EXHIBIT 10.35
SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
BORROWER: VERSO TECHNOLOGIES, INC.
NACT TELECOMMUNICATIONS, INC.
XXXXXXXX.XXX SOFTWARE, INC.
ADDRESS: 000 XXXXXXXX XXXXXXX, XXXXX 000
XXXXXXX, XXXXXXX 00000
DATE: DECEMBER 14, 2001
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK, COMMERCIAL FINANCE DIVISION ("Silicon"), whose address is
0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and the borrower(s) named above
(jointly and severally, the "Borrower"), whose chief executive office is located
at the above address ("Borrower's Address"). The Schedule to this Agreement (the
"Schedule") shall for all purposes be deemed to be a part of this Agreement, and
the same is an integral part of this Agreement. (Definitions of certain terms
used in this Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 LOANS. Silicon will make loans to Borrower (the "Loans"), in amounts
determined by Silicon* up to the amounts (the "Credit Limit") shown on the
Schedule, provided no Default or Event of Default has occurred and is
continuing, and subject to deduction of any Reserves for accrued interest and
such other Reserves as Silicon deems proper from time to time*.
*IN ITS GOOD FAITH BUSINESS JUDGMENT
1.2 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Silicon's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans. Silicon may, in its discretion, charge interest to
Borrower's Deposit Accounts maintained with Silicon. Regardless of the amount of
Obligations that may be outstanding from time to time, Borrower shall pay
Silicon minimum monthly interest during the term of this Agreement in the amount
set forth on the Schedule (the "Minimum Monthly Interest").
1.3 OVERADVANCES. If at any time or for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit (an
"Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay
Silicon interest on the outstanding amount of any Overadvance, on demand, at a
rate equal to the interest rate which would otherwise be applicable to the
Overadvance, plus an additional 2% per annum.
1.4 FEES. Borrower shall pay Silicon the fee(s) shown on the Schedule, which
are in addition to all interest and other sums payable to Silicon and are not
refundable.
1.5 LETTERS OF CREDIT. At the request of Borrower, Silicon may, in its*,
issue or arrange for the issuance of letters of credit for the account of
Borrower, in each case in form and substance satisfactory to Silicon in its sole
discretion (collectively, "Letters of Credit"). The aggregate face amount of all
outstanding Letters of Credit from time to time shall not exceed the amount
shown on the Schedule (the "Letter of Credit Sublimit"), and shall be reserved
against Loans which would otherwise be available hereunder, and in the event at
any time there are insufficient Loans available to Borrower for such reserve,
Borrower shall deposit and maintain with Silicon cash collateral in an amount at
all times equal to such deficiency, which shall be held as Collateral for all
purposes of this Agreement. Borrower shall pay all bank charges (including**
charges of Silicon) for the issuance of Letters of Credit, together with such
additional fee as Silicon's letter of credit department shall charge in
connection with the issuance of the Letters of Credit. Any payment by Silicon
under or in connection with a Letter of Credit shall constitute a Loan hereunder
on the date such payment is made. Each Letter of Credit shall have an expiry
date no later than thirty days prior to the Maturity Date. Borrower hereby
agrees to indemnify, save, and hold Silicon harmless from any loss, cost,
expense, or liability, including payments made by Silicon, expenses, and
reasonable attorneys' fees incurred by Silicon arising out of or in connection
with any Letters of Credit. Borrower agrees to be bound by the regulations and
interpretations of the issuer of any Letters of Credit guarantied by Silicon and
opened for Borrower's account or by Silicon's interpretations of any Letter of
Credit issued by Silicon for Borrower's account, and Borrower
-1-
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
understands and agrees that Silicon shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following
Borrower's instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto***. Borrower understands that
Letters of Credit may require Silicon to indemnify the issuing bank for certain
costs or liabilities arising out of claims by Borrower against such issuing
bank. Borrower hereby agrees to indemnify and hold Silicon harmless with respect
to any loss, cost, expense, or liability incurred by Silicon under any Letter of
Credit as a result of Silicon's indemnification of any such issuing bank. The
provisions of this Loan Agreement, as it pertains to Letters of Credit, and any
other present or future documents or agreements between Borrower and Silicon
relating to Letters of Credit are cumulative.
*GOOD FAITH BUSINESS JUDGMENT
**CUSTOMARY
***BUT NOTHING HEREIN SHALL RELIEVE SILICON FROM LIABILITY FOR ITS OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Silicon a security interest in
all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located: All Inventory, Equipment, Receivables, and
General Intangibles, including, without limitation, all of Borrower's Deposit
Accounts, and all money, and all property now or at any time in the future in
Silicon's possession (including claims and credit balances), and all proceeds
(including proceeds of any insurance policies, proceeds of proceeds and claims
against third parties), all products and all books and records related to any of
the foregoing (all of the foregoing, together with all other property in which
Silicon may now or in the future be granted a lien or security interest, is
referred to herein, collectively, as the "Collateral").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.
In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation, is and
will continue to be, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. Borrower is and will continue
to be qualified and licensed to do business in all jurisdictions in which any
failure to do so would have a material adverse effect on Borrower. The
execution, delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (i) have been duly and validly authorized, (ii)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (iii) do not violate Borrower's articles or certificate
of incorporation, or Borrower's by-laws, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Silicon 30 days' prior written notice before changing its
name or doing business under any other name. Borrower has complied, and will in
the future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give Silicon at least 30 days prior
written notice before opening any additional place of business, changing its
chief executive office, or moving any of the Collateral to a location other than
Borrower's Address or one of the locations set forth on the Schedule.*
*NOTWITHSTANDING THE FOREGOING, EXCEPT AS OTHERWISE PERMITTED BY SECTION 5.5
BELOW, SO LONG AS THIS AGREEMENT IS IN EFFECT, BORROWER SHALL NOT TRANSFER ANY
ASSETS OR COLLATERAL TO ANY PARENT, SUBSIDIARY OR AFFILIATE OF BORROWER (UNLESS
SUCH ENTITY IS A CO-BORROWER UNDER THIS AGREEMENT) NOR SHALL BORROWER TRANSFER
ANY ASSETS OR COLLATERAL TO ANY LOCATION LOCATED OUTSIDE OF THE UNITED STATES
REGARDLESS OF WHETHER OR NOT SUCH LOCATION IS SET FORTH ON THE SCHEDULE.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for Permitted Liens. Silicon now has, and will
continue to have, a first-priority perfected and enforceable security interest
in all of the Collateral, subject only to the Permitted Liens, and Borrower will
at all times defend Silicon and the Collateral against all claims of others.
None of the Collateral now is or will be affixed to any real property in such a
manner, or with such intent, as to become a fixture. Borrower is not and will
not become a lessee under any real property lease pursuant to which the lessor
may obtain any rights in any of the Collateral and no such lease now prohibits,
restrains, impairs or will prohibit, restrain or impair Borrower's right to
remove any Collateral from the leased premises. Whenever any Collateral is
located upon premises in which any third party has an interest (whether as
owner, mortgagee, beneficiary under a deed of trust, lien or otherwise),
Borrower shall, whenever requested by Silicon, use its best efforts to cause
such third party to execute and deliver to Silicon, in form acceptable to
Silicon, such waivers and subordinations as Silicon shall specify, so as to
ensure that Silicon's rights in the Collateral are,
-2-
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
and will continue to be, superior to the rights of any such third party.
