Loan Agreement - Venture Lending & Leasing Inc. and IMGIS Inc.
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LOAN AGREEMENT
Dated as of March 26, 1997
between
IMGIS, INC.
as Borrower,
and
VENTURE LENDING & LEASING, INC.,
as Lender
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TABLE OF CONTENTS
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ARTICLE 1 - DEFINITIONS.............................................................1
ARTICLE 2 - THE COMMITMENT AND LOANS................................................4
2.1 THE COMMITMENT.........................................................4
2.2 LIMITATION ON LOANS....................................................5
2.3 NOTES EVIDENCING LOANS; REPAYMENT......................................5
2.4 PROCEDURES FOR BORROWING...............................................5
2.5 INTEREST...............................................................6
2.6 TERMINAL PAYMENT.......................................................6
2.7 INTEREST RATE CALCULATION..............................................6
2.8 DEFAULT INTEREST.......................................................6
2.9 LENDER'S RECORDS.......................................................6
2.10 SECURITY..............................................................6
2.11 ISSUANCE OF WARRANT TO LENDER.........................................6
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES..........................................7
3.1 DUE ORGANIZATION.......................................................7
3.2 AUTHORIZATION, VALIDITY AND ENFORCEABILITY.............................7
3.3 COMPLIANCE WITH APPLICABLE LAWS........................................7
3.4 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES...........................7
3.5 NO CONFLICT............................................................7
3.6 NO LITIGATION, CLAIMS OR PROCEEDINGS...................................8
3.7 CORRECTNESS OF FINANCIAL STATEMENTS....................................8
3.8 NO SUBSIDIARIES........................................................8
3.9 NO EVENT OF DEFAULT....................................................8
3.10 FULL DISCLOSURE.......................................................8
ARTICLE 4 - CONDITIONS PRECEDENT....................................................8
4.1 CONDITIONS TO FIRST LOAN...............................................8
4.2 CONDITIONS TO ALL LOANS................................................9
ARTICLE 5 - AFFIRMATIVE COVENANTS...................................................9
5.1 NOTICE TO LENDER.......................................................9
5.2 FINANCIAL STATEMENTS..................................................10
5.3 MANAGERIAL ASSISTANCE FROM LENDER.....................................11
5.4 EXISTENCE.............................................................11
5.5 INSURANCE.............................................................11
5.6 ACCOUNTING RECORDS....................................................11
5.7 COMPLIANCE WITH LAWS..................................................11
5.8 TAXES AND OTHER LIABILITIES...........................................12
5.9 USE OF PROCEEDS.......................................................12
ARTICLE 6 - NEGATIVE COVENANTS.....................................................12
6.1 INDEBTEDNESS..........................................................12
6.2 LIENS.................................................................12
6.3 DIVIDENDS.............................................................12
6.4 CHANGES/MERGERS.......................................................12
6.5 SALES OF ASSETS.......................................................13
6.6 LOANS/INVESTMENTS.....................................................13
6.7 TRANSACTIONS WITH RELATED PERSONS.....................................13
ARTICLE 7 - EVENTS OF DEFAULT......................................................13
7.1 EVENTS OF DEFAULT.....................................................13
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ARTICLE 8 - GENERAL PROVISIONS.....................................................14
8.1 NOTICES...............................................................14
8.2 BINDING EFFECT........................................................15
8.3 NO WAIVER.............................................................15
8.4 RIGHTS CUMULATIVE.....................................................15
8.5 UNENFORCEABLE PROVISIONS..............................................15
8.6 ACCOUNTING TERMS......................................................15
8.7 INDEMNIFICATION; EXCULPATION..........................................15
8.8 REIMBURSEMENT.........................................................16
8.9 EXECUTION IN COUNTERPARTS.............................................16
8.10 ENTIRE AGREEMENT.....................................................16
8.11 GOVERNING LAW AND JURISDICTION.......................................16
8.12 WAIVER OF JURY TRIAL.................................................17
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LIST OF EXHIBITS
Exhibit "A" Form of Note
Exhibit "B" Form of Borrowing Request
Exhibit "C" Security Agreement
Exhibit "D" Form of Warrant
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LOAN AGREEMENT
This LOAN AGREEMENT is entered into as of March 26, 1997,
between IMGIS, INC., a California corporation ("Borrower"), and VENTURE LENDING
& LEASING, INC., a Maryland corporation ("VLLI" or "Lender").
WHEREAS, Lender has agreed to make available to Borrower a
term loan facility upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
The definitions appearing in this Agreement or any supplement
or addendum to this Agreement, shall be applicable to both the singular and
plural forms of the defined terms:
"AFFILIATE" means any Person which directly or indirectly
controls, is controlled by, or is under common control with Borrower. "Control,"
"controlled by" and "under common control with" mean direct or indirect
possession of the power to direct or cause the direction of management or
policies (whether through ownership of voting securities, by contract or
otherwise); provided, that control shall be conclusively presumed when any
Person or affiliated group directly or indirectly owns ten percent (10%) or more
of the securities having ordinary voting power for the election of directors of
a corporation.
"AGREEMENT" means this Loan Agreement as it may be amended or
supplemented from time to time.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. ss.101, eT Seq.), as amended.
"BASIC INTEREST" means the fixed rate of interest payable on
the outstanding balance of each Loan at the applicable Designated Rate.
"BORROWING DATE" means the Business Day on which the proceeds
of a Loan are disbursed by Lender.
"BORROWING REQUEST" means a written request from Borrower in
substantially the form of EXHIBIT "B" hereto, requesting the funding of one or
more Loans on a particular Borrowing Date.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City or San Francisco are
authorized or required by law to close.
"CLOSING DATE" means the date of this Agreement.
"COLLATERAL" has the meaning ascribed thereto in the Security
Agreement.
