment: of a receiver for all or any portion of
Tenant's properties or financial records. Which is not dismissed within 90
days.
(c) Assignment or subletting by Tenant in violation of paragraph 10.1.
11.2 Remedies for Default
In case of default as described in paragraph 11.1 Landlord shall have the
right to the following remedies which are intended to be cumulative and in
addition to any other remedies provided under applicable law.
(a) Landlord may at its option terminate the lease by notice to Tenant.
With or without termination, Landlord my retake possession of the Premises
and may use or relet the Premises without accepting a surrender or waiving
the right to damages. Following such retaking of possession, efforts by
Landlord to relet the Premises shall be sufficient if Landlord follows its
usual procedures for finding tenants, for the space at rates not less than
the current rates for other comparable space In the Building. If Landlord
has other vacant space In the Building, prospective tenants may be placed
In such other space without prejudice to Landlords claim to damages or
loss of rentals from Tenant.
(b) Landlord may recover all damages caused by Tenants default which shall
Include an amount equal to rentals W because of the default, unamortized
lease commissions paid for this lease, and the unamortized cost of any
tenant improvements Installed by Landlord to meet Tenants special
requirements. Landlord may sue periodically to recover damages as they
occur throughout the lease term, and no action
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accrued damages shall bar a later action for damages subsequently
accruing. Landlord may elect in any one action to recover accrued damages
plus damages attributable to the remaining term of the lease Such damages
shall be measured by the difference between the rent under this lease and
the reasonable rental value of the Premises for the remainder of the term,
discounted to the time of judgement at the prevailing Interest rate on
Judgement.
(c) Landlord may make any payment or perform any obligation which Tenant
has failed to perform, in which case Landlord shall be entitled to recover
from Tenant upon demand all amounts so expended, plus interest from the
date of the expenditure at the rate of one-and-one-half percent per month.
Any such payment or performance by Landlord shall not waive Tenant's
default.
12.1 Surrender.
On expiration or early termination of this lease Tenant shall deliver all
keys to Landlord and surrender the Premises vacuumed, swept, and free of
debris and in the same condition as at the commencement of the term
subject only to reasonable wear from ordinary use. Tenant shall remove all
of its furnishings and bade fixtures that remain Its property and repair
an damage resulting from such removal provided that Tenant shall not be
required to recarpet or repaint. Failure to remove shall be an abandonment
of the property, and Landlord may dispose of it In any manner without
liability Tenant falls to vacate the Premises when required, Including
failure to remove all its personal property, Landlord may elect either:
(i) to treat Tenant as a tenant from month to month, subject to the
provisions of this lease except that rent shall be one-and-one-half times
the total rent being charged when the lease term expired, and arty option
or other rights regarding extension of the term or expansion of the
Premises shall no longer apply; or (ii) to eject Tenant from the Premises
and recover damages caused by wrongful holdover.
13.1 Regulations.
Landlord shall have the right but shag not be obligated to make, revise
and enforce regulations or policies consistent with this lease for the
purpose of promoting safety, health (Including moving, use of common areas
and prohibition of smoking), order, economy, cleanliness, and good service
to all tenants of the Building. All such regulations and policies shall be
complied with as If part of this lease.
14.1 Access.
During times other than normal Building hours Tenants officers and
employees or those having business with Tenant may be required to identify
themselves or show passes in order to gain access to the Building.
Landlord shall have no liability for permitting or refusing to permit
access by anyone. Landlord may regulate access to any Building elevators
outside of normal Building hours. Landlord shall have the right to enter
upon the Premises at arty time by passkey or otherwise to determine
Tenants compliance with this lease, to perform necessary services,
maintenance and repairs or alterations to the Building or the Premises, or
to show the Premises to ant prospective tenant or purchasers. Except in
case of emergency such entry shall be at such times and In such manner as
to minimize interference with the reasonable business use of the Premises
by Tenant.
14.2 Furniture and Bulky Articles.
Tenant shall move furniture and bulky articles in and out of the Building
or make independent use of the elevators only at times approved by
Landlord following at Mast 24 hours written notice to Landlord of the
intended move. Landlord win not unreasonably withhold its consent under
this paragraph.
15.1 Notices.
Notices between the parties relating to this lease shall be in writing,
effective when delivered, or if mailed, effective on the second day
following mailing, postage prepaid, to the address for the party stated in
this lease or to such other address as either party may specify by notice
to the other. Notice to Tenant may always be delivered to the Premises.
Rent shall be payable to Landlord at the same address and in the same
manner, but shah be considered paid only when received.
16.1 Subordination and Attornment.
This lease shall be subject to and subordinate to arty mortgages, deeds of
bust, or land sale contracts (hereafter collectively referred to as
encumbrances) now existing against the Building, provided that the lease
shall not be effective until Landlord shall have provided Tenant with a
subordination, nondisturbance and attornment agreement In customary form.
At Landlord's option this lease shall be subject and subordinate to any
future encumbrance hereafter placed against the Building (including the
underlying W4 or any modifications of existing encumbrances, and Tenant
shall execute such documents as may reasonably be requested by Landlord or
the holder of the encumbrance to evidence this subordination provided that
such documents contain customary non-disturbance agreements. If any
encumbrance is foreclosed tenant shall attorn to such purchaser and this
Lease shall continue.
16.2 Transfer of Building.
If the Building is sold or otherwise transferred by Landlord or arty
successor, Tenant shall attorn to the purchaser or transferee and
recognize A as the lessor under this lease, and, provided the purchaser or
transferee assumes all obligations hereunder, the transferor shall have no
further liability hereunder, for liabilities arising after the date of
such transfer.
16.3 Estoppels.
Either party will within 10 days after notice from the other execute,
acknowledge and deliver to the other party a certificate certifying
whether or not this Maw has been modified and Is In kill force and effect
whether there are any modifications or alleged breaches by #)a other
party. the dates to which rent has been paid In advance, and the amount of
any security deposit or prepaid rent and any other facts that may
reasonably be requested. Failure to deliver the certificate within the
specified time shall be conclusive upon the party of whom the certificate
was requested that the lease Is In full force and effect and has not been
modified except as may be represented by the party
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requesting the certificate. If requested by the holder of any
encumbrances, or any ground less, Tenant will agree to give such holder or
less notice of and an opportunity to cure any default by Landlord under
this lease.
17.1 Attorneys' Fees.
In any litigation arising out of this lease, the prevailing party shall be
entitled to recover attorney's fees at trial and on any appeal. If
Landlord Incurs attorneys fees because of a default by Tenant, Tenant
shall pay all such fees whether or not litigation is filed.
18.1 Quiet Enjoyment
Landlord warrants that so long as Tenant complies with all terms of this
lease it shall be entitled to peaceable and undisturbed possession of the
Premises free from any eviction or disturbance by Landlord. Neither
Landlord nor Its managing agent shall have any liability to Tenant for
loss or damages arising out of the acts, Including criminal acts, of other
tenants of the Building or third parties, nor any liability for any reason
which exceeds the value of Its Interest in the Building.
19.1 Additional Rent - Tax Adjustment
Whenever for any July 1 - June 30 tax year, the real property taxes Wed
against the Building and its underlying land exceed those Wed for the
199912000 tax year, then the monthly rental for the one succeeding
calendar year shall be Increased by one twelfth of such tax Increase times
Tenants proportionate share. "Real property taxes as used herein means all
taxes and assessments of any public authority against the Building and the
land on which It Is located. the cost of contesting any tax and form of
fee or charge Imposed on Landlord as a direct consequence of owning or
leasing the Premises, Including but not limited to rent taxes, gross
receipt taxes, leasing taxes,' or any fee or charge wholly or partially In
lieu of or In substitution for ad valorem real property taxes or
assessments, whether now existing or hereafter enacted. If any portion of
the Building Is occupied by a tax-exempt tenant so that the Building has a
partial tax exemption under ORS 307.112 or a similar statute, then real
property taxes shag mean taxes computed as If such partial tax exemption
did not exist. If a separate assessment or identifiable tax increase
arises because of Improvements to the Premises, then Tenant shall pay 100
percent of such increase. LANDLORD AGREES TO LIMIT ANNUAL INCREASES IN
REAL ESTATE TAXES AND OPERATING EXPENSES TO 5%, ON A CUMULATIVE BASIS.
19.2 [RESERVED]
19.3 Operating Expense Adjustment.
Tenant shall pay as additional rent Tenants Proportionate share of the
amount by which operating expenses for the Building Increase over those
experienced by Landlord during the calendar year 2000 (base year).
Effective January I of each year Landlord shall estimate the amount by
which operating expenses are expected to Increase, N any, over those
incurred In the base year. Monthly rental for that year shall be increased
by one-twelfth of Tenants share of the estimated increase. Following the
end of each calendar year, Landlord shag compute the actual increase in
operating expenses and bill Tenant for any deficiency or credit Tenant
with any excess collected. As used herein *operating expenses shall mean
all costs of operating and maintaining the Building as determined by
standard real estate accounting practice, Including , but not limited to:
all water and sewer charges; the cost of natural gas and electricity
provided to the building; Janitorial and cleaning supplies and services;
administration costs and management fees at the same rate as during the
base year; security services, if any, insurance premiums; licenses;
permits for the operation and maintenance of the building and all of its
component elements and mechanical systems; the annual amortized capital
improvement cost (amortized over such a period as Landlord may select bid
not shorter than the period allowed under the Internal Revenue code and at
a current market interest rate) for any capital Improvements to the
Building required by any government authority or those which have a
reasonable probability of improving the operating efficiency of the
Building. LANDLORD AGREES TO LIMIT ANNUAL INCREASES IN REAL ESTATE TAXES
AND OPERATING EXPENSES TO 5%, ON A CUMULATIVE BASIS. IN NO EVENT WILL
TENANTS PROPORTIONATE SHARE, PLUS THE PROPORTIONATE SHARE OF ALL OTHER
TENANTS EVER EXCEED 100% IF THE BUILDING IS NOT 100% OCCUPIED DURING THE
BASE YEAR, THE ACTUAL OPERATING EXPENSES FOR THE BASE YEAR WILL BE GROSSED
UP TO REFLECT THE EXPENSES AT 1W% OCCUPANCY.
19.4 Disputes.
If Tenant disputes any computation of additional rent or rent adjustment
under paragraphs 19.1 through 193 of this Lease, it shall give notice to
Landlord not later than one year after the notice from Landlord describing
the computation in question, but in any event not later than 30 days after
expiration or earlier termination of this Lease. If Tenant falls to give
such a notice, the computation by Landlord shag be binding and conclusive
between the parties for the W Public accountant selected by Landlord and
period In question. If Tenant gives a timely notice, the dispute Wall be
resolved by an Independent certified public accountant selected by
landlord and acceptable to Tenant whose decision shall be conclusive
between the parties. Each party shag pay one-half of the fee for making
such determination except that if the adjustment in favor Tenant does not
exceed three percent of the escalation amounts for the year in question.
Tenant shag pay the entire cost of any such third-part determination.
Nothing herein shall reduce Tenants obligations to male all payments as
required by this lease.
20.1 Complete Agreement; No Implied Covenants.
This lease and the attached Exhibits and Schedules, if any, constitute the
entire agreement of the parties and supersede all prior written and oral
agreements and representations and there are no implied covenants or other
agreements between the parties except as expressly set forth In this
Lease. Neither Landlord nor Tenant is relying on any representations other
than those expressly set forth herein.
20.2 Space Leased As Is.
N/A.
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20.3 Captions.
The titles to the paragraphs of this lease are descriptive only and are
not intended to change or influence the meaning of any paragraph or to be
part of this lease.
20.4 Nonwaiver.
Failure by Landlord to promptly enforce any regulation. remedy or right of
any kind under this Lease shall not constitute a waiver of the same and
such right or remedy may be asserted at any time after Landlord becomes
entitled to the benefit thereof notwithstanding delay In enforcement.
20.5 Exhibits.
The following Exhibits are attached hereto and incorporated as part of
this lease: EXHIBIT A & B
20.6 Tenant Improvements.
SEE EXHIBIT A & B
20.7 Vehicle Parking.
TENANT HAS THE RIGHT TO USE WITHOUT CHARGE 60 PARKING SPACES FOR EMPLOYEE
PARKING LOCATED BEHIND THE BUILDING. VISITOR PARKING IS LOCATED IN THE
FRONT OF THE BUILDING. TENANT IS RESPONSIBLE FOR POLICING ITS EMPLOYEES,
OR NOVA CCOP CAN IMPLEMENT PROCEDURES TO BE ENFORCED BY TENANT.
20.8 Window/Glass.
Not withstanding an provision herein, during the term of this lease Tenant
shall replace at its sole cost and expense, any and all window and for
glass panes situated within and upon the demised premises that may be
broken from any cause, act on or neglect of whatever kind by Tenant, or
Tenant's agents, employees, customers or clients. In the event Tenant
should fail to Immediately replace such windows and/or glass pares,
Landlord shag have the right to replace the same and Tenant agrees to
reimburse Landlord for any and all expenses incurred by Landlord In
replacing such windows and/or glass panes.
IN WITNESS WHEREOF. the duly authorized representatives of the parties have
executed this lease as of the day and year first written above.
<TABLE>
<S> <C> <C>
LANDLORD: NOVA CCOP, INC.
By:
Title:
Address for Notices:
P.O. BOX 10638
EUGENE, OR 97440
TENANT: SALES LOGIX CORPORATION
By: /s/
Title: Director of I/T & Facilities
Address for Notices:
88010 N. GAINEY CENTER
SCOTTSDALE, AZ
</TABLE>
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EXHIBIT "A"
[2 PAGE DIAGRAM OMITTED]
<PAGE> 8
EXHIBIT "B"
TENANT IMPROVEMENTS:
LANDLORD AGREES TO PROVIDE THE BUILD OUT AS SHOWN ON EXHIBIT "A" PAGE 1 WITH THE
CONDITION THAT THE TENANT CONTRIBUTES $40,000.00 TOWARDS REMODEL ON THE SPACE.
LANDLORD AGREES TO PAY $10.00 PER SQUARE FOOT FOR REMODEL ON THE ADDITIONAL
SPACE MARKED PAGE 2 OF EXHIBIT W. TENANT IS RESPONSIBLE FOR ANY AMOUNT SPENT
OVER THE $10.00 PER SQUARE FOOT ALLOWANCE.
CONTINUING RIGHT OF FIRST NOTICE:
TENANT SHALL HAVE A CONTINUOUS RIGHT OF FIRST OFFER AND RIGHT OF FIRST REFUSAL
WITH RESPECT TO ALL SPACE LOCATED ON THE FLOOR CONTIGUOUS TO THE LEASE PREMISES.
ANY SPACE ACQUIRED UNDER THE RIGHT OF FIRST OFFER WILL BE ADDED TO TENANTS LEASE
AT THE THEN ESCALATED RATE WITH ALLOWANCES EQUAL TO THOSE PROVIDED ON THE
ORIGINAL SPACE PRO-RATED FOR THE AMOUNT OF TIME REMAINING ON THE ORIGINAL LEASE.
RENEWAL OPTIONS:
TENANT SMALL HAVE THE RIGHT TO RENEW THE LEASE FOR ONE ADDITIONAL TERM OF 5
YEARS, AT THE SAME TERMS AND CONDITIONS OF THE ORIGINAL LEASE EXCEPT FOR RENT,
WHICH SHALL BE AT MARKET RATE. TENANT WAIVES ANY RIGHT TO CANCEL THE LEASE
DURING THE RENEWAL OPTION PERIOD.
ELECTRICAL CAPACITY:
LANDLORD SHALL PROVIDE AT LEAST 12 WATTS PER SQUARE FOOT OF ELECTRICAL CAPACITY
TO THE PREMISES, EXCLUSIVE OF LIGHTING AND HVAC.
<PAGE> 1
STANDARD OFFICE LEASE-GROSS
1. BASIC LEASE PROVISIONS ("Basic Lease Provisions")
1.1 PARTIES: This Lease, dated, for reference purposes only, February
3, 2000, is made by and between Century San Jose, LLC (herein called "Lessor")
and SalesLogix Corporation, a Delaware corporation herein called "Lessee").
1.2 PREMISES: Suite Number 300 consisting of approximately 17,803
rentable square feet, more or less, as defined in Paragraph 2 and as shown on
Exhibit "A" hereto (the "Premises"),
1.3 BUILDING: Commonly described as being located at 550 S. Winchester
Boulevard in the City of San Jose, in the County of Santa Clara, and as defined
in Paragraph 2.
1.4 USE: General office, research and development, and other legal
related uses, subject to Paragraph 6.
1.5 TERM: Ninety-Six (96) months commencing May 1, 2000 ("Commencement
Date") and ending April 30, 2008 as defined in Paragraph 3, or such other date
that the Premise has been vacated by the existing tenant and possession has been
returned to lessor pursuant to a termination agreement between Lessor and the
existing tenant.
1.6 BASE RENT: Sixty-Six Thousand Seven Hundred Sixty-One and 00/100ths
Dollars ($66,761.00) per month, payable on the first (1st) day of each month,
per Paragraph 4.1.
1.7 BASE RENT INCREASE: The monthly Base Rent is payable under
Paragraph 1.6 above shall be increased by four percent (4%), compounded annually
on each anniversary of the Commencement Date.
1.8 RENT PAID UPON EXECUTION. Sixty-Six Thousand Seven Hundred
Sixty-One and 00/100ths Dollars ($66,761.00) for the first month.
1.9 SECURITY DEPOSIT: Eight-Seven Thousand Eight Hundred Fifty-Three
and 00/100ths Dollars ($87,853.00).
1.10 LESSEE'S SHARE OF OPERATING EXPENSE INCREASE: Seventeen and
48/100ths percent (17.48%) as defined in Paragraph 4.2.
2. PREMISES, PARKING AND COMMON AREAS:
2.1 PREMISES: The Premises are a portion of a building, herein
sometimes referred to as the "Building" identified in Paragraph 1.3 of the Basic
Lease Provisions. "Building" shall include adjacent parking structures used in
connection therewith. The Premises, the Building, the Common Areas, the land
upon which the same are located, along with all other buildings and improvements
thereon or thereunder, are herein collectively referred to as the "Office
Building Project". Lessor hereby leases to Lessee and Lessee leases from Lessor
for the term, at the rental, and upon all of the conditions set forth herein,
the real property referred to in the Basic Lease Provisions, Paragraph 1.2. as
the "Premises", including rights to the Common Areas as hereinafter specified.
2.2 VEHICLE PARKING: So long as Lessee is not in default, and subject
to the rules and regulations attached hereto, and as established by Lessor from
time to time, Lessee shall be entitled to use Sixty-Six (66) parking spaces in
the Office Building Project, on a 24 hour per day basis, seven days per week,
except as provided below.
2.2.1 Lessor shall have the right during the Term hereof to
remove the existing parking spaces within the Office Building Project in order
to construct a new or remodeled parking area or facility ("New Parking
Facility"). During -the time that Lessor, its employees and/or contractors are
preparing for and constructing the New Parking Facility (the "Parking
Construction Period"), Lessor reserves the right to relocate the parking spaces
to which Lessee is entitled to use hereunder to an area near the Building Office
Project ("Off-Site Parking"), and to arrange either (i) a passenger shuttle
service from the Off-Site Parking to the Office Building Project for Lessee's
use, or (ii) a valet parking service for Lessee's use. Lessor shall notify
Lessee of the approximate dates of the Parking Construction Period not less than
thirty (30) days from the commencement of the Parking Construction Period.
Lessor shall have the right to amend the dates of the Parking Construction
Period as Lessor deems necessary in its sole and absolute discretion. Lessor
shall have the right to establish reasonable rules and regulations applicable to
Lessee's use of the Off-Site Parking and Lessee agrees to abide by and conform
to the same, and to cause its employees, suppliers, customers and invitees to so
abide and conform.
2.2.2 If Lessee commits, permits or allows any of the
prohibited activities described in the Lease or the rules then in effect, then
Lessor shall have the right, without notice, in addition to such other rights
and remedies that it may have, to remove or tow away the vehicle involved from
either the Office
1
<PAGE> 2
Building Project, parking area, or any off-site parking as applicable, and
charge the cost to Lessee, which cost shall be immediately payable upon demand
by Lessor.
2.3 COMMON AREAS - DEFINITION. The term "Common Areas" is defined as
all areas and facilities outside the Premises and within the exterior boundary
line of the Office Building Project that are provided and designated by the
Lessor from time to time for the general non-exclusive use of Lessor, Lessee and
of other lessees of the Office Building Project and their respective employees,
suppliers, shippers, customers and invitees, including, but not limited to,
common entrances, lobbies, corridors, stairways and stairwells, public
restrooms, elevators, escalators, parking areas to the extent not otherwise
prohibited by this Lease, loading and unloading areas, trash areas, roadways,
sidewalks, walkways, parkways, ramps, driveways, landscaped areas and decorative
walls.
2.4 COMMON AREAS - RULES AND REGULATIONS. Lessee agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit B with respect
to the Office Building Project and Common Areas, and to cause its employees,
suppliers, shippers, customers, and invitees to so abide and conform. Lessor or
such other person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
modify, amend and enforce said rules and regulations. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees, their agents, employees and invitees of the Office Building
Project.
2.5 COMMON AREAS - CHANGES. Lessor shall have the right, in Lessor's
sole discretion, from time to time:
(a) To make changes to the Building interior and exterior and
Common Areas, including, without limitation, changes in the location, size,
shape, number, and appearance thereof, including, but not limited to, the
lobbies, windows, stairways, air shafts, elevators, escalators, restrooms,
driveways, entrances, parking spaces, parking areas, loading and unloading
areas, ingress, egress, direction of traffic, decorative walls, landscaped areas
and walkways;
(b) To close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises remains
available;
(c) To designate other land and improvements outside the
boundaries of the Office Building Project to be a part of the Common Areas,
provided that such other land and improvements have a reasonable and functional
relationship to the Office Building Project,
(d) To add additional buildings and improvements to the Common
Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Office Building Project as Lessor
may deem to be appropriate.
3. TERM.
3.1 TERM. The Term and Commencement Date of this Lease shall be as
specified in Paragraph 1.5 of the Basic Lease Provisions.
3.2 DELAY IN POSSESSION. Notwithstanding said Commencement Date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date and subject to Paragraph 3.2.2, Lessor shall not be subject to any
liability therefore, nor shall such failure affect the validity of this Lease or
the obligations of Lessee hereunder or extend the term hereof; but, in such
case, Lessee shall not be obligated to pay rent or perform any other obligation
of Lessee under the terms of this Lease, except as may be otherwise provided in
this Lease, until possession of the Premises is tendered to Lessee, as
hereinafter defined; provided, however, that if Lessor shall not have delivered
possession of the Premises within sixty (60) days following said Commencement
Date, as the same may be extended under the terms of the Work Letter (as defined
below) executed by Lessor and Lessee, Lessee may at Lessee's option, by notice
in writing to Lessor within ten (10) days thereafter cancel this Lease, in which
event the parties shall be discharged from all obligations hereunder; provided,
however, that, as to Lessee's obligations, Lessee first reimburses Lessor for
all costs incurred for non-standard improvements and, as to Lessor's
obligations, Lessor shall return any money previously deposited by Lessee (less
any offsets due Lessor for non-standard improvements); and provided further,
that if such written notice by Lessee is not received by Lessor within said ten
(10) day period, Lessee's right to cancel this Lease hereunder shall terminate
and be of no further force or effect.
3.2.1 POSSESSION TENDERED - DEFINED. Possession of the
Premises shall be deemed tendered to Lessee ("Tender of Possession") when (1)
the improvements to be provided by Lessor under this Lease are substantially
completed, (2) the Building utilities are ready for use in the Premises.
3.2.2 DELAYS CAUSED BY LESSEE. There shall be no abatement of
rent, and the sixty (60) day period following the Commencement Date before which
Lessee's right to cancel this Lease accrues under Paragraph 3.2, shall not be
deemed extended to the extent of any delays caused by acts or omissions of
Lessee, Lessee's agents, employees and contractors.
3.3 EARLY POSSESSION. If Lessee occupies the Premises prior to said
Commencement Date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not change the termination date, and Lessee shall
pay rent for such occupancy.
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<PAGE> 3
3.4 UNCERTAIN COMMENCEMENT. In the event commencement of the lease term is
defined as the completion of the improvements, Lessor shall notify Lessee in
writing of the Commencement Date once determined establishing the date of Tender
of Possession (as defined in Paragraph 3.2.1) of the actual taking of possession
by Lessee, whichever first occurs, as the Commencement Date.
4. RENT.
4.1 BASE RENT. Subject to adjustment as hereinafter provided in Paragraph
4.3, and except as may be otherwise expressly provided in this Lease, Lessee
shall pay to Lessor the Base Rent for the Premises set forth in Paragraph 1.6 of
the Basic Lease Provisions, without offset or deduction. Lessee shall pay Lessor
upon execution hereof the advance Base Rent described in Paragraph 1.8 of the
Basic Lease Provisions. Rent for any period during the term hereof which is for
less than one month shall be prorated based upon the actual number of days of
the calendar month involved. Rent shall be payable in lawful money of the United
States to Lessor at the address stated herein or to such other persons or at
such other places as Lessor may designate in writing.
4.2 OPERATING EXPENSE INCREASE. Lessee shall pay to Lessor during the term
hereof, in addition to the Base Rent, Lessee's Share, as hereinafter defined, of
the amount by which all Operating Expenses, as hereinafter defined, for each
Comparison Year exceeds the amount of all Operating Expenses for the Base Year,
such excess being hereinafter referred to as the "Operating Expense Increase",
in accordance with the following provisions:
(a) "Lessee's Share" is defined, for purposes of this Lease,
as the percentage set forth in Paragraph 1.10 of the Basic Lease Provisions,
which percentage has been determined by dividing the approximate square footage
of the Premises by the total approximate square footage of the rentable space
contained in the Office Building Project. It is understood and agreed that the
square footage figures set forth in the Basic Lease Provisions are
approximations which Lessor and Lessee agree are reasonable and shall not be
subject to revision except in connection with an actual change in the size of
the Premises or change in the space available for lease in the Office Building
Project.
(b) "Base Year" is defined as the calendar year in which the
Lease term commences.
(c) "Comparison Year" is defined as each calendar year during
the term of this Lease subsequent to the Base Year; provided, however, Lessee
shall have no obligation to pay a share of the Operating Expense Increase
applicable to the first twelve (12) months of the Lease Term (other than such as
are mandated by a governmental authority, as to which government mandated
expenses Lessee shall pay Lessee's Share, notwithstanding they occur during the
first twelve (12) months). Lessee's Share of the Operating Expense Increase for
the first and last Comparison Years of the Lease Term shall be prorated
according to that portion of such Comparison Year as to which Lessee is
responsible for a share of such increase.
(d) "Operating Expenses" is defined, for purposes of this
Lease, to include all costs, if any, incurred by Lessor in the exercise of its
reasonable discretion, for:
(i) The operation, repair, maintenance, and replacement,
in neat, clean, safe, good order and condition, of the Office Building Project,
including, but not limited to, the following:
(aa) The Common Areas, including their surfaces,
coverings, decorative items, carpets, drapes and window coverings, and including
parking areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, stairways, parkways, driveways, landscaped areas, striping, bumpers,
irrigation systems, Common Area lighting facilities, building exteriors and
roofs, fences and gates.
(bb) All heating, air conditioning, plumbing,
electrical systems, life safety equipment, telecommunication and other equipment
used in common by, or for the benefit of, lessees or occupants of the Office
Building Project, including elevators and escalators, tenant directories, fire
detection systems including sprinkler systems maintenance and repair.
(ii) Trash disposal, janitorial and security services;
(iii) Any other service to be provided by Lessor that is
elsewhere in this Lease stated to be an "Operating Expense";
(iv) The costs of the premiums for the liability and property
insurance policies to be maintained by Lessor under Paragraph 8 hereof;
(v) The amount of the real property taxes to be paid by Lessor
under Paragraph 10.1 hereof;
(vi) The cost of water, sewer, gas, electricity, and other
publicly mandated services to the Office Building Project;
(vii) Labor, salaries and applicable fringe benefits and
costs, materials, supplies and tools, used in maintaining and/or cleaning the
Office Building Project and accounting and a management fee attributable to the
operation of the Office Building Project,
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(viii) Replacing and/or adding improvements mandated by any
governmental agency and any repairs or removals necessitated thereby amortized
over its useful life according to federal income tax regulations or guidelines
for depreciation thereof (including interest on the unamortized balance as is
then reasonable in the judgment of Lessor's accountants);
(ix) Replacements of equipment or improvements that have a
useful life for depreciation purposes according to federal income tax guidelines
of five (5) years or less, as amortized over such life.
(e) Operating Expenses shall not include the costs of replacements of
equipment or improvements that have a useful life for federal income tax
purposes in excess of five (5) years unless it is of the type described in
Paragraph 4.2(d)(viii), in which case their cost shall be included as above
provided.
(f) Operating Expenses shall not include any expenses paid by any lessee
directly to third parties, or as to which Lessor is otherwise reimbursed by any
third party, other tenant, or by insurance proceeds.
(g) Lessee's Share of Operating Expense Increase shall be payable to
Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by Lessor from time to time in advance of Lessee's Share
of the Operating Expenses Increase for any Comparison Year, and the same shall
be payable monthly or quarterly, as Lessor shall designate, during each
Comparison Year of the Lease term, on the same day as the Base Rent is due
hereunder. In the event that Lessee pays Lessor's estimate of Lessee's Share of
Operating Expense Increase as aforesaid, Lessor shall deliver to Lessee within
sixty (60) days after the expiration of each Comparison Year a reasonably
detailed statement showing Lessee's Share of the actual Operating Expense
Increase incurred during such year. If Lessee's payments under this Paragraph
4.2(g) during said Comparison Year exceed Lessee's Share as indicated on said
statement, Lessee shall be entitled to credit the amount of such overpayment
against Lessee's Share of Operating Expenses Increase next falling due. If
Lessee's payments under this paragraph during said Comparison Year were less
than Lessee's Share as indicted on said statement, Lessee shall pay to Lessor
the amount of the deficiency within ten (10) days after delivery by Lessor to
Lessee of said statement. Lessor and Lessee shall forthwith adjust between them
by cash payment any balance determined to exist with respect to that portion of
the last Comparison Year for which Lessee is responsible as to Operating Expense
Increases, notwithstanding that the Lease term may have terminated before the
end of such Comparison Year. Lessee shall have the right to audit Operating
Expenses within one hundred eighty (180) days following receipt of a detailed
statement of Operating Expenses from Lessor.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof the
Security Deposit set forth in Paragraph 1.9 of the Basic Lease Provisions as
security for Lessee's faithful performance of Lessee's obligations hereunder. If
Lessee fails to pay Rent or other charges due hereunder, or otherwise defaults
with respect to any provision of this Lease, Lessor may use, apply or retain all
or any portion of said Deposit for the payment of any Rent or other charge in
default for the payment of any other sum to which Lessor may become obligated by
reason of Lessee's default, or to compensate Lessor for any loss or damage which
Lessor may suffer thereby. If Lessor so uses or applies all or any portion of
said Deposit, Lessee shall within ten (10) days after written demand therefor
deposit cash with Lessor in an amount sufficient to restore said Deposit to the
full amount then required of Lessee. If the Monthly Base Rent shall from time to
time increase during the term of this Lease, Lessee shall, at the time of such
increase, deposit with Lessor additional money as a Security Deposit so that the
total amount of the Security Deposit held by Lessor shall at all times bear the
same proportion to the then current Base Rent as the initial Security Deposit
bears to the initial Base Rent set forth in Paragraph 1.6 of the Basic Lease
Provisions. Lessor shall not be required to keep said Security Deposit separate
from its general accounts. If Lessee performs all of Lessee's obligations
hereunder, said Deposit, or so much thereof as has not heretofore been applied
by Lessor, shall be returned, without payment of interest or other increment for
its use, to Lessee (or, at Lessor's option, to the last assignee, if any, of
Lessee's interest hereunder) at the expiration of the term hereof, and after
Lessee has vacated the Premises. No trust relationship is created herein between
Lessor and Lessee with respect to said Security Deposit.
6. USE.
6.1 USE. The Premises shall be used and occupied only for the purpose set
forth in Paragraph 1.4 of the Basic Lease Provisions or any other use which is
reasonably comparable to that use and for no other purpose.
6.2 COMPLIANCE WITH LAW.
Lessee shall, at Lessee's expense, promptly comply with all applicable
statutes, ordinances, rules, regulations, orders, covenants and restrictions of
record, and requirements of any fire insurance underwriters or rating bureaus,
now in effect or which may hereafter come into effect, whether or not they elect
a change in policy from that now existing, during the term or any part of the
term hereof, relating in any manner to the Premises and the occupation and use
by Lessee of the Premises. Lessee shall conduct its business in a lawful manner
and shall not use or permit the use of the Premises or the Common Areas in any
manner that will tend to create waste or a nuisance or shall tend to disturb
other occupants of the Office Building Project. Notwithstanding the above,
should the improvement work Lessee plans to do prior to its taking occupancy to
alter the interiors as shown on Exhibit E attached hereto, necessitate any
alterations pursuant to the Americans with Disabilities Act "ADA", as it relates
to the building common areas, Lessor shall be responsible for any related costs
incurred in connection with such ADA work.
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6.3 CONDITION OF PREMISES.
(a) Lessor shall deliver the Premises to Lessee in a clean condition
on the Lease Commencement Date (unless Lessee is already in possession) with the
plumbing, lighting, air conditioning, and heating systems in the Premises in
good operating condition.
(b) Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises and the Office Building Project in their condition existing
as of the Lease Commencement Date or the date that Lessee takes possession of
the Premises, whichever is earlier, subject to punch list items and all
applicable zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and any easements, covenants
or restrictions of record, and accepts this Lease subject thereto and to all
matters disclosed thereby and by any exhibits attached hereon. Neither Lessee
nor Lessor's agent or agents has made any representation or warranty as to the
present or future suitability of the Premises, Common Areas, or Office Building
Project for the conduct of Lessee's business.
7. MAINTENANCE, REPAIRS, ALTERATIONS AND COMMON AREA SERVICES.
7.1 LESSOR'S OBLIGATIONS. Lessor shall keep the Office Building Project,
including the Premises, interior and exterior walls, roof, and Common Areas, and
the heating, air conditioning, plumbing, and electrical equipment whether used
exclusively for the Premises or in common with other premises, in good condition
and repair; provided, however, Lessor shall not be obligated to paint, repair or
replace wall coverings, or to repair or replace any improvements that are not
ordinarily a part of the Building or are above then Building standards. Lessee
shall give prompt written notice to Lessor of any known maintenance or repairs
required to be made by Lessor pursuant to this Paragraph 7.1. Lessor shall not
be liable for any failure to make any such repairs or to perform any maintenance
for which Lessor is responsible unless such failure shall persists for an
unreasonable time after written notice of the need for such repairs or
maintenance is given to Lessor by Lessee and such failure is due solely to
causes within Lessor's reasonable control. Except as provided in Paragraph 9.5,
there shall be no abatement of rent or liability of Lessee on account of any
injury or interference with Lessee's business with respect to any improvements,
alterations or repairs made by Lessor to the Office Building Project or any part
thereof. Lessee expressly waives the benefits of any statute now or hereinafter
in effect which would otherwise afford Lessee the right to make repairs at
Lessor's expense or to terminate this Lease because of Lessor's failure to keep
the Premises in good order, condition and repair.
7.2 LESSEE'S OBLIGATIONS.
(a) Notwithstanding Lessor's obligation to keep the Premises in good
condition and repair, Lessee shall be responsible for payment of the cost
thereof to Lessor as additional rent for that portion of the cost of any
maintenance and repair of the Premises, or any equipment (wherever located) that
serves only Lessee or the Premises, to the extent such cost is attributable to
causes beyond normal wear and tear. Lessee shall be responsible for the cost of
painting, repairing or replacing wall coverings, and to repair or replace any
Premises improvements that are not ordinarily a part of the Building or that are
above then Building standards. Lessor may, at its option, upon reasonable
notice, elect to have Lessee perform any such maintenance or repairs the cost of
which is otherwise Lessee's responsibility hereunder.
(b) On the last day of the term hereof or on any sooner termination,
Lessee shall surrender the Premises to Lessor in the same condition as received,
ordinary wear and tear excepted, clean and free of debris. Any damage or
deterioration of the Premises shall not be deemed ordinary wear and tear if the
same could have been prevented by good maintenance practices by Lessee. Lessee
shall repair any damage to the Premises occasioned by the installation or
removal of Lessee's trade fixtures, alterations, furnishings and equipment.
Except as otherwise stated in this Lease, Lessee shall leave the air lines,
power panels, electrical distribution systems, lighting fixtures, air
conditioning, window coverings, wall coverings, carpets, wall paneling ceilings
and plumbing on the Premises and in good operating condition.