Borrower will keep in full force and effect, and will comply with all the terms
of, any lease of real property where any of the Collateral now or in the future
may be located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in good
working condition*, and Borrower will not use the Collateral for any unlawful
purpose. Borrower will** advise Silicon in writing of any material loss or
damage to the Collateral.***
*(ORDINARY WEAR AND TEAR EXCEPTED)
**AS PROMPTLY AS PRACTICAL
*** NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, BORROWER MAY
CANCEL THAT CERTAIN PROMISSORY NOTE MADE PAYABLE TO VERSO TECHNOLOGIES, INC. BY
SS & CO., INC. ("SS") DATED JANUARY 12, 2001 IN THE PRINCIPAL AMOUNT OF $250,000
IN EXCHANGE FOR THE RECEIPT BY BORROWER IN CASH OF THE SUM OF $125,000, AND
VERSO MAY RELEASE ITS SECURITY INTEREST AND GUARANTY ASSOCIATED THEREWITH, ALL
ON SUBSTANTIALLY THE TERMS SET FORTH IN THAT CERTAIN SETTLEMENT AND RELEASE
AGREEMENT TO BE ENTERED INTO BETWEEN VERSO, SS AND XXXXX XXXXX, A DRAFT OF WHICH
HAS BEEN PROVIDED TO SILICON.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements now
or in the future delivered to Silicon have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and accurately reflect* the financial condition of
Borrower, at the times and for the periods therein stated. Between the last date
covered by any such statement provided to Silicon and the date hereof, there has
been no material adverse change in the financial condition or business of
Borrower. Borrower is now and will continue to be solvent.
*IN ALL MATERIAL RESPECTS
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower*. Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Silicon in
writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or takes any other steps required to keep the
contested taxes from becoming a lien upon any of the Collateral. **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, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not*** from participation
in, permit partial or complete termination of, or permit the occurrence of any
other event with respect to, any such plan which could result in any liability
of Borrower, including any liability to the Pension Benefit Guaranty Corporation
or its successors or any other governmental agency. Borrower shall, at all
times, utilize the services of an outside payroll service providing for the
automatic deposit of all payroll taxes payable by Borrower.
*; PROVIDED, HOWEVER, BORROWER MAY DEFER PAYMENT OF ANY CONTESTED TAXES IF
**EXCEPT AS SET FORTH IN THE SCHEDULE,
***WITHDRAWN, AND WILL NOT WITHDRAW,
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to Borrower, including, but not limited to, those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, and all environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which* may
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Silicon in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower involving any single claim of**
or more, or involving*** or more in the aggregate.
*COULD REASONABLY BE EXPECTED TO
**$150,000
***$300,000
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
4. RECEIVABLES.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and warrants
to Silicon as follows: Each Receivable with respect to which Loans are requested
by Borrower shall, on the date each Loan is requested and made, (i) represent an
undisputed bona fide existing unconditional obligation of the Account Debtor
created by the sale, delivery, and acceptance of goods or the rendition of
services in the ordinary course of Borrower's business,
-3-
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
and (ii) meet the Minimum Eligibility Requirements set forth in Section 8 below.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
*signatures and endorsements on all documents, instruments, and agreements
relating to all Receivables are and shall be genuine**, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms.
*OF BORROWER'S
**(AND THE SIGNATURES AND ENDORSEMENTS OF OTHERS ON ALL DOCUMENTS,
INSTRUMENTS AND AGREEMENTS RELATING TO ALL RECEIVABLES ARE AND SHALL BE, TO THE
BEST OF BORROWER'S KNOWLEDGE, GENUINE)
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall deliver
to Silicon transaction reports and loan requests, schedules and assignments of
all Receivables, and schedules of collections, all on Silicon's standard forms;
provided, however, that Borrower's failure to execute and deliver the same shall
not affect or limit Silicon's security interest and other rights in all of
Borrower's Receivables, nor shall Silicon's failure to advance or lend against a
specific Receivable affect or limit Silicon's security interest and other rights
therein. Loan requests received after 12:00 Noon* will not be considered by
Silicon until the next Business Day. Together with each such schedule and
assignment, or later if requested by Silicon, Borrower shall furnish Silicon
with copies (or, at Silicon's request, originals) of all contracts, orders,
invoices, and other similar documents, and all original shipping instructions,
delivery receipts, bills of lading, and other evidence of delivery, for any
goods the sale or disposition of which gave rise to such Receivables, and
Borrower warrants the genuineness of all of the foregoing. Borrower shall also
furnish to Silicon an aged accounts receivable trial balance in such form and at
such intervals as Silicon shall request. In addition, Borrower shall deliver to
Silicon the originals of all instruments, chattel paper, security agreements,
guarantees and other documents and property evidencing or securing any
Receivables, immediately upon receipt thereof and in the same form as received,
with all necessary indorsements, all of which shall be with recourse. **Borrower
shall also provide Silicon with copies of all credit memos within two days after
the date issued.
*PACIFIC STANDARD TIME
**UPON SILICON'S REQUEST,
4.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to collect all
Receivables, unless and until a Default or an Event of Default has occurred*.
Borrower shall hold all payments on, and proceeds of, Receivables in trust for
Silicon, and Borrower shall immediately deliver all such payments and proceeds
to Silicon in their original form, duly endorsed in blank, to be applied to the
Obligations in such order as Silicon shall determine. Silicon may, in its
discretion, require that all proceeds of Collateral be deposited by Borrower
into a lockbox account, or such other "blocked account" as Silicon may specify,
pursuant to a blocked account agreement in such form as Silicon may specify.
**Silicon or its designee may, at any time, notify Account Debtors that the
Receivables have been assigned to Silicon.
*AND IS CONTINUING
**UPON THE OCCURRENCE AND DURING THE CONTINUATION OF A DEFAULT OR EVENT
OF DEFAULT,
4.5. REMITTANCE OF PROCEEDS. All proceeds arising from the disposition of any
Collateral shall be delivered, in kind, by Borrower to Silicon in the original
form in which received by Borrower not later than the following Business Day
after receipt by Borrower, to be applied to the Obligations in such order as
Silicon shall determine; provided that, if no Default or Event of Default has
occurred*, Borrower shall not be obligated to remit to Silicon the proceeds of
the sale of worn out or obsolete equipment disposed of by Borrower in good faith
in an arm's length transaction for an aggregate purchase price OF** or less (for
all such transactions in any fiscal year). Borrower agrees that it will not
commingle proceeds of Collateral with any of Borrower's other funds or property,
but will hold such proceeds separate and apart from such other funds and
property and in an express trust for Silicon. Nothing in this Section limits the
restrictions on disposition of Collateral set forth elsewhere in this Agreement.
*AND IS CONTINUING
**$50,000
4.6 DISPUTES. Borrower shall notify Silicon promptly of all disputes or
claims relating to Receivables. Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in full,
or agree to do any of the foregoing, except that Borrower may do so, provided
that: (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm's length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit. Silicon may, at any time after the
occurrence* of an Event of Default, settle or adjust disputes or claims directly
with Account Debtors for amounts and upon terms which Silicon considers
advisable in its reasonable credit judgment and, in all cases, Silicon shall
credit Borrower's Loan account with only the net amounts received by Silicon in
payment of any Receivables.
*, AND DURING THE CONTINUATION,
4.7 RETURNS. Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower in the ordinary course of
its
-4-
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
business, Borrower shall promptly determine the reason for such return and
promptly issue a credit memorandum to the Account Debtor in the appropriate
amount (sending a copy to Silicon). In the event any attempted return occurs
after the occurrence* of any Event of Default, Borrower shall (i) hold the
returned Inventory in trust for Silicon, (ii) segregate all returned Inventory
from all of Borrower's other property, (iii) conspicuously label the returned
Inventory as Silicon's property, and (iv) immediately notify Silicon of the
return of any Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on Silicon's request deliver such
returned Inventory to Silicon.
*, AND DURING THE CONTINUATION,
4.8 VERIFICATION. Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.
4.9 NO LIABILITY. Silicon shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction of,
any goods, the sale or other disposition of which gives rise to a Receivable, or
for any error, act, omission, or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Receivable, or for
settling any Receivable in good faith for less than the full amount thereof, nor
shall Silicon be deemed to be responsible for any of Borrower's obligations
under any contract or agreement giving rise to a Receivable. Nothing herein
shall, however, relieve Silicon from liability for its own gross negligence or
willful misconduct.
5. ADDITIONAL DUTIES OF BORROWER.
5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.