"COMMITMENT" means the obligation of Lender to make Loans to
Borrower in an aggregate, original principal amount not exceeding Two Million
Dollars ($2,000,000). The Commitment shall be divided into two parts. The
Initial Availability (the "Initial Availability") shall be for the original
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principal amount of a loan or loans not exceeding $1,000,000. The Remaining
("Remaining Availability") amount shall be for an additional principal amount of
$1,000,000 and shall automatically become available, subject to section 4.2 of
this Agreement, upon the closing of additional venture capital equity financing
of at least $1,000,000.
"DEFAULT" means an event which with the giving of notice,
passage of time, or both would constitute an Event of Default.
"DEFAULT RATE" is defined in SECTION 2.8.
"DESIGNATED RATE" means a fixed rate of interest per annum of
nine and 75/100 percent (9.75%) applicable to a Loan.
"ENVIRONMENTAL LAWS" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any governmental
authorities, in each case relating to environmental, health, or safety matters.
"EVENT OF DEFAULT" means any event described in Article 7.
"GAAP" means generally accepted accounting principles and
practices consistent with those principles and practices promulgated or adopted
by the Financial Accounting Standards Board and the Board of the American
Institute of Certified Public Accountants, their respective predecessors and
successors. Each accounting term used but not otherwise expressly defined herein
shall have the meaning given it by GAAP.
"INDEBTEDNESS" of any Person means at any date, without
duplication and without regard to whether matured or unmatured, absolute or
contingent: (i) all obligations of such Person for borrowed money; (ii) all
obligations of such Person evidenced by bonds, debentures, notes, or other
similar instruments; (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising in
the ordinary course of business; (iv) all obligations of such Person as lessee
under capital leases; (v) all obligations of such Person to reimburse or prepay
any bank or other Person in respect of amounts paid under a letter of credit,
banker's acceptance, or similar instrument, whether drawn or undrawn; (vi) all
obligations of such Person to purchase securities which arise out of or in
connection with the sale of the same or substantially similar securities; (vii)
all obligations of such Person to purchase, redeem, exchange, convert or
otherwise acquire for value any capital stock of such Person or any warrants,
rights or options to acquire such capital stock, now or hereafter outstanding,
except to the extent that such obligations remain performable solely at the
option of such Person; (viii) all obligations to repurchase assets previously
sold (including any obligation to repurchase any accounts or chattel paper under
any factoring, receivables purchase, or similar arrangement); (ix) obligations
of such Person under interest rate swap, cap, collar or similar hedging
arrangements; and (x) all obligations of others of any type described in CLAUSE
(I) through CLAUSE (IX) above guaranteed by such Person.
"INSOLVENCY PROCEEDING" means (a) any case, action or
proceeding before any court or other governmental authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the benefit
of creditors, composition, marshalling of assets for creditors, or other,
similar
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arrangement in respect of its creditors generally or any substantial portion of
its creditors, undertaken under U.S. Federal, state or foreign law, including
the Bankruptcy Code.
"LIEN" means any voluntary or involuntary security interest,
mortgage, pledge, claim, charge, encumbrance, title retention agreement, or
third party interest, covering all or any part of the property of Borrower or
any other Person.
"LOAN" means an extension of credit by Lender under SECTION 2
of this Agreement.
"LOAN DOCUMENTS" means, individually and collectively, this
Agreement, each Note, the Security Agreement and any other security or pledge
agreement(s), and all other contracts, instruments, addenda and documents
executed in connection with this Agreement or the extensions of credit which are
the subject of this Agreement.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means
(a) a material adverse change in, or a material adverse effect upon, the
operations, business, properties, or condition (financial or otherwise) of
Borrower; (b) a material impairment of the ability of Borrower to perform under
any Loan Document; or (c) a material adverse effect upon the legality, validity,
binding effect or enforceability against Borrower of any Loan Document.
"MATURITY DATE" means, with regard to a Loan, the earlier of
(i) its maturity by reason of acceleration, or (ii) its stated maturity date,
which is the first day of the 42nd full month after the Borrowing Date of such
Loan; and is the date on which payment of all outstanding principal, accrued
interest, and the Terminal Payment with respect to such Loan is due.
"NOTE" means a promissory note substantially in the form of
EXHIBIT "A" hereto, executed by Borrower evidencing each Loan.
"OBLIGATIONS" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document, owing by
Borrower to Lender, whether direct or indirect (including those acquired by
assignment), absolute or contingent, liquidated or unliquidated, due or to
become due, now existing or hereafter arising.
"PERMITTED LIEN" means
(A) Involuntary Liens which, in the aggregate, would
not have a Material Adverse Effect and which in any event would not
exceed One-Hundred Thousand Dollars ($100,000);
(B) Liens for current taxes or other governmental or
regulatory assessments which are not delinquent, or which are contested
in good faith by the appropriate procedures and for which appropriate
reserves are maintained;
(C) Purchase money security interests on any property
held or acquired by Borrower in the ordinary course of business
securing Indebtedness incurred or assumed for the purpose of financing
all or any part of the cost of acquiring such property; PROVIDED, that
such Lien attaches solely to the property acquired with such
Indebtedness and that the principal amount of such Indebtedness does
not exceed one hundred percent (100%) of the cost of such property; and
FURTHER PROVIDED, that
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such property is not equipment with respect to which a Loan has been
made hereunder.
(D) Liens in favor of Lender;
(E) bankers' liens, rights of setoff and similar
Liens incurred on deposits made in the ordinary course of business;
(F) materialmen's, mechanics', repairmen's,
employees' or other like Liens arising in the ordinary course of
business and which are not delinquent for more than 45 days or are
being contested in good faith by appropriate proceedings;
(G) any judgment, attachment or similar Lien, unless
the judgment it secures has not been discharged or execution thereof
effectively stayed and bonded against pending appeal within 30 days of
the entry thereof;
(H) licenses or sublicenses of Patents, Patent
Licenses, Trademarks or Trademark Licenses permitted under the
Trademark Collateral Assignment or the Patent Collateral Assignment
(all as defined in the Security Agreement); and.