7.3 ALTERATIONS AND ADDITIONS.
(a) Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions, Utility Installations or repairs in, on or
about the Premises, or the Office Building Project without first obtaining the
prior written consent of Lessor as provided below. As used in this Paragraph 7.3
the term "Utility Installation" shall mean carpeting, window and wall coverings,
power panels, electrical distribution systems, lighting fixtures, air
conditioning, plumbing, and telephone and telecommunication wiring and
equipment. At the expiration of the Term, Lessor may require the removal of any
or all of said alterations, improvements, additions or Utility Installations,
and the restoration of the Premises and the Office Building Project to their
prior condition, at Lessee's expense. Should Lessor permit Lessee to make its
own alterations, improvements, additions or Utility Installations, Lessee shall
use only such contractors as have been expressly approved by Lessor, and Lessor
may require Lessee to provide Lessor, at Lessee's sole cost and expense, a lien
and completion bond in the amount equal to one and one-half times the estimated
cost of such improvements, to insure Lessor against any liability for mechanic's
and materialmen's liens and to insure completion of the work. Should Lessee make
any alterations, improvements, additions or Utility Installations without the
prior approval of Lessor, or use a contractor not expressly approved by Lessor,
Lessor may, at any time during the term of this Lease, require that Lessee
remove any part or all of the same. Lessee may however, make non-structural
alterations to the interior of the Premises costing less than Thirty Thousand
Dollars ($30,000) per occurrence without obtaining Lessor's prior consent,
provided Lessee adhere to all other provisions of this Paragraph 7.3(a).
Notwithstanding, the above Lessee's planned work as shown on Exhibit E shall not
require removal or restoration at the expiration of the Term.
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(b) Any alterations, improvements, additions or Utility Installations
in or about the Premises or the Office Building Project that Lessee shall desire
to make shall be presented to Lessor in written form, with proposed detailed
plans. If Lessor shall give its consent to Lessee's making such alteration,
improvement, addition or Utility Installation, the consent shall be deemed
conditioned upon Lessee acquiring a permit to do so from the applicable
governmental agencies, furnishing a copy thereof to Lessor prior to the
commencement of the work, and compliance by Lessee with all conditions of said
permit in a prompt and expeditious manner. Lessee shall give Lessor not less
than ten (10) day's notice prior to the commencement of any work in the Premises
by Lessee, and Lessor shall have the right to post notices of non-responsibility
in or on the Premises or the Building as provided by law.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building or the Office Building
Project, or any interest therein. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend itself and Lessor against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises, the Building or the Office Building
Project, upon the condition that if Lessor shall so require, Lessee shall
furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to
such contested hen claim or demand indemnifying Lessor against liability for the
same and holding the Premises, the Building and the Office Building Project free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's reasonable attorneys' fees and costs in participating in such
action if Lessor shall decide it is in Lessor's best interest to do so.
(d) All alterations, improvements, additions and Utility Installations
(whether or not such Utility Installations constitute trade fixtures of Lessee),
which may be made to the Premises by Lessee, including, but not limited to,
floor coverings, panelings, doors, drapes, built-ins, moldings, sound
attenuation, and lighting and telephone or communication systems, conduit,
wiring and outlets, shall be made and done in a good and workmanlike manner and
of good and sufficient quality and materials and shall be the property of Lessor
and remain upon and be surrendered with the Premises at the expiration of the
Lease term) unless Lessor requires their removal pursuant to Paragraph 7.3(a).
Provided Lessee is not in default, notwithstanding the provisions of this
Paragraph 73(d), Lessee's personal property and equipment, other than that which
is affixed to the Premises so that it cannot be removed without material damage
to the Premises or the Building, and other than Utility Installations, shall
remain the property of Lessee and may be removed by Lessee subject to the
provisions of Paragraph 7.2.
(e) Lessee shall provide Lessor with as-built plans and specifications
for any alterations, improvements, additions or Utility Installation.
7.4 UTILITY ADDITIONS. Lessor reserves the right to install new or
additional utility facilities throughout the Office Building Project for the
benefit of Lessor or Lessee, or any other lessee of the Office Building Project,
including, but not by way of limitation, such utilities as plumbing, electrical
systems, communication systems, and fire protection and detection systems, so
long as such installations do not unreasonably interfere with Lessee's use of
the Premises.
8. INSURANCE; INDEMNITY.
8.1 LESSOR'S INSURANCE. All insurance maintained by Lessor shall be for
the sole benefit of Lessor and under Lessor's sole control.
8.1.1 PROPERTY INSURANCE. Lessor agrees to maintain property insurance
insuring the Building against damage or destruction due to risks including fire,
vandalism and malicious mischief in an amount not less than the replacement cost
thereof, in the form and with deductibles and endorsements as selected by
Lessor. At its election, Lessor may instead obtain "All Risk" coverage, and may
also obtain earthquake, pollution, and/or flood insurance in amounts selected by
Landlord.
8.1.2 OPTIONAL INSURANCE. Lessor, at Lessor's option, may also carry
insurance against loss of rent, in an amount equal to the amount of Base Rent
and Additional Rent that Lessor could be required to abate to all Building
tenants in the event of condemnation, damage or destruction for a period of
twelve (12) months. Lessor may also carry such other insurance in such amounts
and on such terms as Lessor shall determine. Lessor shall not be obligated to
insure any furniture, machinery, goods, inventory or supplies which Lessee may
keep or maintain in the Premises, or any leasehold improvements, additions or
alterations, which Lessee has installed within the Premises.
8.2 LESSEE'S INSURANCE. Lessee shall procure at Lessee's sole cost and
expenses and keep in force during this Lease the following insurance issued by
an insurance company acceptable to Lessor and licensed to do business in the
State of California:
8.2.1 COMMERCIAL GENERAL LIABILITY ("CGL") INSURANCE written on an
OCCURRENCE BASIS, covering the Premises and all operations of Lessee in or about
the Premises for bodily injury, property damage and personal injury liability:
(a) Lessee's CGK coverage shall be written with LIMITS of not
less than:
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(i) Two Million Dollars ($2,000,000) each
occurrence (combined single limit for bodily injury and property damage);
(ii) One Million Dollars ($1,000,000) for
personal injury liability;
(iii) One Million Dollars ($1,000,000)
aggregate for products completed operations; and
(iv) Two Million Dollars ($2,000,000)
general aggregate. The general aggregate limit shall apply separately to
liability arising in connection with Lessee's use and occupancy of the Premises.
(b) Said policy shall provide contractual liability
coverage insuring Lessee's indemnification obligations under this Lease.
(c) Said policy shall name Lessee's employees,
Lessor, Lessor's property manager-South Bay Development, employees and any party
holding an interest to which this Lease may be subordinated as Additional
Insureds, and shall provide for the severability of interests of insureds.
(d) Said policy shall provide that its coverage shall
be "primary" and noncontributing with any insurance maintained by Lessor and any
party holding an interest to which this Lease may be subordinated.
8.2.2 FIRE LEGAL LIABILITY INSURANCE covering direct physical
damage and loss of use of the Building for which Lessee is legally obligated in
an amount of the full replacement value of the Building.
8.2.3 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY
INSURANCE. Workers' Compensation Insurance shall be provided as required by any
applicable law or regulation. Employers' Liability Insurance shall be provided
in amounts not less than One Million Dollars ($1,000,000) each accident for
bodily injury by accident; One Million Dollars ($1,000,000) policy for bodily
injury by disease; and One Million Dollars ($1,000,000) each employee for bodily
injury by disease.
8.2.4 PROPERTY INSURANCE ON LESSOR'S IMPROVEMENTS AND
BETTERMENTS on an "all risk" bases, excluding earthquake peril, for one hundred
percent (100%) of replacement value.
8.2.5 COMMERCIAL AUTO LIABILITY INSURANCE with a combined
limit of not less than One Million Dollars ($1,000,000) for bodily injury and
property damage for each accident Such insurance shall cover liability arising
out of any auto (including owned, hired and non-owned autos).
8.2.6 GENERAL INSURANCE REQUIREMENTS. All coverages described
in the paragraph 8.2 shall provide, or shall be endorsed to provide:
(a) that said insurance shall not be canceled nor
materially reduced unless THIRTY (30) DAYS PRIOR WRITTEN NOTICE shall have been
given to Lessor; and
(b) A WAIVER OF ALL RIGHTS OF SUBROGATION by the
insurance carrier against Lessor, its agents, employees and any party holding an
interest to which this lease may be subordinated.
(c) Said policies or CERTIFICATE(S) OF INSURANCE,
along with any required endorsements, evidencing the foregoing coverage
requirements shall be delivered to Lessor by lessee upon commencement of the
term of this Lease and upon renewal of said insurance.
8.3 INDEMNITY. Lessee shall indemnify and hold harmless Lessor and its
agents, Lessors master or ground lessor, partners and lenders, from and against
any and all claims for damage to the person or property of anyone or any entity
arising from Lessee's use of the Office Building Project, or new parking
facility or off-site parking, or from the conduct of Lessee's business or from
any activity, work or things done, permitted or suffered by Lessee in or about
the Premises or elsewhere and shall further indemnify and hold harmless Lessor
from any and all claims, costs and expenses arising from any act or omission of
Lessee, or any of Lessee's agents, contractors, employees, or invitees, and from
and against all costs, attorneys' fees, expenses and liabilities incurred by
Lessor as the result of any such use, conduct, activity, work, things done,
permitted or suffered, breach, default or negligence, and in dealing reasonably
therewith, including, but not limited to, the defense or pursuit of any claim or
any action or proceeding involved therein; and in case any action or proceeding
be brought against Lessor by reason of any such matter, Lessee upon notice from
Lessor shall defend the same at Lessee's expense by counsel reasonably
satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense,
Lessee need not have first paid any such claim in order to be so indemnified.
Lessee, as a material part of the consideration to Lessor, hereby assumes all
risk of damage to property of Lessee or injury to persons, in, upon or about the
Office Building Project arising from any cause and Lessee hereby waives all
claims in respect thereof against Lessor.
8.4 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of income
therefrom or for loss of or damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other person
in or about the Premises or the Office Building Project, nor shall Lessor be
liable for injury to the person of Lessee, Lessee's employees, agents or
contractors, whether such damage or injury is caused by or results from theft,
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fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether said
damage or injury results from conditions arising upon the Premises or upon other
portions of the Office Building Project, or from other sources or places, or
from new construction or the repair, alteration or improvement of any part of
the Office Building Project, or of the equipment, fixtures or appurtenances
applicable thereto, and regardless of whether the cause of such damage or injury
or the means of repairing the same is inaccessible, Lessor shall not be liable
for any damages arising from any act or neglect of any other lessee, occupant or
user of the Office Building Project, nor from the failure of Lessor to enforce
the provisions of any other lease of any other lessee of the Office Building
Project.
9. DAMAGE OR DESTRUCTION. If the Office Building Project is damaged by fire or
other insured casualty and the insurance proceeds have been made available
therefore by the holder or holders of any mortgages or deeds of trust covering
the Premises or the Office Building Project, the damage shall be repaired by and
at the expense of the Lessor to the extent such insurance proceeds are available
therefore and provided such repairs can, in Lessor's opinion, be made within one
hundred twenty (120) days after the occurrence of such damage without the
payment of overtime or other premiums, and until such repairs are completed rent
shall be abated in proportion to the part of the Premises which is unusable by
Lessee in the conduct of its business (but there shall be no abatement of rent
by reason of any portion of the Premises being unusable for a period equal to
one (1) day or less). If the damage is due to the fault or neglect of Lessee or
its employees, agents or visitors, there shall be no abatement of rent. If
repairs cannot, in Lessor's opinion, be made within one hundred twenty (120)
days, Either Party may, at its option, make them within a reasonable time and in
such event this Lease shall continue in effect and the rent shall be abated in
the manner provided in this Paragraph 9. Lessor's election to make such repairs
must be evidenced by written notice to Lessee within thirty (30) days after the
learning of the occurrence of the damage. If Lessor does not so elect within
such thirty (30) day period to make such repairs which cannot be made within one
hundred twenty (120) days, then either party may, by written notice to the
other, cancel this Lease as of the date of the occurrence such damage. A total
destruction of the Office Building Project shall automatically terminate this
Lease. Except as provided in this Paragraph 9, there shall be no abatement of
rent and no liability of Lessor by reason of any injury to or interference with
repairs, alterations or improvements in or to any portion of the Office Building
Project or the Premises or in or to fixtures, appurtenances and equipment
therein, Lessee understands that Lessor will not carry insurance of any kind for
Lessee's furniture, furnishings, fixtures or equipment, and that Lessor shall
not be obligated to repair any damage thereto or replace the same. With respect
to any damage which Lessor is obligated to repair or elects to repair, Lessee,
as a material inducement to Lessor entering into this Lease, irrevocably waives
and releases its rights under the provisions of Sections 1932(2) and 1933(4) of
the California Civil Code.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the real property tax, defined
in Paragraph 10.3, applicable to the Office Building Project subject to
reimbursement by Lessee of Lessee's Share of such taxes in accordance with the
provisions of Paragraph 42, except as otherwise provided in Paragraph 10.2.
10.2 ADDITIONAL IMPROVEMENTS. Lessee shall not be responsible for
paying any increase in real property tax specified in the tax assessor's records
and work sheets as being caused by additional improvements placed upon the
Office Building Project by other lessees or by Lessor for the exclusive
enjoyment of any other lessee. Lessee shall, however, pay to Lessor at the time
that Operating Expenses are payable under Paragraph 4.2(c) the entirety of any
increase in real property tax if assessed solely by reason of additional
improvements placed upon the Premises by Lessee or at Lessee's request.
10.3 DEFINITION OF "REAL PROPERTY TAX". As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary, and any license fee, commercial rental tax, improvement bond
or bonds, levy or tax (other than inheritance, personal income or estate taxes)
imposed on the Office Building Project or any portion thereof by any authority
having the direct or indirect power to tax, including any city, county, state or
federal government, or any school, agricultural, sanitary, fire, street,
drainage or other improvement district thereof, as against any legal or
equitable interest of Lessor in the Office Building Project. The term "real
property tax" shall also include any tax, fee, levy, assessment or charge (i) in
substitution of, partially or totally, any tax, fee, levy, assessment or charge
hereinabove included within the definition of "real property tax", or (ii) the
nature of which was hereinbefore included within the definition of "real
property tax", or (iii) which is imposed as a result of a change in ownership,
as defined by applicable local statutes for property tax purposes, of the Office
Building Project or which is added to a tax or charge hereinbefore included
within the definition of real property tax by reason of such change of
ownership, or (iv) which is imposed by reason of this transaction, any
modifications or changes hereto, or any transfers hereof.
10.4 JOINT ASSESSMENT. If the improvements or property, the taxes for
which are to be paid separately by Lessee under Paragraph 10.2 or 10.5 are not
separately assessed, Lessee's portion of that tax shall be equitably determined
by Lessor from the respective valuation assigned in the assessor's work sheets
or such other information (which may include the cost of construction) as may be
reasonably available. Lessor's reasonable determination thereof, on good faith,
shall be conclusive.
10.5 PERSONAL PROPERTY TAXES.
(a) Lessee shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere.
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(b) If any of Lessee's said personal property shall be
assessed with Lessor's real property, Lessee shall pay to Lessor the taxes
attributable to Lessee within ten (10) days after receipt of a written statement
setting forth the taxes applicable to Lessee's property.
11. UTILITIES.
11.1 SERVICES PROVIDED BY LESSOR. Lessor shall provide heating,
ventilation, air conditioning, and janitorial service as reasonably required,
reasonable amounts of electricity for normal lighting and office machines, water
for reasonable and normal drinking and lavatory use, and replacement light bulbs
and/or fluorescent tubes and ballasts for standard overhead fixtures.
11.2 SERVICES EXCLUSIVE TO LESSEE. Lessee shall pay for all water, gas,
heat, light, power, telephone and other utilities and services specially or
exclusively supplied and/or metered exclusively to the Premises or to Lessee,
together with any taxes thereon. If any such services are not separately metered
to the Premises, Lessee shall pay at Lessor's option, either Lessee's Share or a
reasonable proportion to be determined by Lessor of all charges jointly metered
with other premises in the Building.
11.3 HOURS OF SERVICE. Said services and utilities shall be provided
during generally accepted business days and hours or such other days or hours as
may hereafter be set forth. Utilities and services required at other times shall
be subject to reimbursement by Lessee to Lessor of the cost thereof. After hours
usage of the HVAC system will be billed at $5.00 per hour per heat pump. As of
the Commencement Date, accepted business hours are 7:00 a.m. to 7:00 p.m. Monday
through Friday. Lessor shall have the right to increase the after hours usage
charge by providing thirty (30) days' notice thereof.
11.4 EXCESS USAGE BY LESSEE. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water, lighting
or power, or suffer or permit any act that causes extra burden upon the
utilities or services, including, but not limited to, security services, over
standard office usage for the Office Building Project. Lessee shall reimburse
Lessor for any excess expenses or costs that may arise out of a breach of this
subparagraph by Lessee. Lessor may, in its sole discretion, install at Lessee's
expense supplemental equipment and/or separate metering applicable to Lessee's
excess usage or loading.
11.5 INTERRUPTIONS. There shall be no abatement of rent and Lessor
shall not be liable in any respect whatsoever for the inadequacy, stoppage,
interruption or discontinuance of any utility or service due to riot, strike,
labor dispute, breakdown, accident, repair or other cause beyond Lessor's
reasonable control or in cooperation with governmental request or directions.
12. NONASSIGNMENT.
12.1 LESSEE'S CONSENT REQUIRED. Lessee's interest in this Lease is not
assignable, by operation of law or otherwise, nor shall Lessee have the right to
sublet the Premises, transfer any interest of Lessee therein or permit any use
of the Premises by another party, without the prior written consent of Lessor to
such assignment, subletting, transfer or use, which consent Lessor agrees not to
withhold unreasonably subject to the provisions of Paragraph 12.2 below. A
consent to one assignment, subletting, occupancy or use by another party shall
not be deemed to be a consent to any subsequent assignment, subletting,
occupancy or use by another party. Any assignment or subletting without such
consent shall be void and shall, at the option of Lessor, terminate this Lease.
Lessor's waiver or consent to any assignment or subletting hereunder shall not
relieve Lessee from any obligation under this Lease unless the consent shall so
provide.
12.2 TRANSFEREE INFORMATION REQUIRED. If Lessee desires to assign its
interest in this Lease or sublet the Premises, or transfer any interest of
Lessee therein, or permit the use of the Premises by another party (hereinafter
collectively referred to as a "Transfer"), Lessee shall give Lessor at least
twenty (20) days prior written notice of the proposed Transfer and of the terms
of such proposed Transfer, including, but not limited to, the name and legal
composition of the proposed transferee, a financial statement of the proposed
transferee, the nature of the proposed transferee's business to be carried on in
the Premises, the payment to be made or other consideration to be given to
Lessee on account of the Transfer, and such other pertinent information as may
be requested by Lessor, all in sufficient detail to enable Lessor to evaluate
the proposed Transfer and the prospective transferee. It is the intent of the
parties hereto that this Lease shall confer upon Lessee only the right to use
and occupy the Premises, and to exercise such other rights as are conferred upon
Lessee by this Lease. The parties agree that this Lease is not intended to have
a bonus value nor to serve as a vehicle whereby Lessee may profit by a future
Transfer of this Lease or the right to use or occupy the Premises as a result of
any favorable terms contained herein, or future changes in the market for leased
space. It is the intent of the parties that any such bonus value that may attach
to this Lease shall be and remain the exclusive property of Lessor. Accordingly,
in the event Lessee seeks to Transfer its interest in this Lease or the
Premises, Lessor shall have the following options, which may be exercised at its
sole choice without limiting Lessor in the exercise of any other right or remedy
which Lessor may have by reason of such proposed Transfer:
(a) Lessor may elect to terminate this Lease effective as of
the proposed effective date of the proposed Transfer and release Lessee from any
further liability hereunder accruing after such termination date by giving
Lessee written notice of such termination within twenty (20) days after receipt
by Lessor of Lessee's notice of intent to transfer as provided above. If Lessor
makes such election to terminate this Lease,
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Lessee shall surrender the Premises, in accordance with Paragraph 50, on or
before the effective termination date; or
(b) Lessor may consent to the proposed Transfer on the
condition that Lessee agrees to pay to Lessor, as additional rent, any and all
rents or other consideration (including key money) received by Lessee from the
transferee by reason of such Transfer in excess of the rent payable by Lessee to
Lessor under this Lease (less any reasonable brokerage commissions incurred by
Lessee in connection with the Transfer). Lessee expressly agrees that the
foregoing is a reasonable condition for obtaining Lessor's consent to any
Transfer; or
(c) Lessor may reasonably withhold its consent to the
proposed Transfer.
13. DEFAULT, REMEDIES.
13.1 DEFAULT. The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Lessee:
(a) The vacation or abandonment of the Premises by Lessee.
Vacation of the Premises shall include the failure to occupy the Premises for a
continuous period of thirty (30) days or more, whether or not the rent is paid.
(b) The breach by Lessee of any of the covenants, conditions
or provisions of Paragraphs 7.3.(a), (b) or (c) (Alterations), 12.1 (Assignment
or Subletting), 13.1(a) (Vacation or Abandonment), 13.1(e) (Insolvency), 13.1(f)
(False Statement), 16(a) (Estoppel Certificate), 30(b) (Subordination), 33
(Auctions), or 42.1 (Easements), all of which are hereby deemed to be material,
non-curable defaults without the necessity of any notice by Lessor to Lessee
thereof.
(c) The failure by Lessee to make any payment of rent or any
other payment required to be made by Lessee hereunder, as and when due, where
such failure shall continue for a period of three (3) business days after
written notice thereof from Lessor to Lessee. In the event that Lessor serves
Lessee with a Notice to Pay Rent or Quit pursuant to applicable Unlawful
Detainer statutes such Notice to Pay Rent or Quit shall also constitute the
notice required by this subparagraph.
(d) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
Lessee other than those referenced in Subparagraphs (b) and (c) above, where
such failure shall continue for a period of thirty (30) days after written
notice thereof from Lessor to Lessee, provided, however, that if the nature of
Lessee's noncompliance is such that more than thirty (30) days are reasonably
required for its cure, then Lessee shall not be deemed to be in default if
Lessee commenced such cure within said thirty (30) day period and thereafter
diligently pursues such cure to completion. To the extent permitted by law, such
thirty (30) day notice shall constitute the sole and exclusive notice required
to be given to Lessee under applicable Unlawful Detainer statutes.
(e) (i) The making by Lessee of any general arrangement or
general assignment for the benefit of creditors; (ii) Lessee becoming a "debtor"
as defined in 11 U.S.C. 101 or any successor statute thereto (unless, in the
case of a petition filed against Lessee, the same is dismissed within sixty (60)
days); (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within thirty
(30) days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within thirty (30)
days. In the event that any provision of this Paragraph 13.1(e) is contrary to
any applicable law, such provision shall be of no force or effect
(f) The discovery by Lessor that any financial statement given
to Lessor by Lessee, or its successor in interest or by any guarantor of
Lessee's obligation hereunder, was materially false.
13.2 REMEDIES. In the event of any material default or breach of this
Lease by Lessee, Lessor may at any time thereafter, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such default-
(a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease and the term hereof shall terminate
and Lessee shall immediately surrender possession of the Premises to Lessor. In
such event Lessor shall be entitled to recover from Lessee all damages incurred
by Lessor by reason of Lessee's default, including, but not limited to, the cost
of recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorneys' fees,
and any real estate commission actually paid; the worth at the time of award by
the court having jurisdiction thereof of the amount by which the unpaid rent for
the balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Lessee proves could be reasonably avoided;
and, that portion of the leasing commission paid by Lessor pursuant to Paragraph
15 applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case this
Lease shall continue in effect whether or not Lessee shall have vacated or
abandoned the Premises. In such event Lessor shall be entitled to enforce all of
Lessor's rights and remedies under this Lease, including the right to recover
the rent as it becomes due hereunder.
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(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
are located. Unpaid installments of rent and other unpaid monetary obligations
to Lessee under the terms of this Lease shall bear interest from the date due at
the maximum rate then allowable by law.
13.3 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of Base Rent, Lessee's Share of Operating Expense Increase or
other sums due hereunder will cause Lessor to incur costs not contemplated by
this Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting charges,
and late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the Office Building Project. Accordingly, if any installment
of Base Rent, Operating Expense Increase, or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within six (6) days after such
amount shall be due, then, without any requirements for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to 6% of such overdue amount. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of late payment by Lessee.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee's default with respect to such overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder.
14. CONDEMNATION. If the Premises or any portion thereof or the Office Building
Project are taken under the power of eminent domain, or sold under the threat of
the exercise of said power (all of which are herein called "condemnation"), this
Lease shall terminate as to the part so taken as of the date the condemning
authority takes title or possession, whichever first occurs; provided that if so
much of the Premises or the Office Building Project are taken by such
condemnation as would substantially and adversely affect the operation of
Lessee's business conducted from the Premises, In Lessor's reasonable
discretion, Lessee shall have the option, to be exercised only in writing within
thirty (30) days after Lessor shall have given Lessee written notice of such
taking (or in the absence of such notice, within thirty (30) days after receipt
after the condemning authority shall have taken possession), to terminate this
Lease as of the date the condemning authority takes such possession. If Lessee
does not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Premises remaining,
except that the rent and Lessee's Share of Operating Expense Increase shall be
reduced from the Common Areas usable by Lessee. Lessor shall have the option in
its sole discretion to terminate this Lease as of the taking of possession by
the condemning authority, by giving written notice to Lessee of such election
within thirty (30) days after receipt of notice of a taking by condemnation of
any part of the Premises or the Office Building Project. Any award for the
taking of all or any part of the Premises or the Office Building Project under
the power or eminent domain or any payment made under threat of the exercise of
such power shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any separate award for loss of or damage to Lessee's trade fixtures,
removable personal property and unamortized tenant improvements that have been
paid for by Lessee. For that purpose the cost of such improvements shall be
amortized over the original term of this Lease excluding any options. In the
event that this Lease is not terminated by reason of such condemnation, Lessor
shall to the extent of severance damages received by Lessor in connection with
such condemnation, repair any damage to the Premises caused by such condemnation
except to the extent that Lessee has been reimbursed therefor by the condemning
authority. Lessee shall pay any amount in excess of such severance damages
required to complete such repair.
15. BROKERS. Lessee represents and warrants to Lessor that it has not dealt with
any broker respecting this transaction, except Colliers International and hereby
agrees to indemnify and hold Lessor harmless from and against any brokerage
commission or fee, obligation, claim or damage (including attorneys' fees) paid
or incurred respecting any other broker claiming through Lessee or with
which/whom Lessee has dealt. It is acknowledged that one or more of Lessor's
partners may be real estate brokers.
16. ESTOPPEL CERTIFICATE.
(a) Each party (as "responding party") shall at any time upon not less
than ten (10) days' prior written notice from the other party ("requesting
party") execute, acknowledge and deliver to the requesting party a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in fall force and effect) and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrancer of the Office Building Project or
of the business of Lessee.
(b) At the requesting party's option, the failure to deliver such
statement within such time shall be a material default of this Lease by the
party who is to respond without any further notice to such party, or it shall be
conclusive upon such party that (i) this Lease is in full force and effect,
without modification except as may be represented by the requesting party, (ii)
there are no uncured defaults in the requesting party's performance, and (iii)
if Lessor is the requesting party, not more than one months rent has been paid
in advance.
(c) If Lessor desires to finance, refinance, or sell the Office
Building Project, or any part thereof, Lessee hereby agrees to deliver to any
lender or purchaser designated- by Lessor such financial statements of Lessee as
may be reasonably required by such lender or purchaser. Such statements shall
include the past three (3) years' financial statements of Lessee. All such
financial statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
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17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only the
owner or owners, at the time in question, of the fee title or a lessee's
interest in a ground lease of the Office Building Project. In the event of any
transfer of such title or interest, Lessor herein named (and in case of any
subsequent transfers then the grantor) shall be relieved from and after the date
of such transfer of all liability as respects Lessor's obligations thereafter to
be performed, provided that any funds in the hands of Lessor or the then grantor
at the time of such transfer, in which Lessee has an interest, shall be
delivered to the grantee. The obligations contained in this Lease to be
performed by Lessor shall, subject as aforesaid, be binding on Lessor's
successors and assigns, only during their respective periods of ownership.
18. SEVERABILITY. The invalidity of any provision of this Lease as determined by
a court of competent jurisdiction shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law or judgements from the date due. Payment of such interest
shall not excuse or cure any default by Lessee under this Lease, provided,
however, that interest shall not be payable on late charges incurred by Lessee.
20. TIME OF ESSENCE. Time is of the essence with respect to the obligations to
be performed under this Lease.
21. ADDITIONAL RENT. All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited, to Lessee's Share of Operating
Expense Increase and any other expenses payable by Lessee hereunder shall be
deemed to be rent, whether or not described or designated as such. Upon Lessee's
non-payment of any of the same, Lessor shall have all the rights and remedies
with respect thereto as Lessor has for the non-payment of Base Rent.
22. INCORPORATION OF PRIOR AGREEMENTS, AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
or contemporaneous agreement or understanding pertaining to any such matter
shall be effective. This Lease may be modified in writing only, signed by the
parties in interest at the time of the modification. Except as otherwise stated
in this Lease, Lessee hereby acknowledges that neither the real estate broker
listed in Paragraph 15 hereof nor any cooperating broker on this transaction nor
the Lessor or any employee or agents of any of said persons has made any oral or
written warranties or representations to Lessee relative to the condition or use
by Lessee of the Premises or the Office Building Project and Lessee acknowledges
that Lessee assumes all responsibility regarding the occupational Safety Health
Act, the legal use and adaptability of the Premises and the compliance thereof
with all applicable laws and regulations in effect during the term of this
Lease.
23. NOTICES. Any notice required or permitted to be given hereunder shall be in
writing and may be given by personal delivery or by certified or registered
mail, and shall be deemed sufficiently given if delivered or addressed to Lessee
or to Lessor at the address noted below or adjacent to the signature of the
respective parties, as the case may be. Mailed notices shall be deemed given
upon actual receipt at the address required, or forty-eight hours following
deposit in the mail, postage prepaid, whichever first occurs. Either party may
by notice to the other specify a different address for notice purposes except
that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time to time
hereafter designate by notice to Lessee. At the date of execution of this Lease,
the address of Lessor is:
1690 Dell Avenue
Campbell, CA 95008
and the address of Lessee is:
8800 North Gainey Center Drive
Suite 200
Scottsdale, AZ 85258
Attn: Jim Craig
24. WAIVERS. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder by
Lessor shall not be a waiver of any preceding breach by Lessee of any provision
hereof, other than the failure of Lessee to pay the particular rent so accepted,
regardless of Lessor's knowledge of such preceding breach at the time of
acceptance of such rent.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession of the
Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, except that the rent payable
shall be one hundred-fifty percent (150%) of the rent payable immediately
preceding the termination date of this Lease, and
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all Options, if any, granted under the terms of this Lease shall be deemed
terminated and be of no further effect during said month to month tenancy.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. COVENANTS AND CONDITIONS. Each provision of this Lease performable by Lessee
shall be deemed both a covenant and a condition.
29. BINDING EFFECT, CHOICE OF LAW. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provisions of Paragraph
17, this Lease shall bind the parties, their personal representatives,
successors and assignees. This Lease shall be governed by the laws of the State
of California and any litigation concerning this Lease between the parties
hereto shall be initiated in Santa Clara County.
30. SUBORDINATION.
(a) This Lease, and any Option or right of first refusal granted hereby, at
Lessor's option, shall be subordinate to any ground lease, mortgage, deed of
trust, or any other hypothecation or security now or hereafter placed upon the
Office Building Project and to any and all advances made on the security thereof
and to all renewals, modifications, consolidations, replacements and extensions
thereof. Notwithstanding such subordination, Lessee's right to quiet possession
of the Premises shall not be disturbed if Lessee is not in default and so long
as Lessee shall pay the rent and observe and perform all of the provisions of
this Lease, unless this Lease is otherwise terminated pursuant to its terms. If
any mortgagee, trustee or ground lessor shall elect to have this Lease and any
Options granted hereby prior to the lien of its mortgage, deed or trust or
ground lease, and shall give written notice thereof to Lessee, this Lease and
such Options shall be deemed prior to such mortgage, deed of trust or ground
lease, whether this Lease or such Options are dated prior or subsequent to the
date of said mortgage, deed of trust or ground lease or the date of recording
thereof. Lessor agrees to use its best efforts to provide Lessee with a
subordination, nondisturbance and attornment agreement in customary form
executed by the lender having a lien against Office Building Project upon
obtaining permanent financing.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination, or to make this Lease or any Option granted herein
prior to the lien of any mortgage, deed of trust or ground lease, as the case
may be so long as any subordination agreement contains customary non-disturbance
provisions. Lessee's failure to execute such documents within ten (10) days
after written demand shall constitute a material default by Lessee hereunder
without further notice to Lessee or, at Lessor's option, Lessor shall execute
such documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee does
hereby make, constitute and irrevocably appoint Lessor as Lessee's
attorney-in-fact and in Lessee's name, place and stead, to execute such
documents in accordance with this Paragraph 30(b).
31. ATTORNEYS' FEES.
31.1 If either party brings an action to enforce the terms hereof or declare
rights hereunder, the prevailing party in any such action, trial or appeal
thereon, shall be entitled to his reasonable attorneys' fees to be paid by the
losing party as fixed by the court in the same or a separate suit, and whether
or not such action is pursued to decision or judgment.
31.2 The attorneys' fee award shall not be computed in accordance with any
court fee schedule, but shall be such as to fully reimburse all attorneys' fees
reasonably incurred in good faith.
31.3 Lessor shall be entitled to reasonable attorneys' fees and all other
costs and expenses incurred in the preparation and service of notice of default
and consultations in connection herewith, whether or not a legal transaction is
subsequently commenced in connection with such default.
32. LESSOR'S ACCESS.
32.1 Lessor and Lessor's agents shall have the right to enter the Premises
at reasonable times for the purpose of inspecting the same, performing any
services required of Lessor, showing the same to prospective purchasers,
lenders, or lessees, taking such safety measures, erecting such scaffolding or
other necessary structures, making such alterations, repairs, improvements or
additions to the Premises or to the Office Building Project as Lessor may
reasonably deem necessary or desirable and the erecting, using and maintaining
of utilities, services, pipes and conduits through the Premises and/or other
premises as long as there is no material adverse effect to Lessee's use of the
Premises. Lessor may at any time place on or about the Premises or the Building
any ordinary "For Sale" signs and Lessor may at any time during the last 120
days of the term hereof place on or about the Premises any ordinary "For Lease"
signs.
32.2 All activities of Lessor pursuant to this Paragraph 32 shall be without
abatement of rent, nor shall Lessor have any liability to Lessee for the same.
32.3 Lessor shall have the right to retain keys to the Premises and to
unlock all doors in or upon the Premises other than to files, vaults and safes,
and in the case of emergency to enter the Premises by any reasonably appropriate
means, and any such entry shall not be deemed a forcible or unlawful entry or
detainer of the Premises or an eviction. Lessee waives any charges for damages
or injuries or interference with Lessee's property or business in connection
therewith.
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33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common Areas
without first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent The holding of any auction on the Premises or Common Areas in violation
of this Paragraph 33 shall constitute a material default of this Lease.
34. SIGNS. Lessee shall at Lessee's expense be granted a pro rata share of the
lobby signage as well as signage on the third (3rd) floor of the premises.
Lessee shall not place any sign upon the Premises or the Office Building Project
without Lessor's prior written consent.
35. MERGER. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
36. CONSENTS. Except for Paragraphs 33 (Auctions) and 34 (Signs) hereof,
wherever in this Lease, the consent of one party is required to an act of the
other party such consent shall not be unreasonably withheld or delayed.
37. GUARANTOR. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and observing
and performing all of the covenants, conditions, and provisions on Lessee's part
to be observant and performed hereunder, Lessee shall have quiet possession of
the Premises for the entire term hereof subject to all of the provisions of this
Lease.
39. SECURITY MEASURES - LESSOR'S RESERVATIONS.
39.1 Lessee hereby acknowledges that Lessor shall have no obligation
whatsoever to provide security measures for the benefit of the Premises or the
Office Building Project. Lessee assumes all responsibility for the protection of
Lessee, its agents, and invitees and the property of Lessee and of Lessee's
agents and invitees from acts of third parties. Nothing herein contained shall
prevent Lessor, at Lessor's sole option, from providing security protection for
the Office Building Project or any part thereof, in which event the cost thereof
shall be included within the definition of Operating Expense, as set forth in
Paragraph 4.2(d).
