EXHIBIT 10.17
LOAN AND SECURITY AGREEMENT
(EXIM FACILITY)
THIS LOAN AND SECURITY AGREEMENT (EXIM FACILITY) (this "AGREEMENT")
dated as of the Effective Date between SILICON VALLEY BANK, a California
corporation ("BANK"), and XXXXXXXXXX, a California corporation and X. X.
XXXXXXXXXX, a California corporation (jointly and severally, the "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
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Accounting terms not defined in this Agreement shall be construed
following GAAP. Calculations and determinations must be made following GAAP.
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in Section 13. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meaning provided by the Code to the
extent such terms are defined therein.
2 LOAN AND TERMS OF PAYMENT
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2.1 PROMISE TO PAY. Borrower hereby unconditionally promises to pay
Bank the outstanding principal amount of all Credit Extensions and accrued and
unpaid interest thereon as and when due in accordance with this Agreement.
2.1.1 REVOLVING ADVANCES.
(a) AVAILABILITY. Subject to the terms and conditions of this
Agreement, Bank shall make Advances not exceeding the Availability Amount.
Amounts borrowed hereunder may be repaid and, prior to the Revolving Line
Maturity Date, reborrowed, subject to the applicable terms and conditions
precedent herein.
(b) TERMINATION; REPAYMENT. The Revolving Line terminates on
the Revolving Line Maturity Date, when the principal amount of all Advances, the
unpaid interest thereon, and all other Obligations relating to the Revolving
Line shall be immediately due and payable.
2.1.2 [INTENTIONALLY OMITTED].
2.1.3 [INTENTIONALLY OMITTED].
2.1.4 [INTENTIONALLY OMITTED].
2.1.5 [INTENTIONALLY OMITTED].
2.1.6 [INTENTIONALLY OMITTED].
2.1.7 [INTENTIONALLY OMITTED].
2.2 OVERADVANCES. If, at any time, the Credit Extensions exceed the
lesser of either (a) the Revolving Line or (b) the Borrowing Base, Borrower
shall immediately pay to Bank in cash such excess.
2.3 PAYMENT OF INTEREST ON THE CREDIT EXTENSIONS.
(a) INTEREST RATE.
(i) ADVANCES. Subject to Section 2.3(b), the principal
amount outstanding under the Revolving Line shall accrue interest at a floating
per annum rate equal to 0.75 percentage points above the Prime Rate, which
interest shall be payable monthly in accordance with Section 2.3(f) below.
(b) DEFAULT RATE. Immediately upon the occurrence and during
the continuance of an Event of Default, Obligations shall bear interest at a
rate per annum which is five percentage points above the rate that is otherwise
applicable thereto (the "DEFAULT RATE"). Payment or acceptance of the increased
interest rate provided in this Section 2.3(b) is not a permitted alternative to
timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Bank.
(c) ADJUSTMENT TO INTEREST RATE. Changes to the interest rate
of any Credit Extension based on changes to the Prime Rate shall be effective on
the effective date of any change to the Prime Rate and to the extent of any such
change.
(d) 360-DAY YEAR. Interest shall be computed on the basis of
a 360-day year for the actual number of days elapsed.
(e) DEBIT OF ACCOUNTS. Bank may debit any of Borrower's
deposit accounts, including the Designated Deposit Account, for principal and
interest payments or any other amounts Borrower owes Bank when due. These debits
shall not constitute a set-off.
(f) PAYMENTS. Unless otherwise provided, interest is payable
monthly on the first calendar day of each month. Payments of principal and/or
interest received after 12:00 p.m. Pacific time are considered received at the
opening of business on the next Business Day. When a payment is due on a day
that is not a Business Day, the payment is due the next Business Day and
additional fees or interest, as applicable, shall continue to accrue.
2.4 FEES. Borrower shall pay to Bank:
(a) COMMITMENT FEE. A fully earned, non-refundable commitment
fee of $37,500, on the Effective Date; and
(b) UNUSED REVOLVING LINE FACILITY FEE. See the "UNUSED
REVOLVING LINE FACILITY FEE" set forth in the Non-Exim Agreement; and
(c) BANK EXPENSES. All Bank Expenses (including reasonable
attorneys' fees and expenses, plus expenses, for documentation and negotiation
of this Agreement) incurred through and after the Effective Date, when due.
3 CONDITIONS OF LOANS
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3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. Bank's obligation to make
the initial Advance is subject to the condition precedent that Borrower shall
consent to or shall have delivered, in form and substance satisfactory to Bank,
such documents, and completion of such other matters, as Bank may reasonably
deem necessary or appropriate, including, without limitation:
(a) duly executed original signatures to the Loan Documents
to which it is a party;
(b) duly executed original signatures to the Control
Agreements;
(c) its Operating Documents and a good standing certificate
of Borrower certified by the Secretary of State of the State of California as of
a date no earlier than thirty (30) days prior to the Effective Date;
(d) duly executed original signatures to the completed
Borrowing Resolutions for Borrower;
(e) certified copies, dated as of a recent date, of financing
statement searches, as Bank shall request, accompanied by written evidence
(including any UCC termination statements) that the Liens indicated in any such
financing statements either constitute Permitted Liens or have been or, in
connection with the initial Advance, will be terminated or released; and
evidence that that certain Judgment Entered by Stipulation in favor of Comdisco,
Inc. and filed in the San Xxxx Obispo County Superior Court (Case No. CV 000372)
has been satisfied and released;
(f) the Perfection Certificate(s) executed by Borrower;
(g) the insurance policies and/or endorsements required
pursuant to Section 6.5 hereof; and
(h) payment of the fees and Bank Expenses then due as
specified in Section 2.4 hereof.
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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:
(a) except as otherwise provided in Section 3.4(a), timely
receipt of an executed Payment/Advance Form;
(b) the representations and warranties in Section 5 shall be
true in all material respects on the date of the Payment/Advance Form and on the
Funding Date of each Credit Extension; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, and no Default or Event of Default shall 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 in all material respects; provided, however,
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date; and
(c) in Bank's sole discretion, there has not been a Material
Adverse Change.
3.3 COVENANT TO DELIVER.
Borrower agrees to deliver to Bank each item required to be delivered
to Bank under this Agreement as a condition to any Credit Extension. Borrower
expressly agrees that the extension of a Credit Extension prior to the receipt
by Bank of any such item shall not constitute a waiver by Bank of Borrower's
obligation to deliver such item, and any such extension in the absence of a
required item shall be in Bank's sole discretion.
3.4 PROCEDURES FOR BORROWING.
(a) ADVANCES. Subject to the prior satisfaction of all other
applicable conditions to the making of an Advance set forth in this Agreement,
to obtain an Advance, Borrower shall notify Bank (which notice shall be
irrevocable) by electronic mail, facsimile, or telephone by 12:00 p.m. Pacific
time on the Funding Date of the Advance. Together with any such electronic or
facsimile notification, Borrower shall deliver to Bank by electronic mail or
facsimile a completed Payment/Advance Form executed by a Responsible Officer or
his or her designee. Bank may rely on any telephone notice given by a person
whom Bank believes is a Responsible Officer or designee. Bank shall credit
Advances to the Designated Deposit Account. Bank may make Advances under this
Agreement based on instructions from a Responsible Officer or his or her
designee or without instructions if the Advances are necessary to meet
Obligations which have become due.
4A. EXIM PROVISIONS.
4A.1 EXIM GUARANTY. Prior to the first Credit Extension hereunder,
Borrower shall cause the Export Import Bank of the United States (the "Exim
Bank") to guarantee the Credit Extensions made under this Agreement, pursuant to
a Master Guarantee Agreement, Loan Authorization Agreement and (to the extent
applicable) Delegated Authority Letter Agreement or Fast Track Lender Agreement
(collectively, the "Exim Guaranty"), and Borrower shall cause the Exim Guaranty
to be in full force and effect throughout the term of this Agreement and so long
as any Credit Extensions hereunder are outstanding. If, for any reason, the Exim
Guaranty shall cease to be in full force and effect, or if the Exim Bank
declares the Exim Guaranty void or revokes any obligations thereunder or denies
liability thereunder, or if Borrower takes or permits any action that could be
expected to cause, the EXIM Guarantee to not be in full force and effect, any
such event shall constitute an Event of Default under this Agreement. Nothing in
any confidentiality agreement in this Agreement or in any other agreement shall
restrict Bank's right to make disclosures and provide information to the Exim
Bank in connection with the Exim Guaranty. Bank shall have the right to take all
actions required or authorized in the Exim Guaranty.
4A.2 EXIM BORROWER AGREEMENT; COSTS. Borrower shall, concurrently
execute and deliver a Borrower Agreement, in the form specified by the Exim
Bank, in favor of Bank and the Exim Bank, together with any amendments thereto
which are required by the Exim Bank (as so amended, the "Exim Borrower
Agreement"). This Agreement is subject to all of the terms and conditions of the
Exim Borrower Agreement, all of which are hereby incorporated herein by this
reference. Borrower expressly agrees to perform all of the obligations and
comply with all of the affirmative and negative covenants and all other terms
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and conditions set forth in the Exim Borrower Agreement, as though the same were
expressly set forth herein. In the event of any conflict between the terms of
the Exim Borrower Agreement and the other terms of this Agreement or the
Non-Exim Agreement, whichever terms are more restrictive shall apply. Borrower
acknowledges and agrees that it has received a copy of the Loan Authorization
Agreement which is referred to in the Exim Borrower Agreement. Borrower agrees
to be bound by the terms of the Loan Authorization Agreement, including, without
limitation, by any additions or revisions made prior to its execution on behalf
of Exim Bank. Upon the execution of the Loan Authorization Agreement by Exim
Bank and Bank, it shall become an attachment to the Exim Borrower Agreement.
Borrower shall reimburse Bank for all fees and all out of pocket costs and
expenses incurred by Bank with respect to the Exim Guaranty and the Exim
Borrower Agreement, including without limitation all facility fees and usage
fees, and Bank is authorized to debit Borrower's account with Bank for such
fees, costs and expenses when paid by Bank.
