AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Exhibit 10.7
Execution Version
AMENDED AND RESTATED
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of the Effective Date between SILICON VALLEY BANK, a California corporation (“Bank”), and CALIX NETWORKS, INC., a Delaware corporation (“Borrower”), provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank. This Agreement amends and restates in its entirety, but is not a novation of, that Loan and Security Agreement having an Effective Date of August 29, 2008 (the “First Effective Date”), by and between the parties hereto. The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed following GAAP. Calculations and determinations must be made following GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein.
2 LOAN AND TERMS OF PAYMENT
2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due in accordance with this Agreement.
2.1.1 Revolving Advances.
(a) Availability. Subject to the terms and conditions of this Agreement, Bank shall make Advances not exceeding the Availability Amount. Amounts borrowed hereunder may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein.
(b) [Reserved.]
(c) Repayment. All Obligations on the Revolving Line, if due, shall be payable on the last day of each month. The Revolving Line terminates on the Revolving Line Maturity Date, when the principal amount of all Advances, the unpaid interest thereon, and all other Obligations relating to the Revolving Line shall be immediately due and payable.
2.1.2 Letters of Credit Sublimit.
(a) As part of the Revolving Line, Bank shall issue or have issued Letters of Credit for Borrower’s account. Such aggregate amounts utilized hereunder shall at all times reduce the amount otherwise available for Advances under the Revolving Line. The aggregate amount available to be used for the issuance of Letters of Credit may not exceed the Availability Amount. If, on the Revolving Line Maturity Date, there are any outstanding Letters of Credit, then on such date Borrower shall provide to Bank cash collateral in an amount equal to 105% of the face amount of all such Letters of Credit plus all fees, costs and other amounts due or to become due in connection therewith (as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to said Letters of Credit. All Letters of Credit shall be in form and substance acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank’s standard Application and Letter of Credit Agreement (the “Letter of Credit Application”). Borrower agrees to execute any further documentation in connection with the Letters of Credit as Bank may reasonably request. Borrower further agrees to be bound by the regulations and interpretations of the issuer of any Letters of Credit guarantied by Bank and opened for Borrower’s account or by Bank’s interpretations of any Letter of Credit issued by Bank for Borrower’s account, and Borrower understands and agrees that Bank shall not be liable for any error, negligence, or mistake, whether of omission or commission (other than, in each case, those arising from Bank’s gross negligence or wilful misconduct), in following Borrower’s instructions or those contained in the Letters of Credit or any modifications, amendments, or supplements thereto.
(b) The obligation of Borrower to immediately reimburse Bank for drawings made under Letters of Credit shall be absolute, unconditional, and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, such Letters of Credit, and the Letter of Credit Application.
(c) Borrower may request that Bank issue a Letter of Credit payable in a Foreign Currency. If a demand for payment is made under any such Letter of Credit, Bank shall treat such demand as an Advance to Borrower of the equivalent of the amount thereof (plus fees and charges in connection therewith such as wire, cable, SWIFT or similar charges) in Dollars at the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the country issuing such Foreign Currency.
(d) To guard against fluctuations in currency exchange rates, upon the issuance of any Letter of Credit payable in a Foreign Currency, Bank shall create a reserve (the “Letter of Credit Reserve”) under the Revolving Line in an amount equal to ten percent (10%) of the face amount of such Letter of Credit. The amount of the Letter of Credit Reserve may be adjusted by Bank from time to time to account for fluctuations in the exchange rate. The availability of funds under the Revolving Line shall be reduced by the amount of such Letter of Credit Reserve for as long as such Letter of Credit remains outstanding.
2.1.3 Foreign Exchange Sublimit. As part of the Revolving Line, Borrower may enter into foreign exchange contracts with Bank under which Borrower commits to purchase from or sell to Bank a specific amount of Foreign Currency (each, a “FX Forward Contract”) on a specified date (the “Settlement Date”). FX Forward Contracts shall have a Settlement Date of at least one (1) FX Business Day after the contract date, shall be subject to a reserve of ten percent (10%) of each outstanding FX Forward Contract (the “FX Reserve”), and not exceed a maximum aggregate amount equal to Five Million Dollars ($5,000,000). The aggregate amount of FX Forward Contracts at any one time may not exceed ten (10) times the amount of the FX Reserve. The amount otherwise available for Credit Extensions under the Revolving Line shall be reduced by the FX Reserve. Any amounts needed to fully reimburse Bank will be treated as Advances under the Revolving Line and will accrue interest at the interest rate applicable to Advances.