(I) Liens which have been approved by Lender prior to
the Closing Date and disclosed on SCHEDULE 6.2 to this Agreement.
"PERSON" means any individual or entity.
"QUALIFIED PUBLIC OFFERING" means the closing of a firmly
underwritten public offering of Borrower's common stock with aggregate proceeds
of not less than $12,500,000 (prior to underwriting expenses and commissions).
"RELATED PERSON" means any Affiliate of Borrower, or any
officer, employee, director or equity security holder of Borrower or any
Affiliate.
"SECURITY AGREEMENT" means the Security Agreement
substantially in the form of EXHIBIT "C" hereto, executed by Borrower.
"TERMINAL PAYMENT" means, with respect to each Loan, an amount
payable on the Maturity Date of such Loan in an amount equal to fifteen percent
(15%) of the original principal amount of such Loan.
"TERMINATION DATE" means the earlier of: (a) the date Lender
may terminate making loans or extending credit pursuant to the rights of Lender
under Article 7, or (b) December 31, 1997.
"UCC" means the Uniform Commercial Code as enacted in the
applicable jurisdiction, in effect on the Closing Date and as amended from time
to time.
ARTICLE 2 - THE COMMITMENT AND LOANS
2.1 THE COMMITMENT. Subject to the terms and conditions of
this Agreement, Lender agrees to make term loans to Borrower from time to time
from the Closing Date and to, but not including, the Termination Date in an
aggregate principal amount not exceeding the Commitment. The Commitment is
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not a revolving credit commitment, and Borrower shall not have the right to
repay and reborrow hereunder.
2.2 LIMITATION ON LOANS.
(A) Each Loan shall be in an amount not to exceed one
hundred percent (100%) of the amount paid or payable by Borrower to a
non-affiliated manufacturer, vendor or dealer for an item of equipment
as shown on an invoice therefor (excluding any commissions and any
portion of the payment which relates to the servicing of the equipment
and sales taxes payable by Borrower upon acquisition, and delivery
charges).
(B) Lender shall not be obligated to make any Loan
under its Commitment if at the time of or after giving effect to the
proposed Loan Lender would no longer qualify as: (A) a "venture capital
operating company" under U.S. Department of Labor Regulations Section
2510.3-101(d), Title 29 of the Code of Federal Regulations, as amended;
and (B) a "business development company" under the provisions of
federal Investment Company Act of 1940, as amended; and (C) a
"regulated investment company" under the provisions of the Internal
Revenue Code of 1986, as amended. Each Loan requested by Borrower to be
made on a single Business Day shall be for a minimum principal amount
of Fifty Thousand Dollars ($50,000), except to the extent the remaining
Commitment is a lesser amount.
2.3 NOTES EVIDENCING LOANS; REPAYMENT. Each Loan shall be
evidenced by a separate Note payable to the order of Lender substantially in the
form of EXHIBIT "A" to this Agreement, in the total principal amount of the
Loan. Each Note shall be payable as follows: Principal and Basic Interest shall
be paid in forty two (42) equal and successive monthly payments, in advance,
beginning on the Borrowing Date and continuing on the first Business Day of each
month thereafter; provided, that the first and last such amortization
installment payments shall be paid in advance on the Borrowing Date. If the
Borrowing Date is not the first day of a month, then the 42-month amortization
period shall commence on the first day of the next month following the Borrowing
Date, and interest only shall accrue and be payable for the period from the
Borrowing Date to the first day of the next month. Borrower shall pay to Lender,
in advance, on the Borrowing Date a payment of Basic Interest on the amount of
any Loan that is not made on the first day of the month for interest that will
accrue on such Loan from the Borrowing Date through the last day of the same
month. The payment of amortization installments of principal of and interest on
a Loan in advance results in a higher effective rate of interest than the stated
Designated Rate applicable to such Loan. The full amount of the Terminal Payment
with respect to each Loan shall be due and payable on the Maturity Date of such
Loan.
2.4 PROCEDURES FOR BORROWING.
(A) Borrower shall give Lender, at least five (5)
Business Days' prior to a proposed Borrowing Date, written notice of
any request for borrowing hereunder (a "Borrowing Request"). Each
Borrowing Request shall be in substantially the form of EXHIBIT "B"
hereto, shall be executed by the chief financial or accounting officer
of Borrower, and shall state how much is requested, and shall be
accompanied by such information and documentation as Lender may deem
reasonably necessary to determine whether the proposed borrowing will
comply with the limitations in SECTION 2.2.
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(B) No later than 1:00 p.m. Pacific Standard Time on
the Borrowing Date, if Borrower has satisfied the conditions precedent
in Article 4, Lender shall make the Loan available to Borrower in
immediately available funds.
2.5 INTEREST. Basic Interest on the outstanding principal
balance of the each Loan shall accrue daily at the Designated Rate from the
Borrowing Date until the Maturity Date.
2.6 TERMINAL PAYMENT. Borrower shall pay the Terminal Payment
with respect to each Loan on the Maturity Date of such Loan.
2.7 INTEREST RATE CALCULATION. Basic Interest, along with
charges and fees under this Agreement and any Loan Document, shall be calculated
for actual days elapsed on the basis of a 360-day year, which results in higher
interest, charge or fee payments than if a 365-day year were used. In no event
shall Borrower be obligated to pay Lender interest, charges or fees at a rate in
excess of the highest rate permitted by applicable law from time to time in
effect.
2.8 DEFAULT INTEREST. Any unpaid payments of principal or
interest or the Terminal Payment with respect to any Loan shall bear interest
from their respective maturities, whether scheduled or accelerated, at the
Designated Rate for such Loan PLUS five percent (5.00%) per annum, until paid in
full, whether before or after judgment (the "Default Rate"). Borrower shall pay
such interest on demand.