5.2 INSURANCE. Borrower shall at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require, and Borrower shall provide evidence of such insurance to
Silicon, so that Silicon is satisfied that such insurance is, at all times, in
full force and effect. * All such insurance policies shall name Silicon as an
additional insured and loss payee, and shall contain a lenders loss payee
endorsement in form reasonably acceptable to Silicon. Upon receipt of the
proceeds of any such insurance, Silicon shall apply such proceeds in reduction
of the Obligations as Silicon shall determine in its sole discretion, except
that, provided no Default or Event of Default has occurred and is continuing,
Silicon shall release to Borrower insurance proceeds with respect to Equipment
totaling less than $100,000, which shall be utilized by Borrower for the
replacement of the Equipment with respect to which the insurance proceeds were
paid. Silicon may require reasonable assurance that the insurance proceeds so
released will be so used. If Borrower fails to provide or pay for any insurance,
Silicon may, but is not obligated to, obtain the same at Borrower's expense.
Borrower shall promptly deliver to Silicon copies of all reports made to
insurance companies.
*WITHIN FIVE (5) DAYS OF THE DATE HEREOF, ALL
5.3 REPORTS. Borrower, at its expense, shall provide Silicon with the written
reports set forth in the Schedule, and such other written reports with respect
to Borrower (including budgets, sales projections, operating plans and other
financial documentation), as Silicon shall from time to time reasonably specify.
5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on*
Business Day's notice, Silicon, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy Borrower's books and records**.
Silicon shall take reasonable steps to keep confidential all information
obtained in any such inspection or audit, but Silicon shall have the right to
disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $750 per person per day (or such higher amount as shall represent
Silicon's then current standard charge for the same), plus reasonable out of
pocket expenses. Borrower will not enter into any agreement with any accounting
firm, service bureau or third party to store Borrower's books or records at any
location other than Borrower's Address, without first obtaining Silicon's
written consent, which may be conditioned upon such accounting firm, service
bureau or other third party agreeing to give Silicon the same rights with
respect to access to books and records and related rights as Silicon has under
this Loan Agreement. ***Borrower waives the benefit of any accountant-client
privilege or other evidentiary privilege precluding or limiting the disclosure,
divulgence or delivery of any of its books and records (except that Borrower
does not waive any attorney-client privilege).
*THREE
**;PROVIDED, HOWEVER, UPON THE OCCURRENCE OF A DEFAULT OR EVENT OF DEFAULT,
SILICON, OR ITS AGENTS, SHALL HAVE THE RIGHT TO CONDUCT SUCH INSPECTIONS AND/OR
AUDITS ON ONE BUSINESS DAY'S NOTICE
***WITH RESPECT TO SILICON,
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule, Borrower
shall not, without Silicon's prior written consent*, do any of the following:
(i) merge or consolidate with another corporation or entity; (ii) acquire any
assets, except in the ordinary course of business; (iii) enter into any other
transaction outside the ordinary course of business**; (iv) sell or transfer any
Collateral, except for the sale of finished Inventory in the ordinary course of
Borrower's business, and except for the sale of obsolete or unneeded Equipment
in the ordinary course of business***; (v) store any Inventory or other
Collateral with any warehouseman or other third party****; (vi) sell any
Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent
basis; (vii) make any loans of any money or other assets*****; (viii) incur any
debts, outside the ordinary course of business, which would have a material,
adverse effect on Borrower or on
-5-
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
the prospect of repayment of the Obligations; (ix) guarantee or otherwise become
liable with respect to the obligations of another****** (x) pay or declare any
dividends on Borrower's stock (except for dividends payable solely in stock of
BORROWER*******); (xi) redeem, retire, purchase or otherwise acquire, directly
or indirectly, any of Borrower's stock********; (xii) make any change in
Borrower's capital structure which would have a material adverse effect on
Borrower or on the prospect of repayment of the Obligations; or (xiv) dissolve
or elect to dissolve. Transactions permitted by the foregoing provisions of this
Section are only permitted if no Default or Event of Default would occur as a
result of such transaction.
*which consent, or denial thereof, will be determined in silicon's good faith
business judgment
**, except as otherwise permitted by other provisions of this agreement
***, and except for the issuance of non-exclusive licenses and similar
arrangements for the use of the property of borrower in the ordinary course of
business
****, except for such warehousemen or third parties for which a notice of
security interest to bailee, or similar agreement, in form satisfactory to
silicon, has been executed by such warehouseman or bailee and provided further
that the amount of inventory or other collateral stored in such locations does
not exceed $350,000 in the aggregate, and except for inventory that borrower, in
the ordinary course of its business, has loaned to its customers or is held by
its customers pending the exchange of such inventory, provided that the
aggregate value of such inventory does not exceed $1,000,000 at anytime while
this agreement is in effect
*****, except (a) loans outstanding as of the date hereof and described on
the schedule and (b) loans consisting of (1) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, provided the aggregate amount of such loans under this subclause
(vii)(b)(1) do not exceed $100,000 at any one time outstanding, and (2) loans to
employees, officers or directors relating to the purchase of equity securities
of borrower pursuant to employee stock purchase plans or agreements approved by
borrower's board of directors, provided the aggregate amount of such loans under
this subclause (vii)(b)(2) do not exceed $100,000 at any one time outstanding
******person
*******or dividends or distributions made in respect of a borrower to the
parent of such borrower, provided that such parent is also a borrower hereunder
********, except for the repurchases of stock from the cancellation of
indebtedness and from former employees or directors of borrower under the terms
of applicable repurchase or similar agreements between borrower and such
employees or directors all in an aggregate amount not to exceed $100,000 while
this agreement is in effect
5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to Silicon, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Silicon may deem them reasonably necessary in order
to prosecute or defend any such suit or proceeding.
5.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may deem
reasonably necessary or useful in order to perfect and maintain Silicon's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the "Maturity Date"), subject to Section 6.3
below.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the Maturity
Date as follows: (i) by Borrower, effective three Business Days after written
notice of termination is given to Silicon; or (ii) by Silicon at any time after
the occurrence* of an Event of Default, without notice, effective immediately.
If this Agreement is terminated by Borrower or by Silicon under this Section
6.2, Borrower shall pay to Silicon a termination fee in an amount equal to** of
the Maximum Credit Limit, provided that no termination fee shall be charged if
the credit facility hereunder is replaced with a new facility from another
division of Silicon Valley Bank. The termination fee shall be due and payable on
the effective date of termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations.
*, AND DURING THE CONTINUATION,
**ONE PERCENT (1.0%)
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Without
limiting the generality of the foregoing, if on the Maturity Date, or on any
earlier effective date of termination, there are any outstanding Letters of
Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to the face amount of all such Letters of Credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said Letters of Credit, pursuant to Silicon's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Silicon's security interests in all
-6-
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
of the Collateral and all of the terms and provisions of this Agreement shall
continue in full force and effect until all Obligations have been paid and
performed in full; provided that, without limiting the fact that Loans are
subject to the discretion of Silicon, Silicon may, in its sole discretion,
refuse to make any further Loans after termination. No termination shall in any
way affect or impair any right or remedy of Silicon, nor shall any such
termination relieve Borrower of any Obligation to Silicon, until all of the
Obligations have been paid and performed in full. Upon payment and performance
in full of all the Obligations and termination of this Agreement, Silicon shall
promptly deliver to Borrower termination statements, requests for reconveyances
and such other documents as may be required to fully terminate Silicon's
security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect; or (b) Borrower shall fail to pay
when due any Loan or any interest thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any time shall exceed
the Credit Limit*; or (d) Borrower shall fail to comply with any of the
financial covenants set forth in the Schedule or shall fail to perform any other
non-monetary Obligation which by its nature cannot be cured; or (e) Borrower
shall fail to perform any other non-monetary Obligation, which failure is not
cured within 5 Business Days after the date due; or (f) any levy, assessment,
attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not cured within 10 days after the
occurrence of the same; or (g) any default or event of default occurs under any
obligation secured by a Permitted Lien, which is not cured within any applicable
cure period or waived in writing by the holder of the Permitted Lien; or (h)
Borrower breaches any material contract or obligation, which has or may
reasonably be expected to have a material adverse effect on Borrower's business
or financial condition; or (i) Dissolution, termination of existence** , of
Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; or (j) the
commencement of any proceeding against Borrower or any guarantor of any of the
Obligations under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within*** days after the date commenced; or (k) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing, or commencement of
proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (l) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or (m) Borrower makes any payment on account of any indebtedness
or obligation which has been subordinated to the Obligations other than as
permitted in the applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way limits
his subordination agreement; or (n) there shall be a change in the record or
beneficial ownership of an aggregate of more than**** 20% of the outstanding
shares of stock of Borrower, in one or more TRANSACTIONS*****, compared to the
ownership of outstanding shares of stock of Borrower in effect on the date
hereof, without the prior written consent of Silicon; or (o) Borrower shall
generally not pay its debts as they become due, or Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or (p) there shall be a material adverse change in Borrower's business or
financial condition;. Silicon may cease making any Loans hereunder during any of
the above cure periods, and thereafter if an Event of Default has
occurred******.
