EXHIBIT 10.11
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated as of November
24, 1999, between SILICON VALLEY BANK, a California-chartered bank, with its
principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000
and with a loan production office located at Wellesley Office Park, 00 Xxxxxxx
Xxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxxxxx 00000, doing business under the name
"Silicon Valley East" ("Bank") and XXXXXXXXXXX.XXX, INC. ("Borrower"), provides
the terms on which Bank shall lend to Borrower and Borrower shall repay Bank.
The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed following
GAAP. Calculations and determinations must be made following GAAP. The term
"financial statements" includes the notes and schedules. The terms "including"
and "includes" always mean "including (or includes) without limitation" in this
or any Loan Document. Capitalized terms in this Agreement shall have the
meanings set forth in Section 13. This Agreement shall be construed to impart
upon Bank a duty to act reasonably at all times.
2 LOAN AND TERMS OF PAYMENT
2.1 CREDIT EXTENSIONS. Borrower shall pay Bank the unpaid principal
amount of all Credit Extensions and interest on the unpaid principal amount of
the Credit Extensions as and when due in accordance with this Agreement.
2.1.1 EQUIPMENT FACILITY.
(a) Subject to the terms and conditions of this Agreement, Bank agrees
to lend to Borrower, from time to time prior to the Commitment Termination Date,
equipment advances (each an "Equipment Advance" and collectively the "Equipment
Advances") in an aggregate amount not to exceed the Committed Equipment Line.
When repaid, the Equipment Advances may not be re-borrowed. The proceeds of the
Equipment Advances shall be used solely to reimburse Borrower for the purchase
of Eligible Equipment purchased within ninety (90) days (determined based upon
the applicable invoice date of such Eligible Equipment) of the Equipment Advance
and to purchase new Eligible Equipment. Not withstanding the foregoing, the
proceeds of the first Equipment Advance shall be used to reimburse the Borrower
for the purchase of Eligible Equipment purchased within one hundred twenty (120)
days (determined based upon the applicable invoice date of such Eligible
Equipment) of the Equipment Advance. Bank's obligation to lend hereunder shall
terminate on the earlier of (i) the occurrence and continuance of an Event of
Default, or (ii) the Commitment Termination Date. For purposes of this
Section, the minimum amount of each Equipment Advance is One Hundred Thousand
Dollars ($100,000.00). The Borrower may only request a total of ten (10)
Equipment Advances.
(b) To obtain an Equipment Advance, Borrower shall deliver to Bank a
completed loan supplement in substantially the form attached as Exhibit B ("Loan
Supplement"), together with a UCC Financing Statement covering the Financed
Equipment described on Annex A to the applicable Loan Supplement and such
additional information as Bank may reasonably request at least five (5)
Business Days before the proposed funding date (the "Funding Date"). On each
Funding Date, Bank shall specify in the Loan Supplement for each Equipment
Advance, the Basic Rate, the Loan Factor, and the Payment Dates. If Borrower
satisfies the conditions of each Equipment Advance, Bank shall disburse such
Equipment Advance by internal transfer to Borrower's deposit account with Bank.
Each Equipment Advance may not exceed 100% of the Original Stated Cost of the
Financed Equipment.
(c) Bank's obligation to lend the undisbursed portion of the Committed
Equipment Line shall terminate if there has been a material adverse change in
the general affairs, management, results of operation, condition (financial or
otherwise) of Borrower, whether or not arising from transactions in the ordinary
course of business, or there has been any material adverse deviation by Borrower
from the most recent business plan of Borrower presented to and accepted by Bank
prior to the execution of this Agreement.
2.2 INTEREST RATE; PAYMENTS.
(1) Principal and Interest Payments On Payment Dates. Borrower shall
repay each Equipment Advance pursuant to the terms set forth in the
corresponding Loan Supplement. For each Equipment Advance, Borrower shall make
equal monthly payments of principal and interest, in advance, calculated by the
Bank based upon: (1) the amount of the Equipment Advance, (2) the Basic Rate,
and (3) an amortization schedule equal to the Repayment Period (individually,
the "Scheduled Payment", and collectively, "Scheduled Payments"), on the first
Business Day of the month following the month in which the Funding Date occurs
(or commencing on the Funding Date if the Funding Date is the first Business Day
of the month) with respect to such Equipment Advance and continuing thereafter
during the Repayment Period on the first Business Day of each successive
calendar month (each a "Payment Date"). All unpaid principal and accrued
interest is due and payable in full on the last Payment Date with respect to
such Equipment Advance. Payments received after 12:00 noon Eastern time are
considered received at the opening of business on the next Business Day. An
Equipment Advance may only be prepaid in accordance with Sections 2.2(e) and
2.2(g).