2.9 LENDER'S RECORDS. Principal, Basic Interest, Terminal
Payments and all other sums owed under any Loan Document shall be evidenced by
entries in records maintained by Lender for such purpose. Each payment on and
any other credits with respect to principal, Basic Interest, Terminal Payments
and all other sums outstanding under any Loan Document shall be evidenced by
entries in such records. Absent manifest error, Lender's records shall be
conclusive evidence thereof.
2.10 SECURITY. As security for all Obligations to Lender,
Borrower shall grant concurrently to Lender, or ensure that Lender is
concurrently granted, perfected security interests in all Collateral pursuant to
the Security Agreement and such other Lien documentation satisfactory in form
and substance to Lender, subject only to Permitted Liens.
2.11 ISSUANCE OF WARRANTS TO LENDER. As additional
consideration for its Commitment and obligations under this Agreement, and as a
condition to funding the initial Loan, Lender and its broker (Robert A.
Kingsbook) shall be entitled to receive one or more warrants to purchase a
number of shares of preferred stock of Borrower ("Warrant Shares") with an
aggregate value equal to seven percent (7%) of the Commitment. The Warrant
Shares shall vest in two equal parts. The first 50% shall vest upon the closing
of this commitment at $2.51 per share. The remaining 50% shall vest upon the
borrowing of any portion of the Remaining Availability at a price determined by
1) if any part of the Remaining Availability is borrowed prior to the closing of
an additional round of venture capital or corporate partner equity financing of
at least $3,000,000 ("Round C"), $2.51 per share, 2) if none of the Remaining
Availability is borrowed prior to the closing of Round C, the per share price of
preferred stock issued in Round C. The warrant issued under this Agreement shall
be in substantially the form attached hereto as EXHIBIT "D"; shall be
transferable by Lender, subject to compliance with applicable securities laws;
shall expire on December 31, 2002 or earlier as described in the warrant; and
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shall include piggy-back registration rights, "net issuance" provisions, and
anti-dilution protections reasonably satisfactory to Lender and its counsel.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that as of the Closing Date
and each Borrowing Date, except as set forth on a Schedule of Exceptions
("Schedule of Exceptions") to be amended from time to time:
3.1 DUE ORGANIZATION. Borrower is a corporation duly organized
and validly existing in good standing under the laws of California, and is duly
qualified to conduct business and is in good standing in each other jurisdiction
in which its business is conducted or its properties are located, except where
the failure to be so qualified would not reasonably be expected to have a
Material Adverse Effect.
3.2 AUTHORIZATION, VALIDITY AND ENFORCEABILITY. The execution,
delivery and performance of all Loan Documents executed by Borrower are within
Borrower's powers, have been duly authorized, and are not in conflict with
Borrower's articles of incorporation or by-laws, or the terms of any charter or
other organizational document of Borrower, as amended from time to time; and all
such Loan Documents constitute valid and binding obligations of Borrower,
enforceable in accordance with their terms (except as may be limited by
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights in general, and subject to general principles of equity).
3.3 COMPLIANCE WITH APPLICABLE LAWS. To Borrower's knowledge,
Borrower has complied with all licensing, permit and fictitious name
requirements necessary to lawfully conduct the business in which it is engaged,
and to any sales, leases or the furnishing of services by Borrower, including
without limitation those requiring consumer or other disclosures, the
noncompliance with which would have a Material Adverse Effect.
3.4 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES.
(A) To Borrower's knowledge, Borrower owns or is
licensed or otherwise has the right to use all of the patents,
trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other similar rights that are reasonably
necessary for the operation of its business, without conflict with the
rights of any other Person.
(B) To Borrower's knowledge, no slogan or other
advertising device, product, process, method, substance, part or other
material now employed, or now contemplated to be employed, by Borrower
infringes upon any rights held by any other Person.
(C) To Borrower's knowledge, no claim or litigation
regarding any of the foregoing is pending or threatened, and no patent,
invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or proposed which, in either
case, could reasonably be expected to have a Material Adverse Effect.
3.5 NO CONFLICT. The execution, delivery, and performance by
Borrower of all Loan Documents are not in conflict with any law, rule,
regulation, order or directive, or any indenture, agreement, or undertaking to
which Borrower is a party or by which Borrower may be bound or affected.
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3.6 NO LITIGATION, CLAIMS OR PROCEEDINGS. There is no
litigation, tax claim or proceeding pending, or, to the knowledge of Borrower,
threatened against Borrower or its property.
3.7 CORRECTNESS OF FINANCIAL STATEMENTS. Borrower's financial
statements which have been delivered to Lender fairly and accurately reflect
Borrower's financial condition as of December 31, 1996; and, since that date
there has been no Material Adverse Change. All indebtedness to IBL Corporation,
Aurelius Ltd., and Washington Holdings, L.P. has been canceled either by payment
or exchange of debt for equity.
3.8 NO SUBSIDIARIES. Borrower is not a majority owner of or in
a control relationship with any other business entity.
3.9 NO EVENT OF DEFAULT. No Default or Event of Default has
occurred and is continuing.
3.10 FULL DISCLOSURE. None of the representations or
warranties made by Borrower in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of Borrower in connection with the Loan Documents (including
disclosure materials delivered by or on behalf of Borrower to Lender prior to
the Closing Date), when taken together, contains any untrue statement of a
material fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or delivered.
ARTICLE 4 - CONDITIONS PRECEDENT
4.1 CONDITIONS TO FIRST LOAN. The obligation of Lender to make
its first Loan hereunder is, in addition to the conditions precedent specified
in SECTION 4.2, subject to the fulfillment of the following conditions and to
the receipt by Lender of the documents described below, duly executed and in
form and substance reasonably satisfactory to Lender and its counsel:
(A) RESOLUTIONS. A certified copy of the resolutions
of the Board of Directors of Borrower authorizing the execution,
delivery and performance by Borrower of the Loan Documents.