39.2 Lessor shall have the following rights:
(a) To change the name, address or title of the Office Building Project
or Building in which the Premises are located upon not less than ninety (90)
days prior written notice;
(b) To, at Lessee's expense, provide and install Building standard
graphics on the door of the Premises and such portions of the Common Areas as
Lessor shall reasonably deem appropriate;
(c) To permit any lessee the exclusive right to conduct any business as
long as such exclusive does not conflict with any rights expressly given herein;
(d) To place such signs, notices or displays as Lessor reasonably deems
necessary or advisable upon the roof, exterior of the buildings or the Office
Building Project or on pole signs in the Common Areas.
39.3 Lessee shall not.
(a) Use a representation (photographic or otherwise) of the Building or
the Office Building Project or their name(s) in connection with Lessee's
business;
(b) Suffer or permit anyone, except in emergency, to go upon the roof of
the Building.
40. HAZARDOUS MATERIAL.
A. DEFINITIONS. As used herein, the term "Hazardous Material" shall mean
any substance: (i) the presence of which requires investigation or
remediation under any federal, state or local statute, regulation,
ordinance, order, action, policy or common law; (ii) which is or becomes
defined "hazardous waste," "hazardous substance," pollutant or
contaminant under any federal, state or local statute, regulation, rule
or ordinance or amendments thereto including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 et seq.) and/or the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.); (iii) which is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic, or otherwise hazardous and is or becomes regulated by any
governmental authority, agency, department, commission, board, agency,
or instrumentality of the United States, the State of California or any
political subdivision thereof; (iv) the presence of which on the
Premises causes or threatens to cause a nuisance upon the Premises or to
adjacent properties or poses or threatens to pose a hazard to the health
or safety of persons on or about the Premises; (v) the presence of which
on adjacent
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<PAGE> 15
properties could constitute a trespass to Lessor or Lessee; (vi) without
limitation which contains gasoline, diesel fuel, or other petroleum
hydrocarbons; (vii) without limitation which contains polychlorinated
biphenyls (PCBs), asbestos or urea formaldehyde foam insulation; or
(viii) without limitation radon gas.
B. PERMITTED USE. Subject to the compliance by Lessee with the provisions
of Subparagraphs C, D, E, G, and I below, Lessee shall be permitted to
use and store on the Premises those Hazardous Materials listed in
Exhibit "D" attached hereto in the quantities attached set forth in
Exhibit "13".
C. USE RESTRICTION. Lessee shall not cause or permit any Hazardous Material
to be used, stored, generated, discharged, transported to or from, or
disposed of in or about the Premises, or any other land or improvements
in the vicinity of the Premises, except for limited quantities used or
stored at the Premises and required with the routine operation and
maintenance of the Premises for general office use, and then only upon
the written consent of Lessor and in compliance with all governmental
laws and regulations pertaining to such Hazardous Material. Without
limiting the generality of the foregoing, Lessee, at its sole cost,
shall comply with all Laws relating to the storage, use, generation,
transport, discharge and disposal by Lessee or its Agents of any
Hazardous Material. If the presence of any Hazardous Material on the
Premises caused or permitted by Lessee or its Agents results in
contamination of the Premises or any soil, air, ground or surface waters
under, through, over, on, in or about the Premises, Lessee, at its
expense, shall promptly take all actions necessary to return the
Premises and/or the surrounding real property to the condition existing
prior to the appearance of such Hazardous Material.
D. LESSEE INDEMNITY. Lessee shall defend, protect, hold harmless and
indemnify Lessor and its Agents and Lenders with respect to all actions,
claims, losses (including, diminution in value of the Premises), fines,
penalties, fees, (including, but not limited to, reasonable attorneys'
and consultants' fees and costs) costs, damages, liabilities,
remediation costs, investigation costs, response costs and other
expenses arising out of, resulting from, or caused by any Hazardous
Material used, generated, discharged, transported to or from, stored, or
disposed of by Lessee or its Agents in, on, under, over, through or
about the Premises, the Building, the Office Project, and/or the
surrounding real property. Lessee shall not suffer any lien to be
recorded against the Premises as a consequence for the disposal of any
Hazardous Material on the Premises by Lessee or its Agents, including
any so called state, federal or local "super fund" lien related to the
"clean up" of any Hazardous Material in, over, on, under, through, or
about the Premises.
E. COMPLIANCE. Lessee shall immediately notify Lessor of any inquiry, test,
investigation, enforcement proceeding by or against Lessee or the
Premises concerning any Hazardous Material. Any remediation plan
prepared by or on behalf of Lessee must be submitted to Lessor prior to
conducting any work pursuant to such plan and prior to submittal to any
applicable government authority and shall be subject to Lessor's
consent. Lessor acknowledges that Lessor, as the owner of the Property,
at its election, shall have the sole right to negotiate, defend, approve
and appeal any action taken or order issued with regard to any Hazardous
Material by any applicable governmental authority.
F. ASSIGNMENT AND SUBLETTING. It shall not be unreasonable for Lessor to
withhold its consent to any proposed assignment or subletting if (i) the
proposed assignee's or subtenant' s anticipated use of the Premises
involves the storage, generation, discharge, transport, use or disposal
of any Hazardous Material not permitted under Subparagraph B above, (ii)
if the proposed assignee or subtenant has been required by any prior
landlord, lender, or governmental authority to "clean up" or remediate
any Hazardous Material and has failed to promptly do so; or (iii) if the
proposed assignee or subtenant is subject to investigation or
enforcement order or proceeding by any governmental authority in
connection with the use, generation, discharge, transport, disposal or
storage of any material amount of Hazardous Material, provided that (ii)
and (iii) will not apply in the case of a Fortune 500 Company.
G. SURRENDER. Upon the expiration or earlier termination of the Lease,
Lessee, at its sole cost, shall remove all Hazardous Materials from the
Premises that Lessee or its Agents introduced to the Premises. If Lessee
fails to so surrender the Premises, Lessee shall indemnify, protect,
defend and hold Lessor harmless from and against all damages resulting
from Lessee's failure to surrender the Premises as required by this
Paragraph, including, without limitation, any actions, claims, losses,
liabilities, fees (including, but not limited to, reasonable attorneys'
fees and consultants' fees and costs), fines, costs, penalties, or
damages in connection with the condition of the Premises including,
without limitation, damages occasioned by the inability to relet the
Premises or a reduction in the fair market and/or rental value of the
Premises by reason of the existence of any Hazardous Materials in, on,
over, under, through or around the Premises.
H. RIGHT TO APPOINT CONSULTANT. Lessor shall have the tight to appoint a
consultant to conduct an investigation to determine whether any
Hazardous Material is being used, generated, discharged, transported to
or from, stored or disposed of in, on, over, through, or about the
Premises, in an appropriate and lawful manner. If Lessor has violated
any Law or covenant in
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<PAGE> 16
this Lease regarding the use, storage or disposal of Hazardous Materials
on or about the Premises, Lessee shall reimburse Lessor for the cost of
such investigation. Lessee, at its expense, shall comply with all
reasonable recommendations of the consultant required to conform
Lessee's use, storage or disposal of Hazardous Materials to the
requirements of applicable Law or to fulfill the obligations of Lessee
hereunder.
I. HOLDING OVER. If any action of any kind is required to be taken by any
governmental authority to clean-up, remove, remediate or monitor a
Hazardous Material (the presence of which is the result of the acts or
omissions of Lessee or its Agents) and such action is not completed
prior to the expiration or earlier termination of the Lease, Lessee
shall be deemed to have impermissibly held over until such time as such
required action is completed, and Lessor shall be entitled to all
damages directly or indirectly incurred in connection with such holding
over, including without limitation, damages occasioned by the inability
to re-let the Premises or a reduction of the fair market and/or rental
value of the Premises.
J. PROVISIONS SURVIVE TERMINATION. The provisions of this Paragraph 39
shall survive the expiration or termination of this Lease.
K. CONTROLLING PROVISIONS. The provisions of this Paragraph 39 are intended
to govern the rights and liabilities of the Lessor and Lessee hereunder
respecting Hazardous Materials to the exclusion of any other provisions
in this Lease that might otherwise be deemed applicable. The provisions
of this Paragraph 39 shall be controlling with respect to any provisions
in this Lease that are inconsistent with this Paragraph 39.
41. EASEMENTS.
40.1 Lessor reserves to itself the right, from time to time, to grant such
easements, rights and dedications that Lessor deems necessary or desirable, and
to cause the recordation of Parcel Maps and restrictions, so long as such
easements, rights, dedications, Maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material default of this Lease by Lessee without the need for
further notice to Lessee.
40.2 The obstruction of Lessee's view, air, or light by any structure
erected in the vicinity of the Building, whether by Lessor or third parties,
shall in no way affect this Lease or impose any liability upon Lessor.
42. AUTHORITY. If Lessee is a corporation, trust, or general or limited
partnership, Lessee, and each individual executing this Lease on behalf of such
entity represent and warrant that such individual is duly authorized to execute
and deliver this Lease on behalf of said entity. If Lessee is a corporation,
trust or partnership, Lessee shall, within thirty (30) days after execution of
this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
43. CONFLICT. Any conflict between the printed provisions, Exhibits or Addenda
of this Lease and the typewritten or handwritten provisions, if any, shall be
controlled by the typewritten or handwritten provisions,
44. NO OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to lease.
This Lease shall become binding upon Lessor and Lessee only when fully executed
by both parties.
45. "INTENTIONALLY OMITTED"
46. MULTIPLE PARTIES. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee,
respectively.
47. WORK LETTER. This Lease is supplemented by that certain work letter
agreement ("Work Letter") of even date executed by Lessor and Lessee, attached
hereto as Exhibit C and incorporated herein by this reference.
48. SURRENDER OF PREMISES. Upon the expiration of the Term, or upon any earlier
termination of this Lease, Lessee shall quit and surrender possession of the
Premises to Lessor in as good order and condition as the same are now and
hereafter may be improved by Lessor or Lessee, reasonable wear and tear and
repairs which are Lessor's obligation excepted, and shall, without expense to
Lessor, remove or cause to be removed from the Premises all debris and rubbish,
all furniture, equipment, business and trade fixtures, free-standing cabinet
work, moveable partitioning and other articles of personal property owned by
Lessee or installed or place by Lessee at its own expense in the Premises, and
all similar articles of any other persons claiming under Lessee unless Lessor
exercises its option to have any subleases or subtenancies assigned to it, and
Lessee shall repair all damage to the Premises resulting from the installation
and removal of such items to be removed and restore such areas to the condition
that existed prior to the installation thereof in accordance with all applicable
laws, statutes, building codes and regulations in effect as of the date of such
repair and restoration.
49. DISPOSITION OF PERSONAL PROPERTY. Whenever Lessor shall reenter the Premises
as provided in Paragraph 13.2 hereof, or as otherwise provided in this Lease,
any property of Lessee not removed by Lessee
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<PAGE> 17
upon the expiration of the Term (or within forty-eight (48) hours after a
termination by reason of Lessee's default), as provided in this Lease, shall be
considered abandoned and Lessor may remove any or all of such items and dispose
of the same in any manner or store the same in a public warehouse or elsewhere
for the account and at the expense and risk of lessee, and if Lessee shall fail
to pay the cost of storing any such property after it has been stored for a
period of ninety (90) days after or more, Lessor may sell any or all of such
property at public or private sale, in such manner and at such times and places
as Lessor, in its sole discretion, may deem proper, without notice or to demand
upon Lessee, for the payment of all or any part of such charges or the removal
of any such property, and shall apply the proceeds of such sale: first, to the
cost and expense of such sale, including reasonable attorneys' fees for services
rendered; second, to the payment of the cost of or charges for storing any such
property; third, to they payment of any other sums of money which may then or
thereafter be due to Lessor from Lessee under any of the terms hereof; and
fourth, the balance, if any, to Lessee.
50. MORTGAGEE PROTECTION. Upon any default on the part of Lessor, Lessee shall
give notice by registered or certified mail to any beneficiary of a deed of
trust or mortgagee of a mortgage covering the Premises who has provided Lessee
with notice of their interest together with an address for receiving notice, and
shall offer such beneficiary or mortgagee a reasonable opportunity to cure the
default (which in no event shall be less than ninety (90) days), including time
to obtain possession of the Premises by power of sale or judicial foreclosure if
such should prove necessary to effect a cure. Lessee agrees that each lender to
whom this Lease has been assigned by Lessor is an express third party
beneficiary hereof. Lessee shall not make any prepayment of monthly rent more
than one (1) month in advance without the prior written consent of each such
lender. Lessee waives the collection of any security deposit from such lender(s)
or any purchaser at a foreclosure sale of such lender(s) deed of trust unless
the lender(s) or such purchaser shall have actually received and not refunded
the security deposit. Lessee agrees to make all payments under the Lease to the
lender with the most senior encumbrance upon receiving a direction, in writing,
to pay said amounts to such lender. Lessee shall comply with such written
direction to pay without determining whether an event of default exists under
such lender's loan to Lessor.
51. FINANCIAL STATEMENTS. At any time during the term of this Lease, Lessee
shall, upon ten (10) days' prior written notice from Lessor in connection with a
proposed sale or financing of the Office Building Project, provide Lessor with a
current financial statement and financial statements of the two (2) years prior
to the year of the current financial statement. Such statement shall be prepared
in accordance with generally accepted accounting principles and, if such is the
normal practice of Lessee, shall be audited by an independent certified public
accountant.
52. HEADINGS. The article headings contained in this Lease are for convenience
only and do not in any way limit or amplify any term or provision hereof. The
terms "Lessor" and "Lessee" as used herein shall include the plural as well as
the singular, the neuter shall include the masculine and feminine genders and
the obligations herein imposed upon Lessee shall be joint and several as to each
of the persons, firms or corporations of which Lessee may be composed.
53. "INTENTIONALLY OMITTED"
54. RIGHTS OF LESSOR. Lessor and its agents shall have the right to enter the
Premises at all reasonable times for the purpose of cleaning the Premises,
examining or inspecting the same, serving or posting and keeping posted thereon
notices as provided by law, or which Lessor deems necessary for the protection
of Lessor or the Office Building Project, showing the same to prospective
Lessees or purchasers of the Office Building Project, and for making such
alterations, repairs, improvements or additions to the Premises or to the Office
Building Project as Lessor may deem necessary or desirable. If Lessee shall not
be personally present to open and permit an entry into the Premises at any time
when such an entry by Lessor is necessary or permitted hereunder, Lessor may
enter by means of a master key or may enter forcibly, without liability to
Lessee except for any failure to exercise due care for Lessee's property, and
without affecting this Lease.
55. CONSTRUCTION OF ADDITIONAL IMPROVEMENTS. Lessor hereby notifies Lessee that
Lessor intends to construct a building and related improvements on the parcel
adjacent to the Building and that such construction will cause increased noise
levels, dust and other possible nuisances which may affect occupants of the
Building, including Lessee. Lessee hereby waives all claims for any injury to
Lessee's business or loss of income therefrom, or for damage that may be
sustained by the person or property of Lessee, its employees, invitees,
customers, agents, or contractors, caused by or resulting from such
construction.
56. OPTION TO EXTEND.
GRANT OF OPTION. Lessor hereby grants to Lessee one (1) option (the
"Option") to extend the Initial Term of the Lease ("Initial Term") for an
additional five (5) years (the "Option Term") upon and subject to the terms and
conditions set forth in this Lease. Lessee shall have no right to extend the
Initial Term except as provided herein. The Option shall be personal to
SalesLogix, a Delaware corporation, and shall not be transferable or assignable
to any assignee of the Lease. The Option shall be exercised, if at all, by
Lessee's delivery of written notice of exercise to Lessor no later than one
hundred eighty (180) days nor earlier than two hundred forty (240) days prior to
the expiration date of the Initial Term. The Basic Rental to be paid during the
Option Term shall be at the Prevailing Market Rental, projected as of the
Commencement of the Option Term, as hereinafter defined. As used herein, the
term "Prevailing Market Rental" shall mean the rental and all other monetary
payments and escalations that Lessor could obtain from a third party lessee
desiring to lease the Premises for the Option Term, taking into account the age
of the Project, the size of the Premises, the type and quality of construction
of the Office Building Project and the Premises, and all other factors that
would be
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<PAGE> 18
relevant to a third party in determining the rental such party would be willing
to pay to lease the Premises for the Option Term; provided, however, in no event
shall the Prevailing Market Rental be less than the Base Rent payable by Lessee
to Lessor at the expiration of the Initial Term. If (i) Lessee is in default
under any of the terms, covenants, or conditions of this Lease or (ii) Lessee
does not occupy all of the Premises, either at the time Lessee exercised the
Option or at any time thereafter prior to the commencement date of the Option
Term (the "Option Commencement Date"), then in each case, Lessee's exercise of
the Option shall be of no force and effect and Lessee shall have no rights
hereunder to extend the Initial Term.
Lessor and Lessee shall have fifteen (15) days ("Negotiation Period")
after the date Lessor receives Lessee's notice of exercise of the option within
which to agree on the monthly Base Rent during the Option Term. If Lessor and
Lessee agree on the monthly Base Rent for the Option Term within the Negotiation
Period, the parties hereto shall promptly thereafter execute an amendment to
this Lease stating the monthly Base Rent-for the Option Term. If Lessor and
Lessee are unable to agree on the monthly Base Rent for the Option Term within
the Negotiation Period, then Lessee's notice of exercise of the option shall be
of no effect, the grant of option under this Section 55 shall terminate and be
of no further force or effect, and this Lease shall terminate at the end of the
initial term, unless sooner terminated. Neither Lessor nor Lessee shall have the
right to have a court or other third party set the monthly Base Rent.
57. ATTACHMENTS. Attached hereto are the following documents which constitute a
part of this Lease: Exhibits A - E
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH
TERM AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
<TABLE>
<S> <C>
LESSOR LESSEE
Century San Jose, LLC, SalesLogix Corporation,
a limited liability corporation a Delaware corporation
By /s/ Gary Acord
By /s/ Its CFO
Its Member
By /s/ Gary Acord
Its President, ACT!
</TABLE>
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<PAGE> 19
[DIAGRAM OMITTED]
EXHIBIT "A"
<PAGE> 20
RULES AND REGULATIONS FOR
STANDARD OFFICE LEASE
Dated: February 3, 2000
By and Between Century San Jose, LLC, a limited liability corporation
("Lessor"), and SalesLogix Corporation ("Lessee").
GENERAL RULES
1. Lessee shall not suffer or permit the obstruction of any Common Areas,
including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor in good
faith judges to be a threat to the safety, reputation, or property of the Office
Building Project and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or interfere
with other lessees or persons having business within the Office Building
Project.
4. Lessee shall not keep animals or birds within the Office Building Project,
and shall not bring bicycles, motorcycles, or other vehicles into areas not
designated as authorized for same.
5. Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional locks or bolts,
without prior consent of Lessor.
7. Lessee shall be responsible for the inappropriate use of any toilet rooms,
plumbing or other utilities. No foreign substances of any kind are to be
inserted therein.
8. Lessee shall not deface the walls, partitions or other surfaces of the
Premises or Office Building Project.
9. Lessee shall not suffer or permit anything in or around the Premises or
Building that causes excessive vibration or floor loading in any part of the
Office Building Project.
10. Furniture, significant freight and equipment shall be moved into or out of
the building only with the Lessor's knowledge and consent, and subject to such
reasonable limitations, techniques and timing, as may be designated by Lessor.
Lessee shall be responsible for any damage to the Office Building Project
arising from any such activity.
11. Lessee shall not employ any service or contractor for services or work to be
performed in the Building, except as approved by Lessor.
12. Lessor reserves the right to close and lock the Building on Saturdays,
Sundays and legal holidays, and on other days between the hours of 7:00 P.M. and
7:00 A.M. of the following day. If Lessee uses the Premises during such periods,
Lessee shall be responsible for securely locking any doors it may have opened
for entry.
13. Lessee shall return all keys at the termination of its tenancy and shall be
responsible for the cost of replacing any keys that are lost.
14. No window coverings, shades or awnings shall be installed or used by Lessee.
15. No Lessee, employee or invitee shall go upon the roof of the Building.
16. Lessee shall not suffer or permit smoking or carrying of lighted cigars or
cigarettes in areas reasonably designated by Lessor or by applicable
governmental agencies as non-smoking areas.
17. Lessee shall not use any method of heating or air conditioning other than as
provided by Lessor.
EXHIBIT "B"
Page 1 of 2
1
<PAGE> 21
18. Lessee shall not overload the floor of the Premises or mark, drive nails,
screw or drill into the partitions (except to hang pictures and wall
decorations), ceilings or floor or in any way deface the Premises.
Notwithstanding the foregoing, Lessee may attach items to the partitions,
ceilings and floors for seismic safety purposes by means of screws, nails or
other methods of attachment so long as Lessee removes such items and patches and
repairs any holes in the partitions, ceilings and floors prior to the expiration
of the Lease.
19. The Premises shall not be used for lodging or manufacturing, cooking or food
preparation.
20. Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agency.
21. Lessor reserves the right to waive any one of these rules or regulations,
and/or as to any particular Lessee, and any such waiver shall not constitute a
waiver of any other rule or regulation or any subsequent application thereof to
such Lessee.
22. Lessee assumes all risks from theft or vandalism and agrees to keep its
Premises locked as may be required.
23. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the appropriate
operation and safety of the Office Building Project and its occupants.
Lessee agrees to abide by these and such rules and regulations.
24. Parking:
(a) Automobiles must be parked entirely with the stall lines on the floor.
(b) All directional signs and arrows must be observed.
(c) The speed limit shall be 5 miles per hour.
(d) Parking is prohibited in areas not striped for parking.
(e) If parking cards or any other device or form of identification are
supplied by Lessor (or its operator), they shall remain the property of Lessor
(or its operator). Such parking identification device must be displayed as
requested and may not be mutilated in any manner. The serial number of the
parking identification device may not be obliterated. Devices are not
transferable or assignable and any device in the possession of an unauthorized
holder will be void. There will be a replacement charge to the Lessee or person
designated by Lessee for loss of any parking card.
(f) Lessee (and its operator) may refuse to permit any person who violated
the within rules to park in the garage, and any violation of the rules shall
subject the automobile to removal from the garage at the parker's expense, If
there is a monthly parking charge, in either of said events. Lessor (or its
operator) shall refund a pro rata portion of the current monthly parking rate
and the sticker or any other form of identification supplied by Lessor (or its
operator) will be returned to Lessor (or its operator).
(g) Garage managers or attendants are not authorized to make or allow any
exceptions to these Rules and Regulations.
(h) Every parker is required to park and lock his own automobile, unless
valet parking is provided by Lessor. All responsibility for any loss or damage
to automobiles or any personal property therein is assumed by the parker.
(i) Loss or theft of parking identification devices from automobiles must be
reported to the garage manager immediately, and a lost or stolen report must be
filed by the parker at that time.
(j) The Parking Facilities are for the sole purpose of parking vehicles no
longer than full size, passenger automobiles. Washing, waxing, cleaning or
servicing of any vehicles by the parker or his agents is prohibited.
(k) Lessor (and its operator) reserves the right to refuse the issuance of
monthly stickers or other parking identification devices to any Lessee and/or
its employees who refuse to comply with the above Rules and Regulations and all
posted and unposted city, state, or federal ordinances, laws or agreements.
(l) Lessee agrees to acquaint all employees with these Rules and
Regulations.
25. In the event of a conflict between the Lease and these Rules and
Regulations, the Lease shall control.
EXHIBIT "B"
PAGE 2 OF 2
2
<PAGE> 22
WORK LETTER
Prior to the Commencement Date, unless requested by Lessee to do the following
work at a later time, Lessor shall re-carpet the entire carpeted area with
Lessor's standard floor covering, and paint all walls. The colors of both carpet
and paint shall be approved by Lessee.
All building systems shall be in good working order. All stained or damaged
ceiling tiles shall be replaced.
EXHIBIT "C"
<PAGE> 23
HAZARDOUS MATERIALS
Lessee shall be permitted to use and store on the Premises the following:
Normal Office Cleaning Supplies
If no hazardous materials are used, insert the word "none" and initial.
EXHIBIT "D"
<PAGE> 24
[DIAGRAM OMITTED]
EXHIBIT "E"
<PAGE> 1
CREDIT AGREEMENT
by and between
INTERACT COMMERCE CORPORATION, a Delaware corporation
and
IMPERIAL BANK, a California banking corporation
Dated as of
April 27, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS 1
ARTICLE 1 DEFINITION OF TERMS 1
1.1 Definitions 1
1.2 References 8
1.3 Accounting Terms 8
ARTICLE 2 THE RLC 9
2.1 Commitment 9
2.2 Revolving Line of Credit 9
2.3 RLC Payments 9
2.4 Excess Balance Payment 11
2.5 Conditions 11
2.6 Other RLC Advances by Lender 11
2.7 Assignment 11
2.8 Fees 12
ARTICLE 3 PAYMENTS, FEES AND EURODOLLAR PROVISIONS 12
3.1 Payments 12
3.2 [Intentionally Deleted.] 12
3.3 Maintenance of Accounts 13
3.4 Special Provisions for LIBOR Rate Advances 13
3.5 Prepayments 14
ARTICLE 4 SECURITY 15
4.1 Security 15
4.2 Security Documents 16
ARTICLE 5 CONDITIONS PRECEDENT 16
5.1 Initial or Any Subsequent Advance 16
5.2 No Event of Default 17
5.3 No Material Adverse Effect 18
5.4 Representations and Warranties 18
ARTICLE 6 REPRESENTATIONS AND WARRANTIES 18
6.1 Recitals 18
6.2 Organization and Good Standing 18
6.3 Authorization and Power 18
6.4 Security Documents 18
6.5 No Conflicts or Consents 18
6.6 No Litigation 19
6.7 Financial Condition 19
6.8 Taxes 19
6.9 [Intentionally Deleted.] 19
6.10 Advances 19
6.11 Enforceable Obligations 20
6.12 No Default 20
6.13 Significant Debt Agreements 20
6.14 ERISA 20
</TABLE>
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6.15 Compliance with Law 20
6.16 Solvent 20
6.17 Investment Company Act 20
6.18 Title 20
6.19 [Intentionally Deleted.] 20
6.20 Environmental Matters 21
6.21 Licenses, Tradenames 21
6.22 Senior Indebtedness 21
ARTICLE 7 AFFIRMATIVE COVENANTS 21
7.1 Financial Statements, Reports and Documents 21
7.2 Maintenance of Existence and Rights; Conduct of Business; Management 22
7.3 Operations and Properties 23
7.4 Authorizations and Approvals 23
7.5 Compliance with Law 23
7.6 Payment of Taxes and Other Indebtedness 23
7.7 Compliance with Significant Debt Agreements and Other Agreements 23
7.8 Compliance with Credit Documents 23
7.9 Notice of Default 23
7.10 Other Notices 23
7.11 Books and Records; Access; Audits 24
7.12 ERISA Compliance 24
7.13 Further Assurances 24
7.14 Insurance 24
7.15 Deposit Accounts 25
7.16 Invested Capital 25
7.17 Indebtedness 25
ARTICLE 8 NEGATIVE COVENANTS 25
8.1 No Debt 25
8.2 Liens 26
8.3 Existence 26
8.4 Amendments to Organizational Documents 26
8.5 Margin Stock 26
8.6 Distributions 26
8.7 Payments 26
8.8 Transfer Collateral 26
8.9 Merger; Sale of Assets 27
8.10 Financial Covenants 27
8.11 No Amendment to Subordinated Debt Credit Agreement 27
ARTICLE 9 EVENTS OF DEFAULT 27
9.1 Events of Default 27
9.2 Remedies Upon Event of Default 30
9.3 Performance by Lender 31
ARTICLE 10 MISCELLANEOUS 31
10.1 Modification 31
10.2 Waiver 31
10.3 Payment of Expenses 32
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10.4 Notices 32
10.5 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial 33
10.6 Reference Provision 33
10.7 Invalid Provisions 34
10.8 Binding Effect 35
10.9 Entirety 35
10.10 Headings 35
10.11 Survival of Representations, Etc. 35
10.12 No Third Party Beneficiary 35
10.13 Time 35
10.14 Schedules and Exhibits Incorporated 35
10.15 Counterparts 36
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EXHIBIT "A" Form of Advance Notice
EXHIBIT "B" Form of Compliance Certificate
EXHIBIT "C" Borrowing Base Certificate
EXHIBIT "D" Subordination Agreement
EXHIBIT "E" Waiver/Release of Lien Rights
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CREDIT AGREEMENT
BY THIS CREDIT AGREEMENT (together with any amendments or
modifications, the "Credit Agreement"), entered into as of this 27th day of
April, 2000 by and between INTERACT COMMERCE CORPORATION, a Delaware corporation
(the "Borrower"), and IMPERIAL BANK, a California banking corporation (the
"Lender"), in consideration of the mutual promises herein contained and for
other valuable consideration, the parties hereto do hereby agree as follows:
RECITALS
A. Borrower has applied to Lender for a revolving line of credit
facility (the "RLC") in the principal amount of FOUR MILLION AND NO/100 DOLLARS
($4,000,000.00) for the purpose of funding Borrower's general corporate needs.
B. As a condition for extending such financial accommodations,
Lender has required that Borrower enter into this Credit Agreement, establishing
the terms and conditions thereof.
ARTICLE 1
DEFINITION OF TERMS
1.1 Definitions. For the purposes of this Credit Agreement, unless
the context otherwise requires, the following terms shall have the respective
meanings assigned to them in this Article 1 or in the Section hereof referred to
below:
"ACT! Acquisition" means Borrower's acquisition of the ACT!
product line and certain related business from Symantec pursuant to that License
Agreement dated as of December 6, 1999, between Borrower and Symantec.
"Advance" means an RLC Advance.
"Affiliate" of any Person means any Person which, directly or
indirectly, controls or is controlled by such Person. For the purposes of this
definition, "control" (including, with correlative meanings, the term
"controlled by"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"Authorized Officer" means one or more officers of Borrower
duly authorized (and so certified to Lender by the corporate secretary of
Borrower pursuant to a certificate of authority and incumbency from time to time
satisfactory to Lender in the exercise of Lender's reasonable discretion),
acting alone, to request Advances under the provisions of this Credit Agreement
and execute and deliver documents, instruments, agreements, reports, statements
and certificates in connection herewith.
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"Banking Day" means a day of the year on which banks are not
required or authorized to close in Inglewood, California and Phoenix, Arizona.
"B of A" means BA Technology I, LLC, a Delaware limited
liability company.
"Borrower": See the Preamble hereto.
"Borrowing Base" means $4,000,000.00; provided, however, that
in the event Borrower's Liquidity is an amount less than $10,000,000.00,
Borrowing Base shall mean the lesser of (i) $4,000,000.00, or (ii) the Eligible
Cash Balance.
"Borrowing Base Certificate" means a certificate substantially
in the form attached hereto as Exhibit "C".
"Change in Control" means the occurrence or existence of the
following events or conditions without the prior written consent of Lender, if
different than the state of affairs as of the Closing Date:
(a) the acquisition by any Person or two or more Persons
acting in concert of Control of the Borrower.
"Closing Date" means the date of delivery of this Credit
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all property subject to the Security
Documents.
"Control" when used with respect to any Person means the
power, directly or indirectly, to direct the management policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Controlled Group" means, severally and collectively, the
members of the group controlling, controlled by and/or in common control of
Borrower, within the meaning of Section 4001(b) of ERISA.
"Credit Agreement": See the Preamble hereto.
"Credit Documents" means this Credit Agreement, the Note
(including any renewals, extensions and refundings thereof), the Security
Documents and any written agreements, certificates or documents (and with
respect to this Credit Agreement and such other written agreements and
documents, any amendments or supplements thereto or modifications thereof)
executed or delivered pursuant to the terms of this Credit Agreement.
"Default Rate" means at any time five percent (5%) per annum
over the then applicable interest rate.
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"Dollars" and the sign "$" mean lawful currency of the United
States of America.
"Eligible Cash Balance" means an amount equal to fifty-three
percent (53.0%) of Borrower's Liquidity less $2,500,000.00, measured on a
monthly basis.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, together with all final and permanent regulations issued
pursuant thereto. References herein to sections and subsections of ERISA are
deemed to refer to any successor or substitute provisions therefor.
"Event of Default": See Section 9.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Financial Covenants" means the financial covenants specified
in Section 8.10 hereof.
"GAAP" means those generally accepted accounting principles
and practices which are recognized as such by the American Institute of
Certified Public Accountants acting through its Accounting Principles Board or
by the Financial Accounting Standards Board or through other appropriate boards
or committees thereof and which are consistently applied for all periods after
the date hereof so as to properly reflect the financial condition, and the
results of operations and changes in the financial position, of Borrower,
including without limitation accounting rules promulgated pursuant to
Regulations SX and SK, except that any accounting principle or practice required
to be changed by the said Accounting Principles Board or Financial Accounting
Standards Board (or other appropriate board or committee of the said Boards) in
order to continue as a generally accepted accounting principle or practice may
be so changed.
"GE" means GE Capital Equity Investments, Inc., a Delaware
corporation.
"Governmental Authority" means any government (or any
political subdivision or jurisdiction thereof), court, bureau, agency or other
governmental authority having jurisdiction over Borrower or any of its business,
operations or properties.
"Indebtedness" of a Person means each of the following
(without duplication): (a) obligations of that Person to any other Person for
payment of borrowed money, (b) capital lease obligations, (c) notes and drafts
drawn or accepted by that Person payable to any other Person, whether or not
representing obligations for borrowed money (but without duplication of
indebtedness for borrowed money), (d) any obligation for the purchase price of
property the payment of which is deferred for more than one year or evidenced by
a note or equivalent instrument, (e) guarantees of Indebtedness of third
parties, and (f) a recourse or nonrecourse payment obligation of any other
Person that is secured by a Lien on any property of the first Person, whether or
not assumed by the first Person, up to the fair market value (from time to time)
of such property (absent manifest evidence to the contrary, the fair market
value of such property shall be the amount determined under GAAP for financial
reporting purposes).
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"Invested Capital Condition" means that, in the event
Borrower's Liquidity is an amount less than $15,000,000.00 at the end of each
quarter or other measurement period provided for herein, Borrower shall provide
evidence reasonably satisfactory to Lender on or before the end of the next
quarter or within ninety (90) days after such other measurement period,
whichever is later, that it has raised a minimum of $20,000,000.00 in invested
capital in the form of subordinated debt and/or equity. If such investment is
structured as subordinated debt, the terms and conditions relating to the
subordination of such subordinated debt shall be reasonably acceptable to
Lender, including the execution of a Subordination Agreement substantially in
the form attached hereof as Exhibit "D".
"Lender": See the Preamble hereto.
"LIBOR" means the London Interbank Offered Rate, determined as
provided herein, for the applicable LIBOR Interest Period to be specified by the
Borrower as provided herein. For each Advance under the LIBOR option, the LIBOR
rate will remain in effect through the end of the LIBOR Interest Period. If
prior to the due date for a LIBOR Rate Advance Borrower requests a continuation
of said LIBOR Rate Advance, Borrower's request shall comply with the request
procedure specified below and the LIBOR rate for the LIBOR Rate Advance shall be
re-determined for the next LIBOR Interest Period as provided below. LIBOR shall
mean with respect to any LIBOR Interest Period the rate equal to the arithmetic
mean (rounded upwards, if necessary, to the nearest one-sixteenth (1/16th) of
one percent (1%)) of:
(a) the offered rates per annum for deposits in U.S.
Dollars for a period equal to such LIBOR Interest Period which appears
at 11:00 a.m., London time, on the Reuters Screen LIBOR Page on the
Banking Day that is two (2) Banking Days before the first day of such
LIBOR Interest Period, in each case if at least four (4) such offered
rates appear on such page, or
(b) if clause (a) is not available, (x) the offered rate
per annum for deposits in U.S. Dollars for a period equal to such LIBOR
Interest Period for a LIBOR Rate Advance hereunder which appears as of
11:00 a.m., London time on the Telerate Monitor on Telerate Screen 3750
on the Banking Day which is two (2) Banking Days before the first day
of such LIBOR Interest Period; or (y) if clause (x) above is not
available, the arithmetic mean (rounded upwards, if necessary, to the
nearest one-sixteenth (1/16th) of one percent (1%)) of the interest
rates per annum offered by at least three (3) prime banks selected by
Lender at approximately 11:00 a.m., London time, on the Banking Day
which is two (2) Banking Days before such date for deposits in U.S.
Dollars to prime banks in the London interbank market, in each case for
a period equal to such LIBOR Interest Period for a LIBOR Rate Advance
hereunder in an amount equal to the amount to which the LIBOR applies.