(b) Interest Rate. Borrower shall pay interest on the unpaid
principal amount of each Equipment Advance from the first Payment Date after the
Funding Date of such Equipment Advance until the Equipment Advance has been paid
in full, at the per annum rate of interest equal to the Basic Rate determined by
Bank as of the Funding Date for each Equipment Advance in accordance with the
definition of the Basic Rate. Any amounts outstanding during the continuance of
an Event of Default shall bear interest at a per annum rate equal to the Basic
Rate plus five percent (5%)(the "Default Rate"). If any change in the law
increases Bank's expenses or decreases its return from the Equipment Advances,
Borrower shall pay Bank upon request the amount of such increase or decrease.
(c) Interim Payment. In addition to the Scheduled Payments, on the
Funding Date for each
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Equipment Advance (unless the Funding Date is the first Business Day of the
month, in which event no Interim Payment shall be due or owing), Borrower shall
pay to Bank, on behalf of Bank, an amount (the "Interim Payment") equal to the
initial Equipment Advance multiplied by the product of (i) the quotient derived
from dividing the initial Loan Factor with respect to such Equipment Advance by
30, and (ii) the number of days from the Funding Date of the Equipment Advance
until the first Payment Date with respect to such Equipment Advance.
(d) Final Payment. On the Maturity Date with respect to each
Equipment Advance, Borrower
shall pay, in addition to the unpaid principal and accrued interest and all
other amounts due on such date with respect to such Equipment Advance, an amount
equal to the Final Payment.
(e) Prepayment Upon an Event of Loss. If any Financed Equipment is
subject to an Event of
Loss and Borrower is required to or elects to prepay the Equipment Advance with
respect to such Financed Equipment pursuant to Section 6.7 then such Equipment
Advance shall be prepaid to the extent and in the manner provided in such
section.
(f) Mandatory Prepayment Upon an Acceleration. If the Equipment
Advances are accelerated
following the occurrence of an Event of Default or otherwise (other than
following an Event of Loss), then Borrower shall immediately pay to Bank (i) all
unpaid Scheduled Payments with respect to each Equipment Advance due prior to
the date of prepayment, (ii) all accrued unpaid interest, including interest at
the Default Rate, to the date of the prepayment, (iii) the Final Payment, and
(iv) all other sums, if any, that shall have become due and payable with respect
to any Equipment Advance.
(g) Permitted Prepayment of Loans. With Bank's prior written
consent, which shall not be
unreasonably withheld, delayed or conditioned, Borrower shall have the option to
prepay all, but not less than all, of the Equipment Advances advanced by Bank
under this Agreement, provided Borrower (i) provides written notice to Bank of
its election to prepay the Equipment Advances at least thirty (30) days prior to
such prepayment, and (ii) pays, on the date of such prepayment (A) all
outstanding principal; (B) all unpaid accrued interest to the date of the
prepayment; (C) the Final Payment in respect of each Equipment Advance ; and (D)
all other sums, if any, that shall have become due and payable hereunder with
respect to this Agreement.
2.3 FEES. Borrower shall pay to Bank all Bank Expenses (including
reasonable attorneys' fees and expenses incurred through and after the Closing
Date when due.
2.4 REQUEST TO DEBIT. Bank may debit any of Borrower's deposit accounts
including Account Number ______________________ for principal and interest
payments or any amounts Borrower owes Bank when due. Bank shall notify Borrower
when it debits Borrower's accounts. These debits are not a set-off.
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3 CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The obligation of
Bank to make the initial Credit Extension is subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:
(1) this Agreement;
(2) a certificate of the Secretary of Borrower with respect to
articles, bylaws, incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(3) an opinion of Borrower's counsel;
(4) financing statements (Forms UCC-1);
(5) insurance certificate;
(6) payment of the fees and Bank Expenses then due specified in
Section 2.3 hereof;
(7) Certificate of Good Standing/Legal Existence;
(8) Certificate of Foreign Qualification (if applicable); and
(9) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. Bank's obligations to
make each Credit Extension, including the initial Credit Extension, is subject
to the following:
(1) timely receipt of a completed Loan Supplement and UCC financing
statement covering the Financed Equipment described on Annex A to the Loan
Supplement; and
(2) the representations and warranties in Section 5 must be materially
true on the date of the Loan Supplement and on the effective date of each Credit
Extension and no Event of Default may have occurred and be continuing, or result
from the Credit Extension. Each Credit Extension is Borrower's representation
and warranty on that date that the representations and warranties in Section 5
remain true.
(3) the Bank shall have the opportunity to confirm that upon filing
the UCC-1 financing statement covering the Equipment described on the Loan
Supplement, that the Bank shall have a first perfected security interest in such
Equipment.