(B) INCUMBENCY AND SIGNATURES. A certificate of the
secretary of Borrower certifying the names of the officer or officers
of Borrower authorized to sign the Loan Documents, together with a
sample of the true signature of each such officer.
(C) OPINION OF COUNSEL. The opinion of Gunderson
Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel for
Borrower, together with any opinions, certificates and other matters on
which such opinion relies.
(D) ARTICLES AND BY-LAWS. Certified copies of the
Articles of Incorporation and By-Laws of Borrower, as amended through
the Closing Date.
(E) THIS AGREEMENT. A counterpart of this Agreement
with all schedules completed and attached thereto, and disclosing such
information as is acceptable to Lender.
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(F) SECURITY AGREEMENT; FINANCING STATEMENTS. A
Security Agreement executed by Borrower, substantially in the form of
EXHIBIT "C", together with filing copies (or other evidenced of filing
satisfactory to Lender and its counsel) of such Uniform Commercial Code
financing statements, collateral assignments and termination
statements, with respect to the Collateral as Lender shall request.
(G) LIEN SEARCHES. Uniform Commercial Code lien,
judgment, bankruptcy and tax lien searches of Borrower from the
California Secretary of State, and such other jurisdictions as Lender
may reasonably request, all as of a date reasonably satisfactory to
Lender and its counsel.
(H) GOOD STANDING CERTIFICATE. A Certificate of Good
Standing as of a date acceptable to Lender with respect to Borrower
from the California Secretary of State.
(I) WARRANT. A warrant issued by Borrower to Lender
exercisable for the Warrant Shares, as described in SECTION 2.11
hereof.
4.2 CONDITIONS TO ALL LOANS. The obligation of Lender to make
its initial Loan and each subsequent Loan is subject to the following further
conditions precedent that:
(A) NO DEFAULT. No Default or Event of Default has
occurred and is continuing or will result from the making of any such
Loan, and the representations and warranties of Borrower contained in
Article 3 of this Agreement are true and correct as of the Borrowing
Date of such Loan.
(B) NO MATERIAL ADVERSE CHANGE. No Material Adverse
Change shall have occurred since the date of the most recent financial
statements submitted to Lender.
(C) BORROWING REQUEST. Borrower shall have delivered
to Lender a Borrowing Request for such Loan.
(D) NOTE. Borrower shall have delivered an executed
Note evidencing such Loan, in form and substance satisfactory to
Lender.
(E) SUPPLEMENTAL LIEN FILINGS. Borrower shall have
executed and delivered such amendments or supplements to the Security
Agreement and financing statements as Lender may reasonably request in
connection with the proposed Loan, in order to create or perfect or to
maintain the perfection of Lender's Liens on the Collateral.
(F) VCOC LIMITATION. The making of the Loan will not
result in a violation of the condition applicable to Lender described
in SECTION 2.2(B).
ARTICLE 5 - AFFIRMATIVE COVENANTS
During the term of this Agreement and until its performance of
all obligations to Lender, Borrower will:
5.1 NOTICE TO LENDER. Promptly give written notice to Lender
of:
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(A) Any litigation or administrative or regulatory
proceeding affecting Borrower where the amount claimed against Borrower
is Fifty Thousand Dollars ($50,000) or more, or where the granting of
the relief requested could reasonably have a Material Adverse Effect.
(B) The occurrence of any Default or any Event of
Default where the Borrower has knowledge of such Default or Event of
Default.
(C) Any change in the location of Borrower's
principal place of business or the Collateral at least thirty (30) days
in advance of such change.
(D) Any default by Borrower under any joint venture,
partnering, distribution, cross-licensing, strategic alliance,
collaborative research or manufacturing, license or similar agreement
which could reasonably be expected to have a Material Adverse Effect.
(E) Any other matter which has resulted or might
reasonably result in a Material Adverse Change, of which the Borrower
is aware.
5.2 FINANCIAL STATEMENTS. Deliver to each Lender or cause to
be delivered to Lender, in form and detail satisfactory to Lender the following
financial information, which Borrower warrants shall be accurate and complete in
all material respects:
(A) QUARTERLY FINANCIAL STATEMENTS. As soon as
available but no later than thirty (45) days after the end of each
quarter, Borrower's balance sheet as of the end of such period, and
Borrower's income statement for such period and for that portion of
Borrower's financial reporting year ending with such period, prepared
and attested by a responsible financial officer of Borrower as being
complete and correct and fairly presenting Borrower's financial
condition and the results of Borrower's operations. After a Qualified
Public Offering, the foregoing interim financial statements shall be
delivered no later than 45 days after each fiscal quarter and for the
quarter-annual fiscal period then ended.
(B) YEAR-END FINANCIAL STATEMENTS. As soon as
available but no later than one hundred (100) days after and as of the
end of each financial reporting year, a complete copy of Borrower's
audit report, which shall include balance sheet, income statement,
statement of changes in equity and statement of cash flows for such
year, prepared and certified by an independent certified public
accountant selected by Borrower and reasonably satisfactory to Lender
(the "Accountant"). The Accountant's certification shall not be
qualified or limited due to a restricted or limited examination by the
Accountant of any material portion of Borrower's records or otherwise.
(D) GOVERNMENT REQUIRED REPORTS; PRESS RELEASES.
Within thirty (30) days after sending, issuing, making available, or
filing, copies of all statements released by Borrower to any news media
for publication, all reports, proxy statements, and financial
statements that Borrower sends or makes available to its stockholders,
and, not later than thirty (30) days after actual filing, all
registration statements and reports that Borrower files or is required
to file with the Securities and Exchange Commission, or any other
governmental or regulatory authority.
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(E) OTHER INFORMATION. Such other statements, lists
of property and accounts, budgets, forecasts, reports, or other
information as Lender may from time to time reasonably request.