4A.3 NON-EXIM AGREEMENT; CROSS-COLLATERALIZATION; CROSS-DEFAULT. Bank
and the Borrower are parties to that certain Loan and Security Agreement of
approximate even date herewith (as amended from time to time, the "Non-Exim
Agreement"). Both this Agreement and the Non-Exim Agreement shall continue in
full force and effect, and all rights and remedies under this Agreement and the
Non-Exim Agreement are cumulative. The term "Obligations" as used in this
Agreement and in the Non-Exim Agreement shall include without limitation the
obligation to pay when due all Credit Extensions made pursuant to this Agreement
(the "Exim Loans") and all interest thereon and the obligation to pay when due
all Credit Extensions made pursuant to the Non-Exim Agreement (the "Non-Exim
Loans") and all interest thereon. Without limiting the generality of the
foregoing, all "Collateral" as defined in this Agreement and as defined in the
Non-Exim Agreement shall secure all Exim Loans and all Non-Exim Loans and all
interest thereon, and all other Obligations. Any Event of Default under this
Agreement shall also constitute an Event of Default under the Non-Exim
Agreement, and any Event of Default under the Non-Exim Agreement shall also
constitute an Event of Default under this Agreement. In the event Bank assigns
its rights under this Agreement and/or under any note evidencing Exim Loans
and/or its rights under the Non-Exim Agreement and/or under any note evidencing
Non-Exim Loans, to any third party, including without limitation the Exim Bank,
whether before or after the occurrence of any Event of Default, Bank shall have
the right (but not any obligation), in its sole discretion, to allocate and
apportion Collateral to the Agreement and/or note assigned and to specify the
priorities of the respective security interests in such Collateral between
itself and the assignee, all without notice to or consent of the Borrower.
4A.4 EXIM INSURANCE. If required by Bank, Borrower will obtain, and pay
when due all premiums with respect to, and maintain uninterrupted foreign credit
insurance. In addition, Borrower will execute in favor of Bank an assignment of
proceeds of any insurance policy obtained by Borrower and issued by EXIM Bank
insuring against comprehensive commercial and political risk (the "EXIM Bank
Policy"). The insurance proceeds from the EXIM Bank Policy assigned or paid to
Bank will be applied to the balance outstanding under this EXIM Agreement.
Borrower will immediately notify Bank and EXIM Bank in writing upon submission
of any claim under the EXIM Bank Policy, and thereafter Bank will not be
obligated to make any further Credit Extensions to Borrower without prior
approval from EXIM Bank.
4 CREATION OF SECURITY INTEREST
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4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants Bank, to secure
the payment and performance in full of all of the Obligations, a continuing
security interest in, and pledges to Bank, the Collateral, wherever located,
whether now owned or hereafter acquired or arising, and all proceeds and
products thereof. Borrower represents, warrants, and covenants that the security
interest granted herein is and shall at all times continue to be a first
priority perfected security interest in the Collateral (subject only to
Permitted Liens that may have superior priority to Bank's Lien under this
Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall
promptly notify Bank in a writing signed by Borrower of the general details
thereof and grant to Bank in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance reasonably satisfactory to Bank.
If this Agreement is terminated, Bank's Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations) are
repaid in full in cash. Upon payment in full in cash of the Obligations and at
such time as Bank's obligation to make Credit Extensions has terminated, Bank
shall, at Borrower's sole cost and expense, release its Liens in the Collateral
and all rights therein shall revert to Borrower.
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4.2 AUTHORIZATION TO FILE FINANCING STATEMENTS. Borrower hereby
authorizes Bank to file financing statements, without notice to Borrower, with
all appropriate jurisdictions to perfect or protect Bank's interest or rights
hereunder, including a notice that any disposition of the Collateral, by either
Borrower or any other Person, shall be deemed to violate the rights of Bank
under the Code.
5 REPRESENTATIONS AND WARRANTIES
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Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION, AUTHORIZATION; POWER AND AUTHORITY. Borrower is
duly existing and in good standing as a Registered Organization in its
jurisdiction of formation and is qualified and licensed to do business and is in
good standing in any jurisdiction in which the conduct of its business or its
ownership of property requires that it be qualified except where the failure to
do so could not reasonably be expected to have a material adverse effect on
Borrower's business. In connection with this Agreement, Borrower has delivered
to Bank a completed certificate signed by Borrower, entitled "Perfection
Certificate". Borrower represents and warrants to Bank that (a) Borrower's exact
legal name is that indicated on the Perfection Certificate and on the signature
page hereof; (b) Borrower is an organization of the type and is organized in the
jurisdiction set forth in the Perfection Certificate; (c) the Perfection
Certificate accurately sets forth Borrower's organizational identification
number or accurately states that Borrower has none; (d) the Perfection
Certificate accurately sets forth Borrower's place of business, or, if more than
one, its chief executive office as well as Borrower's mailing address (if
different than its chief executive office); (e) Borrower (and each of its
predecessors) has not, in the past five (5) years, changed its jurisdiction of
formation, organizational structure or type, or any organizational number
assigned by its jurisdiction; and (f) all other information set forth on the
Perfection Certificate pertaining to Borrower and each of its Subsidiaries is
accurate and complete (it being understood and agreed that Borrower may from
time to time update certain information in the Perfection Certificate after the
Effective Date to the extent permitted by one or more specific provisions in
this Agreement). If Borrower is not now a Registered Organization but later
becomes one, Borrower shall promptly notify Bank of such occurrence and provide
Bank with Borrower's organizational identification number.
The execution, delivery and performance by Borrower of the Loan
Documents to which it is a party have been duly authorized, and do not (i)
conflict with any of Borrower's organizational documents, (ii) contravene,
conflict with, constitute a default under or violate any material Requirement of
Law, (iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any its Subsidiaries or any of their property or assets may be
bound or affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in
full force and effect) or (v) constitute an event of default under any material
agreement by which Borrower is bound. Borrower is not in default under any
agreement to which it is a party or by which it is bound in which the default
could reasonably be expected to have a material adverse effect on Borrower's
business.
5.2 COLLATERAL. Borrower has good title to, has rights in, and the
power to transfer each item of the Collateral upon which it purports to xxxxx x
Xxxx hereunder, free and clear of any and all Liens except Permitted Liens.
Borrower has no deposit accounts other than the deposit accounts with Bank, the
deposit accounts, if any, described in the Perfection Certificate delivered to
Bank in connection herewith, or of which Borrower has given Bank notice and
taken such actions as are necessary to give Bank a perfected security interest
therein. The Accounts are bona fide, existing obligations of the Account
Debtors.
The Collateral is not in the possession of any third party bailee (such
as a warehouse) except as otherwise provided in the Perfection Certificate
(exclusive of Borrower's evaluation/demonstrative Inventory placed at customer
sites from time to time). None of the components of the Collateral shall be
maintained at locations other than as provided in the Perfection Certificate or
as Borrower has given Bank notice pursuant to Section 7.2. In the event that
Borrower, after the date hereof, intends to store or otherwise deliver any
portion of the Collateral to a bailee, then Borrower will first receive the
written consent of Bank and such bailee must execute and deliver a bailee
agreement in form and substance satisfactory to Bank in its sole discretion. No
landlord agreement will be required from the lessor of Borrower's facility at
000 Xxxxxxx Xxxx, Xxx Xxxx Xxxxxx, XX 00000, at which Borrower's Inventory is
stored and maintained, as long as Borrower maintains availability under the
Inventory Sublimit equal to at least three months' rent at such facility
(currently totaling approximately $250,000).
All Inventory is in all material respects of good and marketable
quality, free from material defects.
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Borrower is the sole owner of its intellectual property, except for
non-exclusive licenses granted to its customers in the ordinary course of
business. Each patent is valid and enforceable, and no part of the intellectual
property has been judged invalid or unenforceable, in whole or in part, and to
the best of Borrower's knowledge, no claim has been made that any part of the
intellectual property violates the rights of any third party except to the
extent such claim could not reasonably be expected to have a material adverse
effect on Borrower's business. Except as noted on the Perfection Certificate,
Borrower is not a party to, nor is bound by, any material license or other
agreement with respect to which Borrower is the licensee (a) that prohibits or
otherwise restricts Borrower from granting a security interest in Borrower's
interest in such license or agreement or any other property, or (b) for which a
default under or termination of could interfere with the Bank's right to sell
any Collateral. Borrower shall provide written notice to Bank within thirty (30)
days of entering or becoming bound by any such license or agreement (other than
over-the-counter software that is commercially available to the public).
Borrower shall take such steps as Bank requests to obtain the consent of, or
waiver by, any person whose consent or waiver is necessary for (x) all such
licenses or agreements to be deemed "Collateral" and for Bank to have a security
interest in it that might otherwise be restricted or prohibited by law or by the
terms of any such license or agreement, whether now existing or entered into in
the future, and (y) Bank to have the ability in the event of a liquidation of
any Collateral to dispose of such Collateral in accordance with Bank's rights
and remedies under this Agreement and the other Loan Documents.
5.3 ACCOUNTS RECEIVABLE. For any Eligible Account in any Borrowing Base
Certificate, all statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing such Eligible Account are
and shall be true and correct and all such invoices, instruments and other
documents, and all of Borrower's Books are genuine and in all respects what they
purport to be. Whether or not an Event of Default has occurred and is
continuing, Bank may notify any Account Debtor owing Borrower money of Bank's
security interest in such funds and verify the amount of such Eligible Account.
All sales and other transactions underlying or giving rise to each Eligible
Account shall comply in all material respects with all applicable laws and
governmental rules and regulations. Borrower has no knowledge of any actual or
imminent Insolvency Proceeding of any Account Debtor whose accounts are an
Eligible Account in any Borrowing Base Certificate. To the best of Borrower's
knowledge, all signatures and endorsements on all documents, instruments, and
agreements relating to all Eligible Account are genuine, and all such documents,
instruments and agreements are legally enforceable in accordance with their
terms.
5.4 LITIGATION. There are no actions or proceedings pending or, to the
knowledge of the Responsible Officers, threatened in writing by or against
Borrower or any of its Subsidiaries involving more than One Hundred Thousand
Dollars ($100,000) except for the following: (i) that certain complaint filed by
Xxxx Xxxxxxxx against X. X. Xxxxxxxxxx in the Massachusetts Superior Court for
negligence and breach of implied warranty and (ii) that certain lawsuit filed
against Borrower by the former Xxx. Xxxxx Xxxxxxxxxx for the cost of capital
repairs.