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4 CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower grants Bank a continuing
security interest in all presently existing and later acquired Collateral to
secure all Obligations and performance of each of Borrower's duties under the
Loan Documents. Any security interest shall be a first priority security
interest in the Collateral. If the Agreement is terminated, Bank's lien and
security interest in the Collateral shall continue until Borrower fully
satisfies its Obligations. Upon termination of this Agreement and satisfaction
of the Obligations, Bank shall release its security interest in all Collateral,
and shall execute all documents and take all actions reasonably requested by
Borrower in connection therewith.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION. Borrower and each Subsidiary is
duly existing and in good standing in its state of formation and qualified and
licensed to do business in, and in good standing in, any state in which the
conduct of its business or its ownership of property requires that it be
qualified.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's organizational documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which or
by which it is bound in which the default could reasonably be expected to cause
a Material Adverse Change.
5.2 COLLATERAL. Borrower has good title to the Collateral, free of Liens.
5.3 LITIGATION. Except as shown in the Schedule, there are no actions or
proceedings pending or, to Borrower's knowledge, threatened by or against
Borrower or any Subsidiary in which an adverse decision could could reasonably
be expected to cause a Material Adverse Change.
5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All consolidated
financial statements for Borrower and any Subsidiary delivered to Bank fairly
present in all material respects Borrower's consolidated financial condition and
Borrower's consolidated results of operations. There has not been any material
deterioration in Borrower's consolidated financial condition since the date of
the most recent financial statements submitted to Bank.
5.5 SOLVENCY. Borrower is able to pay its debts (including trade debts)
as they mature.
5.6 REGULATORY COMPLIANCE. Borrower is not an "investment company" or a
company "controlled" by an "investment company" under the Investment Company
Act. Borrower is not engaged as one of its important activities in extending
credit for margin stock (under Regulations T and U of the Federal Reserve Board
of Governors). Borrower has complied with the Federal Fair
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Labor Standards Act. Borrower has not violated any laws, ordinances or rules,
the violation of which could reasonably be expected to cause a Material Adverse
Change. None of Borrower's or any Subsidiary's properties or assets has been
used by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by
previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Borrower and each Subsidiary has
timely filed all required tax returns and paid, or made adequate provision to
pay, all material taxes. Borrower and each Subsidiary has obtained all consents,
approvals and authorizations of, made all declarations or filings with, and
given all notices to, all government authorities that are necessary to continue
its business as currently conducted.
5.7 SUBSIDIARIES. Borrower does not own any stock, partnership interest
or other equity securities.
5.8 FULL DISCLOSURE. No representation, warranty or other statement of
Borrower in any certificate or written statement given to Bank contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained in the certificates or statements, in light of
the circumstances in which they were made, not misleading.
6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 GOVERNMENT COMPLIANCE. Borrower shall maintain its and all
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a material adverse effect on Borrower's
business or operations. Borrower shall comply, and have each Subsidiary comply,
with all laws, ordinances and regulations to which it is subject, noncompliance
with which could have a material adverse effect on Borrower's business or
operations or cause a Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(1) Borrower shall deliver to Bank: (i) a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during the period, in a form acceptable to Bank and certified by a
Responsible Officer (a) prior to the occurrence of the Capitalization Event, as
soon as available, but no later than thirty (30) days after the last day of each
month, and (b) upon and after the occurrence of the Capitalization Event, as
soon as available, but no later than forty five (45) days after the last day of
each quarter; (ii) as soon as available, but no later than ninety (90) days
after the end of Borrower's fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm acceptable to Bank; (iii) within five (5) days of filing,
copies of all statements, reports and notices made available to Borrower's
security holders or to any holders of Subordinated Debt and all reports on Form
10-K, 10-Q and 8-K filed with the Securities and Exchange Commission; (iv) a
prompt report of any legal actions pending or threatened against Borrower or any
Subsidiary that could result in damages or
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costs to Borrower or any Subsidiary of Two Hundred Thousand Dollars
($200,000.00) or more; and (v) other financial information Bank reasonably
requests.
(2) Borrower shall deliver to Bank with the financial statements, a
Compliance Certificate signed by a Responsible Officer in the form of Exhibit C
as follows: (i) if prior to the occurrence of the Capitalization Event, within
thirty (30) days after the last day of each month, and (ii) upon and after the
occurrence of the Capitalization Event, within forty five (45) days after the
last day of each quarter.
6.3 TAXES. Borrower shall make, and cause each Subsidiary to make, timely
payment of all material federal, state, and local taxes or assessments owing by
Borrower and shall deliver to Bank, on demand, appropriate certificates
attesting to such payments.
6.4 INSURANCE. Borrower shall keep its business and the Collateral
insured for risks and in amounts, as Bank requests. Insurance policies shall be
in a form, with companies, and in amounts that are reasonably satisfactory to
Bank. All property policies shall have a lender's loss payable endorsement
showing Bank as an additional loss payee and all liability policies shall show
the Bank as an additional insured and all policies shall provide that the
insurer must give Bank at least twenty (20) days notice before canceling its
policy. At Bank's request, Borrower shall deliver certified copies of policies
and evidence of all premium payments. Proceeds payable under any policy shall,
at Bank's option, be payable to Bank on account of the Obligations.