5.3 MANAGERIAL ASSISTANCE FROM LENDER. Permit Lender, as a
"venture capital operating company" to participate in, and influence the conduct
of management of Borrower through the exercise of "management rights," as such
terms are defined in 29 C.F.R. ss. 2510.3-101(d), and:
(A) Permit Lender to make available to Borrower, at
no cost to Borrower, "significant managerial assistance", as defined in
Section 2(a)(47) of the Investment Company Act of 1940, as amended,
either in the form of: (i) consulting arrangements with Lender or any
of its officers, directors, employees or affiliates, (ii) Borrower's
allowing Lender to provide recommendations of prospective candidates
for election to Borrower's Board of Directors, or (iii) Lender, at
Borrower's request, seeking the services of third-party consultants to
aid Borrower with respect to its management and operations;
(B) Permit Lender to make available consulting and
advisory services to officers of Borrower regarding Borrower's
equipment acquisition and financing plans, and such other matters
affecting the business, financial condition and prospects of Borrower
as Lender shall reasonably deem relevant; and
(C) If Lender reasonably believes that financial or
other developments affecting Borrower have impaired or are likely to
impair Borrower's ability to perform its obligations under this
Agreement, permit Lender reasonable access to Borrower's management
and/or Board of Directors and opportunity to present Lender's views
with respect to such developments.
5.4 EXISTENCE. Maintain and preserve Borrower's existence and
all rights and privileges necessary or desirable in the normal course of its
business; and keep all Borrower's property in good working order and condition,
ordinary wear and tear excepted.
5.5 INSURANCE. Obtain and keep in force insurance in such
amounts and types as is usual in the type of business conducted by Borrower,
with insurance carriers having a policyholder rating of not less than "A" and
financial category rating of Class VII in "Best's Insurance Guide," unless
otherwise approved by Lender. Such insurance policies must be in form and
substance satisfactory to Lender, and shall list Lender as an additional insured
or loss payee, as applicable, on endorsement(s) in form reasonably acceptable to
Lender. Borrower shall furnish to Lender such endorsements, and upon Lender's
request, copies of any or all such policies.
5.6 ACCOUNTING RECORDS. Maintain adequate books, accounts and
records, and prepare all financial statements in accordance with GAAP, and in
compliance with the regulations of any governmental or regulatory authority
having jurisdiction over Borrower or Borrower's business; and permit employees
or agents of Lender at such reasonable times as Lender may request, to inspect
Borrower's properties, and to examine, and make copies and memoranda of
Borrower's books, accounts and records. Such examination shall be at Lender's
expense, as long as Borrower is not in Default.
5.7 COMPLIANCE WITH LAWS. Comply with all laws (including
Environmental Laws), rules, regulations applicable to, and all orders and
directives of any governmental or regulatory authority having jurisdiction
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over, Borrower or Borrower's business, and with all material agreements to which
Borrower is a party, except where the failure to so comply would not have a
Material Adverse Effect.
5.8 TAXES AND OTHER LIABILITIES. Pay all Borrower's
obligations when due; pay all taxes and other governmental or regulatory
assessments before delinquency or before any penalty attaches thereto, except as
may be contested in good faith by the appropriate procedures and for which
Borrower shall maintain appropriate reserves; and timely file all required tax
returns.
5.9 USE OF PROCEEDS. Use the proceeds of Loans only as set
forth in Article 2 of this Agreement; and not directly or indirectly to purchase
or carry any margin stock, as defined from time to time by the Board of
Governors of the Federal Reserve System in Federal Regulation U.
ARTICLE 6 - NEGATIVE COVENANTS
During the term of this Agreement and until the performance of
all obligations to Lender, Borrower will not (without Lender's prior written
consent):
6.1 INDEBTEDNESS. Be indebted for borrowed money or the
deferred purchase price of property, or become liable as a surety, guarantor,
accommodation party or otherwise for or upon the obligation of any other Person,
except:
(A) Indebtedness incurred for the acquisition of
supplies or inventory on normal trade credit, including a working
capital credit line with a bank; and other indebtedness incurred
pursuant to one or more transactions permitted under SECTION 6.4;
(B) Indebtedness not to exceed Seven Hundred Fifty
Thousand Dollars ($750,000) in aggregate principal amount outstanding
at any time secured by purchase money security interests covered by
clause (c) of the definition of Permitted Lien;
(C) Indebtedness of Borrower under this Agreement;
and
(D) Any Indebtedness approved by Lender prior to the
Closing Date.
6.2 LIENS. Create, incur, assume or permit to exist any Lien,
or grant any other Person a negative pledge, on any of Borrower's property,
except Permitted Liens. Borrower and Lender agree that this covenant is not
intended to constitute a lien, deed of trust, equitable mortgage, or security
interest of any kind on any of Borrower's real property, and this Agreement
shall not be recorded or recordable.
6.3 DIVIDENDS. Except after a Qualified Public Offering, pay
any dividends or purchase, redeem or otherwise acquire or make any other
distribution with respect to any of Borrower's capital stock, except dividends
or other distributions solely of capital stock of Borrower or repurchases of
unvested shares, at the original purchase price, held by employees.
6.4 CHANGES/MERGERS. Liquidate or dissolve, or enter into any
consolidation, merger, partnership, joint venture or other combination that
would constitute a Material Adverse Change.
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6.5 SALES OF ASSETS. Sell, transfer, lease or otherwise
dispose of any of Borrower's assets except for fair consideration or where such
sale, transfer, lease or other disposition of assets would not constitute a
Material Adverse Change.
6.6 LOANS/INVESTMENTS. Make or suffer to exist any loans,
guaranties, advances, or investments, except:
(A) Accounts receivable in the ordinary course of
Borrower's business;
(B) Investments in domestic certificates of deposit
issued by, and other domestic investments with, financial institutions
organized under the laws of the United States or a state thereof,
having One Hundred Million Dollars ($100,000,000) in capital and a
rating of at least "investment grade" or "A" by Moody's or any
successor rating agency;"
(C) Investments in marketable obligations of the
United States of America and in open market commercial paper given the
highest credit rating by a national credit agency and maturing not more
than one year from the creation thereof; and
(D) Temporary advances to cover incidental expenses
to be incurred in the ordinary course of business.