"Reuters Screen LIBOR Page" as used herein means the display designated
as page LIBOR on the Reuters Monitor Money Rates Service or such other
page as may replace the LIBOR page on that service for the purpose of
displaying London interbank offered rates of major banks.
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"LIBOR Based Rate" means the rate per annum equal to the sum
of LIBOR and three hundred basis points (300 b.p.).
"LIBOR Interest Period" means, for each LIBOR Rate Advance,
the period commencing on the date of such LIBOR Rate Advance and ending on the
last day of the period selected by Borrower pursuant to the provisions herein
and, thereafter, each subsequent period commencing on the last day of the
immediately preceding LIBOR Interest Period and ending on the last day of the
period selected by Borrower pursuant to the provisions herein. The duration of
each LIBOR Interest Period shall be one, two, three or six months, as selected
by Borrower (A), for a new Advance, in the request for a LIBOR Rate Advance or
(B), for an outstanding Advance, in the request for a LIBOR Rate Advance to
continue bearing interest at the LIBOR Based Rate or (C), for an outstanding
Variable Rate Advance, in the request to convert to a LIBOR Rate Advance;
provided, however, that:
(i) LIBOR Interest Periods commencing on the
same date shall be of the same duration;
(ii) Whenever the last day of any LIBOR Interest
Period would otherwise occur on a day other than a Banking
Day, the last day of such LIBOR Interest Period shall be
extended to occur on the next succeeding Banking Day, provided
that if such extension would cause the last day of such LIBOR
Interest Period to occur in the next following calendar month,
the last day of such LIBOR Interest Period shall occur on the
next preceding Banking Day; and
(iii) No LIBOR Interest Period with respect to any
Advance shall extend beyond the applicable Maturity Date.
"LIBOR Rate Advance" means an Advance designated by Borrower,
that bears, or is requested to bear, interest at a LIBOR Based Rate.
"Lien" means any lien, mortgage, security interest, tax lien,
pledge, encumbrance, conditional sale or title retention arrangement, or any
other interest in property designed to secure the repayment of Indebtedness
whether arising by agreement or under any statute or law, or otherwise.
"Liquidity" means available unrestricted cash or cash
equivalents.
"Loan" or "Loans" means the RLC.
"Material Adverse Effect" means any circumstance or event
which (i) has any material adverse effect upon the validity or enforceability of
any Credit Document, (ii) materially impairs the ability of Borrower to fulfill
its obligations under the Credit Documents, or (iii)
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causes an Event of Default or any event which, with notice or lapse of time or
both, would become an Event of Default.
"Note" means that Revolving Promissory Note of even date
herewith in the amount of the RLC, executed by Borrower and delivered pursuant
to the terms of this Credit Agreement, together with any renewals, extensions,
modifications or replacements thereof.
"Obligation" means all present and future indebtedness,
obligations and liabilities of Borrower to Lender, and all renewals and
extensions thereof, or any part thereof, arising pursuant to this Credit
Agreement or represented by the Note, including without limitation the Loan and
all interest accruing thereon, and attorneys' fees incurred in the enforcement
or collection thereof, regardless of whether such indebtedness, obligations and
liabilities are direct, indirect, fixed, contingent, joint, several or joint and
several; together with all indebtedness, obligations and liabilities of Borrower
evidenced or arising pursuant to any of the other Credit Documents, and all
renewals and extensions thereof, or part thereof.
"Payment Date" with respect to a Loan means the tenth day of
each month, commencing the tenth day of the first month after the first Advance
applicable to such Loan shall have been made, provided that if any such day is
not a Banking Day, then such Payment Date shall be the next successive Banking
Day.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or substantially all of the Pension Benefit Guaranty
Corporation's functions under ERISA.
"Permitted Liens" means:
(a) Liens in Lender's favor.
(b) Liens for taxes, assessments and governmental charges
or levies imposed upon Borrower or upon such Borrower's income or
profits or property, if the same are not yet due and payable or if the
same are being contested in good faith and as to which adequate cash
reserves have been provided to the reasonable satisfaction of Lender.
(c) Liens securing the royalty payments due Symantec as a
result of Borrower's acquisition of ACT!
(d) Liens resulting from purchase money financing as to
the personal property so financed and any sales proceeds.
(e) Liens resulting from the Master Lease dated June 7,
1996, between Borrower, as lessee, and Comdisco, Inc., as lessor, not
to exceed $500,000.00.
(f) Liens resulting from lease purchase agreements in an
aggregate amount less than $10,000,000.00.
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(g) Liens created with the permission of Lender, which
permission shall not be unreasonably withheld.
"Person" includes an individual, a corporation, a joint
venture, a partnership, a trust, a limited liability Borrower, an unincorporated
organization or a government or any agency or political subdivision thereof.
"Plan" means an employee defined benefit plan or other plan
maintained by Borrower for employees of Borrower and covered by Title IV of
ERISA, or subject to the minimum funding standards under Section 412 of the
Code.
"Prime Rate" means the interest rate per annum publicly
announced by Lender, or its successors, as its "prime rate" as in effect from
time to time. Borrower acknowledges that the Prime Rate is not necessarily the
best or lowest rate offered by Lender and Lender may lend to its customers at
rates that are at, above or below its Prime Rate.
"Quarterly End Date" means each March 31, June 30, September
30 and December 31.
"Regulation U" means Regulation U promulgated by the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 221, or any other
regulation hereafter promulgated by said Board to replace the prior Regulation U
and having substantially the same function.
"Regulatory Change" means any change effective after the date
of this Agreement in United States federal, state, or foreign law, regulations,
or rules or the adoption or making after such date of any interpretation,
directive, or request applying to a class of banks including Lender, of or under
any United States federal, state, or foreign law, regulation or rule (whether or
not having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
"Reportable Event" means any "reportable event" as described
in Section 4043(b) of ERISA with respect to which the thirty (30) day notice
requirement has not been waived by the PBGC.
"RLC" means that revolving line of credit made available by
Lender to Borrower pursuant to Article 2 hereof.
"RLC Advance" means a disbursement of the proceeds of the RLC.
"RLC Commitment" means Four Million And No/100 Dollars
($4,000,000.00).
"RLC Fee": See Section 2.8 hereof.
"RLC Maturity Date" means April 26, 2001.
"Security Agreement": See Section 4.1 hereof.
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"Security Documents": See Section 4.2 hereof.
"Significant Debt Agreement" means all documents, instruments
and agreements executed by Borrower, evidencing, securing or ensuring any
Indebtedness of Borrower or any guaranty in excess of $100,000.00 in outstanding
principal (or principal equivalent) amount.
"Subordinated Debt" means Indebtedness of Borrower
subordinated to the payment of the Obligation pursuant to written agreements
acceptable to Lender.
"Subordination Agreement" means a Subordination Agreement
substantially in form attached hereto as Exhibit "D".
"Subsidiary" means any corporation of which more than 50% of
the outstanding shares of capital stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of such
corporation, irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency, is at the time directly or indirectly owned by the Borrower, by
the Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries.
"Symantec" means Symantec Corporation, a Delaware corporation.
"Variable Rate" means the rate per annum equal to (i) the
Prime Rate per annum as in effect from time to time, plus (ii) one-half of one
percent (0.50%). The Variable Rate will change on each day that the "Prime Rate"
changes.
"Variable Rate Advance" means an Advance designated by
Borrower, that bears, or is requested to bear, interest at the Variable Rate.
1.2 References. Capitalized terms shall be equally applicable to
both the singular and the plural forms of the terms therein defined. References
to "Credit Agreement," "this Agreement," "herein," "hereof," "hereunder," or
other like words mean this Credit Agreement as amended, supplemented, restated
or otherwise modified and in effect from time to time.
1.3 Accounting Terms. Except as expressly provided to the contrary
herein, all accounting terms shall be interpreted and all accounting
determinations shall be made in accordance with GAAP, except as otherwise
specifically provided for herein. To the extent any change in GAAP affects any
computation or determination required to be made pursuant to this Credit
Agreement, such computation or determination shall be made as if such change in
GAAP had not occurred unless Borrower and Lender agree in writing on an
adjustment to such computation or determination to account for such change in
GAAP.
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ARTICLE 2
THE RLC
2.1 Commitment. Subject to the conditions herein set forth, Lender
agrees to make the RLC available to or for the benefit of Borrower, and Borrower
agrees to draw upon the RLC, in the manner and upon the terms and conditions
herein expressed, amounts that shall not exceed the Borrowing Base.
2.2 Revolving Line of Credit.
(a) Subject to the terms and conditions set forth in this
Credit Agreement, the RLC shall be a revolving line of credit, against
which RLC Advances may be made to Borrower, repaid by Borrower and new
RLC Advances made to Borrower, as Borrower may request, provided that
(i) no RLC Advance shall be made if an Event of Default shall be
continuing, (ii) no RLC Advance shall be made that would cause the
outstanding principal balance of the RLC to exceed the lesser of the
RLC Commitment or the Borrowing Base, and (iii) no RLC Advance shall be
made on or after the RLC Maturity Date.
(b) The RLC shall be evidenced by the Note.
2.3 RLC Payments. The RLC shall bear interest and be payable to
Lender upon the following terms and conditions:
(a) Interest shall accrue:
(i) On the unpaid principal of an RLC Advance at
the Variable Rate except to the extent that an RLC Advance
bears interest at the LIBOR Based Rate.
(ii) On the unpaid principal of an RLC Advance at
the LIBOR Based Rate to the extent Borrower shall elect and to
the extent not otherwise provided herein.
(b) All interest shall be computed on the basis of a
360-day year and accrue on a daily basis for the actual number of days
elapsed. All accrued and unpaid interest through the end of the
preceding month shall be due and payable on each Payment Date.
(c) The entire unpaid principal balance, all accrued and
unpaid interest, and all other amounts payable under the Note shall be
due and payable in full on the RLC Maturity Date.
(d) Each request for an RLC Advance shall be
substantially in the form attached hereto as Exhibit "A" from an
Authorized Officer and shall, in
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addition to complying with the other requirements in this Agreement,
(i) specify the date and amount of the requested RLC Advance, (ii)
specify whether the RLC Advance shall be an RLC Advance that bears
interest at the Variable Rate or shall be an RLC Advance that bears
interest at the LIBOR Based Rate, (iii) if the RLC Advance is to bear
interest at the LIBOR Based Rate, be in a minimum amount of $250,000.00
with integral multiples of $50,000.00 in excess thereof, and (iv) if
the RLC Advance is to bear interest at the LIBOR Based Rate, (A)
specify the LIBOR Interest Period, and (B) be delivered to Lender
before 9:00 a.m. (Phoenix, Arizona local time) at least three (3)
Banking Days prior to the date of the requested RLC Advance. Any
request for an RLC Advance not complying with the foregoing
requirements for an RLC Advance bearing interest at the LIBOR Based
Rate shall bear interest at the Variable Rate; provided that in the
event such non-compliance is due to Borrower's failure to specify the
required information, Lender agrees to notify Borrower of such failure
and to provide Borrower the opportunity to provide such information
prior to directing that the RLC Advance bear interest at the Variable
Rate.
(e) If Borrower desires that a LIBOR Rate Advance
continue to bear interest at the LIBOR Based Rate after the end of an
existing LIBOR Interest Period, Borrower shall deliver to Lender not
later than 9:00 a.m. (Phoenix, Arizona local time) at least three (3)
Banking Days prior to the end of the existing LIBOR Interest Period; a
notice making such election and specifying the new LIBOR Interest
Period. If Borrower does not deliver such notice within such time, then
after the existing LIBOR Interest Period the LIBOR Rate Advance shall
become a Variable Rate Advance and shall bear interest at the Variable
Rate.
(f) Borrower may upon written notice to and received by
Lender not later than 9:00 a.m. (Phoenix, Arizona local time) (i) on
the third Banking Day, in the case of any conversion of a Variable Rate
Advance into a LIBOR Rate Advance and (ii) on the first Banking Day in
the case of any conversion of a LIBOR Rate Advance into a Variable Rate
Advance, prior to the date of the proposed conversion, convert any RLC
Advance of one type into an RLC Advance of the other type; provided,
however, that any conversion of a LIBOR Rate Advance (A) shall only be
made on the last day of the applicable LIBOR Interest Period except as
otherwise provided herein, and (B) shall be made only as to an RLC
Advance in a minimum amount of $250,000.00 with integral multiples of
$50,000.00 in excess thereof. Each such notice of a conversion shall
specify the date of such conversion and the RLC Advance(s) to be
converted.
(g) Each request for an RLC Advance as well as each
election by the Borrower that an LIBOR Rate Advance continue to bear
interest at the LIBOR Based Rate after the end of an existing LIBOR
Interest Period and each conversion request shall be irrevocable and
binding on Borrower once the request is received by Lender. Borrower
shall indemnify Lender against any cost, loss or expense incurred by
Lender as a result of Borrower's failure to fulfill, on or before the
date specified for an RLC Advance in any request for an RLC Advance,
the
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conditions to such RLC Advance set forth herein, including any cost,
loss or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by Lender to fund such RLC Advance
when such RLC Advance, as a result of such failure, is not made on the
date so specified.
(h) [Intentionally Deleted.]
(i) If any payment of interest and/or principal is not
received by Lender within ten (10) days of when such payment is due,
then in addition to the remedies conferred upon Lender under the Loan
Documents, a late charge of five percent (5%) of the amount of the
installment due and unpaid will be added to the delinquent amount to
compensate Lender for the expense of handling the delinquency,
regardless of any notice and cure period.
(j) Upon the occurrence of an Event of Default and after
maturity, including maturity upon acceleration, the unpaid principal
balance, all accrued and unpaid interest and all other amounts payable
hereunder shall bear interest at the Default Rate.
2.4 Excess Balance Payment. There shall be due and payable from
Borrower to Lender, and Borrower shall repay to Lender, within five (5) days of
written demand from Lender, from time to time, any amount by which the
outstanding principal balance of the RLC exceeds the Borrowing Base.
2.5 Conditions. Lender shall have no obligation to make any RLC
Advance unless and until all of the conditions and requirements of this Credit
Agreement are fully satisfied. However, Lender in its sole and absolute
discretion may elect to make one or more RLC Advances prior to full satisfaction
of one or more such conditions and/or requirements. Notwithstanding that such an
RLC Advance or RLC Advances are made, such unsatisfied conditions and/or
requirements shall not be waived or released thereby. Borrower shall be and
continue to be obligated to fully satisfy such conditions and requirements, and
Lender, at any time, in Lender's sole and absolute discretion, may stop making
RLC Advances until all conditions and requirements are fully satisfied.
2.6 Other RLC Advances by Lender. Lender, after giving fifteen
(15) days prior written notice to Borrower to allow for corrective action, from
time to time, may make RLC Advances in any amount in payment of (i) insurance
premiums, taxes, assessments, liens or encumbrances existing against property
encumbered by the Security Documents, (ii) interest accrued and payable upon the
RLC, (iii) any charges and expenses that are the obligation of Borrower under
this Credit Agreement or any Security Document, and (iv) any charges or matters
necessary to preserve the property encumbered by the Security Documents or to
cure any still existing Event of Default.
2.7 Assignment. Borrower shall have no right to the proceeds of
the Loan other than to have the same disbursed by Lender in accordance with the
disbursement provisions contained in this Credit Agreement. Any assignment or
transfer, voluntary or involuntary, of this Credit
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Agreement or any right hereunder shall not be binding upon or in any way affect
Lender without its written consent.
2.8 Fees. In connection with the Loan, Borrower agrees to pay to
Lender on the Closing Date a non-refundable fee in the amount of $17,500.00 (the
"RLC Fee").
ARTICLE 3
PAYMENTS, FEES AND EURODOLLAR PROVISIONS
3.1 Payments.
(a) All payments and prepayments by the Borrower of
principal of and interest on the Note and all fees, expenses and any
other Obligation payable to Lender in connection with the Loan shall be
nonrefundable and made in Dollars or immediately available funds to
Lender not later than 2:00 p.m., (Phoenix, Arizona local time) on the
dates called for under this Agreement, at the office of Lender in
Inglewood, California. Funds received after such hour shall be deemed
to have been received by Lender on the next Banking Day.
(b) Unless otherwise required by applicable law, payments
will be applied first to accrued, unpaid interest, then to principal,
and any remaining amount to any unpaid collection costs, late charges
and other charges; provided, however, upon delinquency or other
default, Lender reserve the right to apply payments among principal,
interest, late charges, collection costs and other charges at its
discretion.
(c) [Intentionally Deleted.]
(d) Whenever any payment to be made hereunder shall be
stated to be due on a day which is not a Banking Day, such payment
shall be made on the next succeeding Banking Day, and such extension of
time shall in such case be included in the computation of interest,
commission or fee, as the case may be.
(e) Borrower authorizes Lender to collect all interest,
fees, costs, and/or expenses due under this Agreement by charging
Borrower's demand deposit account maintained by Borrower with Lender as
designated on the Automatic Debit Authorization of even date herewith
executed by Borrower, for the full amount thereof. Should there be
insufficient funds in any such demand deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately
due and payable by Borrower.
3.2 [Intentionally Deleted.]
3.3 Maintenance of Accounts. Lender shall maintain, in accordance
with its usual practice, an account or accounts evidencing the indebtedness of
the Borrower and the amounts
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payable and paid from time to time hereunder. In any legal action or proceeding
in respect of this Agreement, the entries made in the ordinary course of
business in such account or accounts shall be evidence of the existence and
amounts of the obligations of the Borrower therein recorded. The failure to
record any such amount shall not, however, limit or otherwise affect the
obligations of the Borrower hereunder to repay all amounts owed hereunder,
together with all interest accrued thereon as provided in the Note.
3.4 Special Provisions for LIBOR Rate Advances.
(a) Funding: Notwithstanding any provision of the Credit
Documents to the contrary, Lender shall be entitled to fund and
maintain its funding of all or any part of any Advance in any manner it
sees fit; provided, however, that for the purposes of the Note, all
determinations thereunder shall be made as if Lender had actually
funded and maintained each Advance bearing interest at the LIBOR Based
Rate during the LIBOR Interest Period therefor through the purchase of
deposits having a maturity corresponding to the last day of the LIBOR
Interest Period and bearing an interest rate equal to the LIBOR Based
Rate for such LIBOR Interest Period.
(b) Inadequacy of Eurodollar Pricing: If, due to any
Regulatory Change, there shall be any increase in the cost to Lender of
agreeing to make or making, funding, or maintaining Advances bearing
interest at the LIBOR Based Rate (including, without limitation, any
increase in any applicable reserve requirement), then the Borrower
shall from time to time, upon written demand by Lender, pay to Lender
such amounts as Lender may reasonably determine to be necessary to
compensate Lender for any additional costs that Lender reasonably
determines are attributable to such Regulatory Change. Lender will
notify the Borrower in writing of any Regulatory Change that will
entitle Lender to compensation, detailing such compensation, pursuant
to this paragraph as promptly as practicable, but in any event within
ninety (90) days after Lender obtains knowledge thereof; provided,
however, that if Lender fails to give such notice within ninety (90)
days after it obtains knowledge of such a Regulatory Change, Lender
shall, with respect to compensation payable in respect of any costs
resulting from such Regulatory Change, only be entitled to payment for
costs incurred from and after the date that Lender does give such
notice. Lender will furnish to the Borrower a certificate setting forth
in reasonable detail the basis for the amount of each request by Lender
for compensation under this paragraph. Determinations by Lender of the
amounts required to compensate Lender shall be conclusive, absent
manifest error. Lender shall be entitled to compensation in connection
with any Regulatory Change only for costs actually incurred by Lender.
(c) Illegality: Notwithstanding any provision of the
Credit Documents, if Lender shall notify the Borrower that as a result
of a Regulatory Change it is unlawful for Lender to make Advances at
the LIBOR Based Rate, or to fund or maintain Advances bearing interest
at the LIBOR Based Rate, (i) the obligations
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of Lender to make Advances at the LIBOR Based Rate and to convert
Variable Rate Advances to the LIBOR Based Rate shall be suspended until
Lender shall notify the Borrower that the circumstances causing such
suspension no longer exist, and (ii) in the event such Regulatory
Change makes the maintenance of Advances at the LIBOR Based Rate
unlawful, the Borrower shall forthwith prepay in full all Advances
bearing interest at the LIBOR Based Rate then outstanding, together
with interest accrued thereon and all amounts in connection with such
prepayment specified herein, unless the Borrower, within five (5)
Banking Days of written notice from Lender, converts all Advances
bearing interest at the LIBOR Based Rate then outstanding into Advances
bearing interest at the Variable Rate pursuant to the conversion
procedures herein and pays all amounts in connection with such
prepayments or conversions specified herein.
(d) Market Disruption: Notwithstanding any other
provision of the Credit Documents, if prior to the commencement of any
LIBOR Interest Period, Lender shall determine (i) that United States
dollar deposits in the amount of any Advance bearing interest at the
LIBOR Based Rate to be outstanding during such LIBOR Interest Period
are not readily available to Lender in the London interbank market, or
(ii) by reason of circumstances affecting the London interbank market,
adequate and reasonable means do not exist for ascertaining the LIBOR
Based Rate for such LIBOR Interest Period in the manner prescribed in
the definition of "LIBOR Based Rate," then Lender shall promptly give
written notice thereof to the Borrower and the obligation of Lender to
create, continue, or effect by conversion any Advance bearing interest
at the LIBOR Based Rate in such amount and for such LIBOR Interest
Period shall terminate until United States dollar deposits in such
amount and for the LIBOR Interest Period shall again be readily
available in the London interbank market and adequate and reasonable
means exist for ascertaining the LIBOR Based Rate.
3.5 Prepayments.
(a) Borrower may, upon at least two (2) Banking Days'
notice in the case of LIBOR Rate Advances and one (1) Banking Day's
notice in the case of Variable Rate Advances to Lender stating the
proposed date and aggregate principal amount of the prepayment, and if
such notice is given Borrower shall, prepay the outstanding principal
balance of the Loans in whole or in part at any time prior to the
Maturity Date as stated in such notice by Borrower, subject to payment
of all amounts specified hereinbelow with respect to any LIBOR Rate
Advance.
(b) If for any reason (including voluntary prepayment,
voluntary conversion of a LIBOR Rate Advance into a Variable Rate
Advance, or prepayment due to acceleration, but excluding any mandatory
prepayment or mandatory conversion such as pursuant to Section 3.4(c)),
Lender receives all or part of the principal amount of a LIBOR Rate
Advance prior to the last Banking Day of the LIBOR Interest Period for
such Advance, the Borrower shall
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immediately on demand by Lender, pay the "LIBOR Breakage Fees," defined
as the amount (if any) by which (i) the additional interest which would
have been payable on the amount so received had it not been received
until the last day of such LIBOR Interest Period exceeds (ii) the
interest which would have been recoverable by Lender (without regard to
whether Lender actually so invest said funds) by placing the amount so
received on deposit in the certificate of deposit markets or the
offshore currency interbank markets or United States Treasury
investment products, as the case may be for a period starting on the
date on which it was so received and ending on the last day of such
LIBOR Interest Period at the interest rate determined by Lender in its
reasonable discretion. Lender's determination as to such amount shall
be conclusive and final, absent manifest error.
(c) The Borrower shall pay to Lender, upon demand, such
other amount or amounts as shall be sufficient to compensate it for any
loss, costs or expense ("LIBOR Prepayment Charges") actually incurred
by it as a result of any prepayment by the Borrower (including
voluntary prepayment, voluntary conversion of a LIBOR Rate Advance into
a Variable Rate Advance, or prepayment due to acceleration, but
excluding any mandatory prepayment or mandatory conversion such as
pursuant to Section 3.4(c)) of all or part of the principal amount of a
LIBOR Rate Advance prior to the last Banking Day of the LIBOR Interest
Period for such Advance (including without limitation, any failure by
the Borrower to borrow a LIBOR Rate Advance on the loan date for such
borrowing specified in the relevant notice of borrowing hereunder).
Such LIBOR Prepayment Charges shall include, without limitation, any
interest or fees payable by Lender to lenders of funds obtained by them
in order to make or maintain their loans based on the London interbank
Eurodollar market. Lender's determination as to such LIBOR Prepayment
Charges shall be conclusive and final, absent manifest error.
(d) Lender agrees that it shall make a best effort to
minimize any such LIBOR Breakage Fees or any such LIBOR Prepayment
Charges.
ARTICLE 4
SECURITY
4.1 Security. So long as any Loan is outstanding, Borrower shall
cause such Loan and Borrower's obligations under this Credit Agreement to be
secured at all times by a valid and effective security agreement (the "Security
Agreement"), duly executed and delivered by or on behalf of Borrower, granting
Lender a valid and enforceable security interest in all of its personal property
as described therein, subject to no prior Liens except for Permitted Liens. Upon
repayment and performance in full by Borrower of the Note and the Credit
Documents, the security interest of Lender shall terminate and all rights in the
Collateral shall revert to Borrower. Upon repayment and performance by Borrower,
Lender shall execute and deliver to Borrower
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such documents as Borrower shall reasonably request to evidence the termination
of Lender's security interest in the Collateral.
4.2 Security Documents. All of the documents required by this
Article 4 shall be in form satisfactory to Lender and Lender's counsel, and,
together with any financing statements for filing and/or recording, and any
other items required by Lender to fully perfect and effectuate the liens and
security interests of Lender contemplated by the Security Agreement, and this
Credit Agreement, may heretofore or hereinafter be referred to as the "Security
Documents."
ARTICLE 5
CONDITIONS PRECEDENT
The obligation of Lender to make the any Loan and to make each and any
Advance hereunder is subject to the full prior satisfaction at each such time of
each of the following conditions precedent:
5.1 Initial or Any Subsequent Advance. Prior to its making the
initial Advance or any subsequent Advance, Lender shall have received the
following each in form and substance satisfactory to Lender:
(a) This Credit Agreement. This Credit Agreement, duly
executed and delivered to Lender by Borrower.
(b) The Note. The Note, duly executed, drawn to the order
of Lender and otherwise as provided in Article 2 hereof.
(c) Organizational Documents. A copy of the current
Certificate of Incorporation (or other charter documents, however named) of
Borrower, including all amendments thereto, certified as current and complete by
the appropriate authority of the state of said corporation's incorporation,
together with evidence of said corporation's good standing in said corporation's
state of incorporation and in every other state in which it is doing business or
the conduct of said corporation's business requires such standing for the
enforcement of material contracts.
(d) Secretary Certificate. A certificate of the corporate
secretary of Borrower, signed by the duly appointed secretary thereof and issued
as of the Closing Date, certifying that (i) attached thereto is a true and
complete copy of the corporate by-laws of Borrower in effect on the date of
passage of the corporate resolutions described immediately below and at all
subsequent times to and including the date of the certificate, (ii) attached
thereto is a true and complete copy of the resolutions adopted by the Board of
Directors of Borrower authorizing the Loan, the execution, delivery, and
performance of this Credit Agreement, the Note, the Credit Documents, and all
advances of credit hereunder, and that such resolutions have not been modified,
rescinded, or amended and are in full force
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<PAGE> 22
and effect, (iii) no change has been made to Borrower's charter documents other
than as reflected in the certified copies submitted in connection with the
delivery of this Credit Agreement or as approved in writing by Lender, and (iv)
set forth therein and appropriately identified are the names, current official
titles, and signatures of the officers of Borrower authorized to sign this
Credit Agreement and other documents to be delivered hereunder and/or to act as
Authorized Officers hereunder.
(e) Security Agreement. The Security Agreement, duly
executed and delivered to Lender by Borrower.
(f) Lender's Fees and Costs. Payment of the RLC Fee plus
Lender's other fees and costs as provided herein (including, without
limitation reasonable attorneys' fees and costs pursuant to Section
10.3 and the costs associated with the annual audit conducted pursuant
to Section 7.11 herein).
(g) Compliance Certificate. A Compliance Certificate
substantially in the form of Exhibit "B" attached hereto, indicating
that Borrower is in compliance with the Financial Covenants as of March
31, 2000.
(h) Financing Statements. Financing statements, duly
executed and delivered to Lender by Borrower.
(i) Subordination Agreements. A subordination agreement
acceptable to Lender, duly executed by BofA and GE.
(j) Landlord Waiver. A Lien waiver substantially in the
form of Exhibit "E" attached hereto, executed by the landlord of the
leased premises where Borrower's principal place of business is
located.
(k) Borrower's Financial Statements. Borrower's 1999
fiscal year end financial statements audited by a certified public
accountant reasonably acceptable to Lender. For the purposes of this
paragraph, Ernst & Young LLP shall be deemed acceptable.
(l) Additional Information. Such other information and
documents as may reasonably be required by Lender or Lender's counsel.
5.2 No Event of Default. No Event of Default known to Borrower
shall have occurred and be continuing, or result from Lender's making of any
Loan.
5.3 No Material Adverse Effect. Since the date of the most recent
financial statements provided to Lender by Borrower, no change shall have
occurred in the business or financial condition of Borrower that could have a
Material Adverse Effect.
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5.4 Representations and Warranties. The representations and warranties
contained in Article 6 hereof shall be true and correct in all material
respects, with the same force and effect as though made on and as of the Closing
Date (other than those of such representations which by their express terms
speak to a date prior to that date, which representations shall, in all material
respects, be true and correct as of such respective date).
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loans, Borrower represents and warrants to
Lender that:
6.1 Recitals. The recitals and statements of intent appearing in this
Credit Agreement are true and correct.
6.2 Organization and Good Standing. It is duly organized, validly
existing and in good standing in all states and/or countries in which the nature
of its business and property makes such qualifications necessary or appropriate.
It has the legal power and authority to own its properties and assets and to
transact the business in which it is engaged and is or will be qualified in
those states and/or countries wherein the nature of its proposed business and
property will make such qualifications necessary or appropriate in the future.
6.3 Authorization and Power. It has the corporate power and requisite
corporate authority to execute, deliver and perform this Credit Agreement, the
Note and the other Credit Documents to be executed by it; it is duly authorized
to, and has taken all action, corporate or otherwise, necessary to authorize it
to, execute, deliver and perform this Credit Agreement, the Note and such other
Credit Documents and is and will continue to be duly authorized to perform this
Credit Agreement, the Note and such other Credit Documents.
6.4 Security Documents. The liens, security interests and assignments
created by the Security Documents will, when granted, be valid, effective and
enforceable liens, security interests and assignments, except to the extent (if
any) otherwise agreed in writing by Lender.
6.5 No Conflicts or Consents. Neither the execution and delivery of
this Credit Agreement, the Note or the other Credit Documents to which it is a
party, nor the consummation of any of the transactions herein or therein
contemplated, nor compliance with the terms and provisions hereof or with the
terms and provisions thereof, (a) will materially contravene or conflict with:
(i) any provision of law, statute or regulation to which it is subject, (ii) any
judgment, license, order or permit applicable to it, (iii) any indenture, credit
agreement, mortgage, deed of trust, or other agreement or instrument to which it
is a party or by which it may be bound, or to which it may be subject, or (b)
will violate any provision of its organizational documents. No consent,
approval, authorization or order of any court or Governmental Authority or other
Person is required in connection with the execution and delivery by it of the
Credit Documents or to consummate the transactions contemplated hereby or
thereby, or if required, such consent, approval, authorization or order shall
have been obtained.
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6.6 No Litigation. Except for those matters that have been previously
disclosed to Lender in writing, there are no actions, suits or legal, equitable,
arbitration or administrative proceedings pending, or to its actual knowledge
overtly threatened, against Borrower that would, if adversely determined, have a
Material Adverse Effect.
6.7 Financial Condition. It has delivered to Lender copies of the
Borrower's financial statements for the quarter ending March 31, 2000. Such
financial statements, in all material respects, fairly and accurately present
the financial position of Borrower as of such date, have been prepared in
accordance with GAAP and neither contain any untrue statement of a material fact
nor fail to state a material fact required in order to make such financial
statements not misleading. Since the date thereof, Borrower has not discovered
any obligations, liabilities or indebtedness (including contingent and indirect
liabilities and obligations or unusual forward or long-term commitments) which
in the aggregate are material and adverse to the financial position or business
of Borrower that should have been but were not reflected in such financial
statements. No changes having a Material Adverse Effect have occurred in the
financial condition or business of Borrower since the date of such financial
statements.
6.8 Taxes. It has filed or caused to be filed all returns and reports
which are required to be filed by any jurisdiction, and has paid or made
provision for the payment of all taxes, assessments, fees or other governmental
charges imposed upon its properties, income or franchises, as to which the
failure to file or pay would have a Material Adverse Effect, except such
assessments or taxes, if any, which are being contested in good faith by
appropriate proceedings.
6.9 [Intentionally Deleted.]
6.10 Advances. Each request for an Advance or for the extension of any
financial accommodation by Lender whatsoever shall constitute an affirmation
that the representations and warranties contained herein are, true and correct
as of the time of such request. All representations and warranties made herein
shall survive the execution of this Credit Agreement, all advances of proceeds
of the Loans and the execution and delivery of all other documents and
instruments in connection with the Loans and/or this Credit Agreement, so long
as Lender has any commitment to lend hereunder and until the Loans have been
paid in full and all of Borrower's obligations under this Credit Agreement, the
Note and all Security Documents have been fully discharged. Any investigation at
any time made by or on behalf of Lender shall not diminish Lender's right to
rely on the representations and warranties herein.
6.11 Enforceable Obligations. This Credit Agreement, the Note and the
other Credit Documents are the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, except
as limited by bankruptcy, insolvency or other laws or equitable principles of
general application relating to the enforcement of creditors' rights.
6.12 No Default. No event or condition has occurred and is continuing
that constitutes an Event of Default.
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<PAGE> 25
6.13 Significant Debt Agreements. It is not in default in any material
respect under any Significant Debt Agreement.
6.14 ERISA. (a) No Reportable Event has occurred and is continuing with
respect to any Plan; (b) PBGC has not instituted proceedings to terminate any
Plan; (c) neither the Borrower, any member of the Controlled Group, nor any
duly-appointed administrator of a Plan (i) has incurred any liability to PBGC
with respect to any Plan other than for premiums not yet due or payable or (ii)
has instituted or intends to institute proceedings to terminate any Plan under
Section 4041 or 4041A of ERISA; and (d) each Plan of Borrower has been
maintained and funded in all material respects in accordance with its terms and
in all material respects in accordance with all provisions of ERISA applicable
thereto. Neither the Borrower nor any of its Subsidiaries participates in, or is
required to make contributions to, any Multi-employer Plan (as that term is
defined in Section 3(37) of ERISA).
6.15 Compliance with Law. It is in substantial compliance with all
laws, rules, regulations, orders, writs, injunctions and decrees that are
applicable to it, or its properties, noncompliance with which would have a
Material Adverse Effect.
6.16 Solvent. It (both before and after giving effect to the Loans
contemplated hereby) is solvent, has assets having a fair value in excess of the
amount required to pay its probable liabilities on its existing debts as they
become absolute and matured, and has, and will have, access to adequate capital
for the conduct of its business and the ability to pay its debts from time to
time incurred in connection therewith as such debts mature.
6.17 Investment Company Act. It is not, and is not directly or
indirectly controlled by, or acting on behalf of, any person which is, an
"Investment Company" within the meaning of the Investment Company Act of 1940,
as amended.
6.18 Title. It has good and marketable title to the Collateral.
6.19 [Intentionally Deleted.]
6.20 Environmental Matters. Except as previously disclosed to Lender in
writing, it, to the best of its knowledge after due investigation, is in
compliance in all material respects with all applicable environmental, health
and safety statutes and regulations and Borrower does not have any material
contingent liability in connection with any improper treatment, disposal or
release into the environment of any hazardous or toxic waste or substance.
6.21 Licenses, Tradenames. It, as of the date hereof, owns or possesses
the right to use all necessary trademarks, tradenames, copyrights, patents,
patent rights, and licenses to conduct its business as now operated, without any
known conflict with valid trademarks, tradenames, copyright patents and license
rights of others.
6.22 Senior Indebtedness. For purposes of that Senior Subordinated Note
and Warrant Purchase Agreement dated as of December 31, 1999, among Borrower, B
of A and GE (the
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"Subordinated Debt Credit Agreement"), the Loan and the other obligations of
Borrower under this Credit Agreement is designated as "Senior Indebtedness."
ARTICLE 7
AFFIRMATIVE COVENANTS
Until payment in full of the Loan and the complete performance of the
Obligation, Borrower agrees that:
7.1 Financial Statements, Reports and Documents. It shall deliver, or
cause to be delivered, to Lender each of the following:
(a) Annual Statements of Borrower. As soon as available and in
any event within ninety (90) days after the close of each fiscal year
of Borrower, audited financial statements of Borrower, including its
balance sheet as of the close of such fiscal year and statements of
income of Borrower for such fiscal year, in each case setting forth in
comparative form the figures for the preceding fiscal year, all in
reasonable detail and accompanied by an unqualified opinion thereon of
independent public accountants of recognized national standing selected
by Borrower and acceptable to Lender, to the effect that such financial
statements have been prepared in accordance with GAAP.