Notwithstanding the foregoing and subject to Section 6.7 below, so long as no
Event of Default has occurred and is continuing, Borrower shall have the option
of applying the proceeds of any casualty policy up to Five Thousand Dollars
($5,000.00) toward the replacement or repair of destroyed or damaged property;
provided that (i) any such replaced or repaired property (a) shall be of equal
or like value as the replaced or repaired Collateral and (b) shall be deemed
Collateral in which Bank has been granted a first priority security interest and
(ii) after the occurrence and during the continuation of an Event of Default all
proceeds payable under such casualty policy shall, at the option of the Bank, be
payable to Bank on account of the Obligations.
6.5 PRIMARY ACCOUNTS. Borrower shall maintain an operating account with
Bank. On the Closing Date, Borrower shall deposit at least Two Million Five
Hundred Thousand Dollars ($2,500,000.00) with the Bank. Upon the occurrence of
the Capitalization Event, Borrower shall deposit with Bank an additional Five
Million Dollars ($5,000,000.00).
6.6 FURTHER ASSURANCES. Borrower shall execute any further instruments
and take further action as Bank requests to perfect or continue Bank's security
interest in the Collateral or to effect the purposes of this Agreement.
6.7 LOSS; DESTRUCTION; OR DAMAGE. Borrower shall bear the risk of the
Financed Equipment being lost, stolen, destroyed, or damaged. If during the
term of this Agreement any item of Financed Equipment becomes obsolete or is
lost, stolen, destroyed, damaged beyond repair, rendered permanently unfit for
use, or seized by a governmental authority for any reason for a period
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equal to at least the remainder of the term of this Agreement (an "Event of
Loss"), then in each case, Borrower:
(1) prior to the occurrence of an Event of Default, at Borrower's
option, shall (i) pay to Bank on account of the Obligations all accrued interest
to the date of the prepayment, plus all outstanding principal, plus the Final
Payment; or (ii) repair or replace any Financed Equipment subject to an Event of
Loss provided the repaired or replaced Financed Equipment is of equal or like
value to the Financed Equipment subject to an Event of Loss and provided further
that Bank has a first priority perfected security interest in such repaired or
replaced Financed Equipment.
(2) during the continuance of an Event of Default, on or before the
next Payment Date following such Event of Loss, for each such item of Financed
Equipment subject to such Event of Loss, Borrower shall, at Bank's option, pay
to Bank an amount equal to the sum of: (i) all accrued and unpaid Scheduled
Payments (with respect to such Equipment Advance related to the Event of Loss)
due prior to the next such Payment Date, (ii) all outstanding principal plus
unpaid accrued interest), (iii) the Final Payment plus (iv) all other sums, if
any, that shall have become due and payable, including interest at the Default
Rate with respect to any past due amounts.
(3) On the date of receipt by Bank of the amount specified above with
respect to each such item of Financed Equipment subject to an Event of Loss,
this Agreement shall terminate as to such Financed Equipment. If any proceeds of
insurance or awards received from governmental authorities are in excess of the
amount owed under this Section, Bank shall promptly remit to Borrower the amount
in excess of the amount owed to Bank.
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without the Bank's written
consent, which shall not be unreasonably withheld:
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of
(collectively a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any material part of the Collateral, other than a Transfer (i) of inventory
in the ordinary course of business; (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; or (iii) of worn-out or obsolete Equipment.
7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses currently engaged in by Borrower or if either the Chief
Financial Officer or the Chief Executive Officer leaves office and a replacement
acceptable to the Bank is not made within thirty (30) days. Borrower shall not,
without at least thirty (30) days prior written notice to Bank, relocate its
principal executive office or add any new offices or business locations.