*AND SUCH OVERADVANCE IS NOT IMMEDIATELY REPAID IN ACCORDANCE WITH THE TERMS
OF SECTION 1.3 HEREOF
**OR INSOLVENCY
***60
****35%
*****HELD BY ANY ONE PERSON
******AND IS CONTINUING
7.2 REMEDIES. Upon the occurrence of any Event of Default, and at any time
thereafter*, Silicon, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement; (b) Accelerate
and declare all or any part of the Obligations to be immediately due, payable,
and performable, notwithstanding any deferred or installment payments allowed by
any instrument evidencing or relating to any Obligation; (c) Take possession of
any or all of the Collateral wherever it may be found, and for that purpose
Borrower hereby authorizes Silicon without judicial process to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge for so long as Silicon deems it
-7-
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
reasonably necessary in order to complete the enforcement of its rights under
this Agreement or any other agreement; provided, however, that should Silicon
seek to take possession of any of the Collateral by Court process, Borrower
hereby irrevocably waives: (i) any bond and any surety or security relating
thereto required by any statute, court rule or otherwise as an incident to such
possession; (ii) any demand for possession prior to the commencement of any suit
or action to recover possession thereof; and (iii) any requirement that Silicon
retain possession of, and not dispose of, any such Collateral until after trial
or final judgment; (d) Require Borrower to assemble any or all of the Collateral
and make it available to Silicon at places designated by Silicon which are
reasonably convenient to Silicon and Borrower, and to remove the Collateral to
such locations as Silicon may deem advisable; (e) Complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal, Silicon shall have the right to
use Borrower's premises, vehicles, hoists, lifts, cranes, equipment and all
other property without charge; (f) Sell, lease or otherwise dispose of any of
the Collateral, in its condition at the time Silicon obtains possession of it or
after further manufacturing, processing or repair, at one or more public and/or
private sales, in lots or in bulk, for cash, exchange or other property, or on
credit, and to adjourn any such sale from time to time without notice other than
oral announcement at the time scheduled for sale. Silicon shall have the right
to conduct such disposition on Borrower's premises without charge, for such time
or times as Silicon deems reasonable, or on Silicon's premises, or elsewhere and
the Collateral need not be located at the place of disposition. Silicon may
directly or through any affiliated company purchase or lease any Collateral at
any such public disposition, and if permissible under applicable law, at any
private disposition. Any sale or other disposition of Collateral shall not
relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Receivables and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes Silicon to endorse or sign Borrower's name on all collections,
receipts, instruments and other documents, to take possession of and open mail
addressed to Borrower and remove therefrom payments made with respect to any
item of the Collateral or proceeds thereof, and, in Silicon's sole discretion,
to grant extensions of time to pay, compromise claims and settle Receivables and
the like for less than face value; (h) Offset against any sums in any of
Borrower's general, special or other Deposit Accounts with Silicon; and (i)
Demand and receive possession of any of Borrower's federal and state income tax
returns and the books and records utilized in the preparation thereof or
referring thereto. All reasonable attorneys' fees, expenses, costs, liabilities
and obligations incurred by Silicon with respect to the foregoing shall be added
to and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. Without limiting any of Silicon's rights and remedies, from and
after the occurrence of any Event of Default**, the interest rate applicable to
the Obligations shall be increased by an additional four percent per annum.
*DURING THE CONTINUATION THEREOF
**AND DURING THE CONTINUATION THEREOF
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and Silicon
agree that a sale or other disposition (collectively, "sale") of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable: (i) Notice of the sale is given to Borrower at least*
seven days prior to the sale, and, in the case of a public sale, notice of the
sale is published at least* days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted; (ii) Notice of the
sale describes the collateral in general, non-specific terms; (iii) The sale is
conducted at a place designated by Silicon, with or without the Collateral being
present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m; (v)
Payment of the purchase price in cash or by cashier's check or wire transfer is
required; **(vi) With respect to any sale of any of the Collateral, Silicon may
(but is not obligated to) direct any prospective purchaser to ascertain directly
from Borrower any and all information concerning the same. Silicon shall be free
to employ other methods of noticing and selling the Collateral, in its
discretion, if they are commercially reasonable.
*10
**AND
7.4 POWER OF ATTORNEY. Upon the occurrence of any Event of Default*, without
limiting Silicon's other rights and remedies, Borrower grants to Silicon an
irrevocable power of attorney coupled with an interest, authorizing and
permitting Silicon (acting through any of its employees, attorneys or agents) at
any time, at its option, but without obligation, with or without notice to
Borrower, and at Borrower's expense, to do any or all of the following, in
Borrower's name or otherwise, but Silicon agrees to exercise the following
powers in a commercially reasonable manner: (a) Execute on behalf of Borrower
any documents that Silicon may, in its sole discretion, deem advisable in order
to perfect and maintain Silicon's security interest in the Collateral, or in
order to exercise a right of Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
present and future agreements; (b) Execute on behalf of Borrower any document
exercising, transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property which
is part of Silicon's Collateral or in which Silicon has an interest; (c) Execute
on behalf of Borrower, any invoices relating to any Receivable, any draft
against any Account Debtor and any notice to any Account Debtor, any proof of
claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or
other lien, or assignment or satisfaction of mechanic's, materialman's or other
lien; (d) Take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into Silicon's
possession; (e) Endorse all checks and other forms of remittances received by
Silicon; (f) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any
-8-
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
judgment based thereon, or otherwise take any action to terminate or discharge
the same; (g) Grant extensions of time to pay, compromise claims and settle
Receivables and General Intangibles for less than face value and execute all
releases and other documents in connection therewith; (h) Pay any sums required
on account of Borrower's taxes or to secure the release of any liens therefor,
or both; (i) Settle and adjust, and give releases of, any insurance claim that
relates to any of the Collateral and obtain payment therefor; (j) Instruct any
third party having custody or control of any books or records belonging to, or
relating to, Borrower to give Silicon the same rights of access and other rights
with respect thereto as Silicon has under this Agreement; and (k) Take any
action or pay any sum required of Borrower pursuant to this Agreement and any
other present or future agreements. Any and all reasonable sums paid and any and
all reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations.
In no event shall Silicon's rights under the foregoing power of attorney or any
of Silicon's other rights under this Agreement be deemed to indicate that
Silicon is in control of the business, management or properties of Borrower.
*AND DURING THE CONTINUATION THEREOF
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any sale
of the Collateral shall be applied by Silicon first to the reasonable costs,
expenses, liabilities, obligations and attorneys' fees incurred by Silicon in
the exercise of its rights under this Agreement, second to the interest due upon
any of the Obligations, and third to the principal of the Obligations, in such
order as Silicon shall determine in its sole discretion. Any surplus shall be
paid to Borrower or other persons legally entitled thereto; Borrower shall
remain liable to Silicon for any deficiency. If, Silicon, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Silicon shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of purchase price or deferring
the reduction of the Obligations until the actual receipt by Silicon of the cash
therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth in
this Agreement, Silicon shall have all the other rights and remedies accorded a
secured party under the Code and under all other applicable laws, and under any
other instrument or agreement now or in the future entered into between Silicon
and Borrower, and all of such rights and remedies are cumulative and none is
exclusive. Exercise or partial exercise by Silicon of one or more of its rights
or remedies shall not be deemed an election, nor bar Silicon from subsequent
exercise or partial exercise of any other rights or remedies. The failure or
delay of Silicon to exercise any rights or remedies shall not operate as a
waiver thereof, but all rights and remedies shall continue in full force and
effect until all of the Obligations have been fully paid and performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on a Receivable.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Business Day" means a day on which Silicon is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
"continuing" when used with reference to a Default or an Event of Default
means that the Default or Event of Default has occurred and has not been either
waived in writing by Silicon or cured within any applicable cure period.