5.5 NO MATERIAL DEVIATION IN FINANCIAL STATEMENTS. All consolidated
financial statements for Borrower and any of its Subsidiaries 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.
5.6 SOLVENCY. The fair salable value of Borrower's assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities;
Borrower is not left with unreasonably small capital after the transactions in
this Agreement; and Borrower is able to pay its debts (including trade debts) as
they mature.
5.7 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, to the best of Borrower's knowledge, in
all material respects with the Federal Fair Labor Standards Act. Neither
Borrower nor any of its Subsidiaries is a "holding company" or an "affiliate" of
a "holding company" or a "subsidiary company" of a "holding company" as each
term is defined and used in the Public Utility Holding Company Act of 2005.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to have a material adverse effect on its business.
None of Borrower's or any of its Subsidiaries' 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 of its
Subsidiaries have 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 their respective businesses as
currently conducted.
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5.8 SUBSIDIARIES; INVESTMENTS. Borrower does not own any stock,
partnership interest or other equity securities except for Permitted
Investments.
5.9 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
timely filed all required tax returns and reports, and Borrower has timely paid
all foreign, federal, state and local taxes, assessments, deposits and
contributions owed by Borrower. Borrower may defer payment of any contested
taxes, provided that Borrower (a) in good faith contests its obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (b) notifies Bank in writing of the commencement of, and any material
development in, the proceedings, (c) posts bonds or takes any other steps
required to prevent the governmental authority levying such contested taxes from
obtaining a Lien upon any of the Collateral that is other than a "Permitted
Lien". Borrower is unaware of any claims or adjustments proposed for any of
Borrower's prior tax years which could result in additional taxes becoming due
and payable by Borrower. Borrower has paid all amounts necessary to fund all
present pension, profit sharing and deferred compensation plans in accordance
with their terms, and Borrower has not withdrawn from participation in, and has
not permitted partial or complete termination of, or permitted the occurrence of
any other event with respect to, any such plan which could reasonably be
expected to result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or its successors or any other governmental
agency.
5.10 USE OF PROCEEDS. Borrower shall use the proceeds of the Credit
Extensions solely for the purposes specified in the EXIM Borrower Agreement, and
Borrower will not use the proceeds of the EXIM Advances for any purpose
prohibited by the EXIM Borrower Agreement.
5.11 FULL DISCLOSURE. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank, as
of the date such representation, warranty, or other statement was made, taken
together with all such written certificates and written statements 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 not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results).
6 AFFIRMATIVE COVENANTS
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Borrower shall do all of the following:
6.1 GOVERNMENT COMPLIANCE.
(a) Maintain its and all its Subsidiaries' legal existence
and good standing in their respective jurisdictions of formation and maintain
qualification in each jurisdiction in which the failure to so qualify would
reasonably be expected to 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.
(b) Obtain all of the Governmental Approvals necessary for
the performance by Borrower of its obligations under the Loan Documents to which
it is a party and the grant of a security interest to Bank in all of its
property. Borrower shall promptly provide copies of any such obtained
Governmental Approvals to Bank.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Deliver to Bank: (i) as soon as available, but no later
than thirty (30) days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations for such month certified by a Responsible Officer and in a form
acceptable to Bank; (ii) as soon as available, but no later than one hundred and
twenty (120) days after the last day 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 in its
reasonable discretion (including, without limitation, Xxxxxx & XxXxxxxxxx);
(iii) within five (5) days of delivery, copies of all statements, reports and
notices made available to Borrower's security holders or to any holders of
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Subordinated Debt; (iv) in the event that Borrower becomes subject to the
reporting requirements under the Securities Exchange Act of 1934, as amended,
within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission or a link thereto on Borrower's or
another website on the Internet; (v) a prompt report of any legal actions
pending or threatened against Borrower or any of its Subsidiaries that could
result in damages or costs to Borrower or any of its Subsidiaries of one hundred
thousand Dollars ($100,000) or more; (vi) prompt notice of an event that
materially and adversely affects the value of the intellectual property; (vii)
within thirty (30) days after the beginning of each fiscal year of Borrower,
budgets, sales projections and operating plans of Borrower for such fiscal year
of Borrower; (viii) other financial information reasonably requested by Bank;
and (ix) within thirty (30) days after the end of each fiscal quarter, copies of
invoices representing at least ten percent (10%) of Borrower's Export-Related
Accounts Receivable (as defined in the Exim Borrower Agreement (as defined in
the Exim Agreement)) as shown on Borrower's aged listing of accounts receivable
for such fiscal quarter and copies of purchase orders representing at least ten
percent (10%) of Borrower's Export-Related Inventory as shown on Borrower's
inventory report for such fiscal quarter.
(b) Within fifteen (15) days after the last day of each
month, deliver to Bank a duly completed Borrowing Base Certificate signed by a
Responsible Officer, with (i) aged listings of accounts receivable and accounts
payable (by invoice date) and (ii) perpetual inventory reports for the Inventory
valued on a first-in, first-out basis at the lower of cost or market (in
accordance with GAAP) or such other inventory reports as are requested by Bank
in its good faith business judgment.
(c) Within thirty (30) days after the last day of each month,
deliver to Bank with the monthly financial statements, a duly completed
Compliance Certificate signed by a Responsible Officer setting forth
calculations showing compliance with the financial covenants set forth in this
Agreement.
(d) Allow Bank to audit Borrower's Collateral at Borrower's
expense. Such audits shall be conducted no more often than once every six (6)
months unless a Default or an Event of Default has occurred and is continuing.
6.3 INVENTORY; RETURNS. Keep all Inventory in good and marketable
condition, free from material defects. Returns and allowances between Borrower
and its Account Debtors shall follow Borrower's customary practices as they
exist at the Effective Date. Borrower must promptly notify Bank of all returns,
recoveries, disputes and claims that involve more than One Hundred Thousand
Dollars ($100,000).
6.4 TAXES; PENSIONS. Make, and cause each of its Subsidiaries to make,
timely payment of all foreign, federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting pursuant to the
terms of Section 5.9 hereof) and shall deliver to Bank, on demand, appropriate
certificates attesting to such payments, and pay all amounts necessary to fund
all present pension, profit sharing and deferred compensation plans in
accordance with their terms.
6.5 INSURANCE. Keep its business and the Collateral insured for risks
and in amounts standard for companies in Borrower's industry and location and as
Bank may reasonably request. Insurance policies shall be in a form, with
companies, and in amounts that are satisfactory to Bank. All property policies
shall have a lender's loss payable endorsement showing Bank as the sole lender
loss payee and waive subrogation against Bank, and all liability policies shall
show, or have endorsements showing, Bank as an additional insured. All policies
(or the loss payable and additional insured endorsements) shall provide that the
insurer shall endeavor to give Bank at least twenty (20) days notice before
canceling, amending, or declining to renew its policy. At Bank's request,
Borrower shall deliver certified copies of policies and evidence of all premium
payments. Except as otherwise provided in Section 2.1.5(c), proceeds payable
under any policy shall, at Bank's option, be payable to Bank on account of the
Obligations. Notwithstanding the foregoing, except as otherwise provided in
Section 2.1.5(c), (a) 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 Fifty Thousand Dollars ($50,000) with respect to any loss,
but not exceeding One Hundred Thousand Dollars ($100,000) in the aggregate for
all losses under all casualty policies in any one year, toward the replacement
or repair of destroyed or damaged property; provided that any such replaced or
repaired property (i) shall be of equal or like value as the replaced or
repaired Collateral and (ii) shall be deemed Collateral in which Bank has been
granted a first priority security interest, and (b) after the occurrence and
during the continuance of an Event of Default, all proceeds payable under such
casualty policy shall, at the option of Bank, be payable to Bank on account of
the Obligations. If Borrower fails to obtain insurance as required under this
Section 6.5 or to pay any amount or furnish any required proof of payment to
third persons and Bank, Bank may make all or part of such payment or obtain such
insurance policies required in this Section 6.5, and take any action under the
policies Bank deems prudent.
-8-
6.6 OPERATING ACCOUNTS.
(a) Maintain all of its and all of its Subsidiaries'
operating and other deposit accounts and securities accounts with Bank and
Bank's Affiliates which accounts shall represent at least 50% of the dollar
value of Borrower's and such Subsidiaries accounts at all financial
institutions.
(b) Provide Bank five (5) days prior written notice before
establishing any Collateral Account at or with any bank or financial institution
other than Bank or Bank's Affiliates. For each Collateral Account that Borrower
at any time maintains, Borrower shall cause the applicable bank or financial
institution (other than Bank) at or with which any Collateral Account is
maintained to execute and deliver a Control Agreement or other appropriate
instrument with respect to such Collateral Account to perfect Bank's Lien in
such Collateral Account in accordance with the terms hereunder. The provisions
of the previous sentence shall not apply to deposit accounts exclusively used
for payroll, payroll taxes and other employee wage and benefit payments to or
for the benefit of Borrower's employees and identified to Bank by Borrower as
such.
6.7 FINANCIAL COVENANTS.
Borrower shall maintain as of the last day of each month on a
consolidated basis with respect to Borrower and its Subsidiaries:
(a) QUICK RATIO. A ratio of Quick Assets to Current
Liabilities of at least 1.0 to 1.0.
(b) DEBT/NET WORTH RATIO. A ratio of Total Liabilities less
Subordinated Debt to Tangible Net Worth plus Subordinated Debt of not more than
0.60 to 1.0.