(b) Monthly Statements of Borrower. As soon as available, and
in any event within thirty (30) days after the end of each month
(except for that at the close of the fiscal year), monthly financial
statements, including copies of the balance sheet of Borrower as of the
end of such month, cash flow statement and statement of income of
Borrower for that month and for the portion of the fiscal year ending
with such month, in each case setting forth in comparative form the
figures for the corresponding period of the preceding fiscal year, all
in reasonable detail and fairly stated, certified by the chief
financial officer of Borrower and prepared by Borrower in accordance
with GAAP, subject to normal year-end adjustment (and the absence of
footnotes and presentation items).
(c) Compliance Certificate of Borrower. Within thirty (30)
days after the end of each month, a certificate signed by the chief
financial officer of the Borrower, substantially in the form of Exhibit
"B" attached hereto certifying that after a review of the activities of
Borrower during such period, Borrower has observed, performed and
fulfilled each and every obligation and covenant contained herein and
no Event of Default exists under any of the same or, if any Event of
Default shall have occurred, specifying the nature and status thereof,
and stating that all financial statements of Borrower delivered to
Lender during the respective period pursuant to Sections 7.1(a) and
7.1(b) hereof, to his/her knowledge, fairly present in all material
respect the financial position of the Borrower and the results of its
operations at the dates and for the periods
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indicated, and have been prepared in accordance with GAAP, together
with a calculation of the Financial Covenants.
(d) Borrowing Base Certificate. Within fifteen (15) days after
the end of each month, a Borrowing Base Certificate substantially in
the form attached hereto as Exhibit "C" signed by the chief financial
officer of Borrower. Borrower shall be required to provide a Borrowing
Base Certificate only in the event Borrower's Liquidity is an amount
less than $10,000,000.00
(e) Promptly after the sending or filing thereof with the
Securities and Exchange Commission or any other regulatory agency,
copies of any material filings, including, without limitation, copies
of Borrower's Quarterly 10Q Reports and the Borrower's Annual 10K
Report.
(f) Other Monthly Reports. Within fifteen (15) days after the
end of each month, reports as to its accounts receivable and inventory
as well as an aging report as to its accounts payable, except Lender in
its sole discretion may not require any of these reports. Lender's
waiver of this requirement for any particular month shall not
constitute a waiver for any subsequent month.
(g) Other Information. Such other information concerning the
business, properties or financial condition of Borrower as Lender shall
reasonably request.
7.2 Maintenance of Existence and Rights; Conduct of Business;
Management. It will preserve and maintain its existence and all of its rights,
privileges, licenses, permits, franchises and other rights necessary or
desirable in the normal conduct of its business, conduct its business in an
orderly and efficient manner consistent with good business practices and
maintain professional management of its business.
7.3 Operations and Properties. It will keep in good working order and
condition, ordinary wear and tear excepted, all of its assets and properties
which are necessary to the conduct of its business.
7.4 Authorizations and Approvals. It will maintain, at its own expense,
all such governmental licenses, authorizations, consents, permits and approvals
as may be required to enable it to comply with its obligations hereunder and
under the other Credit Documents and to operate its businesses as presently or
hereafter duly conducted.
7.5 Compliance with Law. It will comply with all applicable laws,
rules, regulations, and all final, nonappealable orders of any Governmental
Authority applicable to it or any of its property, business operations or
transactions, including without limitation, any environmental laws applicable to
it, a breach of which could result in a Material Adverse Effect.
7.6 Payment of Taxes and Other Indebtedness. It will pay and discharge
(i) all income taxes and payroll taxes, (ii) all taxes, assessments, fees and
other governmental charges
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imposed upon it or upon its income or profits, or upon any property belonging to
it, before delinquent, which become due and payable, (iii) all lawful claims
(including claims for labor, materials and supplies), which, if unpaid, might
become a Lien upon any of its property and (iv) all of its Indebtedness as it
becomes due and payable, except as prohibited hereunder; provided, however, that
it shall not be required to pay any such tax, assessment, charge, levy, claims
or Indebtedness if and so long as the amount, applicability or validity thereof
shall currently be contested in good faith by appropriate actions and
appropriate accruals and reserves therefor have been established in accordance
with GAAP.
7.7 Compliance with Significant Debt Agreements and Other Agreements.
It will comply in all material respects with (i) all Significant Debt
Agreements, and (ii) all agreements and contracts to which it is a party, a
breach of which could result in a Material Adverse Effect.
7.8 Compliance with Credit Documents. It will comply with any and all
covenants and provisions of this Credit Agreement, the Note and all other Credit
Documents.
7.9 Notice of Default. It will furnish to Lender immediately upon
becoming actually aware of the existence of any event or condition that
constitutes an Event of Default, a written notice specifying the nature and
period of existence thereof and the action which it is taking or proposes to
take with respect thereto.
7.10 Other Notices. It will promptly notify Lender of (a) any Material
Adverse Effect, (b) any waiver, release or default under any Significant Debt
Agreement, (c) any claim not covered by insurance against Borrower or any of
Borrower's properties, and (d) the commencement of, and any material
determination in, any litigation with any third party or any proceeding before
any Governmental Authority affecting it, except litigation or proceedings which,
if adversely determined, would not have a Material Adverse Effect.
7.11 Books and Records; Access; Audits. Upon three (3) Banking Days
notice from Lender, it will give any authorized representative of Lender access
during normal business hours to, and permit such representative to examine, copy
or make excerpts from, any and all books, records and documents in its
possession of and relating to the Loan, and to inspect any of its properties. It
will maintain complete and accurate books and records of its transactions in
accordance with good accounting practices. In addition, it will give any
authorized representative of Lender access during normal business hours to
conduct an annual accounts receivable audit and the costs of such audit shall be
for the account of Borrower and, provided no Event of Default exists, shall not
exceed $2,500.00 annually.
7.12 ERISA Compliance. With respect to its Plans, it shall (a) at all
times comply with the minimum funding standards set forth in Section 302 of
ERISA and Section 412 of the Code or shall have duly obtained a formal waiver of
such compliance from the proper Governmental Authority; (b) at Lender's request,
within thirty (30) days after the filing thereof, furnish to Lender copies of
each annual report/return (Form 5500 Series), as well as all schedules and
attachments required to be filed with the Department of Labor and/or the
Internal Revenue Service pursuant to ERISA, in connection with each of its Plans
for each year of the Plan; (c) notify Lender within a reasonable time of any
fact, including, but not limited to, any Reportable
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Event arising in connection with any of its Plans, which constitutes grounds for
termination thereof by the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer such Plan, together with a
statement, if requested by Lender, as to the reason therefor and the action, if
any, proposed to be taken with respect thereto; and (d) furnish to Lender within
a reasonable time, upon Lender's request, such additional information concerning
any of its Plans as may be reasonably requested.
7.13 Further Assurances. It will make, execute or endorse, and
acknowledge and deliver or file or cause the same to be done, all such notices,
certifications and additional agreements, undertakings or other assurances, and
take any and all such other action, as Lender may, from time to time, deem
reasonably necessary or proper to fully evidence the Loan.
7.14 Insurance. It shall maintain in full force and effect at all times
all insurance coverages required under the terms of this Credit Agreement and/or
the Security Documents to which it is a party. In addition, it shall maintain in
full force and effect at all times:
(a) Policies of all risk coverage insurance covering all
tangible personalty in which Lender has been granted or obtained a
security interest to secure the Obligation, in coverage amounts not
less than, from time to time, the fair market value thereof.
(b) Policies of insurance evidencing personal liability and
property damage liability coverages in amounts not less than
$1,000,000.00 (combined single limit for bodily injury and property
damage), and an umbrella excess liability coverage in an amount not
less than $2,000,000.00 shall be in effect with respect to Borrower.
(c) Policies of workers' compensation insurance in amounts and
with coverages as legally required.
Without limitation of the foregoing, it shall at all times maintain insurance
coverages in scope and amount not less than, and not less extensive than, the
scope and amount of insurance coverages customary in the trades or businesses in
which it is from time to time engaged. All of the aforesaid insurance coverages
shall be issued by insurers reasonably acceptable to Lender.
Copies of all policies of insurance evidencing such coverages in effect
from time to time and showing Lender as an additional insured and loss payee
shall be delivered to Lender within fifteen (15) days of the Closing Date and
upon reasonable notice upon issuance of new policies thereafter. From time to
time, promptly upon Lender's request, it shall provide evidence satisfactory to
Lender (i) that required coverage in required amounts is in effect, and (ii)
that Lender is shown as an additional insured and loss payee with respect to all
such coverages, as Lender's interest may appear, by standard (non-attribution)
loss payable endorsement, additional insured endorsement, insurer's certificate
or other means acceptable to Lender in its reasonable discretion. At Lender's
option, it shall deliver to Lender certified copies of all such policies of
insurance in effect from time to time, to be retained by Lender so long as
Lender shall have any commitment to lend hereunder and/or any portion of the
Obligation shall be outstanding or
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unsatisfied. All such insurance policies shall provide for at least thirty (30)
days prior written notice of the cancellation or modification thereof to Lender.
7.15 Deposit Accounts. It shall maintain its principal depository
accounts with Lender.
7.16 Invested Capital. Borrower shall satisfy the Invested Capital
Condition.
7.17 Indebtedness. At least five (5) Banking Days prior to incurring
any such Indebtedness, other than Indebtedness incurred in the ordinary course
of business subject to a Permitted Lien, Borrower shall inform Lender in writing
of any Indebtedness (i) with a Person that is not an Affiliate of Borrower, or
(ii) with a Person that is an Affiliate of Borrower unless such Indebtedness
consists of Subordinated Debt.
ARTICLE 8
NEGATIVE COVENANTS
Until payment in full of the Loan and the performance of the
Obligation, Borrower shall not, without receiving the prior express written
consent of Lender:
8.1 No Debt. Become or remain obligated either directly or as a
guarantor or surety for any Indebtedness for borrowed money, or for any
Indebtedness incurred in connection with the acquisition of any property, real
or personal, tangible or intangible including, but not limited to, lease
purchase agreements that exceed $10,000,000.00 in the aggregate, except:
(a) Indebtedness to the Lender.
(b) Indebtedness secured by liens permitted under Section 8.2
hereof.
8.2 Liens. On and after the date hereof, Borrower will not create or
suffer to exist Liens upon its property, real or personal, including without
limitation its patents, copyrights and trademarks, except (i) Liens, if any, for
the benefit of Lender, and (ii) Permitted Liens.
8.3 Existence. Dissolve or liquidate, or merge or consolidate with or
into any other entity (except for mergers with Borrower's Subsidiaries in which
Borrower is the surviving entity), or turn over the management or operation of
its property, assets or business to any other Person or make any substantial
change in the character of its business.
8.4 Amendments to Organizational Documents. Amend its organizational
documents if the result thereof could result in the occurrence directly or
indirectly of a Material Adverse Effect.
8.5 Margin Stock. Use any proceeds of the Loans, or any proceeds of any
other or future financial accommodation from Lender for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any "margin stock"
as that term is defined in Regulation U or to reduce or retire any indebtedness
undertaken for such purposes within the meaning of said
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Regulation U, and will not use such proceeds in a manner that would involve
Borrower in a violation of Regulation U or of any other Regulation of the Board
of Governors of the Federal Reserve System, nor use such proceeds for any
purpose not permitted by Section 7 of the Exchange Act, or any of the rules or
regulations respecting the extensions of credit promulgated thereunder.
8.6 Distributions. Declare or pay any dividends or make any
distribution of any kind.
8.7 Payments. Make any payment on its Subordinated Debt in any month
unless it is in full compliance with all Financial Covenants prior to and after
giving effect to such payment. Whenever Borrower incurs any debt with a Person
that is an Affiliate of Borrower which has not previously executed a
Subordination Agreement for the benefit of Lender, Borrower shall cause such
Affiliate to execute and deliver to Lender a Subordination Agreement.
8.8 Transfer Collateral. Assign, transfer or convey any of its right,
title and interest in the Collateral, except in the ordinary course of business.
8.9 Merger; Sale of Assets. (i) Sell, lease, transfer or dispose of
substantially all of the Collateral to another entity; or (ii) consolidate with
or merge into another entity, or permit any transfer of the ownership of the
Collateral, permit any other entity to merge into it or consolidate with it, or
permit any transfer of the ownership or power to control Borrower.
8.10 Financial Covenants.
(a) Cash. Permit Borrower's Liquidity for any month to be an
amount less than $2,500,000.00.
(b) Quick Ratio. Permit Borrower's Quick Ratio to be less than
2.0 to 1 at the end of any month. As used herein, "Quick Ratio" means
Borrower's Liquidity plus accounts receivable, divided by the sum of
trade payables, accrued liabilities and the outstanding principal
balance of the RLC. Borrower's deferred revenue accounts and royalty
payments to Symantec shall not be included in calculating Borrower's
Quick Ratio.
(c) Sales. Permit:
(i) Its quarterly sales for the quarterly period
ending March 31, 2000, to be an amount less than
$15,560,000.00
(ii) Its quarterly sales for the quarterly period
ending June 30, 2000, to be an amount less than $18,428,000.00
(iii) Its quarterly sales for the quarterly period
ending September 30, 2000, to be an amount less than
$23,629,000.00.
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(iv) Its quarterly sales for the quarterly period
ending December 31, 2000, to be an amount less than
$27,614,000.00
8.11 No Amendment to Subordinated Debt Credit Agreement. Amend the
terms of Article XI of the Subordinated Debt Credit Agreement without the prior
written consent of Lender.
ARTICLE 9
EVENTS OF DEFAULT
9.1 Events of Default. An "Event of Default" shall exist if any one or
more of the following events (herein collectively called "Events of Default")
shall occur and be continuing:
(a) Borrower shall fail to pay any principal of, or interest
on, the Note when the same shall become due or payable and such failure
continues for five (5) Banking Days after written notice thereof to
Borrower.
(b) Any failure or neglect to perform or observe any of the
covenants, conditions, provisions or agreements of Borrower contained
herein, or in any of the other Credit Documents (other than a failure
or neglect described in one or more of the other provisions of this
Section 9.1) and such failure or neglect either cannot be remedied or,
if it can be remedied, it continues unremedied for a period of thirty
(30) days after written notice thereof to Borrower.
(c) Any warranty, representation or statement contained in
this Credit Agreement or any of the other Credit Documents, or which is
contained in any certificate or statement furnished or made to Lender
pursuant hereto or in connection herewith or with the Loan, shall be or
shall prove to have been false when made or furnished.
(d) The occurrence of any material "event of default" or
"default" by Borrower under any Credit Document, or any agreement, now
or hereafter existing, to which Lender or an Affiliate of Lender, and
Borrower or an Affiliate of Borrower are a party.
(e) Borrower shall (i) fail to pay any Indebtedness of
Borrower (other than the Note) due under any Significant Debt
Agreement, or any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or
otherwise) or within any applicable grace period, (ii) fail to perform
or observe any term, covenant, or condition on its part to be performed
or observed under any agreement or instrument relating to such
Indebtedness, within any applicable grace period when required to be
performed or observed, if the effect of such failure to perform or
observe is to accelerate the maturity of such Indebtedness, or any such
Indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled
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prepayment), prior to the stated maturity thereof, or (iii) allow the
occurrence of any material event of default with respect to such
Indebtedness.
(f) Any one or more of the Credit Documents shall have been
determined to be invalid or unenforceable against Borrower executing
the same in accordance with the respective terms thereof, or shall in
any way be terminated or become or be declared ineffective or
inoperative, so as to deny Lender the substantial benefits contemplated
by such Credit Document or Credit Documents.
(g) Borrower shall (i) apply for or consent to the appointment
of a receiver, trustee, custodian, intervenor or liquidator of itself
or of all or a substantial part of its assets, (ii) file a voluntary
petition in bankruptcy or admit in writing that it is unable to pay its
debts as they become due, (iii) make a general assignment for the
benefit of creditors, (iv) file a petition or answer seeking
reorganization of an arrangement with creditors or to take advantage of
any bankruptcy or insolvency laws, (v) file an answer admitting the
material allegations of, or consent to, or default in answering, a
petition filed against it in any bankruptcy, reorganization or
insolvency proceeding, or (vi) take corporate action for the purpose of
effecting any of the foregoing
(h) An involuntary petition or complaint shall be filed
against Borrower, seeking bankruptcy or reorganization of Borrower, or
the appointment of a receiver, custodian, trustee, intervenor or
liquidator of Borrower, or all or substantially all of its assets, and
such petition or complaint shall not have been dismissed within sixty
(60) days of the filing thereof; or an order, order for relief,
judgment or decree shall be entered by any court of competent
jurisdiction or other competent authority approving a petition or
complaint seeking reorganization of Borrower, appointing a receiver,
custodian, trustee, intervenor or liquidator of Borrower, or all or
substantially all of its assets, and such order, judgment or decree
shall continue unstayed and in effect for a period of sixty (60) days.
(i) Any final judgment(s) (excluding those the enforcement of
which is suspended pending appeal) for the payment of money in excess
of the sum of $500,000.00 in the aggregate (other than any judgment
covered by insurance where coverage has been acknowledged by the
insurer) shall be rendered against Borrower, and such judgment or
judgments shall not be satisfied, settled, bonded or discharged at
least ten (10) days prior to the date on which any of its assets could
be lawfully sold to satisfy such judgment.
(j) Either (i) proceedings shall have been instituted to
terminate, or a notice of termination shall have been filed with
respect to, any Plans (other than a Multi-Employer Pension Plan as that
term is defined in Section 4001(a)(3) of ERISA) by Borrower, any member
of the Controlled Group, PBGC or any representative of any thereof, or
any such Plan shall be terminated, in each case under Section 4041 or
4042 of ERISA, and such termination shall give rise to a
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liability of the Borrower or the Controlled Group to the PBGC or the
Plan under ERISA having an effect in excess of $250,000.00 or (ii) a
Reportable Event, the occurrence of which would cause the imposition of
a lien in excess of $250,000.00 under Section 4062 of ERISA, shall have
occurred with respect to any Plan (other than a Multi-Employer Pension
Plan as that term is defined in Section 4001(a)(3) of ERISA) and be
continuing for a period of sixty (60) days.
(k) Any of the following events shall occur with respect to
any Multi-Employer Pension Plan (as that term is defined in Section
4001(a)(3) of ERISA) to which Borrower contributes or contributed on
behalf of its employees and Lender determines in good faith that the
aggregate liability likely to be incurred by Borrower, as a result of
any of the events specified in Subsections (i), (ii) and (iii) below,
will have an effect in excess of $100,000.00; (i) Borrower incurs a
withdrawal liability under Section 4201 of ERISA; (ii) any such plan is
"in reorganization" as that term is defined in Section 4241 of ERISA;
or (iii) any such Plan is terminated under Section 4041A of ERISA.
(l) [Intentionally Deleted.]
(m) The dissolution, liquidation, sale, transfer, lease or
other disposal of all or substantially all of the assets or business of
Borrower.
(n) Any failure to observe any of the Financial Covenants.
(o) A substantial change in the duties, responsibilities or
authority of Patrick Sullivan.
(p) The occurrence of any adverse change in the financial
condition of Borrower that Lender in its reasonable discretion deems
material, or if Lender in good faith shall believe that the prospect of
payment or performance of the Loans is impaired.
9.2 Remedies Upon Event of Default. If an Event of Default shall have
occurred and be continuing, then Lender may, at its sole option, exercise any
one or more of the following rights and remedies, and any other remedies
provided in any of the Credit Documents, as Lender in its sole discretion may
deem necessary or appropriate, all of which remedies shall be deemed cumulative,
and not alternative:
(i) Cease making Advances or extensions of financial
accommodations in any form to or for the benefit of Borrower,
(ii) Declare the principal of, and all interest then
accrued on, the Note and any other liabilities hereunder to be
forthwith due and payable, whereupon the same shall become
immediately due and payable without presentment, demand,
protest, notice of default, notice of acceleration or of
intention to
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accelerate or other notice of any kind all of which Borrower
hereby expressly waives, anything contained herein or in the
Note to the contrary notwithstanding,
(iii Reduce any claim to judgment, and/or
(iv Without notice of default or demand, pursue and
enforce any of Lender' rights and remedies under the Credit
Documents, or otherwise provided under or pursuant to any
applicable law or agreement; provided, however, that if any
Event of Default specified in Sections 9.1(g) and 9.1(h) shall
occur, the principal of, and all interest on, the Note and
other liabilities hereunder shall thereupon become due and
payable concurrently therewith, without any further action by
Lender and without presentment, demand, protest, notice of
default, notice of acceleration or of intention to accelerate
or other notice of any kind, all of which Borrower hereby
expressly waives.
Upon the occurrence and during the continuance of any Event of Default,
Lender is hereby authorized at any time and from time to time, with five (5)
days written notice to Borrower, to setoff and apply any and all moneys,
securities or other property of Borrower and the proceeds therefrom, now or
hereafter held or received by or in transit to Lender or its agents, from or for
the account of Borrower, whether for safe keeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special) and credits of Borrower, and any and all claims of Borrower
against Lender at any time existing. Lender agrees promptly to notify Borrower
in writing prior to and after any such setoff and application, provided that the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of Lender under this Section 9.2 are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) which Lender may have.
9.3 Performance by Lender. Should Borrower fail to perform any
covenant, duty or agreement with respect to the payment of taxes, obtaining
licenses or permits, or any other requirement contained herein or in any of the
Credit Documents within the period provided herein, if any, for correction of
such failure, Lender may, with fifteen (15) days prior written notice, at its
option, perform or attempt to perform such covenant, duty or agreement on behalf
of Borrower. In such event, Borrower shall, at the request of Lender, promptly
pay any amount expended by Lender in such performance or attempted performance
to Lender at its office in Inglewood, California, together with interest thereon
at the Default Rate, from the date of such expenditure until paid.
Notwithstanding the foregoing, it is expressly understood that Lender does not
assume any liability or responsibility for the performance of any duties of
Borrower hereunder or under any of the Credit Documents or other control over
the management and affairs of Borrower.
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ARTICLE 10
MISCELLANEOUS
10.1 Modification. All modifications, consents, amendments or waivers
of any provision of any Credit Document, or consent to any departure by Borrower
therefrom, shall be effective only if the same shall be in writing and accepted
by Lender.
10.2 Waiver. No failure to exercise, and no delay in exercising, on the
part of Lender, any right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other further exercise
thereof or the exercise of any other right. The rights of Lender hereunder and
under the Credit Documents shall be in addition to all other rights provided by
law. No modification or waiver of any provision of this Credit Agreement, the
Note or any Credit Documents, nor consent to departure therefrom, shall be
effective unless in writing and no such consent or waiver shall extend beyond
the particular case and purpose involved. No notice or demand given in any case
shall constitute a waiver of the right to take other action in the same, similar
or other instances without such notice or demand.
10.3 Payment of Expenses. Borrower shall pay all costs and expenses of
Lender (including, without limitation, the attorneys' fees of Lender's legal
counsel) incurred by Lender (subject, with respect to the following clause (i)
only, to a limit of $7,500.00) in connection with (i) the documentation of the
Loans, and (ii) the preservation and enforcement of Lender's rights under this
Credit Agreement, the Note, and/or the other Credit Documents; provided,
however, that notwithstanding the aforesaid, with respect to any legal action
between the parties hereto that is pursued to judgment the prevailing party only
shall be reimbursed by the other party for all costs and expenses (including,
without limitation, reasonable attorneys' fees and costs) incurred in connection
with the preservation and enforcement of its rights under this Credit Agreement,
the Note and/or other Credit Documents. In addition, Borrower shall pay all
costs and expenses of Lender in connection with the negotiation, preparation,
execution and delivery of any and all amendments, modifications and supplements
of or to this Credit Agreement, the Note or any other Credit Document. Borrower
shall receive a written estimate of all legal fees and related legal costs and
will have an opportunity to review all such estimates prior to its approval,
which shall not be unreasonably withheld.
10.4 Notices. Except for telephonic notices permitted herein, any
notices or other communications required or permitted to be given by this Credit
Agreement or any other documents and instruments referred to herein must be (i)
given in writing and personally delivered or mailed by prepaid certified or
registered mail or sent by overnight delivery service, or (ii) made by
telefacsimile delivered or transmitted, to the party to whom such notice or
communication is directed, to the address of such party as follows:
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Borrower: Interact Commerce Corporation
8800 North Gainey Center Drive
Suite 200
Scottsdale, Arizona 85258
Attention: Chief Financial Officer
Telecopier: (480) 348-6921
with a copy to: Osborn Maledon, P.A.
2929 North Central Avenue
Suite 2100
Phoenix, Arizona 85012
Attention: Thomas H. Curzon, Esq.
Telecopier: (602) 640-6067
Lender: Imperial Bank
9920 South La Cienega Boulevard
Suite 636
Inglewood, California 90301
Attention: Lending Services
Telecopier: (310) 417-5695
With a copy to: Imperial Bank
400 East Van Buren
Suite 900
Phoenix, Arizona 85004
Attention: Edmund Ozorio
Telecopier: (602) 261-7881
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the party to whom such notice is
directed. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as aforesaid; or, if mailed, on the third day after it is mailed as aforesaid;
or, if transmitted by telefacsimile, on the day that such notice is transmitted
as aforesaid. Any party may change its address for purposes of this Credit
Agreement by giving notice of such change to the other parties pursuant to this
Section 10.4.
10.5 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial. The Loan
Documents shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of California, except to the extent
Lender has greater rights or remedies under Federal law, whether as a national
bank or otherwise, in which case such choice of California law shall not be
deemed to deprive Lender of any such rights and remedies as may be available
under Federal law. Subject to the provisions of Section 10.6 hereof, each party
consents to the personal jurisdiction and venue of the state courts located in
Los Angeles, State of California in connection with any controversy related to
this Agreement, waives any argument that venue in any such forum is not
convenient and agrees that any litigation initiated by any of them in connection
with this Agreement shall be venued in the Superior Court of Los Angeles County,
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California. The parties waive any right to trial by jury in any action or
proceeding based on or pertaining to this Agreement or any of the Credit
Documents.
10.6 Reference Provision.
(a Each controversy, dispute or claim ("Claim") between the
parties arising out of or relating to this Agreement and/or any of the
Credit Documents, which is not settled in writing within ten days after
the "Claim Date" (defined as the date on which a party gives written
notice to all other parties that a controversy, dispute or claim
exists), will be settled by a reference proceeding in Los Angeles,
California, in accordance with the provisions of Section 638 et seq. of
the California Code of Civil Procedure, or their successor section
("CCP"), which shall constitute the exclusive remedy for the settlement
of any Claim, including whether such Claim is subject to the reference
proceeding and the parties waive their rights to initiate any legal
proceedings against each other in any court or jurisdiction other than
the Superior Court of Los Angeles (the "Court"). The referee shall be a
retired Judge selected by mutual agreement of the parties, and if they
cannot so agree with in thirty days (30) after the Claim Date, the
referee shall be selected by the Presiding Judge of the Court. The
referee shall be appointed to sit as a temporary judge, as authorized
by law. The referee shall (a) be requested to set the matter for
hearing within sixty (60) days after the Claim Date and (b) try any and
all issues of law or fact and report a statement of decision upon them,
if possible, within ninety (90) days of the Claim Date. Any decision
rendered by the referee will be final, binding and conclusive and
judgment shall be entered pursuant to CCP 644 in the Court. All
discovery permitted by this Agreement shall be completed no later than
fifteen (15) days before the first hearing date established by the
referee. The referee may extend such period in the event of a party's
refusal to provide requested discovery for any reason whatsoever,
including, without limitation, legal objections raised to such
discovery or unavailability of a witness due to absence or illness. No
party shall be entitled to "priority" in conducing discovery.
Depositions may be taken by either party upon seven (7) days written
notice, and, request for production of inspection of documents shall be
responded to within ten (10) days after service. All disputes relating
to discovery which cannot be resolved by the parties shall be submitted
to the referee whose decision shall be final and binding upon the
parties.
(b The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State
of California. The rules of evidence applicable to proceedings at law
in the State of California will be applicable to the reference
proceeding. The referee shall be empowered to enter equitable as well
as legal relief, to provide all temporary and/or provisional remedies
and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that
are the subject to the reference. The parties hereto expressly reserve
the right to contest or appeal from
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the final judgment or any appealable order or appealable judgment
entered by the referee. The parties expressly reserve the right to
findings of fact, conclusions of law, a written statement of decision,
and the right to move for a new trial or a different judgment, which
new trial, if granted, is also to be a reference proceeding under this
provision.
(c No provision of Paragraphs (a) or (b) of this Section 10.6,
however, shall limit the right of Lender to bring action for possession
of any Collateral in any jurisdiction, wherever located, in accordance
with the provisions of the Security Documents.
10.7 Invalid Provisions. If any provision of any Credit Document is
held to be illegal, invalid or unenforceable under present or future laws during
the term of this Credit Agreement, such provision shall be fully severable; such
Credit Document shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of such Credit Document; and
the remaining provisions of such Credit Document shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from such Credit Document. Furthermore, in lieu of
each such illegal, invalid or unenforceable provision there shall be added as
part of such Credit Document a provision mutually agreeable to Borrower and
Lender as similar in terms to such illegal, invalid or unenforceable provision
as may be possible and be legal, valid and enforceable.
10.8 Binding Effect. The Credit Documents shall be binding upon and
inure to the benefit of Borrower and Lender and their respective successors,
assigns and legal representatives; provided, however, that Borrower may not,
without the prior written consent of Lender, assign any rights, powers, duties
or obligations thereunder.
10.9 Entirety. The Credit Documents embody the entire agreement between
the parties and supersede all prior agreements and understandings, if any,
relating to the subject matter hereof and thereof.
10.10 Headings. Section headings are for convenience of reference only
and shall in no way affect the interpretation of this Credit Agreement.
10.11 Survival of Representations, Etc. All representations and
warranties by Borrower herein shall survive the making of any Loan and the
execution and delivery of any Note; any investigation at any time made by or on
behalf of Lender shall not diminish Lender's right to rely on the
representations and warranties herein.
10.12 No Third Party Beneficiary. The parties do not intend the
benefits of this Credit Agreement to inure to any third party, nor shall this
Credit Agreement be construed to make or render Lender liable to any
materialman, supplier, contractor, subcontractor, purchaser or lessee of any
property owned by Borrower, or for debts or claims accruing to any such persons
against Borrower. Notwithstanding anything contained herein or in the Note, or
in any other Credit Document, or any conduct or course of conduct by any or all
of the parties hereto, before or after signing this Credit Agreement or any of
the other Credit Documents, neither this Credit
-34-
<PAGE> 40
Agreement nor any other Credit Document shall be construed as creating any
right, claim or cause of action against Lender, or any of its officers,
directors, agents or employees, in favor of any materialman, supplier,
contractor, subcontractor, purchaser or lessee of any property owned by
Borrower, nor to any other person or entity other than Borrower.
10.13 Time. Time is of the essence hereof.
10.14 Schedules and Exhibits Incorporated. All schedules and exhibits
attached hereto, if any, are hereby incorporated into this Credit Agreement by
each reference thereto as if fully set forth at each such reference.
10.15 Counterparts. This Credit Agreement may be executed in multiple
counterparts, each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Credit Agreement
as of the day and year first above written.
INTERACT COMMERCE CORPORATION, a
Delaware corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
IMPERIAL BANK, a California banking
corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
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<PAGE> 41
EXHIBIT "A"
FORM OF ADVANCE NOTICE
Imperial Bank
400 East Van Buren
Suite 900
Phoenix, Arizona 85004
Attention: Edmund Ozorio Date:______________
Telecopier: (602) 261-7881 Time:______________
Dear Ladies and Gentlemen:
The undersigned ("Borrower") refers to the Credit Agreement dated as of
April 27, 2000 (as it may hereafter be amended, modified, extended or restated
from time to time, the "Credit Agreement"), between Interact Commerce
Corporation, a Delaware corporation (the "Borrower"), and Imperial Bank.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement.
The Borrower hereby gives notice that it requests an Advance pursuant
to Section 2.3 of the Credit Agreement and sets forth below the terms of such
requested Advance:
<TABLE>
<S> <C> <C>
A. Date of Advance ____________________
B. Principal Amount of Advance(1) ____________________
C. Type of Advance(2) ____________________
</TABLE>
- --------
(1) Each RLC Advance that is to bear interest at the LIBOR Based Rate shall be
a principal amount which is not less than $250,000.00 with integral multiples of
$50,000.00. There shall be no minimum principal amount for Variable Rate
Advances.
(2) Variable Rate or LIBOR Rate Advance.
-36-
<PAGE> 42
<TABLE>
<CAPTION>
From: Through:
----- --------
<S> <C> <C> <C>
D. LIBOR Interest Period(3) ____________________ ____________________
Applicable Loan Maturity Date ____________________
E. Conversion (Identity of Advance
to be Converted)
Date ____________________
Type ____________________
Amount ____________________
Applicable Maturity Date ____________________
</TABLE>
Sincerely,
INTERACT COMMERCE CORPORATION, a
Delaware corporation
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
- --------
(3) One, two, three or six months and end not later than the RLC Maturity Date.
-37-
<PAGE> 43
EXHIBIT "B"
COMPLIANCE CERTIFICATE
FOR PERIOD ENDING
------------------
("REPORTING PERIOD")
Imperial Bank Arizona
400 East Van Buren
Suite 900
Phoenix, Arizona 85004
Attention: Edmund Ozorio
Telecopier: (602) 261-7881 Date: _____________(4)
Dear Ladies and Gentlemen:
This Compliance Certificate refers to the Credit Agreement dated as of
April 27, 2000 (as it may hereafter be amended, modified, extended or restated
from time to time, the "Credit Agreement"), between Interact Commerce
Corporation, a Delaware corporation (the "Borrower") and Imperial Bank, a
California banking corporation. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit Agreement.
Pursuant to Section 7.1(c) of the Credit Agreement, the undersigned,
hereby certifies that:
1. To the best of the undersigned's knowledge, after a review of the
activities of Borrower during the Reporting Period, Borrower has observed,
performed and fulfilled each and every obligation and covenant contained in the
Credit Agreement and no "Event of Default" thereunder exists [or if so,
specifying the nature and extent thereof and any corrective actions taken or to
be taken].
2. All financial statements of Borrower delivered to Lender during the
Reporting Period, to the undersigned's knowledge, fairly present in all material
respect the financial position of the Borrower and the results of its operations
at the dates and for the periods indicated and have been prepared in accordance
with GAAP, subject to normal year-end adjustment (and the absence of footnotes
and presentation items).
- --------
(4) To be submitted within 30 days after the end of each month.
-38-
<PAGE> 44
3. As of the last Reporting Period, the computations below were true
and correct:
Section 8.10 - Financial Covenants
(a Cash. The Borrower _____ satisfies _____ does not satisfy
the requirement that the Borrower's Liquidity for the previous month is
not an amount less than $2,500,000.00. In addition, a Borrowing Base
Certificate [is] [is not] attached hereto as a result of Borrower's
Liquidity being an amount [less than] [greater than] $10,000,000.00.
(b Quick Ratio.
<TABLE>
<S> <C> <C>
Numerator:
Liquidity, plus A $__________
Accounts Receivables B $__________
Denominator
Trade Payables, plus C $__________
Accrued Liabilities, plus D $__________
Outstanding Principal Balance of RLC E $__________
(A+B)/(C+D+E) __________x
Minimum 2.0 to 1
</TABLE>
(c) Sales
(a) Quarterly sales for quarter ending March 31, 2000:
(i) Actual $_______________.
(ii) Required $15,560,000.00.
(b) Quarterly sales for quarter ending June 30, 2000:
(i) Actual $_______________.
(ii) Required $18,428,000.00.
(c) Quarterly sales for quarter ending September 30, 2000:
(i) Actual $_______________.
(ii) Required $23,629,000.00.
(d) Quarterly sales for quarter ending December 31, 2000:
(i) Actual $_______________.
(ii) Required $27,614,000.00.
-39-
<PAGE> 45
INTERACT COMMERCE CORPORATION, a
Delaware corporation
By:
--------------------------------
Name:
------------------------------
Its:
-------------------------------
-40-
<PAGE> 46
EXHIBIT "C"
BORROWING BASE CERTIFICATE
FOR PERIOD ENDING
------------------
("Reporting Period")
Imperial Bank Arizona
400 East Van Buren
Suite 900
Phoenix, Arizona 85004
Attention: Edmund Ozorio
Telecopier: (602) 261-7881 Date: _____________(5)
Dear Ladies and Gentlemen:
This Borrowing Base Certificate refers to the Credit Agreement dated as
of April 27, 2000 (as it may hereafter be amended, modified, extended or
restated from time to time, the "Credit Agreement"), between Interact Commerce
Corporation, a Delaware corporation (the "Borrower"), and Imperial Bank, a
California banking corporation. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit Agreement.