7.3 COMPLIANCE. Undertake as one of its important activities extending
credit to purchase or carry margin stock, or use the proceeds of any Equipment
Advance for that purpose; fail to meet
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the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower's business or operations or cause a Material Adverse Change, or permit
any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT. Borrower fails to pay any of the Obligations within
three (3) days after their due date. During the additional period the failure to
cure the default is not an Event of Default (but no Credit Extensions shall be
made during the cure period);
8.2 COVENANT DEFAULT. Borrower does not perform any obligation in
Section 6 or violates any covenant in Section 7 or does not perform or observe
any other material term, condition or covenant in this Agreement, any Loan
Documents, or in any agreement between Borrower and Bank and as to any default
under a term, condition or covenant that can be cured, has not cured the default
within ten (10) days after it occurs, or if the default cannot be cured within
ten (10) days or cannot be cured after Borrower's attempts in the ten (10) day
period, and the default may be cured within a reasonable time, then Borrower
shall have additional time, (of not more than thirty (30) days) to attempt to
cure the default. During the additional period the failure to cure the default
is not an Event of Default (but no Credit Extensions shall be made during the
cure period);
8.3 MATERIAL ADVERSE CHANGE. (i) A material impairment in the perfection
or priority of Bank's security interest in the Collateral or in the value of
such Collateral which is not covered by adequate insurance occurs; or (ii) Bank
determines, based upon information available to it and in its reasonable
judgment, that there is a reasonable likelihood that Borrower shall fail to
comply with one or more of the financial covenants in Section 6 during the next
succeeding financial reporting period;
8.4 ATTACHMENT. (i) Any material portion of Borrower's assets is
attached, seized, levied on, or comes into possession of a trustee or receiver
and the attachment, seizure or levy is not removed in thirty (30) days; (ii)
Borrower is enjoined, restrained, or prevented by court order from conducting a
material part of its business; (iii) a judgment or other claim becomes a Lien on
a material portion of Borrower's assets; or (iv) a notice of lien, levy, or
assessment is filed against any of Borrower's assets by any government agency
and not paid within ten (10) days after Borrower receives notice. These are not
Events of Default if stayed or if a bond is posted pending contest by Borrower
(but no Credit Extensions shall be made during the cure period);
8.5 INSOLVENCY. (i) Borrower becomes insolvent; (ii) Borrower begins an
Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against
Borrower and not dismissed or stayed within forty-five (45) days (but no Credit
Extensions shall be made before any Insolvency Proceeding is dismissed);
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8.6 OTHER AGREEMENTS. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of Two Hundred Fifty Thousand Dollars
($250,000) or that could have a Material Adverse Effect;
8.7 JUDGMENTS. If a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least Two Hundred Fifty Thousand
Dollars ($250,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of thirty (30) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment);
8.8 MISREPRESENTATIONS. If Borrower or any Person acting for Borrower
makes any material misrepresentation or material misstatement now or later in
any warranty or representation in this Agreement or in any communication
delivered to Bank or to induce Bank to enter this Agreement or any Loan
Document.
9 BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. When an Event of Default occurs and continues
Bank may, without notice or demand, do any or all of the following in accordance
with applicable law:
(1) Declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are
immediately due and payable without any action by Bank);
(2) Stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and
Bank;
(3) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower
shall assemble the Collateral if Bank requests and make it available as
Bank designates. Bank may enter premises where the Collateral is located,
take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or
superior to its security interest and pay all expenses incurred. Borrower
grants Bank a license to enter and occupy any of its premises, without
charge, to exercise any of Bank's rights or remedies;
(4) Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(5) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral; and
(6) Dispose of the Collateral according to the Code.
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9.2 POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, to be effective upon the occurrence and during the
continuance of an Event of Default, to: (i) endorse Borrower's name on any
checks or other forms of payment or security; (ii) make, settle, and adjust all
claims under Borrower's insurance policies; and (iii) transfer the Collateral
into the name of Bank or a third party as the Code permits. Borrower hereby
appoints Bank its power of attorney to sign Borrower's name on any documents
necessary to perfect or continue the perfection of any security interest
regardless of whether an Event of Default has occurred until all Obligations
have been satisfied in full and Bank is under no further obligation to make
Credit Extensions hereunder. Bank's foregoing appointment as Borrower's
attorney in fact, and all of Bank's rights and powers, coupled with an interest,
are irrevocable until all Obligations have been fully repaid and performed and
Bank's obligation to provide Credit Extensions terminates.
9.3 BANK EXPENSES. If Borrower fails to obtain insurance as required
under Section 6.4 or to pay any amount or furnish any required proof of payment
to third persons and the Bank, Bank may make all or part of the payment or
obtain such insurance policies required in Section 6.4, and take any action
under the policies Bank deems prudent. Any amounts paid by Bank as provided
herein are Bank Expenses and are immediately due and payable, bearing interest
at the then applicable rate and secured by the Collateral. No payments by Bank
are deemed an agreement to make similar payments in the future or Bank's waiver
of any Event of Default.
9.4 BANK'S LIABILITY FOR COLLATERAL. So long as the Bank complies with
reasonable banking practices and applicable law regarding the safekeeping of
collateral, the Bank shall not be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution
in the value of the Collateral; or (d) any act or default of any carrier,
warehouseman, bailee, or other person. Borrower bears all risk of loss, damage
or destruction of the Collateral.
9.5 REMEDIES CUMULATIVE. Bank's rights and remedies under this Agreement,
the Loan Documents, and all other agreements are cumulative. Bank has all
rights and remedies provided under the Code, by law, or in equity. Bank's
exercise of one right or remedy is not an election, and Bank's waiver of any
Event of Default is not a continuing waiver. Bank's delay is not a waiver,
election, or acquiescence. No waiver is effective unless signed by Bank and then
is only effective for the specific instance and purpose for which it was given.