6.8 PROTECTION OF INTELLECTUAL PROPERTY RIGHTS. Borrower shall: (a)
protect, defend and maintain the validity and enforceability of its intellectual
property; (b) promptly advise Bank in writing of material infringements of its
intellectual property; and (c) not allow any intellectual property material to
Borrower's business to be abandoned, forfeited or dedicated to the public
without Bank's written consent. If Borrower (i) obtains any patent, registered
trademark or servicemark, registered copyright, registered mask work, or any
pending application for any of the foregoing, whether as owner, licensee or
otherwise, or (ii) applies for any patent or the registration of any trademark
or servicemark, then Borrower shall immediately provide written notice thereof
to Bank and shall execute such intellectual property security agreements and
other documents and take such other actions as Bank shall request in its good
faith business judgment to perfect and maintain a first priority perfected
security interest in favor of Bank in such property. If Borrower decides to
register any copyrights or mask works in the United States Copyright Office,
Borrower shall: (x) provide Bank with at least fifteen (15) days prior written
notice of Borrower's intent to register such copyrights or mask works together
with a copy of the application it intends to file with the United States
Copyright Office (excluding exhibits thereto); (y) execute an intellectual
property security agreement and such other documents and take such other actions
as Bank may request in its good faith business judgment to perfect and maintain
a first priority perfected security interest in favor of Bank in the copyrights
or mask works intended to be registered with the United States Copyright Office;
and (z) record such intellectual property security agreement with the United
States Copyright Office contemporaneously with filing the copyright or mask work
application(s) with the United States Copyright Office. Borrower shall promptly
provide to Bank copies of all applications that it files for patents or for the
registration of trademarks, servicemarks, copyrights or mask works, together
with evidence of the recording of the intellectual property security agreement
necessary for Bank to perfect and maintain a first priority perfected security
interest in such property.
6.9 LITIGATION COOPERATION. From the date hereof and continuing through
the termination of this Agreement, make available to Bank, without expense to
Bank, Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Bank may deem them reasonably necessary to prosecute
or defend any third-party suit or proceeding instituted by or against Bank with
respect to any Collateral or relating to Borrower.
6.10 [INTENTIONALLY OMITTED]
-9-
6.11 [INTENTIONALLY OMITTED]
6.12 FURTHER ASSURANCES. Execute any further instruments and take
further action as Bank reasonably requests to perfect or continue Bank's Lien in
the Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
------------------
Borrower shall not do any of the following without Bank's prior written
consent:
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of
(collectively, "TRANSFER"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, except for Transfers (a) of Inventory
in the ordinary course of business; (b) of worn-out or obsolete Equipment; and
(c) in connection with Permitted Liens and Permitted Investments.
7.2 CHANGES IN BUSINESS, MANAGEMENT, CONTROL, OR BUSINESS LOCATIONS.
(a) Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses currently engaged in by Borrower and such Subsidiary, as
applicable, or reasonably related thereto; (b) liquidate or dissolve; or (c) (i)
permit or suffer any Change in Control. Borrower shall not, without at least
thirty (30) days prior written notice to Bank: (1) add any new offices or
business locations, including warehouses (unless such new offices or business
locations contain less than Ten Thousand Dollars ($10,000) in Borrower's assets
or property), (2) change its jurisdiction of organization, (3) change its
organizational structure or type, (4) change its legal name, or (5) change any
organizational number (if any) assigned by its jurisdiction of organization.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person. A Subsidiary may merge or
consolidate into another Subsidiary or into Borrower.
7.4 INDEBTEDNESS. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.
7.5 ENCUMBRANCE. Create, incur, allow, or suffer any Lien on any of the
Collateral or assign or convey any right to receive income, including the sale
of any Accounts, or permit any of its Subsidiaries to do so, except for
Permitted Liens, permit any Collateral not to be subject to the first priority
security interest granted herein, except as is otherwise permitted in Section
7.1 hereof and the definition of "Permitted Lien" herein.
7.6 MAINTENANCE OF COLLATERAL ACCOUNTS. Maintain any Collateral Account
except pursuant to the terms of Section 6.6.(b) hereof.
7.7 DISTRIBUTIONS; INVESTMENTS. (a) Pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital stock provided
that (i) Borrower may convert any of its convertible securities into other
securities pursuant to the terms of such convertible securities or otherwise in
exchange thereof, (ii) Borrower may pay dividends solely in common stock (except
that Borrower may pay dividends as provided for with respect to its 8% per annum
Redeemable Convertible Preferred Stock previously issued and outstanding as of
the Effective Date); and (iii) Borrower may repurchase the stock of former
employees or consultants pursuant to stock repurchase agreements so long as an
Event of Default does not exist at the time of such repurchase and would not
exist after giving effect to such repurchase, provided such repurchase does not
exceed in the aggregate of Fifty Thousand Dollars ($50,000) per fiscal year; or
(b) directly or indirectly make any Investment other than Permitted Investments,
or permit any of its Subsidiaries to do so.
7.8 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower, except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-affiliated Person.
7.9 SUBORDINATED DEBT. (a) Make or permit any payment on any
Subordinated Debt, except under the terms of the subordination, intercreditor,
or other similar agreement to which such Subordinated Debt is subject, or (b)
amend any provision in any document relating to the Subordinated Debt which
would increase the amount thereof or adversely affect the subordination thereof
to Obligations owed to Bank.
-10-
7.10 COMPLIANCE. Become an "investment company" or a company controlled
by an "investment company", under the Investment Company Act of 1940 or
undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to meet 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 permit any of its Subsidiaries to do
so; withdraw or permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any present pension, profit sharing and deferred compensation
plan which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.
8 EVENTS OF DEFAULT
-----------------
Any one of the following shall constitute an event of default (an
"EVENT OF DEFAULT") under this Agreement:
8.1 PAYMENT DEFAULT. Borrower fails to (a) make any payment of
principal or interest on any Credit Extension on its due date, or (b) pay any
other Obligations within three (3) Business Days after such Obligations are due
and payable (which three (3) day grace period shall not apply to payments due on
the Revolving Line Maturity Date. During the cure period, the failure to cure
the payment default is not an Event of Default (but no Credit Extension will be
made during the cure period);
8.2 COVENANT DEFAULT.
(a) Borrower fails or neglects to perform any obligation in
Sections 6.2, 6.4, 6.5, 6.6, or 6.7 or violates any covenant in Section 7; or
(b) Borrower fails or neglects to perform, keep, or observe
any other term, provision, condition, covenant or agreement contained in this
Agreement or any Loan Documents, and as to any default (other than those
specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within
ten (10) days after the occurrence thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional period (which shall not in any case exceed thirty (30)
days) to attempt to cure such default, and within such reasonable time period
the failure to cure the default shall not be deemed an Event of Default (but no
Credit Extensions shall be made during such cure period). Grace periods provided
under this section shall not apply, among other things, to financial covenants
or any other covenants set forth in subsection (a) above;
8.3 MATERIAL ADVERSE CHANGE. A Material Adverse Change occurs;
8.4 ATTACHMENT. (a) Any material portion of Borrower's assets is
attached, seized, levied on, or comes into possession of a trustee or receiver;
(b) the service of process seeking to attach, by trustee or similar process, any
funds of Borrower or of any entity under control of Borrower (including a
Subsidiary) on deposit with Bank or any Bank Affiliate; (c) Borrower is
enjoined, restrained, or prevented by court order from conducting any part of
its business; or (d) a notice of lien, levy, or assessment is filed against any
of Borrower's assets by any government agency, and the same under clauses (a)
through (d) hereof are not, within ten (10) days after the occurrence thereof,
discharged or stayed (whether through the posting of a bond or otherwise);
provided, however, no Credit Extensions shall be made during any ten (10) day
cure period;
8.5 INSOLVENCY (a) Borrower is unable to pay its debts (including trade
debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an
Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower
and not dismissed or stayed within thirty (30) days (but no Credit Extensions
shall be made while of any of the conditions described in clause (a) exist
and/or until any Insolvency Proceeding is dismissed);
8.6 OTHER AGREEMENTS. There is a default in any agreement to which
Borrower or any Guarantor 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 Fifty Thousand
Dollars ($50,000) or that could have a material adverse effect on Borrower's
business;
-11-
8.7 JUDGMENTS. One or more judgments, orders, or decrees for the
payment of money in an amount, individually or in the aggregate, of at least
Fifty Thousand Dollars ($50,000) (not covered by independent third-party
insurance as to which liability has been accepted by such insurance carrier)
shall be rendered against Borrower and shall remain unsatisfied, unvacated, or
unstayed for a period of ten (10) days after the entry thereof (provided that no
Credit Extensions will be made prior to the satisfaction, vacation, or stay of
such judgment, order, or decree);
8.8 MISREPRESENTATIONS. Borrower or any Person acting for Borrower
makes any representation, warranty, or other statement now or later in this
Agreement, any Loan Document or in any writing delivered to Bank or to induce
Bank to enter this Agreement or any Loan Document, and such representation,
warranty, or other statement is incorrect in any material respect when made;
8.9 SUBORDINATED DEBT. A default or breach occurs under any agreement
between Borrower and any creditor of Borrower that signed a subordination,
intercreditor, or other similar agreement with Bank, or any creditor that has
signed such an agreement with Bank breaches any terms of such agreement; or
8.10 OMITTED.
8.11 GOVERNMENTAL APPROVALS. Any Governmental Approval shall have been
(a) revoked, rescinded, suspended, modified in an adverse manner or not renewed
in the ordinary course for a full term or (b) subject to any decision by a
Governmental Authority that designates a hearing with respect to any
applications for renewal of any of such Governmental Approval or that could
result in the Governmental Authority taking any of the actions described in
clause (a) above, and such decision or such revocation, rescission, suspension,
modification or non-renewal (i) has, or could reasonably be expected to have, a
Material Adverse Change, or (ii) adversely affects the legal qualifications of
Borrower or any of its Subsidiaries to hold such Governmental Approval in any
applicable jurisdiction and such revocation, rescission, suspension,
modification or non-renewal could reasonably be expected to affect the status of
or legal qualifications of Borrower or any of its Subsidiaries to hold any
Governmental Approval in any other jurisdiction.