Pursuant to Section 7.1(d) of the Credit Agreement, the undersigned,
hereby certifies that:
1. Borrower's Liquidity is an amount equal to: $__________________ (A).
2. Eligible Cash Balance: (A-$2,500,000.00)(.53) = $__________________.
INTERACT COMMERCE CORPORATION, a
Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Its:
----------------------------------
- ---------
(5) To be submitted within 30 days after the end of each month if Borrower's
Liquidity is an amount less than $10,000,000.00.
<PAGE> 47
EXHIBIT "D"
SUBORDINATION AGREEMENT
TO: IMPERIAL BANK
The undersigned ("We") are interested in the financial success of
INTERACT COMMERCE CORPORATION, a Delaware corporation (the "Borrower"), and
agree that financial accommodations from IMPERIAL BANK ("Bank" or "You") to
Borrower pursuant to that Credit Agreement dated as of April 27, 2000 (the
"Credit Agreement") are necessary, and we accordingly request that you grant to
or renew for Borrower such financial accommodation as you may deem proper, and
for the purpose of inducing you to grant, renew or extend such financial
accommodation, we hereby severally agree as follows:
All claims of each of the undersigned against Borrower now or hereafter
existing, whether matured or not (subject to the maximum if specified below),
are and shall be at all times subordinate and subject to any and all claims on
your part against Borrower now or hereafter existing, whether matured or not, so
long as any such claim on your part against Borrower shall remain unpaid, in
whole or in part, and each of the undersigned agrees not to sue upon, or to
collect, or to receive payment upon, by setoff or in any other manner, any claim
or claims on his/hers or its part against Borrower now or hereafter existing,
nor to sell, assign, transfer, pledge, or give a security interest in the same
(except subject expressly to this Agreement), nor to enforce or apply any
security now or hereafter existing, nor to join in any petition in bankruptcy or
any assignment for the benefit of creditors or any creditors agreement, nor to
take any lien or security on any of Borrower's property, real or personal, nor
to incur any obligation to nor receive any loans, advances or gifts from
Borrower, so long as any such claim on your part against Borrower shall exist or
so long as you are committed or otherwise obligated to make any loans to, or
grant any credit to, Borrower. In addition, so long as any claim on your part
against Borrower shall remain unpaid, in whole or in part, Bank shall have a
prior security interest in the assets of Borrower consisting of Collateral (as
defined in the Credit Agreement), now owned or hereafter acquired by Borrower
and each of the undersigned hereby subordinates any security interest, including
without limitation any purchase money security interest, which each of the
undersigned now has or hereafter acquires in the Collateral to all security
interests which Bank now has or hereafter acquires in the Collateral.
All claims on your part against Borrower now or hereafter existing
shall be first paid by Borrower before any payment shall be made by Borrower to
any of the undersigned unless Borrower is in full compliance with all Financial
Covenants (as defined in the Credit Agreement) contained in the Credit
Agreement, prior to and after giving effect to such payment. Said priority of
payment shall apply during the ordinary course of Borrower's business and in
case of any
-2-
<PAGE> 48
assignment by Borrower for the benefit of Borrower's creditors, and in case of
any bankruptcy proceedings instituted by or against Borrower, and in case of the
appointment of any receiver for Borrower or Borrower's business or assets, and
in case of any dissolution or other winding up of the affairs of Borrower, or of
Borrower's business, and in all such cases respectively, the officers of
Borrower and any assignee, trustee in bankruptcy, receiver, and other person or
persons in charge, are hereby directed to pay to you the full amount of your
claims against Borrower before making any payment to any of the undersigned, and
so far as may be necessary for that purpose, each of the undersigned hereby
transfers and assigns to you all of his/her or its rights to any payment or
distribution which might otherwise be coming to him/her or it. You are hereby
irrevocably constituted and appointed the attorney-in-fact of each of the
undersigned to file any and all proofs of claim and any other documents and to
take all other action, either in your name, or in the name of the undersigned,
or any of them, which in your opinion is necessary or desirable to enable you to
obtain all such payments.
Each of the undersigned agrees that if part or all of any claim of the
undersigned shall be evidenced by a promissory note or other instrument, the
undersigned shall cause to be placed thereon a legend stating that the payment
thereof is subordinate to the payment of all claims on your part against
Borrower pursuant to the terms of this Subordination Agreement, and each of the
undersigned agrees to mark all books of account in such manner to indicate that
payment thereof is subordinated pursuant to the terms of this Subordination
Agreement.
Each of the undersigned further agrees that in case he, she or it
should take or receive any security interest in, or lien by way of attachment,
execution, or otherwise on any of the property, real or personal, of Borrower,
or should take or join in any other measure or advantage contrary to this
Agreement, while any claim exists on your part against Borrower, you shall be
entitled to have the same vacated, dissolved and set aside by such proceedings
at law, or otherwise, as you may deem proper, and this Agreement shall be and
constitute full and sufficient ground therefor and shall entitle you to be and
become a party to any proceedings at law, or otherwise, initiated by you or by
any other party, in or by which you may deem it proper to protect your interest
hereunder, and the party so violating this Agreement shall be liable to you for
all loss and damage sustained by you by reason of such breach, including
attorney's fees in any such legal action.
If the undersigned, or any of them, shall receive any payment or
property in violation of this Agreement, such payment of property shall be
received by such undersigned in trust for you and forthwith will be delivered
and transferred to you.
No subordination of obligations of Borrower to the undersigned have
previously been executed by the undersigned for the benefit of anyone else, and
any such subordinations hereafter executed will be, and shall be expressed to be
subject and subordinate to the effect hereof. This Agreement shall be continuing
in effect, it shall not be cancelled or otherwise rendered ineffective by the
payment or discharge at any time of all of Borrower's obligations to you, and it
shall apply to any and all financial accommodations subsequently granted,
renewed or extended by you for Borrower, unless the undersigned shall deliver to
you a written notice of revocation as to future transactions, at a time when
Borrower is no longer obligated to you in any
-3-
<PAGE> 49
way, and while you are not committed or otherwise obligated to make any loans
to, or grant any credit to, Borrower.
--------------------------------------
--------------------------------------
By:
-----------------------------------
Name:
---------------------------------
Its:
----------------------------------
-4-
<PAGE> 50
ACCEPTANCE OF SUBORDINATION AGREEMENT BY BORROWER
The undersigned, being the Borrower named in the foregoing
Subordination Agreement, hereby accepts and consents thereto and agrees to be
bound by all of the provisions thereof and to recognize all priorities and other
rights granted thereby to IMPERIAL BANK, and to pay said Bank in accordance
therewith.
Dated
------------------------
INTERACT COMMERCE CORPORATION, a
Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
-5-
<PAGE> 51
EXHIBIT "E"
When recorded, return to:
Streich Lang, P.A.
Renaissance One
Two North Central Avenue
Phoenix, Arizona 85004-2391
Attention: John M. Pons, Esq.
WAIVER/RELEASE OF LIEN RIGHTS
To induce IMPERIAL BANK, a California banking corporation, whose
address is 400 East Van Buren, Suite 900, Phoenix, Arizona 85004 (hereinafter
called "Lender"), to grant and/or continue financial accommodations to INTERACT
COMMERCE CORPORATION, a Delaware corporation, whose address is 8800 North Gainey
Center Drive, Suite 200, Scottsdale, Arizona 85258 (hereinafter called
"Debtor"), the undersigned covenants and agrees as follows:
1. Debtor has executed a Security Agreement dated April 27, 2000
(hereinafter called the "Security Agreement"), granting to Lender a security
interest in that property of Debtor described in the Security Agreement and on
Schedule "A" attached hereto and made a part hereof (hereinafter called the
"Collateral"). The Collateral includes, but is not limited to, fixtures,
equipment, machinery, furniture and furnishings that are now or hereafter may be
installed, placed or located on the real property described on Schedule "B"
attached hereto (hereinafter called the "Real Property"), which is owned by the
undersigned or in which the undersigned has or claims a lien or interest.
2. The undersigned hereby consents to the Security Agreement and to all
liens, security interests and rights of Lender in the Collateral arising from
the Security Agreement and waives and releases all rights of levy for rent and
all liens, security interests, claims, rights and demands of every kind against
the Collateral.
3. The undersigned hereby grants permission to Lender, its officers,
agents and employees, to enter, at any time, the Real Property or any other
premises where the Collateral may be found and to remove the Collateral,
provided that Lender shall promptly reimburse the undersigned for the cost of
repairing any physical injury done to the Real Property as a result of the
removal of the Collateral.
4. The Collateral shall at all times be personal property, shall not
constitute fixtures or be part of the Real Property and shall not be subject to
distraint or execution by the undersigned or to any claim of the undersigned.
-6-
<PAGE> 52
5. The undersigned shall notify any purchaser of the Real Property, and
any subsequent mortgagee or other encumbrance holder or claimant, of the
existence of this Waiver/Release Agreement, which shall be binding upon the
executors, administrators, successors, assigns and transferees of the
undersigned and shall inure to the benefit of the successors and assigns of
Lender.
6. In the event of any default under its lease or agreement with
Debtor, then prior to: (i) terminating its lease or agreement with Debtor, (ii)
incurring any attorneys' fees, or (iii) incurring any other expenses which it
would, but for this provision, charge Debtor, the undersigned shall notify
Lender in writing at the above address of such default and allow Lender 30 days
after receipt of such notice to remedy any such default on behalf of Debtor;
provided, however, that if the default cannot reasonably be remedied within that
30-day period, the undersigned shall not terminate its lease or agreement with
Debtor or incur any attorneys' fees or other expenses so long as Lender shall
commence to remedy the default within that 30-day period and thereafter
diligently prosecute the remedy to completion.
IN WITNESS WHEREOF, the undersigned has executed this Agreement this
_____ day of ______________, 2000.
--------------------------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Address:
--------------------------------------
--------------------------------------
-7-
<PAGE> 53
STATE OF _____________ )
) ss.
County of ____________ )
The foregoing instrument was acknowledged before me this _____ day of
____________, 2000, by __________________________________________, the
_______________________ of _____________________________________________________
on behalf of said ______________.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
------------------------------------------
Notary Public
My commission expires:
- ----------------------
-8-
<PAGE> 54
SCHEDULE "A"
COLLATERAL DESCRIPTION
All of the property described below in, to or under which Debtor now
has or hereafter acquires any right, title or interest, whether present, future
or contingent, and in Debtor's expectancy to acquire such property (all of the
property described on this schedule is herein called the "Collateral"):
(a) All accounts, general intangibles, instruments, documents
and chattel paper (including all accounts receivable, notes, drafts,
lease agreements and security agreements), and all goods, if any,
represented thereby, whether now existing or hereafter acquired or
created from time to time in the course of Debtor's business;
(b) All inventory now owned or hereafter acquired, including
all goods held for sale or lease in Debtor's business, as now or
hereafter conducted, and all materials, work in process and finished
goods used or to be consumed in Debtor's business (whether or not the
inventory is represented by warehouse receipts or bills of lading or
has been or may be placed in transit or delivered to a public
warehouse);
(c) All equipment now owned or hereafter acquired, including
all furniture, fixtures, furnishings, vehicles (whether titled or
non-titled), machinery, materials and supplies, wherever located,
including but not limited to such items described on the collateral
schedule (if any) attached hereto and by this reference made a part
hereof, together with all parts, accessories, attachments, additions
thereto or replacements therefor;
(d) All instruments, documents and chattel paper now held by
or hereafter delivered to Secured Party, together with all property
rights and security interests evidenced thereby, all increases thereof
(including, without limitation, stock dividends), all profits therefrom
and all transformations thereof, including but not limited to such
items described on the collateral schedule (if any) attached hereto and
by this reference made a part hereof;
(e) All tax refund claims, all policies or certificates of
insurance covering any of the Collateral, all contracts, agreements or
rights of indemnification, guaranty or surety relating to any of the
Collateral, and all claims, awards, loss payments, proceeds and premium
refunds that may become payable with respect to any such policies,
certificates, contracts, agreements or rights;
-9-
<PAGE> 55
(f) All ledger cards, invoices, delivery receipts, worksheets,
books of accounts, statements, correspondence, customer lists, files,
journals, ledgers and records in any form, written or otherwise,
related to any of the Collateral;
(g) Tradenames, trademarks, trademark applications,
copyrights, copyright applications, service marks, domain names and the
entire goodwill of or associated with the business now or hereafter
conducted by the Debtor; provided, however, that Debtor shall not be
required to register any copyrights on material it regards trade
secrets;
(h) All claims for loss or damage to or in connection with any
of the Collateral, all other claims in any form for the payment of
money, including tort claims, and all rights with respect to such
claims and all proceeds thereof;
(i) All accessions to any of the Collateral; and
(j) All products and proceeds of the Collateral, in any form,
including all proceeds received, due or to become due from any sale,
exchange or other disposition of any of the Collateral, whether such
proceeds are cash or noncash in nature or are represented by checks,
drafts, notes or other instruments for the payment of money.
All "Collateral Schedules," if any, attached hereto are hereby incorporated into
this collateral description as if set forth here and at each reference thereto.
-10-
<PAGE> 56
SCHEDULE "B"
REAL PROPERTY
<PAGE> 1
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made and entered into as of the 27th day of
April, 2000, by INTERACT COMMERCE CORPORATION, a Delaware corporation
(hereinafter called "Debtor"), whose chief executive office is located at 8800
North Gainey Center Drive, Suite 200, Scottsdale, Arizona 85258, in favor of
IMPERIAL BANK, a California banking corporation, and its successors and assigns
(hereinafter called "Secured Party"), whose address is 400 East Van Buren, Suite
900, Phoenix, Arizona 85004.
1. SECURITY INTEREST
Debtor hereby grants to Secured Party a security interest (hereinafter
called the "Security Interest") in all of Debtor's right, title and interest in
and to the personal property described on Schedule "A" attached hereto (the
"Collateral").
2. OBLIGATION SECURED
The Security Interest shall secure, in such order of priority as
Secured Party may elect:
(a) Payment of the sum of $4,000,000.00 according to the terms
of that Revolving Promissory Note of even date herewith, made by
Debtor, payable to the order of Secured Party, evidencing a revolving
line of credit, all or any part of which may be advanced to Debtor,
repaid by Debtor and readvanced to Debtor, from time to time, subject
to the terms and conditions thereof, with interest thereon, extension
and other fees, late charges and attorneys' fees, according to the
terms thereof, and all extensions, modifications, renewals,
restatements or replacements thereof (hereinafter called the "Note");
(b) Payment, performance and observance by Debtor of each
covenant, condition, provision and agreement contained herein and of
all monies expended or advanced by Secured Party pursuant to the terms
hereof, or to preserve any right of Secured Party hereunder, or to
protect or preserve the Collateral or any part thereof;
(c) Payment, performance and observance by Debtor of each
covenant, condition, provision and agreement contained in that Credit
Agreement of even date herewith, by and between Debtor and Secured
Party (as extended, modified, renewed, restated or replaced hereinafter
called the "Credit Agreement") and in any other document or instrument
related to the indebtedness described in subparagraph (a) above and of
all monies expended or advanced by Secured Party pursuant to the terms
thereof or to preserve any right of Secured Party thereunder;
(d) Payment and performance of any and all other indebtedness,
obligations and liabilities of Debtor to Secured Party of every kind
and character,
-1-
<PAGE> 2
direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter incurred, whether such indebtedness is from time
to time reduced and thereafter increased or entirely extinguished and
thereafter reincurred.
All of the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the "Obligation."
3. USE; LOCATION; CONSTRUCTION
3.1 The Collateral is or will be used or produced primarily for
business purposes.
3.2 The Collateral will be kept at Debtor's address set forth at the
beginning of this Agreement and/or at the location(s) listed on Schedule "B", if
any, attached hereto.
3.3 Debtor's records concerning the Collateral will be kept at Debtor's
address set forth at the beginning of this Agreement and/or at the location(s)
listed on Schedule "B", if any, attached hereto.
4. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants that:
4.1 Debtor is the owner of the Collateral free of all security
interests or other encumbrances except the Security Interest and, to the best
knowledge of Debtor, no financing statement covering the Collateral is filed or
recorded in any public office except with respect to any Permitted Liens (as
defined in the Credit Agreement).
4.2 The Collateral is, and is intended to be, used, produced or
acquired by Debtor for use primarily for business purposes. The address of
Debtor set forth at the beginning of this Agreement is the chief executive
office of Debtor.
4.3 Each account, chattel paper or general intangible included in the
Collateral is genuine and enforceable in accordance with its terms against the
party named therein who is obligated to pay the same (hereinafter called
"Obligor"), and, assuming Secured Party files with the Arizona Secretary of
State and Patent and Trademark Office, the security interests that are part of
each item of chattel paper included in the Collateral are valid, first and prior
perfected security interests. To the best knowledge of Debtor, each Obligor is
solvent, and the amount that Debtor has represented to Secured Party as owing by
each Obligor is the amount actually and unconditionally owing by that Obligor,
without deduction except for normal cash discounts where applicable; no Obligor
has any valid defense, setoff, claim or counterclaim against Debtor that can be
asserted against Secured Party whether in any proceeding to enforce the Security
Interest or otherwise. Each document, instrument and chattel paper included in
the Collateral is complete and regular on its face and free from evidence of
forgery or alteration. No default has occurred in connection with any
instrument, document or chattel paper included in the Collateral, no payment in
connection therewith is overdue and no presentment, dishonor or protest has
-2-
<PAGE> 3
occurred in connection therewith, except, in each case, in the ordinary course
of business and in amounts properly reserved for in Debtor's financial
statements.
5. COVENANTS OF DEBTOR
5.1 Debtor shall not sell, transfer, assign or otherwise dispose of any
Collateral or any interest therein (except as permitted herein) without
obtaining the prior written consent of Secured Party and shall keep the
Collateral free of all security interests or other encumbrances except the
Security Interest and any Permitted Liens. Although proceeds of Collateral are
covered by this Agreement, this shall not be construed to mean that Secured
Party consents to any sale of the Collateral; provided, however, that Debtor can
sell or dispose of the Collateral in the ordinary course of business.
5.2 Debtor shall keep and maintain the Collateral in good condition and
repair and shall not use the Collateral in violation of any provision of this
Agreement or any applicable statute, ordinance or regulation or any policy of
insurance insuring the Collateral.
5.3 Debtor shall provide and maintain insurance insuring the Collateral
against risks, with coverage and in form and amount satisfactory to Secured
Party. At Secured Party's request, Debtor shall deliver to Secured Party the
original policies of insurance containing endorsements naming Secured Party as a
loss payee.
5.4 Debtor shall pay when due all taxes, assessments and other charges
which may be levied or assessed against the Collateral.
5.5 Debtor shall prevent any portion of the Collateral that is not a
fixture from being or becoming a fixture and shall prevent any portion of the
Collateral from being or becoming an accession to other goods that are not part
of the Collateral.
5.6 Debtor shall keep all titled vehicles properly registered with and
licensed, shall provide Secured Party with the license numbers of all titled
vehicles, and if requested by Secured Party shall cause the Security Interest to
be shown as a valid first lien on the Certificate of Title.
5.7 Debtor, upon demand, shall promptly deliver to Secured Party all
instruments, documents and chattel paper included in the Collateral and all
invoices, shipping or delivery records, purchase orders, contracts or other
items related to the Collateral. Debtor shall notify Secured Party immediately
of any default by any Obligor in the payment or performance of its obligations
with respect to any Collateral if such default could be reasonably expected to
have a Material Adverse Effect on Debtor.
5.8 Debtor shall give Secured Party immediate written notice of any
change in the location of: (i) Debtor's chief executive office; (ii) the
Collateral or any part thereof; or (iii) Debtor's records concerning the
Collateral.
5.9 Secured Party or its agents may inspect the Collateral at
reasonable times and may enter into any premises where the Collateral is or may
be located. Debtor shall keep records
-3-
<PAGE> 4
concerning the Collateral in accordance with generally accepted accounting
principles. Secured Party shall have free and complete access to Debtor's
records and shall have the right to make extracts therefrom or copies thereof.
Upon request of Secured Party from time to time, Debtor shall submit up-to-date
schedules of the items comprising the Collateral in such detail as Secured Party
may reasonably require and shall deliver to Secured Party confirming specific
assignments of all accounts, instruments, documents and chattel paper included
in the Collateral.
5.10 Debtor, at its cost and expense, shall protect and defend this
Agreement, all of the rights of Secured Party hereunder, and the Collateral
against all claims and demands of other parties, including without limitation
defenses, setoffs, claims and counterclaims asserted by any Obligor against
Debtor and/or Secured Party. Debtor shall pay all claims and charges that in the
opinion of Secured Party might prejudice, imperil or otherwise affect the
Collateral or the Security Interest. Debtor shall promptly notify Secured Party
of any levy, distraint or other seizure by legal process or otherwise of any
part of the Collateral and of any threatened or filed claims or proceedings that
might in any way affect or impair the terms of this Agreement.
5.11 Assuming Secured Party files with the Arizona Secretary of State
and Patent and Trademark Office, the Security Interest, at all times, shall be
perfected and shall be prior to any other interests in the Collateral, except
for Permitted Liens. Debtor shall act and perform as necessary and shall execute
and file all security agreements, financing statements, continuation statements
and other documents requested by Secured Party to establish, maintain and
continue the perfected Security Interest. Debtor, on demand, shall promptly pay
all costs and expenses of filing and recording, including the costs of any
searches, deemed necessary by Secured Party from time to time to establish and
determine the validity and the continuing priority of the Security Interest.
5.12 If Debtor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Collateral free from other security interests,
encumbrances or claims, to keep the Collateral in good condition and repair, to
procure and maintain insurance thereon, or to perform otherwise as required
herein, Secured Party may advance the monies necessary to pay the same, to
accomplish such repairs, to procure and maintain such insurance or to so
perform; Secured Party is hereby authorized to enter upon any property in the
possession or control of Debtor for such purposes.
5.13 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof and all
amounts paid, suffered or incurred by Secured Party in exercising any authority
granted herein, including reasonable attorneys' fees, shall be added to the
Obligation, shall be secured by the Security Interest, shall bear interest at
the Default Rate (as defined in the Credit Agreement) until paid, and shall be
due and payable by Debtor to Secured Party immediately without demand.
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<PAGE> 5
6. NOTIFICATION AND PAYMENTS; COLLECTION OF COLLATERAL; USE OF COLLATERAL
BY DEBTOR
6.1 Secured Party, after the occurrence of any Event of Default,
defined below, and with prior written notice to Debtor, may notify any or all
Obligors of the existence of the Security Interest and may direct the Obligors
to make all payments on the Collateral to Secured Party. Until Secured Party has
notified the Obligors to remit payments directly to it, Debtor, at Debtor's own
cost and expense, shall collect or cause to be collected the accounts and monies
due under the accounts, documents, instruments and general intangibles or
pursuant to the terms of the chattel paper. Secured Party shall not be liable or
responsible for any embezzlement, conversion, negligence or default by Debtor or
Debtor's agents with respect to such collections; all agents used in such
collections shall be agents of Debtor and not agents of Secured Party. Unless
Secured Party notifies Debtor in writing that it waives one or more of the
requirements set forth in this sentence, any payments or other proceeds of
Collateral received by Debtor after the occurrence of an Event of Default,
before or after notification to Obligors, shall be held by Debtor in trust for
Secured Party in the same form in which received, shall not be commingled with
any assets of Debtor and shall be turned over to Secured Party not later than
the next business day following the day of receipt. After the occurrence of an
Event of Default, all payments and other proceeds of Collateral received by
Secured Party directly or from Debtor shall be applied to the Obligation in such
order and manner and at such time as Secured Party, in its sole discretion,
shall determine. In addition, after the occurrence of an Event of Default,
Debtor shall promptly notify Secured Party of the return to or possession by
Debtor of goods underlying any Collateral; Debtor shall hold the same in trust
for Secured Party and shall dispose of the same as Secured Party directs.
6.2 Secured Party, after the occurrence of an Event of Default and
without notice to Debtor, may demand, collect and sue on the Collateral (either
in Debtor's or Secured Party's name), enforce, compromise, settle or discharge
the Collateral and endorse Debtor's name on any instruments, documents, or
chattel paper included in or pertaining to the Collateral; Debtor hereby
irrevocably appoints Secured Party its attorney in fact for all such purposes.
6.3 Until the occurrence of an Event of Default, Debtor may: (i) use,
consume and sell any inventory included in the Collateral in any lawful manner
in the ordinary course of Debtor's business provided that all sales shall be at
commercially reasonable prices; and (ii) subject to Paragraphs 6.1 and 6.2
above, retain possession of any other Collateral and use it in any lawful manner
consistent with this Agreement.
7. COLLATERAL IN THE POSSESSION OF SECURED PARTY
7.1 Secured Party shall use such reasonable care in handling,
preserving and protecting the Collateral in its possession as it uses in
handling similar property for its own account. Secured Party, however, shall
have no liability for the loss, destruction or disappearance of any Collateral
unless there is affirmative proof of a lack of due care; the lack of due care
shall not be implied solely by virtue of any loss, destruction or disappearance.
-5-
<PAGE> 6
7.2 Debtor shall be solely responsible for taking any and all actions
to preserve rights against all Obligors; Secured Party shall not be obligated to
take any such actions whether or not the Collateral is in Secured Party's
possession. Debtor waives presentment and protest with respect to any instrument
included in the Collateral on which Debtor is in any way liable and waives
notice of any action taken by Secured Party with respect to any instrument,
document or chattel paper included in any Collateral that is in the possession
of Secured Party.
8. EVENTS OF DEFAULT; REMEDIES
8.1 The occurrence of any of the following events or conditions shall
constitute and is hereby defined to be an "Event of Default":
(a) Any failure or neglect to perform or observe any of the
terms, provisions, or covenants of this Agreement, and such failure or
neglect either cannot be remedied or, if it can be remedied, it
continues unremedied for a period of thirty (30) days after notice
thereof to Debtor.
(b) Any warranty, representation or statement contained in
this Agreement that shall be or shall prove to have been false when
made or furnished.
(c) Any levy or execution upon, or judicial seizure of, any
portion of the Collateral or any other collateral or security for the
Obligation.
(d) Any attachment or garnishment of, or the existence or
filing of any lien or encumbrance against, any portion of the
Collateral or any other collateral or security for the Obligation that
is not removed and released within fifteen (15) days after its
creation, except for Permitted Liens.
(e) The institution of any legal action or proceedings to
enforce any lien or encumbrance upon any portion of the Collateral or
any other collateral or security for the Obligation, that is not
dismissed within fifteen (15) days after its institution, except for
Permitted Liens.
(f) The abandonment by Debtor of all or any part of the
Collateral.
(g) The loss, theft or destruction of, or any substantial
damage to, any portion of the Collateral or any other collateral or
security for the Obligation, that is not adequately covered by
insurance.
(h) The occurrence of any event of default under the Note, the
Credit Agreement or any other document or instrument executed or
delivered in connection with the Obligation.
8.2 Upon the occurrence of any Event of Default and at any time while
such Event of Default is continuing, Secured Party shall have the following
rights and remedies and may do one or more of the following:
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<PAGE> 7
(a) Declare all or any part of the Obligation to be
immediately due and payable, and the same, with all costs and charges,
shall be collectible thereupon by action at law.
(b) Without further notice or demand and without legal
process, take possession of the Collateral wherever found and, for this
purpose, enter upon any property occupied by or in the control of
Debtor. Debtor, upon demand by Secured Party, shall assemble the
Collateral and deliver it to Secured Party or to a place designated by
Secured Party that is reasonably convenient to both parties.
(c) Operate the business of Debtor as a going concern,
including, without limitation, extend sales or services to new
customers and advance funds for such operation. Secured Party shall not
be liable for any depreciation, loss, damage or injury to the
Collateral or other property of Debtor as a result of such action.
Debtor hereby waives any claim of trespass or replevin arising as a
result of such action.
(d) Pursue any legal or equitable remedy available to collect
the Obligation, to enforce its title in and right to possession of the
Collateral and to enforce any and all other rights or remedies
available to it.
(e) Upon obtaining possession of the Collateral or any part
thereof, after written notice to Debtor as provided in Paragraph 8.4
herein, sell such Collateral at public or private sale either with or
without having such Collateral at the place of sale. The proceeds of
such sale, after deducting therefrom all reasonable expenses of Secured
Party in taking, storing, repairing and selling the Collateral
(including reasonable attorneys' fees) shall be applied to the payment
of the Obligation, and any surplus thereafter remaining shall be paid
to Debtor or any other person that may be legally entitled thereto. In
the event of a deficiency between such net proceeds from the sale of
the Collateral and the total amount of the Obligation, Debtor, upon
demand, shall promptly pay the amount of such deficiency to Secured
Party.
8.3 Secured Party, so far as may be lawful, may purchase all or any
part of the Collateral offered at any public or private sale made in the
enforcement of Secured Party's rights and remedies hereunder.
8.4 Any demand or notice of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the Uniform Commercial
Code or otherwise, shall be deemed to be commercially reasonable and effective
if such demand or notice is given to Debtor at least five (5) days prior to such
sale, disposition or other intended action, in the manner provided herein for
the giving of notices.
8.5 Debtor shall pay all costs and expenses, including without
limitation costs of Uniform Commercial Code searches, court costs and reasonable
attorneys' fees, incurred by
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<PAGE> 8
Secured Party in enforcing payment and performance of the Obligation or in
exercising the rights and remedies of Secured Party hereunder. All such costs
and expenses shall be secured by this Agreement and by all deeds of trust and
other lien and security documents securing the Obligation. In the event of any
court proceedings, court costs and attorneys' fees shall be set by the court and
not by jury and shall be included in any judgment obtained by Secured Party.
8.6 In addition to any remedies provided herein for an Event of
Default, Secured Party shall have all the rights and remedies afforded a secured
party under the Uniform Commercial Code and all other legal and equitable
remedies allowed under applicable law. No failure on the part of Secured Party
to exercise any of its rights hereunder arising upon any Event of Default shall
be construed to prejudice its rights upon the occurrence of any other or
subsequent Event of Default. No delay on the part of Secured Party in exercising
any such rights shall be construed to preclude it from the exercise thereof at
any time while that Event of Default is continuing. Secured Party may enforce
any one or more rights or remedies hereunder successively or concurrently. By
accepting payment or performance of any of the Obligation after its due date,
Secured Party shall not thereby waive the agreement contained herein that time
is of the essence, nor shall Secured Party waive either its right to require
prompt payment or performance when due of the remainder of the Obligation or its
right to consider the failure to so pay or perform an Event of Default.
9. MISCELLANEOUS PROVISIONS
9.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the Security Interest; Secured Party
may resort, for the payment or performance of the Obligation, to its several
securities therefor in such order and manner as it may determine.
9.2 Without notice or demand, without affecting the obligations of
Debtor hereunder or the personal liability of any person for payment or
performance of the Obligation, and without affecting the Security Interest or
the priority thereof, Secured Party, from time to time, may: (i) extend the time
for payment of all or any part of the Obligation, accept a renewal note
therefor, reduce the payments thereon, release any person liable for all or any
part thereof, or otherwise change the terms of all or any part of the
Obligation; (ii) take and hold other security for the payment or performance of
the Obligation and enforce, exchange, substitute, subordinate, waive or release
any such security; (iii) join in any extension or subordination agreement; or
(iv) release any part of the Collateral from the Security Interest.
9.3 Debtor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any legal or equitable doctrine or principle of marshalling;
(iii) the benefits of any statute of limitations affecting the enforcement
hereof; (iv) demand, diligence, presentment for payment, protest and demand, and
notice of extension,
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<PAGE> 9
dishonor, protest, demand and nonpayment, relating to the Obligation; and (v)
any benefit of, and any right to participate in, any other security now or
hereafter held by Secured Party.
9.4 The terms herein shall have the meanings in and be construed under
the Uniform Commercial Code. This Agreement shall be governed by and construed
in accordance with the substantive laws (other than conflict laws) of the State
of California, except to the extent Secured Party has greater rights or remedies
under Federal law, whether as a national bank or otherwise, in which case such
choice of California law shall not be deemed to deprive Secured Party of any
such rights and remedies as may be available under Federal law. Subject to the
provisions of Section 10.6 of the Credit Agreement, each party consents to the
personal jurisdiction and venue of the state courts located in Los Angeles,
State of California in connection with any controversy related to this
Agreement, waives any argument that venue in any such forum is not convenient
and agrees that any litigation initiated by any of them in connection with this
Agreement shall be venued in the Superior Court of Los Angeles County,
California. The parties waive any right to trial by jury in any action or
proceeding based on or pertaining to this Agreement or any of the Credit
Documents as defined in the Credit Agreement.
9.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Debtor and a duly authorized officer of Secured Party.
9.6 This is a continuing Agreement which shall remain in full force and
effect until actual receipt by Secured Party of written notice of its revocation
as to future transactions and shall remain in full force and effect thereafter
until all of the Obligation incurred before the receipt of such notice, and all
of the Obligation incurred thereafter under commitments extended by Secured
Party before the receipt of such notice, shall have been paid and performed in
full.
9.7 No setoff or claim that Debtor now has or may in the future have
against Secured Party shall relieve Debtor from paying or performing the
Obligation.
9.8 Time is of the essence hereof. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their heirs,
personal representatives, successors and assigns. The term "Secured Party" shall
include not only the original Secured Party hereunder but also any future owner
and holder, including pledgees, of note or notes evidencing the Obligation. The
provisions hereof shall apply to the parties according to the context thereof
and without regard to the number or gender of words or expressions used.
9.9 All notices required or permitted to be given hereunder shall be in
writing and may be given in person or by United States mail, by delivery service
or by electronic transmission. Any notice directed to a party to this Agreement
shall become effective upon the earliest of the following: (i) actual receipt by
that party; (ii) delivery to the designated address of that party, addressed to
that party; or (iii) if given by certified or registered United States mail,
twenty-four (24) hours after deposit with the United States Postal Service,
postage prepaid, addressed to that party at its designated address. The
designated address of a party shall be the address of that party shown at the
beginning of this Agreement or such other address as that party, from time to
time, may specify by notice to the other parties.
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<PAGE> 10
9.10 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
9.11 Capitalized terms used and not otherwise defined herein shall have
the meanings assigned to such terms in the Credit Agreement.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
INTERACT COMMERCE CORPORATION, a
Delaware corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
DEBTOR
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<PAGE> 11
SCHEDULE "A"
COLLATERAL DESCRIPTION
All of the property described below in, to or under which Debtor now
has or hereafter acquires any right, title or interest, whether present, future
or contingent, and in Debtor's expectancy to acquire such property (all of the
property described on this schedule is herein called the "Collateral"):
1. All accounts, general intangibles, instruments, documents
and chattel paper (including all accounts receivable, notes, drafts,
lease agreements and security agreements), and all goods, if any,
represented thereby, whether now existing or hereafter acquired or
created from time to time in the course of Debtor's business;
2. All inventory now owned or hereafter acquired, including
all goods held for sale or lease in Debtor's business, as now or
hereafter conducted, and all materials, work in process and finished
goods used or to be consumed in Debtor's business (whether or not the
inventory is represented by warehouse receipts or bills of lading or
has been or may be placed in transit or delivered to a public
warehouse);
3. All equipment now owned or hereafter acquired, including
all furniture, fixtures, furnishings, vehicles (whether titled or
non-titled), machinery, materials and supplies, wherever located,
including but not limited to such items described on the collateral
schedule (if any) attached hereto and by this reference made a part
hereof, together with all parts, accessories, attachments, additions
thereto or replacements therefor;
4. All instruments, documents and chattel paper now held by or
hereafter delivered to Secured Party, together with all property rights
and security interests evidenced thereby, all increases thereof
(including, without limitation, stock dividends), all profits therefrom
and all transformations thereof, including but not limited to such
items described on the collateral schedule (if any) attached hereto and
by this reference made a part hereof;
5. All tax refund claims, all policies or certificates of
insurance covering any of the Collateral, all contracts, agreements or
rights of indemnification, guaranty or surety relating to any of the
Collateral, and all claims, awards, loss payments, proceeds and premium
refunds that may become payable with respect to any such policies,
certificates, contracts, agreements or rights;
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<PAGE> 12
6. All ledger cards, invoices, delivery receipts, worksheets,
books of accounts, statements, correspondence, customer lists, files,
journals, ledgers and records in any form, written or otherwise,
related to any of the Collateral;
7. Tradenames, trademarks, trademark applications, copyrights,
copyright applications, service marks, domain names and the entire
goodwill of or associated with the business now or hereafter conducted
by the Debtor; provided, however, that Debtor shall not be required to
register any copyrights on material it regards trade secrets;
8. All claims for loss or damage to or in connection with any
of the Collateral, all other claims in any form for the payment of
money, including tort claims, and all rights with respect to such
claims and all proceeds thereof;
9. All accessions to any of the Collateral; and
10. All products and proceeds of the Collateral, in any form,
including all proceeds received, due or to become due from any sale,
exchange or other disposition of any of the Collateral, whether such
proceeds are cash or noncash in nature or are represented by checks,
drafts, notes or other instruments for the payment of money.