9.6 DEMAND WAIVER. Borrower waives demand, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guaranties held by Bank on which Borrower is
liable.
10 NOTICES
All notices or demands by any party to this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail,
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postage prepaid, return receipt requested, or by telefacsimile at the addresses
listed at the beginning of this Agreement. Either Bank or Borrower may change
its notice address by giving the other written notice.
If to Borrower: Xxxxxxxxxxx.xxx, Inc.
00 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
FAX: (000) 000-0000
with a copy to: Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
High Street Tower
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
If to Bank: Silicon Valley Bank
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx
FAX: (000) 000-0000
with a copy to: Xxxxxx & Xxxxxxxxxx LLP
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esquire
FAX: (000) 000-0000
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Massachusetts law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive
jurisdiction of the State and Federal courts in Suffolk County, Massachusetts;
provided, however, that if for any reason Bank cannot avail itself of such
courts in the Commonwealth of Massachusetts, Borrower accepts jurisdiction of
the courts and venue in Santa Xxxxx County, California.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. This Agreement binds and is for the benefit
of the successors and permitted assigns of each party. Borrower may not assign
this Agreement or any
12
rights or Obligations under it without Bank's prior written consent which may be
granted or withheld in Bank's discretion. Bank has the right, without the
consent of or notice to Borrower, to sell, transfer, negotiate, or grant
participation in all or any part of, or any interest in, Bank's obligations,
rights and benefits under this Agreement, the Loan Documents or any related
agreement.
12.2 INDEMNIFICATION. Borrower hereby indemnifies, defends and holds the
Bank and its officers, employees and agents harmless against: (a) all
obligations, demands, claims, and liabilities asserted by any other party in
connection with the transactions contemplated by the Loan Documents; and (b) all
losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and Borrower (including reasonable
attorneys' fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.
12.3 TIME OF ESSENCE. Time is of the essence for the performance of all
Obligations in this Agreement.
12.4 SEVERABILITY OF PROVISION. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION. All amendments to this Agreement
must be in writing signed by both Bank and Borrower. This Agreement and the
Loan Documents represent the entire agreement about this subject matter, and
supersedes prior or contemporaneous negotiations or agreements. All prior or
contemporaneous agreements, understandings, representations, warranties, and
negotiations between the parties about the subject matter of this Agreement and
the Loan Documents merge into this Agreement and the Loan Documents.
12.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, are one
Agreement.
12.7 SURVIVAL. All covenants, representations and warranties made in this
Agreement continue in full force while any Obligations remain outstanding. The
obligations of Borrower in Section 12.2 to indemnify Bank shall survive until
all statutes of limitations for actions that may be brought against Bank have
run.
12.8 CONFIDENTIALITY. In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (i) to Bank's
subsidiaries or affiliates in connection with their present or prospective
business relations with Borrower; (ii) to prospective transferees or purchasers
of any interest in the Loans; (iii) as required by law, regulation, subpoena, or
other order, (iv) as required in connection with Bank's examination or audit;
and (v) as Bank considers appropriate in exercising remedies under this
Agreement. Confidential information does not include information that either:
(a) is in the public domain or in Bank's possession when disclosed to Bank, or
becomes part of the public domain after disclosure to Bank; or (b) is disclosed
to Bank by a third party, if Bank does not know that the third party is
prohibited from disclosing the information.
13
12.9 ATTORNEYS' FEES, COSTS AND EXPENSES. In any action or proceeding
between Borrower and Bank arising out of the Loan Documents, the prevailing
party shall be entitled to recover its reasonable attorneys' fees and other
costs and expenses incurred, in addition to any other relief to which it may be
entitled, whether or not a lawsuit is filed.
13 DEFINITIONS
13.1 DEFINITIONS.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs or
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"BASIC RATE" is, as of the Funding Date the per annum rate of interest
(based on a year of 360 days) equal to the sum of (a) U.S. Treasury note yield
to maturity for a term equal to the Treasury Note Maturity as quoted in the Wall
Street Journal on the day the Loan Supplement is prepared, plus (b) the Loan
Margin.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
"CAPITALIZATION EVENT" is the making and completion by the Borrower of an
initial public offering.
"CHIEF EXECUTIVE OFFICER" is Xxxxx Xxxxx.
"CHIEF FINANCIAL OFFICER" is Xxxxxx Xxxxxx.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the Massachusetts Uniform Commercial Code.
"COLLATERAL" is the property described on Exhibit A.
---------
"COMMITTED EQUIPMENT LINE" is an Equipment Advance or Equipment Advances
of up to One Million Five Hundred Thousand Dollars ($1,500,000.00).