2.1.4 Cash Management Services Sublimit. Borrower may use up to the Availability Amount for Bank’s cash management services which may include merchant services, direct deposit of payroll, business credit card, and check cashing services identified in Bank’s various cash management services agreements (collectively, the “Cash Management Services”). Any amounts Bank pays on behalf of Borrower for any Cash Management Services will be treated as Advances under the Revolving Line and will accrue interest at the interest rate applicable to Advances.
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2.1.5 Term Loan.
(a) Availability. Bank shall make one (1) term loan available to Borrower in an amount up to the Term Loan Amount on the Effective Date subject to the satisfaction of the terms and conditions of this Agreement. The Term Loan may be a Prime Rate Loan or a LIBOR Loan, as further provided herein.
(b) Repayment. Borrower shall pay only accrued interest on the Term Loan on the Interest Payment Date beginning on the Effective Date through June 30, 2010. Beginning July 1, 2010, Borrower shall repay the Term Loan in (i) thirty-six (36) equal monthly installments of principal, plus (ii) payments of accrued interest on the Interest Payment Date ((i) and (ii) together, the “Term Loan Payment”). Each Term Loan Payment, if due, shall be payable on the last day of each month. Borrower’s final Term Loan Payment, due on the Term Loan Maturity Date, shall include all outstanding principal and accrued and unpaid interest on the Term Loan.
(c) Prepayment. If Borrower elects to prepay or partially repay the Term Loan, or if the Term Loan has become due and payable according to the terms hereof because of the occurrence and continuance of an Event of Default, Borrower shall pay to Bank, in addition to any other sums owing, a termination fee equal to 2.0% of the outstanding Term Loan Amount prepaid if such prepayment or partial prepayment occurs before one calendar year after the Effective Date, and 1.0% of the outstanding Term Loan Amount prepaid if such prepayment or partial prepayment occurs after one calendar year but before two calendar years after the Effective Date (the “Term Loan Termination Fee”), and such Term Loan Termination Fee shall bear interest until paid at a rate equal to the highest rate applicable to the Obligations. No Term Loan Termination Fee shall be applicable to a prepayment or partial prepayment that occurs (i) after two calendar years of the Effective Date or (ii) in connection with any event described in Sections 3.6 and 3.7 hereof provided that such event occurs only with respect to Bank or an assignee to whom an assignment has been made pursuant to Section 12.2.
2.2 Overadvances. If, at any time, the sum of (a) the outstanding principal amount of any Advances (including any amounts used for Cash Management Services), plus (b) the face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), plus (c) the FX Reserve exceeds the lesser of either the Revolving Line or the Borrowing Base (such excess being an “Overadvance”), Borrower shall immediately pay to Bank in cash such Overadvance. Without limiting Borrower’s obligation to repay Bank any amount of the Overadvance, Borrower agrees to pay Bank interest on the outstanding amount of any Overadvance, on demand, at the Default Rate.
2.3 General Provisions Relating to the Credit Extensions. Each Credit Extension shall, at Borrower’s option in accordance with the terms of this Agreement, be either in the form of a Prime Rate Loan or a LIBOR Loan; provided that in no event shall Borrower maintain at any time LIBOR Loans having more than four (4) different Interest Periods for Advances and more than two (2) different Interest Periods for the Term Loan. Borrower shall pay interest accrued on the Advances and Term Loan at the rates and in the manner set forth in Section 2.4(b).
2.4 Payment of Interest on the Credit Extensions.
(a) Computation of Interest. Interest on the Credit Extensions and all fees payable hereunder shall be computed on the basis of a 360-day year and the actual number of days elapsed in the period during which such interest accrues. In computing interest on any Credit Extension, the date of the making of such Credit Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension.