6.7 TRANSACTIONS WITH RELATED PERSONS. Directly or indirectly
enter into any transaction with or for the benefit of a Related Person on terms
more favorable to the Related Person than would have been obtainable in an
"arms' length" dealing. This Section 6.7 shall not apply to any equity financing
transactions with the Company's existing venture capital investors.
ARTICLE 7 - EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT. Upon the occurrence and during the
continuation of any Default, the obligation of Lender to make any additional
Loan shall be suspended. The occurrence of any of the following shall terminate
any obligation of Lender to make any additional Loan; and shall, at the option
of Lender (1) make all sums of Basic Interest and principal, all Terminal
Payments, and any other amounts owing under any Loan Documents immediately due
and payable without notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor or any other notices or demands, and
(2) give Lender the right to exercise any other right or remedy provided by
contract or applicable law:
(A) Borrower shall fail to pay any principal,
interest or Terminal Payment under this Agreement, or fail to pay any
fees or other charges when due under any Loan Document, and such
failure continues for five (5) Business Days or more after the same
first becomes due; or an Event of Default as defined in any other Loan
Document shall have occurred.
(B) Any representation or warranty made, or financial
statement, certificate or other document provided, by Borrower under
any Loan Document shall prove to have been false or misleading in any
material respect when made or deemed made herein.
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(C) Borrower shall fail to pay its debts generally as
they become due or shall commence any Insolvency Proceeding with
respect to itself; an involuntary Insolvency Proceeding shall be filed
against Borrower, or a custodian, receiver, trustee, assignee for the
benefit of creditors, or other similar official, shall be appointed to
take possession, custody or control of the properties of Borrower, and
such involuntary Insolvency Proceeding, petition or appointment is
acquiesced to by Borrower or is not dismissed within sixty (60) days;
or the dissolution or termination of the business of Borrower.
(D) Borrower shall be in default beyond any
applicable period of grace or cure under any other agreement involving
the borrowing of money, the purchase of property, the advance of credit
or any other monetary liability of any kind to Lender or to any Person
which results in the acceleration of payment of such obligation in an
amount in excess of Fifty Thousand Dollars ($50,000).
(E) Any governmental or regulatory authority shall
take any judicial or administrative action, that would have a Material
Adverse Effect, and which cannot be cured by Borrower within thirty
days of such action.
(F) Any sale, transfer or other disposition of all or
a substantial or material part of the assets of Borrower, including
without limitation to any trust or similar entity, shall occur where
such sale, transfer, lease or other disposition of assets would
constitute a Material Adverse Change.
(G) Any judgment(s) singly or in the aggregate in
excess of Fifty Thousand Dollars ($50,000) shall be entered against
Borrower which remain unsatisfied, unvacated or unstayed pending appeal
for thirty (30) or more days after entry thereof.
(H) Borrower shall fail to perform or observe any
covenant contained in this Agreement or any other Loan Document (other
than a covenant which is dealt with specifically elsewhere in this
Article 7) and the breach of such covenant is not cured within 30 days
after the sooner to occur of Borrower's receipt of notice of such
breach from Lender or the date on which such breach first becomes known
to any officer of Borrower; PROVIDED, HOWEVER that if such breach is
not capable of being cured within such 30-day period and Borrower
timely notifies Lender of such fact and Borrower diligently pursues
such cure, then the cure period shall be extended to the date requested
in Borrower's notice but in no event more than 90 days from the initial
breach; PROVIDED, FURTHER, that such additional 60-day opportunity to
cure shall not apply in the case of any failure to perform or observe
any covenant which has been the subject of a prior failure within the
preceding 180 days or which is a willful and knowing breach by
Borrower.
ARTICLE 8 - GENERAL PROVISIONS
8.1 NOTICES. Any notice given by any party under any Loan
Document shall be in writing and personally delivered, sent by overnight
courier, or United States mail, postage prepaid, or sent by facsimile, to be
promptly confirmed in writing, or other authenticated message, charges prepaid,
to the other party's or parties' addresses shown on the signature pages hereto.
Each party may change the address or facsimile number to which notices, requests
and other communications are to be sent by giving written
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notice of such change to each other party. Notice given by hand delivery shall
be deemed received on the date delivered; if sent by overnight courier, on the
next business day after delivery to the courier service; if by first class mail,
on the third business day after deposit in the U.S. Mail; and if by telecopy, on
the date of transmission.
8.2 BINDING EFFECT. The Loan Documents shall be binding upon
and inure to the benefit of Borrower and Lender and their respective successors
and assigns; provided, however, that Borrower may not assign or transfer
Borrower's rights or obligations under any Loan Document without Lender's prior
written consent except in connection with a consolidation, merger or other
transaction in compliance with Section 6.4 of this Agreement. Lender reserves
the right to sell, assign, transfer, negotiate or grant participations in all or
any part of, or any interest in, Lender's rights and obligations under the Loan
Documents. In connection with any of the foregoing, Lender may disclose all
documents and information which Lender now or hereafter may have relating to the
Loans, Borrower, or its business; provided that any person who receives such
information shall have agreed in writing in advance to maintain the
confidentiality of such information on terms reasonably acceptable to Borrower.
8.3 NO WAIVER. Any waiver, consent or approval by Lender of
any Event of Default or breach of any provision, condition, or covenant of any
Loan Document must be in writing and shall be effective only to the extent set
forth in writing. No waiver of any breach or default shall be deemed a waiver of
any later breach or default of the same or any other provision of any Loan
Document. No failure or delay on the part of Lender in exercising any power,
right, or privilege under any Loan Document shall operate as a waiver thereof,
and no single or partial exercise of any such power, right, or privilege shall
preclude any further exercise thereof or the exercise of any other power, right
or privilege. Lender has the right at its sole option to continue to accept
interest and/or principal payments due under the Loan Documents after default,
and such acceptance shall not constitute a waiver of said default or an
extension of the Maturity Date unless Lender agrees otherwise in writing.