9 BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 RIGHTS AND REMEDIES. While an Event of Default occurs and continues
Bank may, without notice or demand, do any or all of the following:
(a) 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);
(b) stop advancing money or extending credit for Borrower's
benefit under this Agreement or under any other agreement between Borrower and
Bank;
(c) demand that Borrower (i) deposits cash with Bank in an
amount equal to the aggregate amount of any Letters of Credit remaining undrawn,
as collateral security for the repayment of any future drawings under such
Letters of Credit, and Borrower shall forthwith deposit and pay such amounts,
and (ii) pay in advance all Letter of Credit fees scheduled to be paid or
payable over the remaining term of any Letters of Credit;
(d) terminate any FX Forward Contracts;
(e) settle or adjust disputes and claims directly with
Account Debtors for amounts on terms and in any order that Bank considers
advisable, notify any Person owing Borrower money of Bank's security interest in
such funds, and verify the amount of such account;
(f) make any payments and do any acts it considers necessary
or reasonable to protect the Collateral and/or 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;
(g) 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;
-12-
(h) ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell the Collateral. Bank is hereby
granted a non-exclusive, royalty-free license or other right to use without
charge, Borrower's labels, patents, copyrights, mask works, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
(i) place a "hold" on any account maintained with Bank and/or
deliver a notice of exclusive control, any entitlement order, or other
directions or instructions pursuant to any Control Agreement or similar
agreements providing control of any Collateral;
(j) demand and receive possession of Borrower's Books; and
(k) exercise all rights and remedies available to Bank under
the Loan Documents or at law or equity, including all remedies provided under
the Code (including disposal of the Collateral pursuant to the terms thereof).
9.2 POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower's name on any
checks or other forms of payment or security; (b) sign Borrower's name on any
invoice or xxxx of lading for any Account or drafts against Account Debtors; (c)
settle and adjust disputes and claims about the Accounts directly with Account
Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle,
and adjust all claims under Borrower's insurance policies; (e) pay, contest or
settle any Lien, charge, encumbrance, security interest, and adverse claim in or
to the Collateral, or any judgment based thereon, or otherwise take any action
to terminate or discharge the same; and (f) transfer the Collateral into the
name of Bank or a third party as the Code permits. Borrower hereby appoints Bank
as its lawful attorney-in-fact to sign Borrower's name on any documents
necessary to perfect or continue the perfection of Bank's security interest in
the Collateral 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 PROTECTIVE PAYMENTS. If Borrower fails to obtain the insurance
called for by Section 6.5 or fails to pay any premium thereon or fails to pay
any other amount which Borrower is obligated to pay under this Agreement or any
other Loan Document, Bank may obtain such insurance or make such payment, and
all amounts so paid by Bank are Bank Expenses and immediately due and payable,
bearing interest at the then highest applicable rate, and secured by the
Collateral. Bank will make reasonable efforts to provide Borrower with notice of
Bank obtaining such insurance at the time it is obtained or within a reasonable
time thereafter. 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 APPLICATION OF PAYMENTS AND PROCEEDS. Borrower shall have no right
to specify the order or the accounts to which Bank shall allocate or apply any
payments required to be made by Borrower to Bank or otherwise received by Bank
under this Agreement when any such allocation or application is not specified
elsewhere in this Agreement. If an Event of Default has occurred and is
continuing, Bank may apply any funds in its possession, whether from Borrower
account balances, payments, proceeds realized as the result of any collection of
Accounts or other disposition of the Collateral, or otherwise, to the
Obligations in such order as Bank shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other Persons legally entitled thereto;
Borrower shall remain liable to Bank for any deficiency. If Bank, in its good
faith business judgment, directly or indirectly enters into a deferred payment
or other credit transaction with any purchaser at any sale of Collateral, Bank
shall have the option, exercisable at any time, of either reducing the
Obligations by the principal amount of the purchase price or deferring the
reduction of the Obligations until the actual receipt by Bank of cash therefor.
9.5 BANK'S LIABILITY FOR COLLATERAL. So long as Bank complies with
reasonable banking practices regarding the safekeeping of the Collateral in the
possession or under the control of Bank, 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.
-13-
9.6 NO WAIVER; REMEDIES CUMULATIVE. Bank's failure, at any time or
times, to require strict performance by Borrower of any provision of this
Agreement or any other Loan Document shall not waive, affect, or diminish any
right of Bank thereafter to demand strict performance and compliance herewith or
therewith. No waiver hereunder shall be effective unless signed by Bank and then
is only effective for the specific instance and purpose for which it is given.
Bank's rights and remedies under this Agreement and the other Loan Documents 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 in
exercising any remedy is not a waiver, election, or acquiescence.
9.7 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 guarantees held by Bank on which
Borrower is liable.
10 NOTICES
-------
All notices, consents, requests, approvals, demands, or other
communication (collectively, "Communication") by any party to this Agreement or
any other Loan Document must be in writing and shall be deemed to have been
validly served, given, or delivered: (a) upon the earlier of actual receipt and
three (3) Business Days after deposit in the U.S. mail, first class, registered
or certified mail return receipt requested, with proper postage prepaid; (b)
upon transmission, when sent by electronic mail or facsimile transmission; (c)
one (1) Business Day after deposit with a reputable overnight courier with all
charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of
which shall be addressed to the party to be notified and sent to the address,
facsimile number, or email address indicated below. Bank or Borrower may change
its address or facsimile number by giving the other party written notice thereof
in accordance with the terms of this Section 10.
If to Borrower: Xxxxxxxxxx and X. X. Xxxxxxxxxx
000 Xxxxxxx Xxxx
Xxx Xxxx Xxxxxx, XX 00000
Attn: Xx. Xxxxx Xxxxxxxxxx
Fax: 000-000-000
Email: XXXXXXXXXXX@XXXXXXXXXX.XXX
Attn: Mr. Xxxxxxx Xxxxx
Fax: 000-000-0000
Email: XXXXXX@XXXXXXXXXX.XXX
If to Bank: Silicon Valley Bank
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxx
Fax: 000-000-0000
Email: XXXXXX@XXX.XXX
11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE
--------------------------------------------------------------
California 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 Santa Xxxxx County, California; provided,
however, that nothing in this Agreement shall be deemed to operate to preclude
Bank from bringing suit or taking other legal action in any other jurisdiction
to realize on the Collateral or any other security for the Obligations, or to
enforce a judgment or other court order in favor of Bank. Borrower expressly
submits and consents in advance to such jurisdiction in any action or suit
commenced in any such court, and Borrower hereby waives any objection that it
may have based upon lack of personal jurisdiction, improper venue, or forum non
conveniens and hereby consents to the granting of such legal or equitable relief
as is deemed appropriate by such court. Borrower hereby waives personal service
of the summons, complaints, and other process issued in such action or suit and
agrees that service of such summons, complaints, and other process may be made
by registered or certified mail addressed to Borrower at the address set forth
in Section 10 of this Agreement and that service so made shall be deemed
completed upon the earlier to occur of Borrower's actual receipt thereof or
three (3) days after deposit in the U.S. mails, proper postage prepaid.
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TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, 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.
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES' AGREEMENT TO WAIVE
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a
trial by jury is not enforceable, the parties hereto agree that any and all
disputes or controversies of any nature between them arising at any time shall
be decided by a reference to a private judge, mutually selected by the parties
(or, if they cannot agree, by the Presiding Judge of the Santa Xxxxx County,
California Superior Court) appointed in accordance with California Code of Civil
Procedure Section 638 (or pursuant to comparable provisions of federal law if
the dispute falls within the exclusive jurisdiction of the federal courts),
sitting without a jury, in Santa Xxxxx County, California; and the parties
hereby submit to the jurisdiction of such court. The reference proceedings shall
be conducted pursuant to and in accordance with the provisions of California
Code of Civil Procedure xx.xx. 638 through 645.1, inclusive. The private judge
shall have the power, among others, to grant provisional relief, including
without limitation, entering temporary restraining orders, issuing preliminary
and permanent injunctions and appointing receivers. All such proceedings shall
be closed to the public and confidential and all records relating thereto shall
be permanently sealed. If during the course of any dispute, a party desires to
seek provisional relief, but a judge has not been appointed at that point
pursuant to the judicial reference procedures, then such party may apply to the
Santa Xxxxx County, California Superior Court for such relief. The proceeding
before the private judge shall be conducted in the same manner as it would be
before a court under the rules of evidence applicable to judicial proceedings.
The parties shall be entitled to discovery which shall be conducted in the same
manner as it would be before a court under the rules of discovery applicable to
judicial proceedings. The private judge shall oversee discovery and may enforce
all discovery rules and order applicable to judicial proceedings in the same
manner as a trial court judge. The parties agree that the selected or appointed
private judge shall have the power to decide all issues in the action or
proceeding, whether of fact or of law, and shall report a statement of decision
thereon pursuant to the California Code of Civil Procedure ss. 644(a). Nothing
in this paragraph shall limit the right of any party at any time to exercise
self-help remedies, foreclose against collateral, or obtain provisional
remedies. The private judge shall also determine all issues relating to the
applicability, interpretation, and enforceability of this paragraph.
12 GENERAL PROVISIONS
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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 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 and the other Loan
Documents.
12.2 INDEMNIFICATION. Borrower agrees to indemnify, defend and hold
Bank and its directors, officers, employees, agents, attorneys, or any other
Person affiliated with or representing Bank harmless against: (a) all
obligations, demands, claims, and liabilities (collectively, "CLAIMS") 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 arising from transactions between Bank and Borrower (including
reasonable attorneys' fees and expenses), except for Claims and/or losses
directly 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 PROVISIONS. 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 and signed by both Bank and Borrower. This
Agreement and the Loan Documents represent the entire agreement about this
subject matter and supersede prior negotiations or agreements. All prior
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.
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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, constitute
one Agreement.
12.7 SURVIVAL. All covenants, representations and warranties made in
this Agreement continue in full force until this Agreement has terminated
pursuant to its terms and all Obligations (other than inchoate indemnity
obligations and any other obligations which, by their terms, are to survive the
termination of this Agreement) have been satisfied. The obligation of Borrower
in Section 12.2 to indemnify Bank shall survive until the statute of limitations
with respect to such claim or cause of action shall 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: (a) to Bank's
Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Bank shall use
commercially reasonable efforts to obtain such prospective transferee's or
purchaser's agreement to the terms of this provision); (c) as required by law,
regulation, subpoena, or other order; (d) to Bank's regulators or as otherwise
required in connection with Bank's examination or audit; and (e) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (i) 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 (ii) is disclosed to Bank by a third
party, if Bank does not know that the third party is prohibited from disclosing
the information.