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(b) Interest Rate. Each Advance and Term Loan shall bear interest on the outstanding principal amount thereof from the date when made, continued or converted until paid in full at a rate per annum equal to (i) if a Prime Rate Loan, at the Prime Rate plus the Prime Rate Margin or (ii) if a LIBOR Loan, at the LIBOR Rate plus the LIBOR Rate Margin, as the case may be. Pursuant to the terms hereof, interest on each Advance and Term Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of any Advance and Term Loan pursuant to this Agreement for the portion of any Advance or Term Loan so prepaid and upon payment (including prepayment) in full thereof. All accrued but unpaid interest on the Advances shall be due and payable on the Revolving Line Maturity Date. All accrued but unpaid interest on the Term Loan shall be due and payable on the Term Loan Maturity Date.
(c) Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, outstanding Obligations shall bear interest at a rate per annum which is two (2) percentage points above the rate that is otherwise applicable thereto (the “Default Rate”). Payment or acceptance of the increased interest rate provided in this Section 2.4(c) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank.
(d) Prime Rate Loans. Changes to the interest rate of any Credit Extension based on changes to the Prime Rate shall be effective on the effective date of any change to the Prime Rate and to the extent of any such change.
(e) LIBOR Loans. The interest rate applicable to each LIBOR Loan shall be determined in accordance with Section 3.6(a) hereunder. Subject to Sections 3.6 and 3.7, such rate shall apply during the entire Interest Period applicable to such LIBOR Loan, and subject to Section 2.1.5, interest calculated thereon shall be payable on the Interest Payment Date applicable to such LIBOR Loan.
(f) Debit of Accounts. To the extent there are sufficient funds available, Bank shall debit any of Borrower’s deposit accounts, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes Bank when due. These debits shall not constitute a set-off.
(g) Payment; Interest Computation; Float Charge. Interest, if due, is payable monthly on the last day of each fiscal month. In computing interest on the Obligations, all payments received (whether debited by Bank from any Collateral Account of Borrower or otherwise received by Bank) after 12:00 p.m. Pacific time on any day shall be deemed received on the next Business Day. In addition, at any time Borrower’s Modified Quick Ratio is less than the Asset Based Threshold, Bank shall be entitled to charge Borrower a “float” charge in an amount equal to one (1) Business Days interest, at the interest rate applicable to the Credit Extensions, on all amounts received by Bank from the Lockbox and Collection Account and applied to prepay the then outstanding Advances. The float charge for each month shall be payable on the last day of such month. Bank shall not, however, be required to credit Borrower’s account for the amount of any item of payment which is unsatisfactory to Bank in its good faith business judgment, and Bank may charge Borrower’s Designated Deposit Account for the amount of any item of payment which is returned to Bank unpaid.
2.5 Fees. Borrower shall pay to Bank:
(a) Commitment Fees. A fully earned, non-refundable commitment fee of $285,000 for the Revolving Line, and $250,000 for the Term Loan, on the Effective Date;
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(b) Letter of Credit Fee. Bank’s customary fees and expenses for the issuance or renewal of Letters of Credit, including, without limitation, a Letter of Credit Fee of 0.75% per annum of the face amount of each Letter of Credit issued, upon the issuance, each anniversary of the issuance, and the renewal of such Letter of Credit by Bank;
(c) Unused Revolving Line Facility Fee. A fee (the “Unused Revolving Line Facility Fee”), payable quarterly, in arrears, on a calendar year basis, in an amount equal to 0.325% per annum of the average unused portion of the Revolving Line, as determined by Bank. The unused portion of the Revolving Line, for the purposes of this calculation, shall include the FX Reserve and amounts reserved under the Cash Management Services Sublimit for products provided, but shall not include the amount of outstanding Letters of Credit. Borrower shall not be entitled to any credit, rebate or repayment of any Unused Revolving Line Facility Fee previously earned by Bank pursuant to this Section notwithstanding any termination of the Agreement, or suspension or termination of Bank’s obligation to make loans and advances hereunder;
(d) Collateral Monitoring Fee. If the Modified Quick Ratio, when measured as of the end of each fiscal month, is below the Asset Based Threshold, a monthly collateral monitoring fee of $750.00, payable in arrears on the last day of each fiscal month and on the Revolving Line Maturity Date (prorated for any partial month); and
(e) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and expenses, plus expenses, for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to make the initial Credit Extension is subject to the condition precedent that Borrower shall consent to or have delivered, in form and substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate, including, without limitation:
(a) duly executed original signatures to the Loan Documents to which it is a party;
(b) its Operating Documents and a good standing certificate of Borrower certified by the Secretary of State of the State of Delaware as of a date no earlier than thirty (30) days prior to the Effective Date;
(c) duly executed original signatures to the completed Borrowing Resolutions for Borrower;
(d) a payoff letter duly executed by White Oak in favor of Bank providing for the termination of all obligations of Borrower under the White Oak Indebtedness and the release of all Liens related thereto;
(e) certified copies, dated as of a recent date, of financing statement searches, as Bank shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;
(f) the Perfection Certificate executed by Borrower;
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(g) evidence satisfactory to Bank that Borrower has received not less than $50,000,000 in gross proceeds from the issuance of new equity in the form of Series J Preferred Stock;
(h) evidence satisfactory to Bank that the insurance policies required by Section 6.7 hereof are in full force and effect, together with appropriate evidence showing lender loss payable and/or additional insured clauses or endorsements in favor of Bank; and
(i) payment of the fees and Bank Expenses then due as specified in Section 2.5 hereof.