All "Collateral Schedules," if any, attached hereto are hereby incorporated into
this collateral description as if set forth here and at each reference thereto.
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<PAGE> 13
SCHEDULE "B"
OTHER ADDRESSES
(Section 3)
1. 550 South Winchester Boulevard
Suite 300
San Jose, California 85128
2. 400 Country Club Road
Suite 400
Eugene, Oregon 97401
3. 8601 North Scottsdale Road
Suite 200
Scottsdale, Arizona 85258
<PAGE> 1
REVOLVING PROMISSORY NOTE
$4,000,000.00 Phoenix, Arizona
April 27, 2000
FOR VALUE RECEIVED, the undersigned (hereinafter called "Maker"),
promises to pay to the order of IMPERIAL BANK, a California banking corporation
(the "Payee"; Payee and each subsequent transferee and/or owner of this Note,
whether taking by endorsement or otherwise, are herein successively called
"Holder"), at Imperial Bank, 9920 South La Cienega Boulevard, Lending Services,
Inglewood, California 90301, or at such other place as Holder may from time to
time designate in writing, the principal sum of FOUR MILLION AND NO/100 DOLLARS
($4,000,000.00) or so much thereof as Holder may advance to or for the benefit
of Maker plus interest calculated on a daily basis (based on a 360-day year)
from the date hereof on the principal balance from time to time outstanding as
hereinafter provided, principal, interest and all other sums payable hereunder
to be paid in lawful money of the United States of America as follows:
A. Interest shall accrue:
(a) On the unpaid principal of an RLC Advance at the
Variable Rate, except to the extent that an RLC Advance bears
interest at the LIBOR Based Rate.
(b) On the unpaid principal of an RLC Advance at the
LIBOR Based Rate, to the extent Borrower shall elect and to
the extent not otherwise provided in the Credit Agreement.
B. All accrued and unpaid interest through the end of the
preceding month shall be due and payable on each Payment Date.
C. The entire unpaid principal balance, all accrued and unpaid
interest, and all other amounts payable hereunder shall be due and
payable in full on the RLC Maturity Date.
The "Variable Rate" means the rate per annum equal to (i) the Prime
Rate per annum as in effect from time to time, plus (ii) one-half of one percent
(0.50%); the Variable Rate shall change on each day that the "Prime Rate"
changes. The LIBOR Based Rate means the rate per annum equal to the sum of LIBOR
and three hundred basis points (300 b.p.). The "RLC Maturity Date" means April
26, 2001.
The principal balance of this Note represents a revolving credit all or
any part of which may be advanced to Maker, repaid by Maker, and re-advanced to
Maker from time to time, subject to the other terms hereof and the conditions,
if any, contained in the Credit Agreement of even date herewith (hereinafter
called "Credit Agreement") by and between Maker and Payee,
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<PAGE> 2
and provided that the principal balance outstanding at any one time shall not
exceed the face amount hereof.
Maker agrees to an effective rate of interest that is the rate stated
above plus any additional rate of interest resulting from any other charges in
the nature of interest paid or to be paid by or on behalf of Maker, or any
benefit received or to be received by Holder, in connection with this Note.
This Note is issued pursuant to the Credit Agreement and is secured by
the Security Documents, as defined in the Credit Agreement, and may now or
hereafter be secured by one or more other security agreements, mortgages, deeds
of trust, assignments or other instruments or agreements. Capitalized terms used
and not otherwise defined herein shall have the meanings assigned to such terms
in the Credit Agreement.
Time is of the essence of this Note, subject to the terms of the Credit
Agreement.
Maker shall pay all costs and expenses, including reasonable attorneys'
fees and court costs, incurred in the collection or enforcement of all or any
part of this Note. All such costs and expenses shall be secured by the Security
Documents.
Failure of Holder to exercise any option hereunder shall not constitute
a waiver of the right to exercise the same in the event of any subsequent
default or in the event of continuance of any existing default after demand for
strict performance hereof.
Maker and all sureties, guarantors and/or endorsers hereof (or of any
obligation hereunder) and accommodation parties hereon (severally each
hereinafter called a "Surety") each: (a) agree that the liability under this
Note of all parties hereto is joint and several; (b) severally waive any and all
formalities in connection with this Note to the maximum extent allowed by law,
including (but not limited to) demand, diligence, presentment for payment,
protest and demand, and notice of extension, dishonor, protest, demand and
nonpayment of this Note; and (c) consent that Holder may extend the time of
payment or otherwise modify the terms of payment of any part or the whole of the
debt evidenced by this Note, at the request of any other person liable hereon,
and such consent shall not alter nor diminish the liability of any person
hereon.
This Note shall be binding upon Maker and its successors and assigns
and shall inure to the benefit of Payee, and any subsequent holders of this
Note, and their successors and assigns.
All notices required or permitted in connection with this Note shall be
given at the place and in the manner provided in the Credit Agreement for the
giving of notices.
If any payment of interest and/or principal is not received by the
Holder within ten (10) days of when such payment is due, then in addition to the
remedies conferred upon the Holder herein and the other loan documents, a late
charge of five percent (5%) of the amount of the installment due and unpaid will
be added to the delinquent amount to compensate the Holder hereof for the
expense of handling the delinquency, regardless of any notice and cure period.
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<PAGE> 3
This Note shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of California, except
to the extent Holder has greater rights or remedies under Federal law, whether
as a national bank or otherwise, in which case such choice of California law
shall not be deemed to deprive Holder of any such rights and remedies as may be
available under Federal law. Subject to the provisions of Section 10.6 of the
Credit Agreement, each party consents to the personal jurisdiction and venue of
the state courts located in Los Angeles, State of California in connection with
any controversy related to this Note, waives any argument that venue in any such
forum is not convenient and agrees that any litigation initiated by any of them
in connection with this Note shall be venued in the Superior Court of Los
Angeles County, California. The parties waive any right to trial by jury in any
action or proceeding based on or pertaining to this Note or any of the Credit
Documents.
IN WITNESS WHEREOF, these presents are executed as of the date first
written above.
INTERACT COMMERCE CORPORATION, a
Delaware corporation
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
MAKER
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<PAGE> 1
EXHIBIT 10.6
MASTER LEASE AGREEMENT
LESSEE #655
DATED AS OF FEBRUARY 28, 2000
This MASTER LEASE AGREEMENT ("Master Lease"), is entered into as of February 28,
2000, between Imperial Bank Equipment Leasing Division, a division of Imperial
Bank (hereinafter called "Lessor"), having its principal place of business at
9920 La Cienega Boulevard, Inglewood, California 90301, and SalesLogix
Corporation, a Corporation (hereinafter called "Lessee"), having its principal
place of business at 8800 N. Gainey Center Drive, Suite 200,Scottsdale, AZ
85258.
I. LOCATION OF DEFINED TERMS
<TABLE>
<CAPTION>
LEASE LEASE
DEFINED TERM SECTION SUB-SECTION DEFINED TERM SECTION SUB-SECTION
- ------------ ------- ----------- ------------ ------- -----------
<S> <C> <C> <C> <C> <C>
Acceptance Date II D Interim Rent IV A
Assignee X A Interim Rental Term III C
Casualty Value VII C Item of Equipment II A
Certificate of Acceptance II D Lease Rate Factor IV A
Claims IX Lease Term III D
Damage VII A Lien VIII C
Daily Lease Rate Factor IV A Loss VII A
End of Term Notice XII A Master Lease Introduction
Equipment II A Purchase Documents II C
Event of Default XI A Rent IV A
Fair Market Value XII C Rent Due Date IV B
Improvement V C Renewal Term XII D
Initial Term III B Rental Period Option IV B
Equipment Repair Notice XIII B Schedule II B
Equipment Inspection Fee XIII B Seller II C
</TABLE>
II. LEASE OF EQUIPMENT
(A) Lease. Lessor agrees to lease to Lessee, and Lessee agrees to lease from
Lessor, subject to the terms and conditions of this Master Lease, the equipment
and related operating systems and other software (collectively, together with
all substitutions and replacements, the "Equipment," and individually, an "Item
of Equipment") described in the equipment schedules (each a "Schedule") executed
from time to time pursuant to this Master Lease.
(B) Schedules. Each Schedule substantially in the form of that attached, when
executed by Lessor and Lessee, shall constitute a separate lease and shall
incorporate by reference the terms and conditions of this Master Lease and any
additional terms and conditions agreed upon by the parties. In the event of a
conflict between the provisions of this Master Lease and a Schedule, the
provisions of the Schedule shall control.
(C) Equipment Procurement. Provided that no Event of Default or event which with
notice or lapse of time or both would constitute an Event of Default has
occurred and is continuing and subject to the representations and warranties set
forth in Section VIII, Lessor may from time to time procure equipment requested
by Lessee and lease it to Lessee pursuant to this Master Lease and a Schedule;
provided, however, Lessor shall not purchase any Equipment unless Lessee is
unconditionally bound to lease it under the terms of this Master Lease and a
Schedule. Lessee authorizes Lessor, in reliance on Lessee's request, to enter
into purchase orders, contracts or other documents ("Purchase Documents") for
acquisition of the Equipment with the seller of the Equipment ("Seller").
(D) Delivery Installation and Acceptance. Lessor or its designated
representative shall arrange for delivery and installation of the Equipment at
the location specified in the applicable Schedule. Lessee shall pay all costs
associated with packing, transportation, taxes, duties, insurance, delivery,
installation, testing and support of the Equipment. Lessor will have no
liability for any delay or failure of the Seller to deliver or service the
Equipment or license any software. Acceptance shall be deemed to occur upon the
date of execution by Lessee of a Certificate of Acceptance in the form of that
attached. Lessee hereby authorizes Lessor to insert in any Schedule the date of
acceptance (the "Acceptance Date") for any Item of Equipment as well as such
items as serial numbers and the Equipment description and cost resulting from
any orders or change orders occurring after the Schedule is executed. In the
event of replacement by the supplier or manufacturer of any Equipment that is
determined after acceptance to be defective, the Equipment list and serial
numbers on the applicable Schedule shall be deemed amended to reflect the
substitute Equipment.
III. TERM
(A) Master Lease Term. Unless otherwise extended by the parties hereto, the term
of this Master Lease shall begin upon execution hereof by Lessor and Lessee and
continue through the last date on which any Schedule entered into pursuant to
this Master Lease remains in effect.
(B) Initial Term. The initial term under each Schedule shall begin on the first
Rent Due Date occurring after the Acceptance Date under such Schedule and shall
continue through the end of the month of the number of months set forth in the
Schedule as the initial term ("Initial Term").
(C) Interim Rental Term. Prior to the commencement of the Initial Term under
each Schedule, Rent shall be due and payable to Lessor for the period beginning
on the Acceptance Date and continuing to the first Rent Due Date of the Initial
Term ("Interim Rental Term").
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(D) Lease Term. "Lease Term" shall mean for each Schedule the Interim Rental
Term, the Initial Term, and all Renewal Terms.
IV. RENT
(A) Rent. Rent for the Equipment under each Schedule for each Rental Period
("Rent") shall be an amount equal to the product of the percentage ("Lease Rate
Factor") set forth in such Schedule multiplied by the total cost of the
Equipment, as set forth in such Schedule. Rent for the Interim Rental Term
("Interim Rent") or any other partial rent period will be prorated on a daily
basis in an amount equal to 1/30th of the monthly Rent ("Daily Lease Rate
Factor"). Rent is payable in immediately available funds to Lessor at the
address or in accordance with the wire transfer instructions set forth in such
Schedule or as otherwise directed by Lessor.
(B) Rent Due Date. Rent under each Schedule (other than Rent for the Interim
Rental Term) shall be payable in advance, on each rent due date ("Rent Due
Date") of the period ("Rental Period"), as set forth in such Schedule. Rent for
the Interim Rental Term shall be due and payable on the first Rent Due Date of
the Initial Term.
(C) Past Due Amounts. To the extent permitted by applicable law, Lessee will pay
on demand a late charge as stipulated under each schedule on each installment of
Rent and any other sums payable hereunder which remain unpaid for more than ten
days after the due date thereof.
(D) NONCANCELABLE RENT AND LEASE OBLIGATIONS. ALL LEASES HEREUNDER SHALL BE NET
LEASES. LESSEE'S OBLIGATION TO PAY RENT AND OTHER AMOUNTS DUE UNDER THIS MASTER
LEASE AND EACH SCHEDULE SHALL BE ABSOLUTE AND UNCONDITIONAL, AND SHALL NOT BE
SUBJECT TO ANY SET OFF, COUNTERCLAIM, ABATEMENT, REDUCTION, RECOUPMENT,
INTERRUPTION OR DEFENSE FOR ANY REASONS WHATSOEVER. THIS AGREEMENT SHALL NOT
TERMINATE NOR SHALL THE OBLIGATIONS OF LESSEE BE AFFECTED BY REASON OF ANY
DEFECT IN OR DAMAGE TO, OR LOSS OF USE OR POSSESSION OF, OR DESTRUCTION OF, ANY
EQUIPMENT FROM ANY CAUSE WHATSOEVER. IT IS THE INTENTION OF THE PARTIES THAT,
RENTS AND OTHER AMOUNTS DUE HEREUNDER SHALL CONTINUE TO BE PAYABLE IN ALL EVENTS
IN THE MANNER AND AT THE TIMES SET FORTH HEREIN UNLESS THE OBLIGATION IS
TERMINATED PURSUANT TO THE EXPRESS TERMS HEREOF. THIS MASTER LEASE AND THE
SCHEDULES CANNOT BE PREPAID OR TERMINATED BY LESSEE DURING THE TERM THEREOF
UNLESS AGREED TO IN WRITING BY LESSOR.
V. EQUIPMENT OWNERSHIP, USE, MAINTENANCE AND PROTECTION
(A) Ownership and Use. Lessee shall use the Equipment in a manner which will not
disqualify it for manufacturer maintenance, and in compliance with all laws,
rules and regulations of every governmental authority having jurisdiction over
the Equipment and within the provisions of all policies of insurance carried by
Lessee. Lessee shall obtain all permits, licenses or other authorizations
necessary for the operation and use of the Equipment. Lessee shall pay all
costs, expenses, fees and charges incurred in connection with the use and
operation of the Equipment. Upon Lessor's request, Lessee will affix and
maintain, in a prominent place on each Item of Equipment, plates, tags or other
identifying markings indicating Lessor's ownership of the Equipment. Lessee
shall not move any Item of Equipment from the location set forth on the
applicable Schedule without the prior written consent of Lessor, which consent
shall not be unreasonably withheld. Lessor may upon reasonable prior notice to
Lessee and during regular business hours inspect the Equipment.
(B) Lessor's Entitlement to Tax Benefits. Lessee acknowledges that Lessor is the
only party entitled to claim tax benefits provided by federal, state and local
income tax law to the owner of the Equipment ("Tax Benefits"), and Lessee agrees
to characterize the relationship herein established as a lease. If requested by
Lessor, Lessee shall furnish Lessor with records and other information necessary
to claim such Tax Benefits. Lessee shall not, and shall not permit any permitted
sub-lessee or assignee to, take or omit to take any action that may result in
the disqualification of the Equipment for, or any recapture of all or any
portion of the Tax Benefits afforded the Equipment.
(C) Improvements. Lessee shall have the right, or the right to cause the Seller
or another nationally recognized and experienced maintenance provider, to affix
or install any accessory, feature, device, improvement, modification, addition,
accession or upgrade ("Improvement") that is compatible with the Equipment. In
the event an Improvement is financed, a party other than Lessor may not finance
it. If Lessor finances any Improvement, it will be leased under the Schedule
covering the related Equipment, and the lease term for the Improvement will be
coterminous with such Schedule. Prior to the return of the Equipment, Lessee may
(if it so chooses and if the Improvement is not financed by Lessor) and shall
(if Lessor so requests) remove the Improvements or cause the Improvements to be
removed by the Seller or another nationally recognized and experienced
maintenance provider, and restore or cause to be restored the Equipment to its
original state, ordinary wear and tear excepted. Lessee shall not remove any
original parts from the Equipment without Lessor's prior written consent. Any
Improvements not removed from the Equipment upon its return or upon the
occurrence of an Event of Default shall, at Lessor's option, become the property
of Lessor.
(D) Maintenance. Lessee shall, at its own cost and expense and at all times
during the Lease Term, take all actions necessary to maintain or cause to be
maintained by the Seller, manufacturer or a third party maintenance provider
reasonably acceptable to Lessor, the Equipment and all Improvements in good
working order, condition and repair, at the Equipment manufacturer's most
current engineering levels (including replacement of all parts which become
damaged or worn out), and in compliance with such maintenance and repair
standards as are set forth in the manufacturer's manual pertaining to the
Equipment, and as otherwise may be required to enforce warranty claims against
each vendor and manufacturer of each item of Equipment, and in compliance with
all requirements of law. Lessee will not discriminate such maintenance between
owned and leased equipment. Lessee shall comply with all instructions issued by
the manufacturer of the Equipment, and Lessee assumes and agrees to pay any cost
necessary to have the manufacturer re-certify that the Equipment will be
eligible upon resale or release by Lessor, for the manufacturer's maintenance
contract at the manufacturer's standard rates as required under Section XII(B).
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(E) Insurance. (1) Lessee will insure for the following risks with insurers of
recognized responsibility: (a) All risk of loss and physical damage to the
Equipment in an amount not less than the greater of (i) the fair market
replacement value or (ii) the aggregate Casualty Value of all Equipment from
time to time and; (b) Comprehensive public liability and property damage
insurance with respect to the condition, possession, maintenance, operation and
use of the Equipment, in an amount not less than $1,000,000 for each occurrence.
Such insurance shall be in full force and effect by not later than the
Installation Date for each item of Equipment and shall remain in effect until
such time as each item of Equipment has been returned to, and accepted by,
Lessor in accordance with the provisions of Section XII(B) hereof.
(F) Delivery of Insurance Certificates. Lessee shall deliver to Lessor and any
Assignee(s) a valid Certificate of Insurance for each such insurance policy upon
the execution thereof and a Certificate of Insurance for each renewal policy not
less than 30 days prior to the expiration of the original policy or any renewal
policy. Such insurance shall (1) include as additional parties insured and loss
payees Lessor and any Assignee(s), (2) provide that such insurance shall not be
materially changed or canceled without at least 30 days prior notice to Lessor
and such Assignees, and (3) provide that such policy shall not be invalidated by
any negligence of, or breach of warranty by, Lessee. Upon the request of Lessor,
Lessee shall provide any additional data related to the insurance as Lessor
reasonably requests.
(G) Failure to Provide Insurance. Lessee acknowledges and agrees that if Lessee
fails to provide any required insurance or fails to continue such insurance in
force, Lessor may do so at Lessee's expense. The cost of any such insurance, at
the option of Lessor, shall be payable on demand or shall be added to the lease
indebtedness. LESSEE ACKNOWLEDGES THAT IF LESSOR SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE EQUIPMENT, UP TO THE BALANCE OF THE LEASE; HOWEVER, LESSEE'S EQUITY IN
THE EQUIPMENT MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY
PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENT OF ANY FINANCIAL RESPONSIBILITY LAWS.
VI. DISCLAIMER OF WARRANTIES; LIMITATION OF REMEDIES
LESSOR IS NOT A MANUFACTURER, SUPPLIER OR DEALER OF THE EQUIPMENT AND HAS NOT
INSPECTED THE EQUIPMENT PRIOR TO DELIVERY TO AND ACCEPTANCE BY LESSEE. LESSOR
HAS NOT MADE AND DOES NOT MAKE ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, WITH RESPECT TO THE EQUIPMENT, INCLUDING, WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY AS TO TITLE, CONDITION, QUALITY, DESIGN, CAPACITY,
VALUE, DURABILITY, SUITABILITY, SAFETY, OR COMPLIANCE WITH ANY LAW, RULE,
REGULATION OR SPECIFICATION, AS TO MERCHANTABILITY OR FITNESS FOR USE OR FITNESS
FOR A PARTICULAR PURPOSE, OR AS TO PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT,
IT BEING AGREED THAT THE EQUIPMENT IS LEASED 'AS IS' AND THAT ALL SUCH RISKS, AS
BETWEEN LESSOR AND LESSEE, ARE TO BE BORNE BY LESSEE. LESSEE ACKNOWLEDGES THAT
IT HAS SELECTED THE EQUIPMENT FROM THE SELLER THEREOF ON THE BASIS OF LESSEE'S
JUDGMENT AND EXPRESSLY DISCLAIMS ANY RELIANCE UPON ANY STATEMENT MADE BY LESSOR
OR ITS AGENTS. LESSOR SHALL NOT IN ANY EVENT BE LIABLE FOR ANY INDIRECT,
CONSEQUENTIAL OR SPECIAL DAMAGES, EVEN IF LESSOR HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
VII. RISK OF LOSS
(A) Risk of Loss. Lessee shall bear the entire risk of the Equipment if damaged,
destroyed or rendered permanently unfit or unavailable for use after its
shipment to Lessee and until it is accepted by Lessor in accordance with Section
XII(B) hereof.
(B) Damage/Event of Loss. (1) In the event any item of Equipment is damaged to a
material extent by any occurrence whatsoever, Lessee shall promptly notify
Lessor and shall determine within 15 days of the date of such notice whether
such item of Equipment can be repaired. If such Equipment can be repaired,
Lessee shall at its cost and expense repair such Equipment to its original
condition. (2) In the event any item of Equipment shall be lost, stolen,
destroyed, damaged beyond repair, or rendered permanently unfit or unavailable
for use (through a governmental taking or any other event), for any reason
whatsoever (any such occurrence being referred to as an "Event of Loss"), Lessee
shall promptly notify Lessor and pay to Lessor, on the first day of the month
immediately following such Event of Loss, an amount equal to the Casualty Value
applicable to such item of Equipment calculated as of the immediately preceding
Rent Due Date plus any unpaid Rent and the installment of Rent for such item of
Equipment due on the Rent Due Date following the Event of Loss. After the
payment of such amounts, Lessee's obligation to pay further Basic Rent for such
item of Equipment shall cease, but Lessee's obligation to pay Interim Rent, if
any, for such item of Equipment, and to pay Rent for all other items of
Equipment shall remain unchanged. (3) Following payment of the Casualty Value
and Rent for an item of Equipment in accordance with the provisions of sentence
2 of this Section VII(B), Lessor shall transfer title to such item of Equipment
to Lessee on an AS IS, WHERE IS basis without representation or warranty.
(C) Casualty Value. The Casualty Value from time to time for any item of
Equipment subject to a Schedule shall be an amount equal to the greater of (1)
the item of Equipment's installed/in-place fair market value at the time of the
Casualty Value determination, or (2) 110% of the Item(s) of Equipment cost as of
the Acceptance Date, declining in even monthly steps to 12% at expiration and
remaining at that value thereafter.
(D) Disposition of Insurance and Other Proceeds. The proceeds of insurance or
any condemnation of an item of Equipment for which an Event of Loss has occurred
shall be paid to Lessor (to the extent that Lessor has not previously received
all Casualty Value and other payments required to be made by Lessee pursuant to
the Lease), and the remainder, if any, shall be paid to Lessee. The proceeds of
insurance with respect to damage to an item of Equipment, the repair of which,
in the opinion of Lessee, is practicable shall unless an Event of Default
hereunder has occurred and is continuing be applied either to such repair or to
the reimbursement of Lessee for the cost of such repair.
VIII. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS
(A) Representations and Warranties. Lessee represents, warrants and covenants to
Lessor, as of the date of this Master Lease and as of the date of each Schedule,
that: (1) Lessee's execution, delivery and performance of this Master Lease and
each Schedule have been duly authorized by all
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necessary action on the part of Lessee, and this Master Lease and each Schedule
constitute legal, valid and binding obligations of Lessee; (2) the execution and
delivery by Lessee of this Master Lease and each Schedule and the performance of
its obligations thereunder do not conflict with or result in a material breach
of Lessee's organizational documents or applicable law, or any judgment order,
writ, injunction, decree, rule or regulation of any court, administrative agency
or other governmental authority, or any agreement or other instrument to which
Lessee is a party or by which it is bound; (3) there are no pending or, to the
knowledge of Lessee, threatened actions or proceedings that could materially
adversely affect the ability of Lessee to perform its obligations under this
Master Lease and the Schedules; (4) there has been no material adverse change in
Lessee's financial condition since the date of this Master Lease; and (5) Lessee
has obtained the proper licenses to use, or ownership of, any software which is
or may be used in connection with the Equipment.
(B) Assignment and Transfer. LESSEE SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT
OF LESSOR, SELL, TRANSFER, ASSIGN, SUBLEASE (EXCEPT, UPON PRIOR WRITTEN NOTICE
TO LESSOR, A SUBLEASE TO A WHOLLY OWNED OR CONTROLLED SUBSIDIARY OR TO ITS
PARENT), PLEDGE OR HYPOTHECATE THIS MASTER LEASE, ANY SCHEDULE, THE EQUIPMENT OR
ANY PART THEREOF OR ANY INTEREST THEREIN. Lessee shall not, without the prior
written consent of Lessor, which shall not be unreasonably withheld, merge or
consolidate with any corporation or other entity (unless Lessee is the surviving
entity or the surviving entity continues the business of Lessee and assumes this
Master Lease and all Schedules) and shall not sell, transfer or otherwise
dispose of all or any substantial part of Lessee's assets.
(C) No Liens. Lessee shall not directly or indirectly create, incur, assume or
allow to exist any lien, mortgage, pledge, security interest, charge,
encumbrance, right, or claim of any kind ("Lien") on or with respect to this
Master Lease, any Schedule or any Item of Equipment. Lessee will promptly notify
Lessor in writing of the existence of any Lien and will promptly, at Lessee's
expense, cause any such Lien to be duly discharged.
(D) Payment of Taxes. Lessee shall reimburse Lessor for, and indemnify and hold
Lessor harmless from, all sales, use, personal property, stamp or other taxes,
and all levies, imposts, duties, charges, fees, assessments or withholdings of
any nature whatsoever (other than those measured by Lessor's net income),
together with any penalties, fines or interest thereon which are at any time
levied, assessed or imposed on the Equipment or any interest of Lessor or Lessee
therein or on the sale, purchase, delivery, ownership, possession, use or
operation of the Equipment or the rentals or other amounts payable under this
Agreement or any Schedule. If requested by Lessor or if filing by Lessee is
required by law, Lessee shall prepare and file, or cause to be prepared and
filed, all necessary forms for the assessment of such taxes and shall promptly
send to Lessor a copy of such filing.
(E) Financial Reports. Lessee shall upon execution hereof, and for the term of
this Master Lease and any Schedules, amendments, extensions and addendums
thereto, furnish or caused to be furnished to Lessor the following: (1) the
audited financial statements of Lessee within 120 days after the close of each
fiscal year; and (2) upon request, quarterly financial statements in a form
reasonably acceptable to Lessor within 60 days after the close of each fiscal
quarter.
(F) Further Assurances; Payment of Lessor's Expenses. Lessee shall promptly
execute and deliver, or cause to be executed and delivered, to Lessor such
further documents and take such further action as Lessor may from time to time
request in order to more effectively carry out the intent and purpose of this
Master Lease and each Schedule, protect the rights and remedies of Lessor
created or intended to be created thereunder and perfect and protect Lessor's
interest in the Equipment. Lessee shall pay all reasonable costs (including
reasonable legal fees and costs) and expenses incurred by Lessor in the
consummation or interpretation of this Master Lease or any Schedule; in
collecting or attempting to collect any sums owed under this Master Lease or any
Schedule; or in enforcing any of Lessor's rights or remedies under this Master
Lease or any Schedule. Lessee shall also pay all filing fees, Lien search fees,
recordation fees and related expenses reasonably incurred by Lessor in
connection with this Master Lease or any Schedule.
IX. GENERAL INDEMNITY
(A) LESSEE SHALL INDEMNIFY, HOLD HARMLESS AND DEFEND LESSOR AND ITS SUCCESSORS
AND ASSIGNS AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
AGAINST ALL CLAIMS DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE
EQUIPMENT, THIS MASTER LEASE OR ANY SCHEDULE, EXCEPT FOR CLAIMS RESULTING SOLELY
FROM LESSOR'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. "CLAIMS" REFERS TO ALL
LOSSES, LIABILITIES, DAMAGES, PENALTIES, EXPENSES (INCLUDING REASONABLE LEGAL
FEES AND COSTS), CLAIMS, ACTIONS AND SUITS, WHETHER IN CONTRACT OR IN TORT AND
WHETHER BASED ON A THEORY OF STRICT LIABILITY OF LESSOR OR OTHERWISE, AND
INCLUDES, BUT IS NOT LIMITED TO, MATTERS RELATING TO: (1) THE SELECTION,
MANUFACTURE, PURCHASE, ACCEPTANCE, REJECTION, OWNERSHIP, DELIVERY, LEASE,
POSSESSION, STORAGE, MAINTENANCE, USE, CONDITION, RETURN OR OPERATION OF THE
EQUIPMENT; (2) ANY LATENT DEFECTS OR OTHER DEFECTS IN ANY EQUIPMENT, WHETHER OR
NOT DISCOVERABLE BY LESSOR OR LESSEE; (3) ANY PATENT, TRADEMARK OR COPYRIGHT
INFRINGEMENT; AND (4) THE CONDITION OF ANY EQUIPMENT ARISING OR EXISTING DURING
LESSEE'S USE. (B) LESSOR SHALL PROMPTLY NOTIFY LESSEE OF ANY CLAIM AFTER RECEIPT
OF A WRITTEN NOTICE OF SUCH CLAIM BY LESSOR, AND LESSEE SHALL HAVE THIRTY (30)
DAYS TO ELECT TO DEFEND, COMPROMISE OR SETTLE THE CLAIM. IF LESSEE ELECTS TO
DEFEND THE CLAIM, (1) LESSOR SHALL HAVE THE RIGHT TO APPROVE LESSEE'S SELECTION
OF COUNSEL, WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD, AND SHALL HAVE
THE RIGHT AT ITS ELECTION TO PARTICIPATE IN SUCH DEFENSE, AND (2) LESSEE SHALL
NOT BE RESPONSIBLE FOR ANY LEGAL FEES OR OTHER EXPENSES RELATING TO DEFENSE OF
THAT CLAIM THAT LESSOR MAY THEREAFTER ELECT TO INCUR. LESSEE SHALL NOT CONSENT
TO ENTRY OF ANY JUDGMENT OR ENTER INTO ANY SETTLEMENT WITHOUT THE EXPRESS
WRITTEN CONSENT OF LESSOR. THIS INDEMNIFICATION OBLIGATION SHALL SURVIVE
TERMINATION OR EXPIRATION OF THIS MASTER LEASE OR ANY SCHEDULE.
X. LESSOR RIGHTS
(A) Assignment. Lessor (and any assignee of Lessor) shall have the right to
sell, assign, transfer, pledge, mortgage or otherwise convey its interest in
this Master Lease, one or more Schedules, any or all of the Equipment or any of
its rights, interests or obligations with respect thereto, in whole or in part,
to one or more persons or entities (each, an "Assignee") without notice to, or
consent of, Lessee. Notwithstanding such assignment, Lessor shall
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not be relieved of its obligations hereunder except to the extent of such
assignment. Lessee agrees that if any Schedule is assigned, (1) Lessee shall, if
instructed by Lessor, pay all amounts due under such Schedule to the Assignee,
(2) Lessee shall execute such acknowledgments to such assignment as are
reasonably required by the Assignee to perfect and protect its right, title and
interest in and to the Equipment, the applicable Schedule and the Rent due
thereunder, and (3) Lessee shall not require the Assignee to perform any
obligation of Lessor, other than those that are expressly assumed by such
Assignee, and shall not assert against any Assignee any claim, defense,
counterclaim or set-off that Lessee may at any time have against Lessor.
LESSEE ACKNOWLEDGES THAT ANY ASSIGNMENT OR TRANSFER IN ACCORDANCE WITH THIS
SECTION BY LESSOR OR AN ASSIGNEE WILL NOT MATERIALLY CHANGE LESSEE'S DUTIES OR
OBLIGATIONS UNDER THIS MASTER LEASE OR THE ASSIGNED SCHEDULE NOR MATERIALLY
INCREASE THE BURDENS OR RISKS IMPOSED ON LESSEE.
(B) Lessor's Performance of Lessee's Obligations. If Lessee fails to perform its
obligations under this Master Lease or any Schedule, Lessor shall have the right
but not the obligation, without releasing Lessee from any obligation hereunder
or under any Schedule, to perform any act or make any payment that Lessor
reasonably deems necessary for the maintenance and protection of the Equipment
and Lessor's interests in the Equipment and in this Master Lease and the
Schedules, and in exercising any such rights, incur any liability and expend any
amounts reasonably necessary to protect such interests. All sums so incurred and
expended by Lessor, together with expenses (including reasonable legal fees and
costs) incurred in connection therewith, shall be immediately due and payable by
Lessee and shall bear interest at the interest rate for late payments set forth
in the applicable Schedule (or such lesser rate or amount as may then be the
maximum permitted by applicable law), from the date so incurred or expended by
Lessor to the date payment is received by Lessor.
(C) Financing Statements. Lessor may, at its option, file with such authorities
and in such locations, as it may deem appropriate, Uniform Commercial Code
financing statements relating to the Equipment, this Master Lease, the Schedules
and the rents payable thereunder. Lessee agrees to promptly execute and deliver
to Lessor any such financing statements requested by Lessor: provided that
Lessor may, at its option, file Uniform Commercial Code financing statements
signed by Lessor only, and if Lessee's signature is required by law, Lessee
appoints Lessor as Lessee's attorney-in-fact to execute such financing
statements or file a copy of this Master Lease or any Schedule as a financing
statement. Lessee will promptly notify Lessor of any change in the location of
its principal place of business or chief executive office.
XI. DEFAULT AND REMEDIES
(A) Events of Default. An "Event of Default" shall occur hereunder and under all
Schedules if Lessee (1) fails to pay any installment of Rent or other payment
required hereunder or under any Schedule within the time period set forth in a
Schedule; (2) is in default subject to the terms of any other loan or lease
agreement with Imperial Bank or any other party; (3) fails to timely perform or
observe any covenant, condition or agreement set forth in this Master Lease or
any Schedule; (4) experiences a material adverse change in its financial
condition as reasonably determined by Lessor; (5) becomes insolvent or makes an
assignment for the benefit of creditors, or institutes or has instituted against
it bankruptcy, reorganization or insolvency proceedings (and, in the case of any
such proceedings instituted against Lessee, such proceeding is not stayed or
dismissed within thirty (30) days), or a trustee, administrator or receiver
shall be appointed for Lessee or for a substantial part of its property; or (6)
makes any statement, representation or warranty in this Master Lease or any
Schedule that is false or misleading in any material respect when made.
(B) Remedies. (1) If an Event of Default occurs under the Lease, Lessor may give
Lessee notice of the Event of Default and upon the giving of such notice or at
any time thereafter do any or all of the following (as Lessor in its sole
discretion elects): (a) proceed by appropriate court action or actions to
enforce performance by Lessee of the applicable covenants and terms of the Lease
or to recover damages for the breach thereof; (b) take possession (by summary
proceedings or otherwise) of any or all items of Equipment subject to the Lease
without prejudice to any other remedy or claim herein referred to; (c) hold,
sell, lease, or otherwise dispose of, any or all items of Equipment subject to
the Lease, in any manner Lessor (in its sole discretion) elects; (d) receive
from Lessee upon demand for any or all Equipment subject to the Lease the
following amounts which Lessee shall be obligated to pay: (i) any unpaid Rent
past due, (ii) as liquidated damages for loss of bargain and not as a penalty,
the aggregate Casualty Value for such Equipment under the Lease in effect as of
the date on which such Event of Default occurred, (iii) all costs and expenses
incurred in searching for, taking, removing, keeping, storing, repairing, and
restoring such items of Equipment, (iv) all other amounts then owing by Lessee
hereunder; and (v) all costs and expenses, including (without limitation)
reasonable legal fees and expenses, incurred by Lessor as a result of an Event
of Default, or the exercise by Lessor of its remedies under this Section XI(A)
or in connection with any bankruptcy proceeding of the Lessee (including,
without limitation, fees and expenses incurred in connection with relief from
stay motions relating to the Equipment, cash collateral disputes,
assumption/rejection motions relating to the Equipment and disputes relating to
any proposed plan and/or disclosure statement); (e) by notice to Lessee, declare
the Lease (for any or all Equipment) canceled without prejudice to Lessor's
rights in respect of all obligations set forth in this Section XI(A) and any
other obligations under the Lease then accrued and remaining unsatisfied; or (f)
avail itself of any other remedy or remedies provided for by any statute or
otherwise available by law, in equity or in bankruptcy or insolvency
proceedings; or (g) terminate any other Lease that Lessor may have with Lessee.