12.9 ATTORNEYS' FEES, COSTS AND EXPENSES. In any action or proceeding
between Borrower and Bank arising out of or relating to 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.
13 DEFINITIONS
-----------
13.1 DEFINITIONS. As used in this Agreement, the following terms have
the following meanings:
"ACCOUNT" is any "account" as defined in the Code with such additions
to such term as may hereafter be made, and includes, without limitation, all
accounts receivable and other sums owing to Borrower.
"ACCOUNT DEBTOR" is any "account debtor" as defined in the Code with
such additions to such term as may hereafter be made.
"ADVANCE" or "ADVANCES" means an advance (or advances) under the
Revolving Line set forth in this Agreement.
"AFFILIATE" of any 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.
"AGREEMENT" is defined in the preamble hereof.
"AVAILABILITY AMOUNT" is (a) the lesser of (i) the Revolving Line or
(ii) the Borrowing Base minus (b) the outstanding principal balance of any
Advances. In addition to the foregoing, the total outstanding Obligations under
this Agreement and under the Non-Exim Agreement shall not at any time exceed
$7,500,000.
"BANK" is defined in the preamble hereof.
"BANK EXPENSES" are all audit fees and expenses, costs, and expenses
(including reasonable attorneys' fees and expenses) for preparing, amending,
negotiating, administering, defending and enforcing the Loan Documents
(including, without limitation, those incurred in connection with appeals or
Insolvency Proceedings) or otherwise incurred with respect to Borrower.
"BORROWER" is defined in the preamble hereof.
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"BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, federal and state tax returns, records regarding Borrower's assets or
liabilities, the Collateral, business operations or financial condition, and all
computer programs or storage or any equipment containing such information.
"BORROWING BASE" means (a) 90% of Eligible Accounts plus (b) the lesser
of (the "Inventory Sublimit"): (i) 50% of the value of Borrower's Eligible
Inventory (valued at the lower of cost or wholesale fair market value) or (ii)
$2,000,000, as determined by Bank from Borrower's most recent Borrowing Base
Certificate; provided, however, that Bank may decrease the foregoing amounts and
percentages in its good faith business judgment based on events, conditions,
contingencies, or risks which, as determined by Bank, may adversely affect
Collateral. Moreover, Borrower shall at all times ensure that the outstanding
principal balance of the Credit Accommodations (as defined in the Exim Borrower
Agreement) that is supported by Export-Related Inventory does not exceed sixty
percent (60%) of the sum of the total outstanding principal balance of the
Disbursements (as defined in the Exim Borrower Agreement). In addition to the
foregoing, the total outstanding Obligations under the Inventory Sublimit under
this Agreement and under the Non-Exim Agreement shall not at any time exceed
$2,000,000.
"BORROWING BASE CERTIFICATE" is that certain certificate in the form
attached hereto as EXHIBIT C.
"BORROWING RESOLUTIONS" are, with respect to any Person, those
resolutions adopted by such Person's Board of Directors and delivered by such
Person to Bank approving the Loan Documents to which such Person is a party and
the transactions contemplated thereby, together with a certificate executed by
its secretary on behalf of such Person certifying that (a) such Person has the
authority to execute, deliver, and perform its obligations under each of the
Loan Documents to which it is a party, (b) that attached as Exhibit A to such
certificate is a true, correct, and complete copy of the resolutions then in
full force and effect authorizing and ratifying the execution, delivery, and
performance by such Person of the Loan Documents to which it is a party, (c) the
name(s) of the Person(s) authorized to execute the Loan Documents on behalf of
such Person, together with a sample of the true signature(s) of such Person(s),
and (d) that Bank may conclusively rely on such certificate unless and until
such Person shall have delivered to Bank a further certificate canceling or
amending such prior certificate.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which Bank is closed.
"CASH EQUIVALENTS" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor's Ratings
Group or Xxxxx'x Investors Service, Inc.; (c) Bank's certificates of deposit
issued maturing no more than one (1) year after issue.
"CHANGE IN CONTROL" means any event, transaction, or occurrence as a
result of which (a) any "person" (as such term is defined in Sections 3(a)(9)
and 13(d)(3) of the Securities Exchange Act of 1934, as an amended (the
"EXCHANGE ACT")), other than a trustee or other fiduciary holding securities
under an employee benefit plan of Borrower, is or becomes a beneficial owner
(within the meaning Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of Borrower, representing twenty-five percent (25%) or
more of the combined voting power of Borrower's then outstanding securities; or
(b) during any period of twelve consecutive calendar months, individuals who at
the beginning of such period constituted the Board of Directors of Borrower
(together with any new directors whose election by the Board of Directors of
Borrower was approved by a vote of at least two-thirds of the directors then
still in office who either were directions at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason other than death or disability to constitute a majority of the
directors then in office.
"CODE" is the Uniform Commercial Code, as the same may, from time to
time, be enacted and in effect in the State of California; provided, that, to
the extent that the Code is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles or Divisions
of the Code, the definition of such term contained in Article or Division 9
shall govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection, or priority of, or
remedies with respect to, Bank's Lien on any Collateral is governed by the
Uniform Commercial Code in effect in a jurisdiction other than the State of
California, the term "CODE" shall mean the Uniform Commercial Code as enacted
and in effect in such other jurisdiction solely for purposes on the provisions
thereof relating to such attachment, perfection, priority, or remedies and for
purposes of definitions relating to such provisions.
"COLLATERAL" is any and all properties, rights and assets of Borrower
described on EXHIBIT A.
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"COLLATERAL ACCOUNT" is any Deposit Account, Securities Account, or
Commodity Account.
"COMMODITY ACCOUNT" is any "commodity account" as defined in the Code
with such additions to such term as may hereafter be made.
"COMMUNICATION" is defined in Section 10.
"COMPLIANCE CERTIFICATE" is that certain certificate in the form
attached hereto as EXHIBIT D.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (a) 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; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) 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 any guarantee or other support arrangement.
"CONTROL AGREEMENT" is any control agreement entered into among the
depository institution at which Borrower maintains a Deposit Account or the
securities intermediary or commodity intermediary at which Borrower maintains a
Securities Account or a Commodity Account, Borrower, and Bank pursuant to which
Bank obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.
"CREDIT EXTENSION" is any Advance or any other extension of credit by
Bank for Borrower's benefit.
"CREDIT PARTY" means Borrower and its Subsidiaries.
"CURRENT ASSETS" are amounts that under GAAP should be included on that
date as current assets on Borrower's consolidated balance sheet.
"CURRENT LIABILITIES" are all obligations and liabilities of Borrower
to Bank, plus, without duplication, the aggregate amount of Borrower's Total
Liabilities that mature within one (1) year.
"DEFAULT RATE" is defined in Section 2.3(b).
"DEFERRED REVENUE" is all amounts received or invoiced in advance of
performance under contracts and not yet recognized as revenue.
"DEPOSIT ACCOUNT" is any "deposit account" as defined in the Code with
such additions to such term as may hereafter be made.
"DESIGNATED DEPOSIT ACCOUNT" is Borrower's deposit account, account
number _____________, maintained with Bank.
"DOLLARS," "DOLLARS" and "$" each mean lawful money of the United
States.
"EFFECTIVE DATE" is the date Bank executes this Agreement as indicated
on the signature page hereof.
"ELIGIBLE ACCOUNTS" means Accounts which arise in the ordinary course
of Borrower's business that meet all Borrower's representations and warranties
in Section 5.3. Bank reserves the right at any time after the Effective Date to
adjust any of the criteria set forth below and to establish new criteria in its
good faith business judgment. Eligible Accounts shall not include:
(a) Accounts for which the Account Debtor has not been invoiced;
(b) Accounts that the Account Debtor has not paid within ninety (90)
days of invoice date;
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(c) Accounts owing from an Account Debtor, fifty percent (50%) or more
of whose Accounts have not been paid within ninety (90) days of invoice date;
(d) Accounts with credit balances over ninety (90) days from invoice
date;
(e) Accounts owing from an Account Debtor, including Affiliates, whose
total obligations to Borrower exceed twenty-five (25%) of all Accounts, for the
amounts that exceed that percentage, unless Bank approves in writing;
(f) [intentionally omitted];
(g) Accounts owing from an Account Debtor which is a federal, state or
local government entity or any department, agency, or instrumentality thereof
except for Accounts of the United States if Borrower has assigned its payment
rights to Bank and the assignment has been acknowledged under the Federal
Assignment of Claims Act of 1940, as amended;
(h) Accounts owing from an Account Debtor to the extent that Borrower
is indebted or obligated in any manner to the Account Debtor (as creditor,
lessor, supplier or otherwise - sometimes called "contra" accounts, accounts
payable, customer deposits or credit accounts), with the exception of customary
credits, adjustments and/or discounts given to an Account Debtor by Borrower in
the ordinary course of its business;
(i) Accounts for demonstration or promotional equipment, or in which
goods are consigned, or sold on a "sale guaranteed", "sale or return", "sale on
approval", "xxxx and hold", or other terms if Account Debtor's payment may be
conditional;
(j) Accounts for which the Account Debtor is Borrower's Affiliate,
officer, employee, or agent;
(k) Accounts in which the Account Debtor disputes liability or makes
any claim (but only up to the disputed or claimed amount), or if the Account
Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out
of business;
(l) Accounts owing from an Account Debtor with respect to which
Borrower has received Deferred Revenue (but only to the extent of such Deferred
Revenue);
(m) Accounts for which Bank in its good faith business judgment
determines collection to be doubtful; and
(n) Accounts which are not "Eligible Export-Related Accounts
Receivable" (as defined in the Exim Borrower Agreement) and meet all standards
for lending as set forth in the Exim Borrower Agreement.