"Default" means any event which with notice or passage of time or both, would
constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9102(a) of the Code.
"Eligible Inventory" means Inventory which Silicon, in its* deems eligible
for borrowing, based on such considerations as Silicon may from time to time
deem appropriate. Without limiting the fact that the determination of which
Inventory is eligible for borrowing is a matter of Silicon's* Inventory which
does not meet the following requirements will not be deemed to be Eligible
Inventory: Inventory which (i) consists of finished goods, in good, new and
salable condition which is not perishable, not obsolete or unmerchantable, and
is not comprised of raw materials, work in process, packaging materials or
supplies; (ii) meets all applicable governmental standards; (iii) has been
manufactured in compliance with the Fair Labor Standards Act; (iv) conforms in
all respects to the warranties and representations set forth in this Agreement;
(v) is at all times subject to Silicon's duly perfected, first priority security
interest; and (vi) is situated at a one of the locations set forth on the
Schedule.
*GOOD FAITH BUSINESS JUDGMENT
"Eligible Receivables" means Receivables arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services, which
Silicon, in its* shall deem eligible for borrowing, based on such
considerations as Silicon may from time to time deem appropriate. Without
limiting the fact that the determination of which Receivables are eligible for
borrowing is a matter of Silicon's* the following (the "Minimum
Eligibility Requirements") are the minimum requirements for a Receivable to be
an Eligible Receivable: (i) the Receivable must not be outstanding for more than
90 days from its invoice date, (ii) the Receivable must not represent progress
xxxxxxxx, or be due under a fulfillment or requirements contract with the
-9-
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
Account Debtor, (iii) the Receivable must not be subject to any contingencies
(including Receivables arising from sales on consignment, guaranteed sale or
other terms pursuant to which payment by the Account Debtor may be conditional),
(iv) the Receivable must not be owing from an Account Debtor with whom Borrower
has any dispute (whether or not relating to the particular Receivable), (v) the
Receivable must not be owing from an Affiliate of Borrower, (vi) the Receivable
must not be owing from an Account Debtor which is subject to any insolvency or
bankruptcy proceeding, or whose financial condition is not acceptable to
Silicon, or which, fails or goes out of a material portion of its business,
(vii) the Receivable must not be owing from the United States or any department,
agency or instrumentality thereof (unless there has been compliance, to
Silicon's satisfaction, with the United States Assignment of Claims Act), (viii)
the Receivable must not be owing from an Account Debtor located outside the
United States or Canada (unless pre-approved by Silicon in its discretion in
writing, or backed by a letter of credit satisfactory to Silicon, or FCIA
insured satisfactory to Silicon), (ix) the Receivable must not be owing from an
Account Debtor to whom Borrower is or may be liable for goods purchased from
such Account Debtor or otherwise. Receivables owing from one Account Debtor will
not be deemed Eligible Receivables to the extent they exceed 25% of the total
Receivables outstanding. In addition, if more than 50% of the Receivables owing
from an Account Debtor are outstanding more than 90 days from their invoice date
(without regard to unapplied credits) or are otherwise not eligible Receivables,
then all Receivables owing from that Account Debtor will be deemed ineligible
for borrowing. Silicon may, from time to time, in ITS* revise the Minimum
Eligibility Requirements, upon written notice to Borrower.
*GOOD FAITH BUSINESS JUDGMENT
"Equipment" means all of Borrower's present and hereafter acquired machinery,
molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dyes, jigs, goods and other tangible
personal property (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"Event of Default" means any of the events set forth in Section 7.1 of this
Agreement.
"General Intangibles" means all general intangibles of Borrower, whether now
owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against Silicon, rights to purchase or sell
real or personal property, rights as a licensor or licensee of any kind,
royalties, telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including without limitation life insurance, key
man insurance, credit insurance, liability insurance, property insurance and
other insurance), tax refunds and claims, computer programs, discs, tapes and
tape files, claims under guaranties, security interests or other security held
by or granted to Borrower, all rights to indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Inventory" means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including, without
limitation, all raw materials, work in process, finished goods and goods in
transit), and all materials and supplies of every kind, nature and description
which are or might be used or consumed in Borrower's business or used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of such goods, merchandise or other personal property, and all
warehouse receipts, documents of title and other documents representing any of
the foregoing.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Silicon in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, termination fees, minimum interest
charges and any other sums chargeable to Borrower under this Agreement or under
any other present or future instrument or agreement between Borrower and
Silicon.
"Permitted Liens" means the following: (i) purchase money security interests
in specific items of Equipment; (ii) leases of specific items of Equipment;
(iii) liens for taxes not yet payable*; (iv) additional security interests and
liens consented to in writing by Silicon, which consent shall not be
unreasonably withheld; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods**. Silicon will have
the
-10-
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
right to require, as a condition to its consent under subparagraph (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement on Silicon's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agrees that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
*OR LIENS FOR TAXES BEING CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS
FOR WHICH ADEQUATE RESERVES HAVE BEEN ESTABLISHED AND ARE MAINTAINED PROVIDED
SUCH LIENS DO NOT HAVE PRIORITY OVER ANY SECURITY INTEREST OF SILICON
**AND (IX) LIENS ON ASSETS ACQUIRED BY BORROWER IN ACCORDANCE WITH SECTION
5.5 HEREOF, PROVIDED SUCH LIENS WOULD OTHERWISE BE PERMITTED PURSUANT TO CLAUSES
(I) OR (II) OF THE DEFINITION OF PERMITTED LIENS
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, *corporation,
government, or any agency or political division thereof, or any other entity.
*LIMITED LIABILITY COMPANY
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, securities accounts, investment
property, documents and all other forms of obligations at any time owing to
Borrower, all guaranties and other security therefor, all merchandise returned
to or repossessed by Borrower, and all rights of stoppage in transit and all
other rights or remedies of an unpaid vendor, lienor or secured party.
"Reserves" means, as of any date of determination, such amounts as Silicon
may from time to time establish* and revise in good faith reducing the amount of
Loans, Letters of Credit and other financial accommodations which would
otherwise be available to Borrower under the lending formula(s) provided in the
Schedule: (a) to reflect events, conditions, contingencies or risks which, as
determined by Silicon in good faith, do or may affect (i) the Collateral or any
other property which is security for the Obligations or its value (including
without limitation any increase in delinquencies of Receivables), (ii) the
assets, business or prospects of Borrower or any Guarantor, or (iii) the
security interests and other rights of Silicon in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect Silicon's
good faith belief that any collateral report or financial information furnished
by or on behalf of Borrower or any Guarantor to Silicon is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which Silicon determines in good faith constitutes an
Event of Default or may, with notice or passage of time or both, constitute an
Event of Default.
*IN ITS GOOD FAITH BUSINESS JUDGMENT
Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, and other items of payment received by Silicon (including proceeds of
Receivables and payment of the Obligations in full) shall be deemed applied by
Silicon on account of the Obligations two Business Days after receipt by Silicon
of immediately available funds*, and, for purposes of the foregoing, any such
funds received after 12:00 Noon on any day shall be deemed received on the next
Business Day. Silicon shall not, however, be required to credit Borrower's
account for the amount of any item of payment which is unsatisfactory to Silicon
in its sole discretion, and Silicon may charge Borrower's loan account for the
amount of any item of payment which is returned to Silicon unpaid.
*(EXCEPT WITH RESPECT TO WIRE TRANSFERS WHICH SHALL BE DEEMED APPLIED BY
SILICON ON ACCOUNT OF THE OBLIGATIONS THE SAME BUSINESS DAY AS DEEMED RECEIVED
BY SILICON)
9.2 APPLICATION OF PAYMENTS. All payments with respect to the Obligations may
be applied, and in Silicon's sole discretion reversed and re-applied, to the
Obligations, in such order and manner as Silicon shall determine in its sole
discretion.