14
"COMMITMENT TERMINATION DATE" shall be the date which is the one year
anniversary of the Closing Date.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"CREDIT EXTENSION" is each Equipment Advance or any other extension of
credit by Bank for Borrower's benefit.
"ELIGIBLE EQUIPMENT" is (a) general purpose computer equipment, office
equipment, test and laboratory equipment, furnishings, and (b) Other Equipment
that complies with all of Borrower's representations and warranties to Bank and
which is reasonably acceptable to Bank in all respects.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"EQUIPMENT ADVANCE" is defined in Section 2.1.1.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"EVENT OF LOSS" is defined in Section 6.7.
"FINAL PAYMENT" is a payment (in addition to and not a substitution for the
regular monthly payments of principal plus accrued interest) due on the Maturity
Date for such Equipment Advance equal to the Loan Amount for such Equipment
Advance at such time multiplied by the Final Payment Percentage.
"FINAL PAYMENT PERCENTAGE" is, for each Equipment Advance, five percent
(5.0%).
"FINANCED EQUIPMENT" is all present and future Eligible Equipment in which
Borrower has any interest, the
purchase of which is financed by an Equipment Advance.
15
"FUNDING DATE" is any date on which an Equipment Advance is made to or on
account of Borrower.
"GAAP" is generally accepted accounting principles.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred price
of property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN AMOUNT" in respect of each Equipment Advance is the aggregate amount
of such Equipment Advance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note executed by
Borrower, and any other present or future agreement between Borrower and/or for
the benefit of Bank in connection with this Agreement, all as amended, extended
or restated.
"LOAN FACTOR" is the percentage which results from dividing (i) the monthly
Scheduled Payment with respect to the applicable Equipment Advance by (ii) the
original principal amount of such Equipment Advance.
"LOAN MARGIN" is three hundred fifty (350) basis points.
"LOAN SUPPLEMENT" is defined in Section 2.1.1(b) and attached as Exhibit B.
---------
"MATERIAL ADVERSE CHANGE " is defined in Section 8.3.
"MATURITY DATE" is, with respect to each Equipment Advance, the last day of
the Repayment Period for such Equipment Advance, or if earlier, the date of
acceleration of such Equipment Advance by Bank following an Event of Default.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit and foreign
exchange contracts, if any, and including interest accruing after Insolvency
Proceedings begin and debts, liabilities, or obligations of Borrower assigned to
Bank.
16
"ORIGINAL STATED COST" is: (i) the original cost to the Borrower of the
item of new Equipment net of any and all freight, installation, tax, or (ii)
the fair market value assigned to such item of used Equipment by mutual
agreement of Borrower and Bank at the time of making of the Equipment Advance.
"OTHER EQUIPMENT" is leasehold improvements, intangible property such as
computer software and software licenses, equipment specifically designed or
manufactured for Borrower, other intangible property, limited use property and
other similar property and soft costs approved by the Bank, including sales tax,
freight and installation expenses. Unless otherwise agreed to by Bank, not more
than 25% of the aggregate Equipment Advances shall consist of Other Equipment.
"PAYMENT DATE" is defined in Section 2.2(a).
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
"REPAYMENT PERIOD," as to each Equipment Advance, is thirty six (36) months
from the Funding Date of such Equipment Advance.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, President,
Chief Financial Officer and Controller of Borrower.
"SCHEDULE" is any attached schedule of exceptions.
"SCHEDULED PAYMENT" is defined in Section 2.2(a).
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to Borrower's
debt to Bank (pursuant to a subordination agreement entered into between the
Bank, the Borrower and the subordinated creditor).
"SUBSIDIARY" is for any Person, joint venture, or any other business entity
of which more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person.
"TREASURY NOTE MATURITY" is thirty six (36) months.
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first above written.
BORROWER:
XXXXXXXXXXX.XXX, INC.
By_________________________________________
Name:______________________________________
Title:_____________________________________
BANK:
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By_________________________________________
Name:______________________________________
Title:_____________________________________
SILICON VALLEY BANK
By_________________________________________
Name:______________________________________
Title:_____________________________________
(Signed in Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxx)
000000.0 (56120/232)
18
EXHIBIT A
---------
The Collateral consists of all of Borrower's right, title and interest in
and to the following:
Each item of equipment, or personal property financed with a "Equipment
Advance" pursuant to that certain Loan and Security Agreement, dated as of
_______________________________, 1999 (the "Loan Agreement"), by and between
Borrower and Bank, including, without limitation, the property described in
Annex A hereto, whether now owned or hereafter acquired, together with all
substitutions, renewals or replacements of and additions, improvements, and
accessions to any and all of the foregoing, and all proceeds from sales,
renewals, releases or other dispositions thereof.
19
ANNEX A TO EXHIBIT A
--------------------
The Financed Equipment being financed with the Equipment Advance is listed
below. Upon the funding of such Equipment Advance, this schedule automatically
shall be deemed to be a part of the Collateral.