(C) The remedies set forth in this Section XI(B), (Remedies), are not intended
to be exclusive, and each shall be cumulative. The amounts to be paid to Lessor
under clause (d) of Section XI(B) shall be increased by interest, at the Overdue
Rate, to the date of receipt by Lessor of the amount payable under said clause,
from the respective due dates of such amounts or (with respect to costs,
expenses, and losses for which Lessor is entitled to payment or reimbursement
under said clause) from the respective dates incurred by Lessor.
(D) Any amounts received by Lessor as the result of its sale, lease during the
original term hereof, or other disposition of the Equipment hereunder shall be
paid or applied in the following order: (1) to any remaining obligation of
Lessee under clause (d) of Section XI (B), (2) to reimburse Lessee for the
Casualty Value previously paid as liquidated damages, and (3) to Lessor, any
remaining balance.
XII. END OF LEASE TERM
(A) End of Term Notice. Lessee shall give Lessor no less than ninety (90) days
and no more than 365 days written notice prior to the expiration of the
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Lease Term under any Schedule, as to whether it will purchase, return or extend
the term of the leased Equipment on the applicable Schedule at expiration of the
Lease Term ("End of Term Notice"). If Lessee fails to give timely notice or
fails to return the Equipment to Lessor upon expiration of the Lease Term as
provided herein, the Schedule shall continue in full force and effect and will
extend on a month to month basis at the applicable Rent, until Lessee provides
Lessor with ninety (90) days prior written notice of Lessee's intent to
purchase, return or extend the term of the leased Equipment on the applicable
Schedule. Such notice once given shall be irrevocable.
(B) Return. (1) Upon the expiration or other permitted termination of this
Schedule or any extension thereof, Lessee, at its sole cost, risk, and expense,
will return to Lessor all, (but not less than all), of the Equipment then
subject to the Schedule to a location in the Continental United States specified
by Lessor. Lessee shall be responsible at its sole cost and expense, for (a) the
de-installation, removal and packaging of the Equipment (including, but not
limited to, any and all software, all manuals, maintenance records, maintenance
record jackets, repair orders and all other similar documents) in a manner
suitable for cartage by a common commercial carrier acceptable to Lessor, and
(b) the transportation of the Equipment, upon written notification by Lessor, as
to the date and destination of the shipping. Such Equipment, upon return, shall
be free and clear of all mortgages, liens, security interest, charges,
encumbrances and claims. If Lessor shall so require, Lessee shall provide free
and safe storage, as well as maintain sufficient insurance coverage (as
specified in the Master Lease) for such Equipment for a period not to exceed 120
days from the expiration date or the last day of any extension period therefor.
(2) Upon return of such Equipment, Lessor or its agent shall inspect the
Equipment. If any item of Equipment is not returned to Lessor, it shall be
deemed to be a casualty and an Event of Loss during the Lease Term. In the event
Lessor determines that repairs, additions or replacements are necessary to place
the Equipment in the same condition as when originally leased to Lessee
(reasonable wear and tear excepted), which at a minimum will require that the
Equipment be in complete and running condition with no missing or damaged
components and/or certified as being eligible for the Seller's or the
manufacturer's generally available maintenance contract at then prevailing
prices. (3) If Lessor determines that the Equipment (after inspection) is
damaged or worn beyond normal wear and tear, Lessor or Lessor's agent will
prepare an invoice which fully describes the repairs and the estimated cost
required to place the Equipment in complete and running condition, and certified
as being eligible for the Seller's or the manufacturer's generally available
maintenance contract ("Equipment Repair Notice"). Lessee shall pay such invoiced
costs in addition to an inspection fee equal to one-tenth (.1%) percent of the
applicable Equipment's Cost ("Equipment Inspection Fee"), within ten (10) days
of the date of such notice. (4) In the event Lessee fails to remit payment to
Lessor within ten (10) days of receiving such Equipment Repair Notice, Lessee
shall pay to Lessor, Interim Rent equal to the Daily Lease Rate Factor,
multiplied by the Equipment cost as set forth in the applicable Schedule, for
each day in excess of the Lease Term, until such Equipment Repair Notice payment
is made.
(C) Purchase Option. Provided that no Event of Default has occurred and the
applicable Equipment Schedule has not been previously terminated, Lessee shall
have the right at its option, upon not less than 90 days and no more than 365
days written notice to Lessor prior to the Expiration Date, to purchase all (but
not less than all) of the Equipment subject to the applicable Equipment Schedule
on its Expiration Date. In such case, Lessee's purchase price shall be payable
to Lessor on the Expiration Date and shall be an amount equal to the Equipment's
fair market value as determined by Lessor in good faith. Lessor shall transfer
to Lessee, "AS IS" "WHERE IS," without recourse or warranty, expressed or
implied, of any nature (except to warrant to those claiming by, under or through
Lessee, the absence of any liens created by Lessor), all of Lessor's right,
title and interest in and to the Item(s) of Equipment with respect to which such
payment has been received.
(D) Renewal Option. Provided that no Event of Default has occurred and the
applicable lease Schedule has not been earlier terminated, Lessee shall have the
right at its option, upon not less than ninety (90) days and no more than 365
days written notice to Lessor prior to the Expiration Date, to renew all (but
not less than all) of the Equipment subject to the applicable Equipment Schedule
for a firm term renewal period not less than six months.
XIII. MISCELLANEOUS
(A) Captions: Counterparts; Integration: Entire Agreement. The captions
contained in this Master Lease are for convenience only and shall not affect the
interpretation of this Master Lease. This Master Lease and the Schedules may be
executed by the parties in one or more counterparts, each of which shall be
deemed an original, but all of which shall constitute one and the same
agreement. Only one counterpart of this Master Lease and each Schedule shall be
marked "Original," and all other counterparts shall be marked "Duplicate." To
the extent, if any, that this Master Lease or any Schedule constitutes chattel
paper (as such term is defined in the Uniform Commercial Code in effect in any
applicable jurisdiction), no security interest in this Master Lease or any such
Schedule may be created through the transfer or possession of any counterpart
other than the Original. THIS AGREEMENT, TOGETHER WITH ALL SCHEDULES, ANNEXES
AND EXHIBITS THERETO, CONSTITUTES THE ENTIRE AGREEMENT OF THE PARTIES WITH
RESPECT TO THE SUBJECT MATTER HEREOF. NO VARIATION OR MODIFICATION OF THIS
AGREEMENT OR ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS SHALL BE VALID
UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF EACH OF THE
PARTIES HERETO.
(B) Notices. All notices under this Master Lease and the Schedules shall be in
writing and shall be delivered to the parties by certified mail, return receipt
requested, by courier service or by facsimile transmission, at their respective
addresses or facsimile numbers set forth in the Schedules (or such other address
or number as either party may designate in writing from time to time). Notice
shall be deemed to have been given (1) on the third day after being deposited in
the United States mail, by certified mail, return receipt requested, properly
addressed and with postage prepaid; or (2) on the day delivered by courier
service or transmitted by facsimile.
(C) No Waiver: Lessor Approval. Any failure of Lessor to require strict
performance by Lessee or any written waiver by Lessor of any provision of this
Master Lease or any Schedule shall not constitute consent to or waiver of any
other breach of the same or any other provision of this Master Lease or any
Schedule. This Master Lease and each Schedule shall not be binding upon Lessor
unless and until executed by Lessor.
(D) Governing Law: Severability. THIS MASTER LEASE AND EACH SCHEDULE SHALL. BE
GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE
STATE OF CALIFORNIA. If any provision of this Master Lease or any Schedule is
illegal, invalid or unenforceable under any applicable law of any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent such
laws apply without invalidating the remaining provisions of this Master Lease or
such Schedule or causing such provision to be ineffective or unenforceable under
the laws of any other jurisdiction.
Page 6 of 16
<PAGE> 7
(E) Quiet Enjoyment. So long as no Event of Default has occurred and is
continuing, neither Lessor nor any Assignee will interfere with Lessee's quiet
enjoyment and use of the Equipment.
(F) Survival. All obligations of Lessee to make payments to Lessor under this
Master Lease or any Schedule or to indemnify Lessor pursuant to the terms of
this Master Lease or any Schedule, and all rights of Lessor under this Master
Lease and each Schedule shall survive the expiration or termination of this
Master Lease and each Schedule.
(G) Software. Any software or other licensed products attached to or provided in
connection with the Equipment shall at all time remain property of the owner
thereof, and Lessee shall not obtain title to any such software.
(H) Export Laws. Lessee shall not export or re-export, directly or indirectly,
any software or technology received by it in connection with this Master Lease
or any Schedule, or allow the direct product thereof to be exported or
re-exported, directly or indirectly, in violation of applicable law, including
without limitation the regulations of the United States Department of Commerce.
(I) Present Value. In the event it is necessary to determine the present value
of rentals under any Schedule, the parties agree that the discount rate to be
used in determining such present values shall be the then prevailing Federal
Reserve Bank Discount Rate as published in the Wall Street Journal as of the
date of discounting.
(J) Foreign Corrupt Practices Act. The parties shall comply with all applicable
laws affecting this Agreement and the performance of this Agreement. The parties
shall maintain all registrations with governmental agencies, commercial
registries chambers of commerce, or other offices which may required under local
law in order to conduct their commercial business. The parties shall also comply
with United States laws applicable to the sale of the Equipment, including the
Foreign Corrupt Practices Act (which prohibits certain payments to governmental
officials or political parties).
(K) True Lease: Maximum Rate. This Master Lease and the Schedules are intended
to be a "Finance Lease," as defined in Article 2A of the Uniform Commercial
Code, unless otherwise indicated in a Schedule. Lessor hereby informs Lessee
that (i) the identity of the Seller is set forth in the applicable Schedule,
(ii) the Lessee is entitled under Article 2A to the promises and warranties,
including those of any third party, provided to Lessor in connection with, or as
part of, the contract by which Lessor acquired the Equipment, and (iii) Lessee
may communicate with the Seller and receive an accurate and complete statement
of the promises and warranties, including any disclaimers and limitations of
them or of remedies. As a precaution in the event that, notwithstanding the
express intention of the parties hereto to enter into a true lease, this Master
Lease or any Schedule is ever deemed to be other than a true lease, or in the
event that the parties hereto intend to enter into a lease intended as security,
if so indicated on the applicable Schedule, Lessee hereby grants Lessor a
security interest in the Equipment and all proceeds thereof, including, without
limitation, insurance proceeds. In any such event, notwithstanding any
provisions contained herein or in any Schedule, neither Lessor nor any Assignee
shall be entitled to receive, collect or apply as interest any amount in excess
of the maximum rate or amount permitted by applicable law. In the event Lessor
or any Assignee ever receives, collects or applies as interest any amount in
excess of the maximum amount permitted by applicable law, such excess amount
shall be applied to the unpaid principal balance and any remaining excess
refunded to Lessee. In determining whether the interest paid or payable under
any specific contingency exceeds the maximum rate or amount permitted by
applicable law, Lessor and Lessee shall, to the maximum extent permitted under
applicable law, characterize any non principal payment as an expense or fee
rather than interest, exclude voluntary prepayments and the effect thereof, and
spread the total amount of interest over the entire term of this Master Lease
and the Schedules.
(L) Waiver of Jury Trial, Etc. The Lessee and the Lessor each hereby waives any
right to trial by jury in any litigation in any court with respect to, in
connection with, or arising out of this master lease or any schedule entered
into in connection therewith, or any other claim or dispute howsoever arising,
between the Lessor and the Lessee.
LESSEE, BY THE SIGNATURE BELOW OF ITS AUTHORIZED REPRESENTATIVE,
ACKNOWLEDGES THAT IT HAS READ THIS MASTER LEASE, UNDERSTANDS IT, AND
AGREES TO BE BOUND BY ITS TERMS AND CONDITIONS.
<TABLE>
<S> <C> <C> <C>
LESSOR: IMPERIAL BANK EQUIPMENT LEASING LESSEE: SALESLOGIX CORPORATION
DIVISION,
A DIVISION OF IMPERIAL BANK
Signature: Signature:
--------------------------------- --------------------------------------
Name: Name:
--------------------------------- --------------------------------------
Title: Title
--------------------------------- --------------------------------------
</TABLE>
Page 7 of 16
<PAGE> 8
LEASE MODIFICATION AGREEMENT
This Lease Modification Agreement dated as of May 8, 2000, is entered
into by and between IMPERIAL BANK EQUIPMENT LEASING DIVISION, a division of
Imperial Bank, a California corporation ("Lessor") and SalesLogix Corporation, a
Corporation ("Lessee").
RECITALS
A. Lessor and Lessee have entered into Standard Schedule 001 to
Master Lease Agreement dated February 28, 2000, and Certificate of Acceptance
thereto executed by Lessee on March 14, 2000, and together with all related
documents, (the "Lease"), providing for the "lease" the following equipment (the
"Equipment"):
Refer to Attached Schedule "A"
B. Lessor and Lessee acknowledge that the cost of the Equipment
financed ("Equipment Cost") is not correct and now desire to correct the
Equipment Cost and related Rent Payment.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein, the parties hereto agree as follows:
1. The Total Cost of the Equipment set forth in the Lease of
$2,706,024.32 is changed to $2,418,311.12.
2. The Lease Rate Factor set forth in the Lease of 3.213% remains
the same.
3. The Rent Payment set forth in the Lease of $86,944.56 is
changed to $77,700.34.
4. Except as expressly amended by this Agreement, the Lease is
ratified and confirmed by Lessor and Lessee and shall remain
in full force and effect.
5. This Agreement shall be governed by, construed and interpreted
in accordance with the internal laws (and not the law of
conflicts) of the State of California.
IN WITNESS WHEREOF, the parties have caused this Lease Modification
Agreement to be duly executed by their authorized representatives as of the day
and year first above written.
<TABLE>
<CAPTION>
LESSOR LESSEE
IMPERIAL BANK EQUIPMENT LEASING DIVISION, SALESLOGIX CORPORATION
A division of Imperial Bank
<S> <C>
By: ___________________________________ By: _____________________________________
Its:___________________________________ Its:_____________________________________
</TABLE>
1
<PAGE> 9
IMPERIAL BANK EQUIPMENT LEASING DIVISION, AMENDMENT
A division of Imperial Bank
THIS AMENDMENT No. 1 dated March 3, 2000, to the Master Lease agreement
dated February 28, 2000, (the "Agreement"), is entered into by and between
IMPERIAL BANK EQUIPMENT LEASING DIVISION, a division of Imperial Bank, a
California corporation and SALESLOGIX CORPORATION, a corporation. Capitalized
terms used herein and not otherwise defined shall have the meanings set forth in
the Agreement.
1. The Agreement is hereby amended as follows:
A) IN THE EVENT THAT FOR ANY REASON THE PROPOSED AGREEMENT BETWEEN
IMPERIAL BANK AND SALESLOGIX DOES NOT CLOSE BY APRIL 14, 2000,
SALESLOGIX CORPORATION AGREES TO PLACE A CERTIFICATE OF DEPOSIT, EQUAL
TO THE COST OF THE LEASED EQUIPMENT, WITH THE IMPERIAL BANK LEASING
DIVISION.
B) SALESLOGIX AGREES TO MAINTAIN MINIMUM CASH BALANCES OF $10.0 MILLION
MEASURED MONTHLY DURING THE TERM OF THE LEASE. SHOULD CASH BALANCES
DROP BELOW THE MINIMUM, SALESLOGIX AGREES TO PLACE A CERTIFICATE OF
DEPOSIT WITH IMPERIAL BANK LEASING DIVISION IN AN AMOUNT AGREEABLE WITH
IMPERIAL BANK.
2. Except as specifically set forth herein, all of the terms and
provisions of the Agreement are ratified and confirmed by the parties hereto and
shall remain in full force and effect:
3. This Amendment shall be governed by, construed and interpreted in
accordance with the internal laws (and not the law of conflicts) of the state of
California.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their authorized representatives the day and year first above
written.
<TABLE>
<S> <C>
IMPERIAL BANK EQUIPMENT LEASING DIVISION, SALESLOGIX CORPORATION
A division of Imperial Bank
By: ______________________________________ By: _________________________________
Its:_______________________________________ Its:_________________________________
</TABLE>
1
<PAGE> 10
SCHEDULE "A"
TO EQUIPMENT SCHEDULE NO. 001
TO MASTER LEASE AGREEMENT
DATED AS OF FEBRUARY 28, 2000
BETWEEN IMPERIAL BANK EQUIPMENT LEASING DIVISION,
A DIVISION OF IMPERIAL BANK, AS LESSOR,
AND SALESLOGIX CORPORATION, AS LESSEE
EQUIPMENT LIST
<TABLE>
<CAPTION>
EQUIPMENT DESCRIPTION QUANTITY ESTIMATED COST
- --------------------- -------- --------------
<S> <C> <C>
E250 BASE UNIT 1 $3,974.00
400MHZ-2MB ULTRA SPARC-II PROCESSOR MOD 2 8,992.00
9.1GB 10000-RPM ULTRASCSI HARD DRIVE 2 1,980.00
256MB FOR ULTRA 2 2,430.00
SOLARIS 2.6 STD ENGLISH SERVER MEDIA K 1 80.00
POWER CORD 1
PGX32 8BIT/24BIT COLOR FRAME BUFFER 1 266.00
17" COLOR MONITOR/ 15.7 DIAG .28MM NON 1 351.00
UNIX TYPE-6 KEYBOARD 1
FREIGHT 250.00
ADVANCED SYSTEMS GROUP INVOICE INV-0018867 $18,323.00
SUN SPECTRUM MAINTENANCE GOLD 7 X 24 4 $8,709.00
SUN SPECTRUM MAINTENANCE GOLD 7 X 24 2 4,044.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019266 $12,753.00
SUN SPECTRUM MAINTENANCE 1 $8,484.00
SUN SPECTRUM MAINTENANCE 1 6,670.00
SUN SPECTRUM MAINTENANCE 4 8,709.00
SUN SPECTRUM MAINTENANCE 2 4,044.00
SUN SPECTRUM MAINTENANCE 1 605.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019267 $28,512.00
SUN SPECTRUM MAINTENANCE 1 YEAR GOLD 1 $2,167.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019272 $2,167.00
SUN SPECTRUM MAINTENANCE GOLD 7 X 24 1 $8,484.00
SUN SPECTRUM MAINTENANCE GOLD 7 X 24 1 6,670.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019277 $15,154.00
NBU MEDIA/DOC KIT, CDROM-UNIX, AGENTS 1 $200.00
VERITAS NETBACKUP FOR WINDOWS 1 100.00
NBY SERVER LICENSE FOR UNIX, SOLAROS 2 13,260.00
ANNUAL 7 X 24 SUPPORT F/SUN MASTER LICENSE 2 3,910.00
NBU SINGLE CLIENT CONNECTION, NT PLATFORM 7 3,822.00
PREMIER DIRECT ASSIST SUPPORT, NT CLIENT 7 1,127.00
NBU SINGLE CLIENT CONNECTION - SERVER 2 1,092.00
PREMIER SUPPORT NETBACKUP CLIENT 2 322.00
NBU DB EXT MEDIA/DOC KIT- ORACLE, SYBASE 1 100.00
NBU DATABASE EXTENSION FOR ORACLE 1 3,900.00
PREMIER SUPPORT: NETBACKUP DB EXT 1 1,150.00
NBU ROBOTIC SUPPORT - TIER 4 1 19,500.00
NBY ROBOTIC SUPPORT TIER 4 1 5,750.00
NBU ROBOTIC SUPPORT TIER 4 2ND CONNECT 1 7,800.00
</TABLE>
1
<PAGE> 11
<TABLE>
<S> <C> <C>
NBU ROBOTIC SUPPORT TIER 4 - 2ND CONNECT 1 2,300.00
ULTRA F/W/D SCSI ADAPTER 2 2,036.00
MEDIA/DOC KIT VCS FOR SOLARIS NBU 1 200.00
LIC-STANDARD VCS FOR SOLARIS NBU AGENT 2 2,550.00
ASG INSTALLATION SERVICES 1 36,000.00
OPT CABLE DSCSI 12M 2 530.00
FREIGHT 75.00
ADVANCED SYSTEMS GROUP $105,724.00
ENTERPRISE 5501 - SVR BASE CABINET 1 $32,680.00
OPT 2ND PWR SEQUENCER EXP CAB 1 836.00
MOUNTING BRACKET F/E5500 E6500 1 114.00
ENTERPRISE CAB FLOOR BRACKETS 1 304.00
220V POWER CORD FOR ENTERPRISE 2
E4501 BASE, 2+PCM 32X CD SERVER LICENSE 1 24,320.00
RACKMOUNT RAILS FOR E4X00 1 342.00
CPU/MEMORY BOARD FOR EXX00 ENTERPRISE 4 18,240.00
400MHZ/8MB ULTRASPARC CPU MODULE 8 91,200.00
1GB MEMORY EXPANSION FOR X000 SERVERS 4 28,880.00
I/O BOARD F/3XX -- W/FC-AL 6 29,640.00
POWER/COOLING MODULE F/X000 SERVERS 4 5,472.00
ULTRA F/W/D SCSI ADAPTER 8 7,872.00
D1000 RACKMOUNT 2 16,372.00
FAST QUAD ETHERNET W/QFE 4 6,064.00
5M NULL ETHERNET CABLE TERMINAL 2 250.00
5M SERIAL CABLE 5 METER SERIAL CABLE 2 250.00
SOLARIS STANDARD LAT REL ENG DESKTOP 1 60.00
SOLARIS STANDARD LAT REL ENGLISH SERVE 1 80.00
MEDIA KIT FOR VERITAS DBASE ED/HA 1 200.00
VERITAS D8 ED/HA FOR ORACLE LICENSE 2 48,480.00
PREMIER SUPPORT F/DB ED/HA 2 13,938.00
POWER CORD 2
ASG INSTALLATION SERVICES 1 37,500.00
INTEGRATION 3
ENTERPRISE SYSTEM BUILD 1
RUSH 24 HOUR BUILD BY ACCESS INTEGRATION 2 400.00
CREDIT MEMO MOUNTING BRACKET (114.00)
FREIGHT 1,300.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019318 $364,680.00
ORACLE ENT SVR V8I W/ HOTBU PERP LIC 1,600 $280,000.00
ORACLE ENT SVR V8I W/ HOTBU PERP LIC 1,600 40,000.00
ORACLE ENT SVR 8U TUNING PACK 1,600 19,200.00
ORACLE ENT SVR V8I W/ HOT BU, PL, PU 1,600 72,000.00
ORACLE ENT SVR V8I W/ HOT BU, PL, PU 1,600 24,000.00
ORACLE ENT SVR 8I TUNING PACK 1,600 9,600.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019320 $444,800.00
ENTERPRISE 5501 SVR BASE CBINET 1 $32,680.00
OPT 2ND PWR SEQUENCER 1 836.00
MOUNTING BRACKET F/35500 1 114.00
ENTERPRISE CAB FLOOR BRACKETS 1 304.00
220V POWER CORD FOR ENTERPRISE 2
E4501 BASE CD SERVER LICENSE 1 24,320.00
RACKMOUNT RAILS FOR E4X00 1 342.00
CPY MEMORY BOARD EXX00 ENTERPRISE 4 18,240.00
400 MHZ /8MB 8MB ULTRASPARC CPU MODULE 8 91,200.00
</TABLE>
2
<PAGE> 12
<TABLE>
<S> <C> <C>
1GB MEMORY EXPANSION FOR X000 SERVERS 4 28,880.00
I/O BOARD F/EXX00 4 19,760.00
POER COOLING MODULE F/X0000 SERVERS 4 5,472.00
ULTRA F/W/D SCSI ADAPTER 4 3,936.00
D1000 RACKMOUNT 2 16,372.00
9.1GB 1000 RPM EXP DISK FOR A1000 4 4,140.00
FAST QUAD ETHERNET W/QFE 4 6,064.00
5M NULL ETHERNET CABLE TERMINAL 2 250.00
TERMINAL CONCENTRATOR KIT 1 1,900.00
ULTRA 5,360MHZ 8.4GB 5400/RPM IDE 32C 1 1,931.00
17" COLOR MONITOR 1 351.00
SOLARIS DESKTOP MEDIA VER 2.6 1 60.00
SOLARIS 2.6 STD ENGLISH SERVER MEDIA 1 80.00
FOUNDATION SUITE/HA 1 200.00
FOUNDATION SUITE/HA LICENSE ONLY 2 35,360.00
PREMIER SUPPORT FOR FS/HA 2 10,166.00
POWER CORD 2
ASG INSTALLATION SERVICES 1 37,500.00
CREDIT MEMO MOUNTING BRACKET 1 (114.00)
ADVANCED SYSTEMS GROUP INVOICE INV-0019372 $340,844.00
SYM 3830 G36B FRAME 1 $115,920.00
SYN 3030 72.4GB OPEN 12 145,440.00
4096MB M2E CACHE MEMORY 1 60,360.00
4 PORT DP USCSU CHANNEL DIR 4 60,480.00
19M WIDE DIFFERNTIAL SCSI 68 PIN 4 1,569.60
SYM CONTROL CTR PKG COMPONENT 1 58,000.00
LEVEL 1 INSTALL SYM CONTROL CTR 1 5,000.00
1 YEAR MAINT. & SUPPORT 1 11,604.00
CABINET W/ 1-14 DATAMOVER SLOTS 1 45,600.00
2 DATA MOVERS 2 46,800.00
CONTROL STATION 1 13,008.00
CFX INSTALL KIT 1
6M SCSI CABLE 6 1,584.00
MULTIPROTOCOL DOC 1
NFS-M0PROTOCOL DATA MOVER LIC 2 36,000.00
NFS CONTROL STATION MANAGER LICENSES 1 27,800.00
NFS SW 1 YEAR MAINT 2 7,200.00
NFS SW 1 YEAR MAINT 1 5,568.00
ASG INSTALLATION SERVICES 1 22,500.00
FREIGHT 4,000.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019391 $668,433.60
DIRECTORY SERVER 4.1 MEDIA AND DOC 1 $100.00
ALLIANCE MAINTENANCE SILVER KIT 1
DIRECTORY SERVER MAINTENANCE 200,000 40,000.00
ASG INSTALLATION SERVICES 1 2,500.00
FREIGHT 40.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019399 $42,640.00
COMPAQ PROLIANT 1850R PIII 600 BASE 1 $9,062.00
9.1GB ULTRA2 10K RPM 2 1,050.00
128MB REGISTERED SDRAM DIMM 6 2,538.00
7X24 SUPPORT 2 2,938.00
PROLAINT 6400R 2-256-6/500 W/2X500MHZ 5 67,125.00
256MB EDO MEMORY KIT 5 8,570.00
9.1GB PLUGGABLE ULTRA2 5 3,150.00
</TABLE>
3
<PAGE> 13
<TABLE>
<S> <C> <C>
7X24 SUPPORT 5 12,995.00
ASG INSTALLATION SERVICES 1 6,00.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019400 $113,428.00
ASG INSTALLATION SERVICES 1 $22,500.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019401 $22,500.00
E450 SERVER BASE, 32X CD, 2*PWR SUPPLIES 1 $10,211.00
E450 RACK MOUNTING KIT 1 680.00
400 MHZ ULTRASPARC II CPU MODULE 2 10,080.00
512MB MEMORY EXPANSION FOR E450 2 5,400.00
9.1GB 1000 RPM ULTRASCSI HARD DRIVE 5 4,950.00
8BAY WITH H/W RAID INT STORAGE DRIVE 1 2,426.00
PGX23 8BIT/24BIT COLOR FRAME BUFFER 1 266.00
550W POWER SUPPLY F/E450 1 1,022.00
12-24GB 4MM DDS3 INTERNAL DRIVE 1 1,013.00
SOLARIS PCNETLINK UPDATE 1
TYPE 6 KEYBOARD 1
ASG INSTALLATION SERVICES 1 1,995.00
ENTERPRISE SYSTEM BUILD BY ACCESS 1
POWER CORD 1
FREIGHT 250.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019444 $38,293.00
IPLANET WEB SERVER ENTERPRISE ED LIC ON 8 $10,168.00
IPLANET WEB SERVER ENTERPRISE ED MAINT. 8 2,542.00
IPLANET WEB SERVER ENTERPRISE ED 4.0 1 60.00
FREIGHT 15.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019445 $12,785.00
SCALAR 1000 DLT CNTRL MOD 6DRIVE BAYS 1 $36,800.00
SCALAR 1000/DLT DRIVE MODULE 4 30,000.00
SCALAR 1000 ON SITE INSTALLATION 1 1,500.00
FREIGHT 400.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019448 $68,700.00
E250 BASE UNIT 1 $3,974.00
400MHZ - 2MB ULTRAPSARC - II PROCESSOR MOD 2 8,992.00
9.1GB 1000-RPM ULTRASCSI HARD DRIVE 2 1,980.00
256MB FOR ULTRA 4 4,860.00
SOLARIS 2.6 STD ENGLISH SERVER MEDIA KIT 1 80.00
POWER CORD 1
PGX32 8BIT/24BIT COLOR FRAME BUFFER 1 266.00
17" COLOR MONITOR 1 351.00
UNIX TYPE 6 KEYBOARD 1
WORKGROUP SERVER INSTALL 1 1,495.00
ENTERPRISE SYSTEM BUILD 1
FREIGHT 200.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019456 $22,198.00
SOLARIS STANDARD LAT REL ENGLISH SERVER 1 $80.00
FREIGHT 15.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019497 $95.00
ENTERPRISE 250 SERVER BASE/RACKMOUNT 2 $7,948.00
400MHZ 2 MB ULTRASPARC II PROCESSOR MOD 2 8,992.00
256MB FOR ULTRA 4 4,860.00
</TABLE>
4
<PAGE> 14
<TABLE>
<S> <C> <C>
18.2GB 10K RPM ULTRASCSI DISK DRIVE 2 2,700.00
PGX23 8BIT/24BIT COLOR FRAME BUFFER 2 532.00
12-23GB 4MM DDS3 INTERNAL DRIVE 2 2,026.00
SOLARIS STANDARD LAT REL ENGLISH SERVER 2 160.00
SOLARIS PCNETLINK UPDATE V1.0 2
POWER CORD 2
ASG INSTALLATION SERVICES 2 3,990.00
FREIGHT 285.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019498 $31,493.00
ENTERPRISE 250 TOWER/RACK SIDEGRADE 1 $595.00
FREIGHT 50.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019581 $645.00
INTERACCESS NT INSTALLATION 1 $4,200.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019588 $4,200.00
OMNIVIEW PS/2 10' CABLE KIT 7 $175.00
BELKIN OMNIVIEW PRC 4 PORT KVM SWITCH 2 660.00
FREIGHT 55.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019595 $890.00
NATURAL KEYBOARD V2.0 ELITE ERGO 2 $130.00
BASIC MOUSE V1.0 SERIAL AND WINDOW 2 70.00
FREIGHT 55.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019596 $255.00
COMPAQ PROLIANT 1850R RED PWR SUPPLY 2 $735.00
FREIGHT 25.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019597 $760.00
PCI DUAL 10/100 COMPAQ PC 7 $1,953.00
FREIGHT 55.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019598 $2,008.00
WIN NT SVR STD ED 4.0 LIC ONLY 7 $4,421.69
DISK KIT WIN NT SVR STD ED 4.0 IBM 2 47.78
WIN NT OPTION PACK 4.0 IBM LIC ONLY 5 375.85
WIN NT SERV CLIENT LIC 4.0 IBM 10 303.00
INTERACCESS NT INSTALLATION 1 9,000.00
FREIGHT 25.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019600 $14,173.32
ULTRA F/W/D SCSI ADAPTER 1 $984.20
OPT CABLE DSCSI 12M 1 265.00
FREIGHT 50.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019671 $1,299.20
SUN SPECTRUM MAINTENANCE 2 $8,090.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019706 $8,090.00
SUN SPECTRUM MAINTENANCE 1 $5,923.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019707 $5,923.00
COMPAQ NETELLIGENT ETHERNET ADAPTER 10 2 $350.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019714 $350.00
</TABLE>
5
<PAGE> 15
<TABLE>
<S> <C> <C>
PC ANYWHERE SOFTWARE 9.0 7 $1,155.00
FREIGHT 35.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019715 $1,190.00
PROLIANT 1850R 512KB PROCESSOR OPTION 4 $4,347.00
128MB REG SDRAM DIMM 4 1,748.00
256MB REG SDRAM DIMM ALL 4 3,864.00
128MB REG SDRAM DIMM 2 874.00
256MB REG SDRAM DIMM ALL 2 1,932.00
7' TP ETHERNET CABLES 26 130.00
FREIGHT 450.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019794 $13,345.00
1GB MEMORY EXPANSION FOR X000 SERVERS 8 $60,800.00
FREIGHT 40.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019814 $60,840.00
PROLIANT 1850R SVR-RACK MOUNT PIII-500 4 $15,341.00
NC3122 PCI DUAL 10/100 UTP CONTROLLER 4 1,138.00
UNIV 9.1GB HOT PLUT UTLRA2 1" HARD DRIVE 2 1,200.50
3 YR 24X7 4HR WORKGROUP SERVER SUPPORT 2 5,692.50
BASIC MOUSE V1.0 SERIAL AND WINDOW 1 15.00
BELKIN OMNIVIEW PRC 4 PORT KVM SWITCH 2 600.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019831 $23,987.00
MAG 17" 720V2 5 $1,200.00
FREIGHT 525.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019858 $1,725.00
COMPAQ PROLAINT 1750R PII 450 MODEL 1 $3,065.00
FREIGHT 75.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019884 $3,140.00
UNIV 9.1GB HOT PLUG ULTRA2 1" HARD DRIVE 4 $2,507.00
COMPAQ NETELLIGENT ETHERNET ADAPTER 10 2 280.00
COMPAQ PROLIANT 1850R RED PWR SUPPLY 4 1,495.00
3YR 24X7 4HR WORKGROUP SERVER SUPPORT 4 6,785.00
PROLIANT 3000 SERVER RACK MOUNTED PIII 2 8,486.70
PROLIANT 1850R 512KB PROCESSOR OPTION 2 2,173.50
512MB REG SDRAM DIMM 2 5,331.50
NC3122 PCI DUAL 10/100 UTP CONTROLLER 2 569.00
PROLIANT 3000/5500 RPS 2 1,207.50
OMNIVIEW PS/2 10' CABLE KIT 6 150.00
FREIGHT 50.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019887 $29,035.20
DIGITAL LINEAR TAPE - COMPACT IV 15 $10,800.00
DIGITAL LINEAR TAPE CLEANING CARTRIDGE 1 428.00
FREIGHT 35.00
ADVANCED SYSTEMS GROUP INVOICE INV-0019979 $11,263.00
FRU, ADAPTER, VIDEO PGX32 6 $228.00
FREIGHT 10.00
ADVANCED SYSTEMS GROUP INVOICE INV-0020002 $238.00
UNIV 9.1GB HOT PLUT ULTRA 2 1" HARD DRIVE 1 $750.00
ADVANCED SYSTEMS GROUP INVOICE INV-0020012 $750.00
</TABLE>
6
<PAGE> 16
<TABLE>
<S> <C> <C>
SYM 3030 36GB DRIVE PAIRS 2 $28,560.00
1024 CACHE UPGRADE 1 33,360.00
12M SCSI CABLE 4 1,400.00
TF FOR OPEN SYSTEMS 1 105,000.00
FREIGHT 75.00
ADVANCED SYSTEMS GROUP INVOICE INV-0020010 $168,395.00
TOTAL SCHEDULE 001 $2,706,024.32
</TABLE>
LESSOR'S INITIALS LESSEE'S INITIALS
-------------------- --------------------
7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 54,566
<SECURITIES> 0
<RECEIVABLES> 12,942
<ALLOWANCES> 1,123
<INVENTORY> 0
<CURRENT-ASSETS> 80,294
<PP&E> 16,301
<DEPRECIATION> 3,628
<TOTAL-ASSETS> 161,944
<CURRENT-LIABILITIES> 39,129
<BONDS> 0
0
0
<COMMON> 20
<OTHER-SE> 63,801
<TOTAL-LIABILITY-AND-EQUITY> 161,944
<SALES> 21,768
<TOTAL-REVENUES> 21,768
<CGS> 5,705
<TOTAL-COSTS> 24,993
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,982
<INCOME-PRETAX> (12,123)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,123)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,123)
<EPS-BASIC> (0.62)
<EPS-DILUTED> (0.62)
</TABLE>