9.3 CHARGES TO ACCOUNTS. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable to the Loans. Silicon may also, in its discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.
9.4 MONTHLY ACCOUNTINGS. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within thirty days after each
account is rendered, describing the nature of any alleged errors or admissions.
9.5 NOTICES. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or
by regular first-class mail, or certified mail return receipt requested,
addressed to Silicon or Borrower at the addresses shown in the heading to this
Agreement, or at any other address designated in writing by one party to the
other party. Notices to Silicon shall be directed to the Commercial Finance
Division, to the attention of the Division Manager or the Division Credit
Manager. All notices shall be deemed to have been given upon delivery in
-11-
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
the case of notices personally delivered, or at the expiration of one Business
Day following delivery to the private delivery service, or* Business Days
following the deposit thereof in the United States mail, with postage prepaid.
*THREE
9.6 SEVERABILITY. Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.
9.7 INTEGRATION. This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between Borrower and Silicon and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.
9.8 WAIVERS. The failure of Silicon at any time or times to require Borrower
to strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Borrower and Silicon shall not waive or
diminish any right of Silicon later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Silicon shall be deemed to have been
waived by any act or knowledge of Silicon or its agents or employees, but only
by a specific written waiver signed by an authorized officer of Silicon and
delivered to Borrower. Borrower waives demand, protest, notice of protest and
notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time held
by Silicon on which Borrower is or may in any way be liable, and notice of any
action taken by Silicon, unless expressly required by this Agreement.
9.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Silicon, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon, but nothing herein shall relieve Silicon* from
liability for its own gross negligence or willful misconduct.
*NOR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY
OTHER PERSON AFFILIATED WITH OR REPRESENTING SILICON
9.10 AMENDMENT. The terms and provisions of this Agreement may not be waived
or amended, except in a writing executed by Borrower and a duly authorized
officer of Silicon.
9.11 TIME OF ESSENCE. Time is of the essence in the performance by Borrower
of each and every obligation under this Agreement.
9.12 ATTORNEYS FEES AND COSTS. *Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and the documents relating to this Agreement; obtain legal advice in
connection with this Agreement or Borrower; enforce, or seek to enforce, any of
its rights; prosecute actions against, or defend actions by, Account Debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim; examine,
audit, copy, and inspect any of the Collateral or any of Borrower's books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon's security interest in, the Collateral; and otherwise represent Silicon
in any litigation relating to Borrower. In satisfying Borrower's obligation
hereunder to reimburse Silicon for attorneys fees, Borrower may, for
convenience, issue checks directly to Silicon's attorneys, Levy, Small & Xxxxxx,
but Borrower acknowledges and agrees that Levy, Small & Xxxxxx is representing
only Silicon and not Borrower in connection with this Agreement. If either
Silicon or Borrower files any lawsuit against the other predicated on a breach
of this Agreement, the prevailing party in such action shall be entitled to
recover its reasonable costs and attorneys' fees, including (but not limited to)
reasonable attorneys' fees and costs incurred in the enforcement of, execution
upon or defense of any order, decree, award or judgment. All attorneys' fees and
costs to which Silicon may be entitled pursuant to this Paragraph shall
immediately become part of Borrower's Obligations, shall be due on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations.
*EXCEPT AS EXPRESSLY PROVIDED BY THE PENULTIMATE SENTENCE OF THIS SECTION
9.12,
9.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and Silicon; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Silicon, and any prohibited assignment
shall be void. No consent by Silicon to any assignment shall release Borrower
from its liability for the Obligations.
9.14 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
-12-
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
9.15 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower against
Silicon, its directors, officers, employees, agents, accountants or attorneys,
based upon, arising from, or relating to this Loan Agreement, or any other
present or future document or agreement, or any other transaction contemplated
hereby or thereby or relating hereto or thereto, or any other matter, cause or
thing whatsoever, occurred, done, omitted or suffered to be done by Silicon, its
directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by Borrower by the commencement of an action or
proceeding in a court of competent jurisdiction by the filing of a complaint
within* after the first act, occurrence or omission upon which such claim or
cause of action, or any part thereof, is based, and the service of a summons and
complaint on an officer of Silicon, or on any other person authorized to accept
service on behalf of Silicon, within thirty (30) days thereafter. Borrower
agrees that such** period is a reasonable and sufficient time for Borrower to
investigate and act upon any such claim or cause of action. The** period
provided herein shall not be waived, tolled, or extended except by the written
consent of Silicon in its sole discretion. This provision shall survive any
termination of this Loan Agreement or any other present or future agreement.
*TWO YEARS
**TWO-YEAR
9.16 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used in
this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Silicon or Borrower under any rule
of construction or otherwise.
9.17 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Santa Xxxxx County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.18 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND SILICON EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER:
VERSO TECHNOLOGIES, INC.
BY /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
VICE PRESIDENT
BY /s/ Xxxxx Xxxx
----------------------------------------
SECRETARY OR ASS'T SECRETARY
BORROWER:
NACT TELECOMMUNICATIONS, INC.
BY /s/ Xxxxxx X. Xxxxxxx
----------------------------------------
VICE PRESIDENT
BY /s/ Xxxxx Xxxx
----------------------------------------
SECRETARY OR ASS'T SECRETARY
-13-
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
BORROWER:
XXXXXXXX.XXX SOFTWARE, INC.
BY /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
VICE PRESIDENT
BY /s/ Xxxxx Xxxx
-------------------------------------
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY /s/ Xxxxx Xxxxxxxx
-----------------------------------------
TITLE Vice President
--------------------------------------
-14-
SILICON VALLEY BANK
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: VERSO TECHNOLOGIES, INC.
NACT TELECOMMUNICATIONS, INC.
XXXXXXXX.XXX SOFTWARE, INC.
ADDRESS: 000 XXXXXXXX XXXXXXX, XXXXX 000
XXXXXXX, XXXXXXX 00000
DATE: DECEMBER 14, 2001
This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.
===============================================================================
1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of a total of
$5,000,000 at any one time outstanding (the
"Maximum Credit Limit"), or the sum of (a) and (b)
below:
(a) 50% of the amount of Borrower's Eligible
Receivables (as defined in Section 8 above)
(the foregoing advance rate is typically
based upon the quality of the Borrower's
Receivables and attendant dilution. The
quality of Borrower's Receivables (and other
Collateral) is determined by the results of
Silicon's initial field examination and
on-going periodic examinations and audits.
The foregoing advance rate will be reviewed
by Silicon, after its receipt and review of
the the results of the next two audits
conducted, after the date hereof, by
Silicon, or its agents, to determine whether
or not such advance rate should be
modified), plus
(b) an amount (the "Inventory Sublimit") not
to exceed the lesser of:
(1) 30% of the value of Borrower's
Eligible Inventory (as defined in
Section 8 above), which advance rate
must be equal to at least 80% of the
appraisal value of the Inventory as
determined below; or
(2) 20% of total outstanding Loans;
or
(3) $1,000,000.
The foregoing Inventory Sublimit is
subject to an appraisal conducted by
appraisers acceptable to Silicon,
which appraisal will be conducted on
the basis of forced liquidation
value.
-1-
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
Loans will be made to each Borrower
based on the Eligible Receivables and
Eligible Inventory of each Borrower,
subject to the Maximum Credit Limit
set forth above for all Loans to all
Borrowers combined.
LETTER OF CREDIT SUBLIMIT
(Section 1.5): $500,000, provided that the total Letter of
Credit Sublimit and the Foreign Exchange Contract
Sublimit shall not, at any time, exceed $500,000.