8.4 RIGHTS CUMULATIVE. All rights and remedies existing under
the Loan Documents are cumulative to, and not exclusive of, any other rights or
remedies available under contract or applicable law.
8.5 UNENFORCEABLE PROVISIONS. Any provision of any Loan
Document executed by Borrower which is prohibited or unenforceable in any
jurisdiction, shall be so only as to such jurisdiction and only to the extent of
such prohibition or unenforceability, but all the remaining provisions of any
such Loan Document shall remain valid and enforceable.
8.6 ACCOUNTING TERMS. Except as otherwise provided in this
Agreement, accounting terms and financial covenants and information shall be
determined and prepared in accordance with GAAP.
8.7 INDEMNIFICATION; EXCULPATION. Borrower shall pay and
protect, defend and indemnify Lender and Lender's employees, officers,
directors, shareholders, affiliates, correspondents, agents and representatives
(other than Lender, collectively "Agents") against, and hold Lender and each
such Agent harmless from, all claims, actions, proceedings, liabilities,
damages, losses, expenses (including, without limitation, attorneys' fees and
costs) and other amounts incurred by Lender and each such Agent, arising from
(i) the matters contemplated by this Agreement or any other Loan Documents, (ii)
financing statement of record outstanding at the time of this Agreement, or
(iii) any contention that Borrower has failed to
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comply with any law, rule, regulation, order or directive applicable to
Borrower's business; PROVIDED, HOWEVER, that this indemnification shall not
apply to any of the foregoing incurred solely as the result of Lender's or any
Agent's gross negligence or willful misconduct. This indemnification shall
survive the payment and satisfaction of all of Borrower's Obligations to Lender.
8.8 REIMBURSEMENT. Borrower shall reimburse Lender for all
costs and expenses, including without limitation reasonable attorneys' fees and
disbursements expended or incurred by Lender in any arbitration, mediation,
judicial reference, legal action or otherwise in connection with (a) the
preparation and negotiation of the Loan Documents, $1,000, (b) the amendment,
interpretation and enforcement of the Loan Documents, including without
limitation during any workout, attempted workout, and/or in connection with the
rendering of legal advice as to Lender's rights, remedies and obligations under
the Loan Documents, (c) collecting any sum which becomes due Lender under any
Loan Document, (d) any proceeding for declaratory relief, any counterclaim to
any proceeding, or any appeal, or (e) the protection, preservation or
enforcement of any rights of Lender. For the purposes of this section,
attorneys' fees shall include, without limitation, fees incurred in connection
with the following: (1) contempt proceedings; (2) discovery; (3) any motion,
proceeding or other activity of any kind in connection with an Insolvency
Proceeding; (4) garnishment, levy, and debtor and third party examinations; and
(5) postjudgment motions and proceedings of any kind, including without
limitation any activity taken to collect or enforce any judgment. All of the
foregoing costs and expenses shall be payable upon demand by Lender, and if not
paid within forty-five (45) days of presentation of invoices shall bear interest
at the highest applicable Default Rate.
8.9 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts which, when taken together, shall constitute but
one agreement.
8.10 ENTIRE AGREEMENT. The Loan Documents are intended by the
parties as the final expression of their agreement and therefore contain the
entire agreement between the parties and supersede all prior understandings or
agreements concerning the subject matter hereof. This Agreement may be amended
only in a writing signed by Borrower and Lender.
8.11 GOVERNING LAW AND JURISDICTION.
(A) THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF CALIFORNIA.
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS
OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN,
CENTRAL OR SOUTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF BORROWER AND LENDER CONSENTS, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF BORROWER AND LENDER IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED
HERETO. BORROWER AND LENDER EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY CALIFORNIA LAW.
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8.12 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVES ITS
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. BORROWER AND LENDER EACH AGREES THAT ANY SUCH CLAIM OR
CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING
THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL
BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEMS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
IN WITNESS WHEREOF, Borrower and Lender have executed this
Agreement as of the date set forth in the preamble.
ADDRESSES FOR NOTICES: IMGIS, INC.
IMGIS, Inc.
611 Anton Boulevard, Suite 400 By: /s/ Chad Steelberg
Costa Mesa, CA 92626 -----------------------------
Attn: CFO Name: Chad Steelberg
Fax No. 714-755-3677 Its: President
Venture Lending & Leasing, Inc. VENTURE LENDING & LEASING, INC.
2010 North First Street, Suite 310
San Jose, CA 95131
Attn: Salvador O. Gutierrez By: /s/ Ronald W. Swenson
Chief Financial Officer -----------------------------
Fax No. 408-435-8625 Name: Ronald W. Swenson
Its: Chief Executive Officer
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SCHEDULE OF EXCEPTIONS
To Loan Agreement Dated March 26, 1997, by and between
Imgis, Inc. (the "Company") and Venture Lending and Leasing, Inc.
1. Article 3, Section 3.6 The Company is currently in negotiations with Anne
Doremus d'oa Catalyst Communications ("Catalyst") regarding a Project
Consultancy Agreement dated June 12, 1996 (the "Consultancy Agreement");
pursuant to which Catalyst has filed a complaint in the Superior Court, State
of California, Orange County for various relief including damages for
$17,277.65 plus interest from the date of the Consultancy Agreement.
2. Article 3, Section 3.6. The Company has received correspondence from a
former employee, Jason Goldstein, requesting payment of $60,000.00 under an
agreement dated May 22, 1996 for compensation due for services performed to
the Company. Although no litigation or proceeding regarding this matter is
pending, the Company may elect to dispute such claim through settlement
negotiations, arbitration, litigation proceedings, or otherwise.