"ELIGIBLE INVENTORY" means, at any time, the aggregate of Borrower's
Inventory that (a) consists of raw materials, parts and finished goods, in good,
new, and salable condition, which is not perishable, returned, consigned,
obsolete, not sellable, damaged, or defective, and is not comprised of
demonstrative or custom inventory, packaging or shipping materials, or supplies;
(b) meets all applicable governmental standards; (c) has been manufactured in
compliance with the Fair Labor Standards Act; (d) is not subject to any Liens,
except the first priority Liens granted or in favor of Bank under this Agreement
or any of the other Loan Documents; (e) is located at the locations identified
by Borrower in the Perfection Certificate where it maintains Inventory (or any
location permitted under Section 7.2); and (f) is otherwise acceptable to Bank
in its good faith business judgment and (g) constitutes "Eligible Export-Related
Inventory" (as defined in the Exim Borrower Agreement) and meet all standards
for lending as set forth in the Exim Borrower Agreement.
"EQUIPMENT" is all "equipment" as defined in the Code with such
additions to such term as may hereafter be made, and includes without limitation
all machinery, fixtures, goods, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing.
"ERISA" is the Employee Retirement Income Security Act of 1974, and its
regulations.
"EVENT OF DEFAULT" is defined in Section 8.
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EXIM DEFINITIONS: The terms "Exim Bank", "Exim Bank Policy", "Exim
Borrower Agreement", "Exim Guaranty", "Exim Loan", "Non-Exim Loan", and
"Non-Exim Agreement" have the meanings set forth in Section 4A.
"FUNDING DATE" is any date on which a Credit Extension is made to or on
account of Borrower which shall be a Business Day.
"GAAP" is generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GENERAL INTANGIBLES" is all "general intangibles" as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation, all copyright rights,
copyright applications, copyright registrations and like protections in each
work of authorship and derivative work, whether published or unpublished, any
patents, trademarks, service marks and, to the extent permitted under applicable
law, any applications therefor, whether registered or not, any trade secret
rights, including any rights to unpatented inventions, payment intangibles,
royalties, contract rights, goodwill, franchise agreements, purchase orders,
customer lists, route lists, telephone numbers, domain names, claims, income and
other tax refunds, security and other deposits, options to purchase or sell real
or personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.
"GOVERNMENTAL APPROVAL" is any consent, authorization, approval, order,
license, franchise, permit, certificate, accreditation, registration, filing or
notice, of, issued by, from or to, or other act by or in respect of, any
Governmental Authority.
"GOVERNMENTAL AUTHORITY" is any nation or government, any state or
other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.
"GUARANTOR" is any present or future guarantor of the Obligations.
"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.
"INITIAL AUDIT" is Bank's inspection of Borrower's Accounts, the
Collateral, and Borrower's Books.
"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.
"INVENTORY" is all "inventory" as defined in the Code in effect on the
date hereof with such additions to such term as may hereafter be made, and
includes without limitation all merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products, including
without limitation such inventory as is temporarily out of Borrower's custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.
"INVESTMENT" is any beneficial ownership interest in any Person
(including stock, partnership interest or other securities), and any loan,
advance or capital contribution to any Person.
"IP AGREEMENT" is that certain Intellectual Property Security Agreement
executed and delivered by Borrower to Bank dated as of the Effective Date.
"LIEN" is a claim, mortgage, deed of trust, levy, charge, pledge,
security interest or other encumbrance of any kind, whether voluntarily incurred
or arising by operation of law or otherwise against any property.
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"LOAN AMOUNT" in respect of each Equipment Advance is the original
principal amount of such Equipment Advance.
"LOAN DOCUMENTS" are, collectively, this Agreement, the Perfection
Certificate, the IP Agreement, any note, or notes or guaranties executed by
Borrower or any Guarantor, and any other present or future agreement between
Borrower any Guarantor and/or for the benefit of Bank in connection with this
Agreement, all as amended, restated, or otherwise modified.
"MATERIAL ADVERSE CHANGE" is (a) a material impairment in the
perfection or priority of Bank's Lien in the Collateral or in the value of such
Collateral; (b) a material adverse change in the business, operations, or
condition (financial or otherwise) of Borrower; or (c) a material impairment of
the prospect of repayment of any portion of the Obligations or (d) 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.
"OBLIGATIONS" are Borrower's obligation to pay when due any debts,
principal, interest, Bank Expenses and other amounts Borrower owes Bank now or
later, whether under this Agreement, the Loan Documents, or otherwise,
including, without limitation, all obligations relating to letters of credit
(including reimbursement obligations for drawn and undrawn letters of credit),
cash management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and the performance of Borrower's
duties under the Loan Documents.
"OPERATING DOCUMENTS" are, for any Person, such Person's formation
documents, as certified with the Secretary of State of such Person's state of
formation on a date that is no earlier than 30 days prior to the Effective Date,
and, (a) if such Person is a corporation, its bylaws in current form, (b) if
such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its
partnership agreement (or similar agreement), each of the foregoing with all
current amendments or modifications thereto.
"PAYMENT/ADVANCE FORM" is that certain form attached hereto as EXHIBIT
B.
"PERFECTION CERTIFICATE" is defined in Section 5.1.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's Indebtedness to Bank under this Agreement and the other
Loan Documents;
(b) Indebtedness existing on the Effective Date and shown on the
Perfection Certificate;
(c) Subordinated Debt;
(d) unsecured Indebtedness to trade creditors incurred in the ordinary
course of business;
(e) Indebtedness incurred as a result of endorsing negotiable
instruments received in the ordinary course of business;
(f) Indebtedness secured by Permitted Liens;
(g) extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (f) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Perfection Certificate and existing on the
Effective Date;
(b) (i) Cash Equivalents;
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(c) Investments consisting of the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
Borrower;
(d) Investments consisting of deposit accounts in which Bank has a
perfected security interest;
(e) Investments accepted in connection with Transfers permitted by
Section 7.1;
(f) Investments of Subsidiaries in or to other Subsidiaries or Borrower
and Investments by Borrower in Subsidiaries not to exceed $100,000 in the
aggregate in any fiscal year;
(g) Investments consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plans or agreements approved by Borrower's Board of
Directors;
(h) Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business;
(i) Investments consisting of notes receivable of, or prepaid royalties
and other credit extensions, to customers and suppliers who are not Affiliates,
in the ordinary course of business; provided that this paragraph [(i)] shall not
apply to Investments of Borrower in any Subsidiary.
"PERMITTED LIENS" are:
(a) Liens existing on the Effective Date and shown on the Perfection
Certificate or arising under this Agreement and the other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, PROVIDED that no notice of
any such Lien has been filed or recorded under the Internal Revenue Code of
1986, as amended, and the Treasury Regulations adopted thereunder;
(c) purchase money Liens (i) on Equipment acquired or held by Borrower
incurred for financing the acquisition of the Equipment securing no more than
$500,000 in the aggregate amount outstanding, or (ii) existing on Equipment when
acquired, IF the Lien is confined to the property and improvements and the
proceeds of the Equipment;
(d) Liens of carriers, warehousemen, suppliers, or other Persons that
are possessory in nature arising in the ordinary course of business so long as
such Liens attach only to Inventory, securing liabilities in the aggregate
amount not to exceed $50,000 and which are not delinquent or remain payable
without penalty or which are being contested in good faith and by appropriate
proceedings which proceedings have the effect of preventing the forfeiture or
sale of the property subject thereto;
(e) Liens to secure payment of workers' compensation, employment
insurance, old-age pensions, social security and other like obligations incurred
in the ordinary course of business (other than Liens imposed by ERISA);
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), BUT any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase;
(g) leases or subleases of real property granted in the ordinary course
of business, and leases, subleases, non-exclusive licenses or sublicenses of
property (other than real property or intellectual property) granted in the
ordinary course of Borrower's business, IF the leases, subleases, licenses and
sublicenses do not prohibit granting Bank a security interest;
(h) non-exclusive license of intellectual property granted to third
parties in the ordinary course of business;
-22-
(i) Liens arising from attachments or judgments, orders, or decrees in
circumstances not constituting an Event of Default under Sections 8.4 and 8.7;
and
(j) Liens in favor of other financial institutions arising in
connection with Borrower's deposit and/or securities accounts held at such
institutions, provided that Bank has a perfected security interest in the
amounts held in such deposit and/or securities accounts.
"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.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.
"QUICK ASSETS" is, on any date, Borrower's consolidated, unrestricted
cash and Cash Equivalents, net billed accounts receivable and investments with
maturities of fewer than 12 months determined according to GAAP.
"REGISTERED ORGANIZATION" is any "registered organization" as defined
in the Code with such additions to such term as may hereafter be made
"REQUIREMENT OF LAW" is as to any Person, the organizational or
governing documents of such Person, and any law (statutory or common), treaty,
rule or regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"RESPONSIBLE OFFICER" is any of the Chief Executive Officer, President,
Chief Financial Officer and Controller of Borrower.
"REVOLVING LINE" is an Advance or Advances in an amount equal to Two
Million Five Hundred Thousand Dollars ($2,500,000).
"REVOLVING LINE MATURITY DATE" is two years from the Effective Date.
"SECURITIES ACCOUNT" is any "securities account" as defined in the Code
with such additions to such term as may hereafter be made.
"SUBORDINATED DEBT" is indebtedness incurred by Borrower subordinated
to all of Borrower's now or hereafter indebtedness to Bank (pursuant to a
subordination, intercreditor, or other similar agreement in form and substance
satisfactory to Bank entered into between Bank and the other creditor), on terms
acceptable to Bank.
"SUBSIDIARY" means, with respect to any Person, any Person of which
more than 50.0% of the voting stock or other equity interests (in the case of
Persons other than corporations) is owned or controlled directly or indirectly
by such Person or one or more of Affiliates of such Person.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries MINUS (a) any amounts attributable to (i)
goodwill, (ii) intangible items including unamortized debt discount and expense,
patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, (iii) notes, accounts receivable
and other obligations owing to Borrower from its officers or other Affiliates,
and (iv) reserves not already deducted from assets, MINUS (b) Total Liabilities
(exclusive of redeemable convertible preferred stock of Borrower, even if
classified outside of equity).
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion of Subordinated Debt permitted by Bank to
be paid by Borrower, but excluding all other Subordinated Debt.
"TRANSFER" is defined in Section 7.1.
"UNUSED REVOLVING LINE FACILITY FEE" is defined in Section 2.4(d).
[Signature page follows.]
-23-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the Effective Date.