FOREIGN EXCHANGE
CONTRACT SUBLIMIT $500,000. Borrower may enter into foreign exchange
forward contracts with Silicon, on its standard
forms, under which Borrower commits to purchase
from or sell to Silicon a set amount of foreign
currency more than one business day after the
contract date (the "FX Forward Contracts");
provided that (1) at the time the FX Forward
Contract is entered into Borrower has Loans
available to it under this Agreement in an amount
at least equal to 10% of the amount of the FX
Forward Contract; and (2) the total FX Forward
Contracts at any one time outstanding may not
exceed 10 times the amount of the Foreign Exchange
Contract Sublimit set forth above; and (3) the
total Letter of Credit Sublimit and the Foreign
Exchange Contract Sublimit shall not, at any time,
exceed $500,000. Silicon shall have the right to
withhold, from the Loans otherwise available to
Borrower under this Agreement, a reserve (which
shall be in addition to all other reserves) in an
amount equal to 10% of the total FX Forward
Contracts from time to time outstanding, and in the
event at any time there are insufficient Loans
available to Borrower for such reserve, Borrower
shall deposit and maintain with Silicon cash
collateral in an amount at all times equal to such
deficiency, which shall be held as Collateral for
all purposes of this Agreement. Silicon may, in its
discretion, terminate the FX Forward Contracts at
any time that an Event of Default occurs and is
continuing. Borrower shall execute all standard
form applications and agreements of Silicon in
connection with the FX Forward Contracts, and
without limiting any of the terms of such
applications and agreements, Borrower shall pay all
standard fees and charges of Silicon in connection
with the FX Forward Contracts.
================================================================================
2. INTEREST.
INTEREST RATE (Section 1.2):
A rate equal to the "Prime Rate" in effect from
time to time, plus 2.0% per annum; provided,
however, that the interest rate shall be reduced to
a rate equal to the "Prime Rate" in effect from
time to time, plus 1.50% per annum at such time as
Borrower has received at least $10,000,000 in cash
consideration for the issuance, after the date
hereof, of equity securities of Borrower. Any such
rate reduction shall
-2-
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
go into effect following Silicon's review of
Borrower's financial statements showing Borrower is
entitled to such rate reduction.
Interest shall be calculated on the basis of a
360-day year for the actual number of days elapsed.
"Prime Rate" means the rate announced from time to
time by Silicon as its "prime rate;" it is a base
rate upon which other rates charged by Silicon are
based, and it is not necessarily the best rate
available at Silicon. The interest rate applicable
to the Obligations shall change on each date there
is a change in the Prime Rate.
MINIMUM MONTHLY
INTEREST (Section 1.2): Not Applicable.
================================================================================
3. FEES (Section 1.4):
Loan Fee: $50,000, payable concurrently herewith, which fee
Silicon acknowledges has been paid by Borrower and
received by Silicon.
Renewal Fee: $25,000, payable on or before the first anniversary
of this Agreement if this Agreement is renewed
beyond the Maturity Date by Silicon, in its sole
discretion, and Borrower accepts such renewal. Such
fee shall be non-refundable and in addition to all
interest and other fees payable to Silicon under
this Agreement.
Collateral Monitoring
Fee: $2,000, per month, payable in arrears (prorated
for any partial month at the beginning and at
termination of this Agreement); provided, however,
whenever Borrower's aging reports (as provided for
herein) are consolidated, such fee shall be $1,000
per month, payable in arrears (prorated for any
partial month at the beginning and at termination
of this Agreement).
Unused Line Fee: In the event, in any calendar month (or portion
thereof at the beginning and end of the term
hereof), the average daily principal balance of the
Loans outstanding during the month is less than the
amount of the Maximum Credit Limit, Borrower shall
pay Silicon an unused line fee in an amount equal
to 0.25% per annum on the difference between the
amount of the Maximum Credit Limit and the average
daily principal balance of the Loans outstanding
during the month, which unused line fee shall be
computed and paid monthly, in arrears, on the first
day of the following month.
================================================================================
4. MATURITY DATE
(Section 6.1): One year from the date of this Agreement.
-3-
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
===============================================================================
5. FINANCIAL COVENANTS
(Section 5.1): Borrower shall comply with each of the following
covenant(s). Compliance shall be determined as of
the end of each month, except as otherwise
specifically provided below:
MINIMUM CASH
ON HAND/MINIMUM
EXCESS AVAILABILITY: Borrower shall at all times maintain a combination
of a minimum of unrestricted cash (and cash
equivalents) in accounts maintained at Silicon, and
Minimum Excess Availability, in an amount of not
less than $1,000,000.
MINIMUM TANGIBLE
NET WORTH: Borrower shall maintain a Tangible Net Worth of not
less than the following:
For each fiscal quarter ending after the date
hereof $3,000,000 plus 50% of Borrower's current
year to date quarterly earnings for any fiscal
quarter ending after the date hereof.
The foregoing Minimum Tangible Net Worth
calculation may be revised by Silicon, in its good
faith business judgment, after its review of the
final purchase accounting associated with Verso
Technologies, Inc.'s acquisition of NACT
Telecommunications, Inc. and Xxxxxxxx.xxx Software,
Inc. and Silicon's receipt of the necessary
internal committee approvals.
DEFINITIONS. For purposes of the foregoing financial covenants,
the following term shall have the following
meaning:
"Current assets", "current liabilities" and
"liabilities" shall have the meaning ascribed
thereto by generally accepted accounting
principles.
"Minimum Excess Availability" shall mean the amount
equal to the Credit Limit less the principal amount
of outstanding Loans.
"Tangible Net Worth" shall mean the excess of total
assets over total liabilities, determined in
accordance with generally accepted accounting
principles, with the following adjustments:
(A) there shall be excluded from assets: (i)
notes, accounts receivable and other
obligations owing to Borrower from its
officers or other Affiliates, and (ii) all
assets which would be classified as
intangible assets under generally accepted
accounting principles, including without
limitation goodwill, licenses, patents,
trademarks, trade names, copyrights,
capitalized software and organizational
costs, licenses and franchises
(B) there shall be excluded from
liabilities: all indebtedness which is
subordinated to the Obligations under a
subordination agreement in form specified by
Silicon or by language in the instrument
evidencing the indebtedness which is
acceptable to Silicon in its
-4-
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
===============================================================================
discretion ("Subordinated Debt") and, to the
extent not subordinated as provided for
above, the deferred purchase price (and the
accrued interest thereon) due WA Telcom
Products Co., Inc. by Verso Technologies,
Inc. ("Verso") for Verso's acquisition of
NACT Telecommunications, Inc., which
deferred purchase price is in the amount of
approximately $5,340,000.
================================================================================
6. REPORTING.
(Section 5.3):
Borrower shall provide Silicon with the following:
1. Monthly Receivable agings, aged by invoice
date, within twenty days after the end of each
month.
2. Monthly accounts payable agings, aged by
invoice date, and outstanding or held check
registers, if any, within twenty days after the
end of each month.
3. Monthly reconciliations of Receivable agings
(aged by invoice date), transaction reports,
and general ledger, within twenty days after
the end of each month.
4. Monthly perpetual inventory reports for the
Inventory valued on a first-in, first-out basis
at the lower of cost or market (in accordance
with generally accepted accounting principles)
or such other inventory reports as are
reasonably requested by Silicon, all within
twenty days after the end of each month.
5. Monthly unaudited financial statements, as soon
as available, and in any event within thirty
days after the end of each month; provided,
however, for the months ending March 31, June
30 and September 30 of each fiscal year, within
40 days after the end of such month, and for
the month ending December 31 of each fiscal
year, 50 after the end of such month.
6. Monthly Compliance Certificates, within thirty
days after the end of each month (provided,
however, for the months ending March 31, June
30 and September 30 of each fiscal year, within
40 days after the end of such month, and for
the month ending December 31 of each fiscal
year, 50 after the end of such month), in such
form as Silicon shall reasonably specify,
signed by the Chief Financial Officer of
Borrower, certifying that as of the end of such
month Borrower was in full compliance with all
of the terms and conditions of this Agreement,
and setting forth calculations showing
compliance with the financial covenants set
forth in this Agreement and such other
information as Silicon shall reasonably
request, including, without limitation, a
statement that at the end of such month there
were no held checks.
7. Quarterly unaudited financial statements, as
soon as available, and in any event within
forty-five days after the end of each fiscal
quarter of Borrower.