Description of Equipment Make Model Serial # Invoice#
20
EXHIBIT B
---------
FORM OF LOAN AGREEMENT SUPPLEMENT
LOAN AGREEMENT SUPPLEMENT No. [ ]
LOAN AGREEMENT SUPPLEMENT No. [ ], dated ______________, ______
("Supplement"), to the Loan and Security Agreement dated as of ______________,
1999 (the "Loan Agreement) by and between the undersigned Xxxxxxxxxxx.xxx, Inc.
("Borrower"), and Silicon Valley Bank ("Bank").
Capitalized terms used herein but not otherwise defined herein are used
with the respective meanings given to such terms in the Loan Agreement.
To secure the prompt payment by Borrower of all amounts from time to time
outstanding under the Loan Agreement, and the performance by Borrower of all the
terms contained in the Loan Agreement, Borrower grants Bank, a first priority
security interest in each item of equipment and other property described in
Annex A hereto, which equipment and other property shall be deemed to be
additional Financed Equipment and Collateral. The Loan Agreement is hereby
incorporated by reference herein and is hereby ratified, approved and confirmed.
Annex A (Equipment Schedule) and Annex B (Loan Terms Schedule) are attached
hereto. The proceeds of the Loan should be transferred to Borrower's account
with Bank set forth below:
Bank Name: Silicon Valley Bank
Account No.: ____________________________
Borrower hereby certifies that (a) the foregoing information is true and correct
and authorizes Bank to endorse in its respective books and records, the Basic
Rate applicable to the Funding Date of the Loan contemplated in this Loan
Agreement Supplement and the principal amount set forth in the Loan Terms
Schedule; (b) the representations and warranties made by Borrower in the Loan
Agreement are true and correct on the date hereof and shall be true and correct
on such Funding Date. No Event of Default has occurred and is continuing under
the Loan Agreement. This Supplement may be executed by Borrower and Bank in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
This Supplement is delivered as of this day and year first above written.
SILICON VALLEY BANK XXXXXXXXXXX.XXX, INC.
By: By:
------------------------------ ------------------------------
Name: Name:
---------------------------- ----------------------------
Title: Title:
--------------------------- ---------------------------
Annex A - Description of Financed Equipment
Annex B - Loan Terms Schedule
21
ANNEX A TO EXHIBIT B
--------------------
The Financed Equipment being financed with the Equipment Advance which this
Loan Agreement Supplement is being executed is listed below. Upon the funding
of such Equipment Advance, this schedule automatically shall be deemed to be a
part of the Collateral.
Description of Equipment Make Model Serial # Invoice#
22
ANNEX B TO EXHIBIT B
LOAN TERMS SCHEDULE #______
Loan Funding Date: _____________, ____
Original Loan Amount: $____________
Basic Rate: ______%
Loan Factor: ______%
Scheduled Payment Dates and Amounts*:
One (1) payment of $_______ due ______________
______ payment of $_______ due monthly in advance from _____ through_____.
One (1) payment of $_______ due ______________
Maturity Date: ____________
Final Payment: An additional amount equal to the Final Payment Percentage
multiplied by the Loan Amount then in effect, shall be paid on
the Maturity Date with respect to such Loan.
Payment No. Payment Date
1
2
3
4
. . .
35
[36]
. . .
*/ The amount of each Scheduled Payment shall change as the Loan Amount changes.
23
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: XXXXXXXXXXX.XXX, INC.
The undersigned authorized officer of XXXXXXXXXXX.XXX, INC. certifies that
under the terms and conditions of the Loan and Security Agreement between
Borrower and Bank (the "Agreement"), (i) Borrower is in complete compliance for
the period ending _______________ with all required covenants except as noted
below and (ii) all representations and warranties in the Agreement are true and
correct in all material respects on this date. Attached are the required
documents supporting the certification. The Officer certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP)
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer acknowledges that no borrowings
may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Financial statements with Compliance Certificate (a) Prior to Capitalization Event: Monthly within 30 days Yes No
(b) After Capitalization Event: Quarterly within 45 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No
COVENANTS REQUIRED ACTUAL COMPLIES
--------- -------- ------ --------
Deposit at Closing $2,500,000.00 $_______ Yes No
Deposit at Occurrence of Capitalization Event $5,000,000.00 $_______ Yes No
COMMENTS REGARDING EXCEPTIONS: See Attached.
---------------------------------------
Sincerely, BANK USE ONLY
_____________________________ Received by: _____________________
Signature AUTHORIZED SIGNER
_____________________________ Date: _________________________
Title
Verified: ________________________
_____________________________ AUTHORIZED SIGNER
Date
Date: ______________________
525425.4 (56120/232)
Compliance Status: Yes No
3
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24