BORROWER:
XXXXXXXXXX
By_________________________________________
Name:______________________________________
Title:_____________________________________
X. X. XXXXXXXXXX
By_________________________________________
Name:______________________________________
Title:_____________________________________
BANK:
SILICON VALLEY BANK
By_________________________________________
Name:______________________________________
Title:_____________________________________
Effective Date:
[Signature page to Loan and Security Agreement]
EXHIBIT A
---------
The Collateral consists of all of Borrower's right, title and interest in and to
the following personal property:
All goods, Accounts (including health-care receivables), Equipment,
Inventory, contract rights or rights to payment of money, leases, license
agreements, franchise agreements, General Intangibles, commercial tort claims,
documents, instruments (including any promissory notes), chattel paper (whether
tangible or electronic), cash, deposit accounts, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and
all Borrower's Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
1
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE REQUEST FORM
---------------------------------
DEADLINE FOR SAME DAY PROCESSING IS NOON P.S.T.*
Fax To: Date: _____________________
-----------------------------------------------------------------------------------------------------------------------
LOAN PAYMENT:
XXXXXXXXXX AND X. X. XXXXXXXXXX
-------------------------------
From Account #___________________ To Account #____________________________
(Deposit Account #) (Loan Account #)
Principal $______________________ and/or Interest $_______________________
AUTHORIZED SIGNATURE:______________________________ Phone Number:______________
Print Name/Title:__________________________________
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
LOAN ADVANCE:
Complete OUTGOING WIRE REQUEST section below if all or a portion of the funds
from this loan advance are for an outgoing wire.
From Account #___________________ To Account #____________________________
(Loan Account #) (Deposit Account #)
Amount of Advance $___________________________
All Borrower's representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
request for an advance; provided, however, that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a specific date
shall be true, accurate and complete in all material respects as of such date:
AUTHORIZED SIGNATURE:______________________________ Phone Number:______________
Print Name/Title:__________________________________
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
OUTGOING WIRE REQUEST:
COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE IS TO BE WIRED.
Deadline for same day processing is noon, P.S.T.
Beneficiary Name: _____________________________ Amount of Wire: $____________
Beneficiary Bank: _____________________________ Account Number:______________
City and State:________________________________
Beneficiary Bank Transit (ABA) #:______________ Beneficiary Bank Code (Swift, Sort, Chip, etc.): _____________________
(FOR INTERNATIONAL WIRE ONLY)
Intermediary Bank:_____________________________ Transit (ABA) #:_______________
For Further Credit to:__________________________________________________________
Special Instruction:____________________________________________________________
BY SIGNING BELOW, I (WE) ACKNOWLEDGE AND AGREE THAT MY (OUR) FUNDS TRANSFER
REQUEST SHALL BE PROCESSED IN ACCORDANCE WITH AND SUBJECT TO THE TERMS AND
CONDITIONS SET FORTH IN THE AGREEMENTS(S) COVERING FUNDS TRANSFER SERVICE(S),
WHICH AGREEMENTS(S) WERE PREVIOUSLY RECEIVED AND EXECUTED BY ME (US).
Authorized Signature:____________________________ 2nd Signature (if required):________________________
Print Name/Title:________________________________ Print Name/Title:___________________________________
Telephone #:_____________________________________ Telephone #:________________________________________
-----------------------------------------------------------------------------------------------------------------------
----------------
* Unless otherwise provided for an Advance bearing interest at LIBOR.
2
EXHIBIT C
---------
BORROWING BASE CERTIFICATE
-------------------------------------------------------------------------------------------------------------
Borrower: Xxxxxxxxxx and X. X. Xxxxxxxxxx
Lender: Silicon Valley Bank
Commitment Amount: $_______________
ACCOUNTS RECEIVABLE
1. Accounts Receivable (invoiced) Book Value as of ____________________ $_______________
2. Additions (please explain on reverse) $_______________
3. TOTAL ACCOUNTS RECEIVABLE $_______________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Un-invoiced Accounts $_______________
5. Amounts over 90 days due $_______________
6. Balance of 50% over 90 day accounts $_______________
7. Credit balances over 90 days $_______________
8. Concentration Limits $_______________
9. Foreign Accounts $_______________
10. Governmental Accounts $_______________
11. Contra Accounts $_______________
12. Promotion or Demo Accounts $_______________
13. Intercompany/Employee Accounts $_______________
13A. Accounts that do not meet requirements under Exim Borrower Agreement $_______________
14. Disputed Accounts $_______________
15. Deferred Revenue $_______________
16. Other (please explain on reverse) $_______________
17. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_______________
18. Eligible Accounts (#3 minus #17) $_______________
19. ELIGIBLE AMOUNT OF ACCOUNTS (90% of #18) $_______________
INVENTORY
20. Eligible Inventory Value as of _______________ $_______________
21. Less Three Months' Rent [#20 minus #21] $_______________
22. ELIGIBLE AMOUNT OF INVENTORY (50% of #21) $_______________
BALANCES
23. Maximum Loan Amount $_______________
24. Total Funds Available [Lesser of #23 or (#19 plus #22)] $_______________
25. Present balance owing on Line of Credit $_______________
26. Outstanding under Sublimits $_______________
27. RESERVE POSITION (#24 minus #25 and #26) $_______________
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THIS IS TRUE, COMPLETE AND CORRECT,
AND THAT THE INFORMATION IN THIS BORROWING BASE CERTIFICATE COMPLIES WITH THE
REPRESENTATIONS AND WARRANTIES IN THE LOAN AND SECURITY AGREEMENT BETWEEN THE
UNDERSIGNED AND SILICON VALLEY BANK.
----------------------------------
BANK USE ONLY
COMMENTS: Received by: _____________________
AUTHORIZED SIGNER
Date: __________________________
By: ___________________________ Verified: ________________________
Authorized Signer AUTHORIZED SIGNER
Date:__________________________ Date: ____________________________
Compliance Status: Yes No
----------------------------------
3
EXHIBIT D
---------
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK Date:_______________
FROM: XXXXXXXXXX AND X. X. XXXXXXXXXX
-------------------------------
The undersigned authorized officer of Xxxxxxxxxx and X. X. Xxxxxxxxxx
("Borrower") certifies that under the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (1) Borrower is
in complete compliance for the period ending _______________ with all required
covenants except as noted below, (2) there are no Events of Default, (3) all
representations and warranties in the Agreement are true and correct in all
material respects on this date except as noted below; provided, however, that
such materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date, (4) Borrower, and each of its
Subsidiaries, has timely filed all required tax returns and reports, and
Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower except as otherwise
permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no
Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Bank. Attached are the
required documents supporting the certification. The undersigned certifies that
these are prepared in accordance with GAAP consistently applied from one period
to the next except as explained in an accompanying letter or footnotes. The
undersigned 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. Capitalized terms used but not otherwise defined
herein shall have the meanings given them in the Agreement.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements with Monthly within 30 days Yes No
Compliance Certificate
Annual financial statement (CPA Audited) + XX XXX within 120 days Yes No
Board Approved Projections Within 30 days after beginning of FY Yes No
10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No
Borrowing Base Certificate A/R & A/P Agings Monthly within 15 days Yes No
Copies of Invoices and Purchase Orders Quarterly within 30 days Yes No
The following Intellectual Property was registered after the Effective Date (if no registrations, state "None")
____________________________________________________________________________
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio 1.0:1.0 _____:1.0 Yes No
Maximum Debt/Tangible Net Worth 0.6:1.0 _____:1.0 Yes No
4
The following financial covenant analyses and information set forth in
Schedule 1 attached hereto are true and accurate as of the date of this
Certificate.
The following are the exceptions with respect to the certification
above: (If no exceptions exist, state "No exceptions to note.")
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Xxxxxxxxxx BANK USE ONLY
X. X. Xxxxxxxxxx
Received by: _____________________
By:____________________________ AUTHORIZED SIGNER
Name:__________________________ Date: ___________________________
Title:_________________________
Verified: ________________________
AUTHORIZED SIGNER
Date: ___________________________
Compliance Status: Yes No
5
SCHEDULE 1 TO COMPLIANCE CERTIFICATE
------------------------------------
FINANCIAL COVENANTS OF BORROWER
-------------------------------
Dated: ____________________
In the event of a conflict between this Schedule and the Loan
Agreement, the terms of the Loan Agreement shall govern.
Dated: ____________________
I. QUICK RATIO (Section 6.7(a))
Required: 1.0:1.00
Actual:
A. Aggregate value of the unrestricted cash and cash
equivalents of Borrower and its Subsidiaries $_________
B. Aggregate value of the net billed accounts receivable of
Borrower and its Subsidiaries $_________
C. Aggregate value of the Investments with maturities of fewer
than 12 months of Borrower and it Subsidiaries $_________
D. Quick Assets (the sum of lines A through C) $_________
E. Aggregate value of Obligations to Bank $_________
F. Aggregate value of liabilities that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance
sheet, including all Indebtedness, and not otherwise
reflected in line E above that matures within one (1) year $_________
G. Current Liabilities (the sum of lines E and F) $_________
H. Quick Ratio (line D divided by line G) __________
Is line H equal to or greater than 1.0:1:00?
________ No, not in compliance ________ Yes, in compliance
6
II. DEBT TO NET WORTH RATIO (Section 6.7(b))
Required: 0.60:1.00
Actual:
A. Aggregate value of liabilities that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance
sheet, including all Indebtedness $_________
B. Aggregate value of Indebtedness of Borrower subordinated to
Borrower's Indebtedness to Bank $_________
C. Debt (line A minus line B) $_________
D. Aggregate value of total assets of Borrower and its
Subsidiaries $_________
E. Aggregate value of goodwill of Borrower [and its
Subsidiaries] $_________
F. Aggregate value of intangible assets of Borrower [and its
Subsidiaries] $_________
G. Aggregate value of any reserves not already deducted from
assets $_________
H. Value of line II.A. $_________
I. Tangible Net Worth (line D minus line E minus line F minus
line G minus line H) $_________
J. Line I plus line B $_________
K. Debt to Net Worth Ratio (line C divided by line J) __________
Is line K equal to or greater than 0.60:1.00?
________ No, not in compliance ________ Yes, in compliance
7