-5-
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
===============================================================================
8. Annual operating budgets (including income
statements, balance sheets and cash flow
statements, by month) for the upcoming fiscal
year of Borrower within thirty days prior to
the end of each fiscal year of Borrower.
9. Annual financial statements, as soon as
available, and in any event within 90 days
following the end of Borrower's fiscal year,
certified by independent certified public
accountants acceptable to Silicon.
================================================================================
7. COMPENSATION
(Section 5.5): Not Applicable.
================================================================================
8. BORROWER INFORMATION:
PRIOR NAMES OF
BORROWER
(Section 3.2): As set forth in the Borrower's
Representations and Warranties dated
December 14, 2001.
PRIOR TRADE
NAMES OF BORROWER
(Section 3.2): As set forth in the Borrower's
Representations and Warranties dated
December 14, 2001.
EXISTING TRADE
NAMES OF BORROWER
(Section 3.2): As set forth in the Borrower's
Representations and Warranties dated
December 14, 2001.
OTHER LOCATIONS AND
ADDRESSES (Section 3.3): As set forth in the Borrower's
Representations and Warranties dated
December 14, 2001.
TAX MATTERS (Section 3.8): Verso Technologies, Inc. received a
"Notice of Audit Assessment Sales, Use
and Hotel Occupancy Tax" from the
Commonwealth of Pennsylvania. The
assessment in the amount of $722,341 was
based on an audit performed at Verso
through the period ended June 30, 2000.
KPMG LLP, Verso's representative in this
matter, has filed an appeal with the
Commonwealth of Pennsylvania, which
should result in a substantial reduction
in the assessment. No response has been
received from the Commonwealth of
Pennsylvania. Verso has an accrued sales
tax liability of $500,000 on its balance
sheet at 10-31-01.
MATERIAL ADVERSE
LITIGATION (Section 3.10): Xxxx X. Good v. Verso Technologies, Inc.,
et al., Case Xx. 000000, Xxxxx xx Xxxx,
Xxxxxxxx Xxxxxx Court of Common Pleas.
OUTSTANDING
LOANS (Section 5.5): As set forth in the Borrower's
Representations and Warranties dated
December 14, 2001.
-6-
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
===============================================================================
INTELLECTUAL
PROPERTY CLAIMS: As set forth on the attached Appendix A.
================================================================================
9. OTHER COVENANTS
(Section 5.1): Borrower shall at all times comply with all of the
following additional covenants:
(1) BANKING RELATIONSHIP. Borrower shall at all
times maintain its primary banking
relationship with Silicon.
(2) SUBORDINATION OF INSIDE DEBT. All present
and future indebtedness of Borrower to its
officers, directors and shareholders
("Inside Debt") shall, at all times, be
subordinated to the Obligations pursuant to
a subordination agreement on Silicon's
standard form. Borrower represents and
warrants that there is no Inside Debt
presently outstanding. Prior to incurring
any Inside Debt in the future, Borrower
shall cause the person to whom such Inside
Debt will be owed to execute and deliver to
Silicon a subordination agreement on
Silicon's standard form.
(3) [Intentionally omitted.]
(4) SUBORDINATION AGREEMENTS. Borrower shall use
its commercially reasonable best efforts to
cause each holder of Verso Technologies,
Inc.'s 7.50% Convertible Debentures Due
November 22, 2005 (the "November 2005
Debentures") to execute and deliver to
Silicon within 60 days after the date hereof
Subordination Agreements, or such other
documents as are satisfactory to Silicon in
its sole discretion, all in such form as
Silicon shall specify, subordinating to the
Obligations the indebtedness of Borrower to
such persons, and Borrower shall cause said
Subordination Agreements (or other
documents) to continue in full force and
effect at all times during the term of this
Agreement.
(5) COPYRIGHT FILINGS. Concurrently, Borrower is
executing and delivering to Silicon an
Intellectual Property Security Agreement
-7-
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
===============================================================================
(the "Intellectual Property Agreement").
Within 60 days after the date hereof,
Borrower shall (i) cause all of its computer
software, the licensing of which results in
Receivables, or which is material to its
business to be registered with the United
States Copyright Office, (ii) complete the
Exhibits to the Intellectual Property
Agreement with all of the information called
for with respect to such software, (iii)
cause the Intellectual Property Agreement to
be recorded in the United States Copyright
Office, and (iv) provide evidence of such
recordation to Silicon.
(6) CONTROL AGREEMENT. As to any Deposit
Accounts and investment accounts maintained
with another institution, Borrower shall
cause such institution, within 30 days after
the date of this Loan Agreement, to enter
into a control agreement in form acceptable
to Silicon in its good faith business
judgment in order to perfect Silicon's
security interest in said Deposit Accounts
and investment accounts.
(7) BAILEE AGREEMENT. Within 30 days after the
date hereof, Borrower shall cause Xxxxxx
Moving & Storage, Team Air and any other
bailee or warehouseman at which Borrower
maintains any Collateral to execute and
deliver to Silicon, on Silicon's standard
form (with such changes as shall be
acceptable to Silicon in its discretion), a
Notice to Bailee of Security Interest with
respect to all Collateral maintained by
Borrower at such bailee or warehouseman.
(8) INACTIVE SUBSIDIARIES. The following are
subsidiaries of Borrower, but the same are,
and will remain throughout the term of this
Agreement, inactive, with assets having an
aggregate value of less than $350,000 (in
the aggregate for all such subsidiaries):
(a) MessageClick, Inc.; (b) Eltrax
International, Inc.; (c) Eltrax Hospitality
Technologies PTE Ltd.; (d) Eltrax (Malaysia)
SBD. BHD.; (e) Eltrax Hospitality
Scandinavia, AS; (f) Eltrax (Australia) Pty.
Ltd.; (g) Eltrax Hospitality Ltd.; (h)
Eltrax Holdings AG; (i) Eltrax AG; (j)
Eltrax Hospitality U.K. Ltd., and (k) World
Access (U.K.), Ltd.
(9) DISSOLVING SUBSIDIARIES. Borrower represents
and warrants to Silicon that the following
are wholly owned subsidiaries of Borrower
that Borrower intends to dissolve within
thirty (30) days of the date hereof, or,
alternatively, merge into Eltrax
International, Inc.: (a) Eltrax ASP Group,
LLC; (b) Cereus Bandwidth, LLC; (c) Cereus
Technology, Inc.; (d) XxxxxxxXxxxx.xxx,
Inc.; (e) Victory Fax Communications, Inc.;
(f) American Internet Media, Inc.; (g)
Cereus Technology Partners, Inc.; (h) Eltrax
Customer Care Group, Inc.; (i) Eltrax
Technology Services Group, Inc.; (j) Eltrax
Hospitality Group, Inc.; and (k) Eltrax
Group, Inc. Borrower covenants and agrees
that while this Agreement is in effect,
Borrower shall not transfer any assets or
Collateral to such subsidiaries.
(10) LANDLORD WAIVERS. Within 30 days after the
date hereof, Borrower shall cause the record
owners (other than Borrower) of
-8-
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
===============================================================================
all real property upon which Borrower
maintains inventory to execute and deliver
to Silicon, on Silicon's standard form (with
such changes as shall be acceptable to
Silicon in its discretion), a landlord
waiver containing such other terms and
conditions as Silicon may require.
Borrower: Silicon:
Verso Technologies, Inc. SILICON VALLEY BANK
By /s/ Xxxxxx X. Xxxxxxx By /s/ Xxxxx Xxxxxxxx
-------------------------------- --------------------------------
Vice President Title Vice President
-----------------------------
By /s/ Xxxxx Xxxx
----------------------------------
Secretary or Ass't Secretary
Borrower:
NACT TELECOMMUNICATIONS, INC.
By /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Vice President
By /s/ Xxxxx Xxxx
----------------------------------
Secretary or Ass't Secretary
Borrower:
XXXXXXXX.XXX SOFTWARE, INC.
By /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Vice President
By /s/ Xxxxx Xxxx
----------------------------------
Secretary or Ass't Secretary