3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to make each Credit Extension, including the initial Credit Extension, is subject to the following:
(a) timely receipt of an executed Transaction Report pursuant to Section 6.2(a)(i);
(b) the representations and warranties in Section 5 shall be true in all material respects on the date of the Transaction Report and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension. Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in Section 5 remain true in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; and
(c) in Bank’s sole discretion, there has not been any material impairment in the general affairs, management, results of operation, financial condition or the prospect of repayment of the Obligations, or there has not been any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank.
3.3 Covenant to Deliver.
Borrower agrees to deliver to Bank each item required to be delivered to Bank under this Agreement as a condition to any Credit Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt by Bank of any such item shall not, unless otherwise agreed to by Bank in writing, constitute a waiver by Bank of Borrower’s obligation to deliver such item, and any such Credit Extension in the absence of a required item shall be made in Bank’s sole discretion.
3.4 Procedures for Borrowing Advances.
(a) Subject to the prior satisfaction of all other applicable conditions to the making of an Advance set forth in this Agreement, each Advance shall be made upon Borrower’s irrevocable written notice delivered to Bank in the form of a Notice of Borrowing, each executed by a Responsible Officer of Borrower or his or her designee or without instructions if the Advances are necessary to meet Obligations which have become due. Bank may rely on any telephone notice given by a person whom Bank believes is a Responsible Officer or designee. Borrower will indemnify Bank for any loss Bank suffers due to such reliance. Such Notice of Borrowing must be received by Bank prior to 12:00 p.m. Pacific time, (i) at least three (3) Business Days prior to the requested Funding Date, in the case of LIBOR Advances, and (ii) on the requested Funding Date, in the case of Prime Rate Advances, specifying:
(1) the amount of the Advance;
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(2) the requested Funding Date;
(3) whether the Advance is to be comprised of LIBOR Advances or Prime Rate Advances; and
(4) the duration of the Interest Period applicable to any such LIBOR Advances included in such notice; provided that if the Notice of Borrowing shall fail to specify the duration of the Interest Period for any Advance comprised of LIBOR Advances, such Interest Period shall be one (1) month.
(b) The proceeds of all such Advances will then be made available to Borrower on the Funding Date by Bank by transfer to the Designated Deposit Account and, subsequently, by wire transfer to such other account as Borrower may instruct in the Notice of Borrowing. No Advances shall be deemed made to Borrower, and no interest shall accrue on any such Advance, until the related funds have been deposited in the Designated Deposit Account.
3.5 Conversion and Continuation Elections.
(a) So long as (i) no Event of Default exists; (ii) Borrower shall not have sent any notice of termination of this Agreement; and (iii) Borrower shall have complied with such customary procedures as Bank has established from time to time for Borrower’s requests for LIBOR Loans, Borrower may, upon irrevocable (except as provided in Section 3.7(e)) written notice to Bank:
(1) elect to convert on any Business Day, Prime Rate Loans into LIBOR Loans;
(2) elect to continue on any Interest Payment Date any LIBOR Loans maturing on such Interest Payment Date as LIBOR Loans; or
(3) elect to convert on any Interest Payment Date any LIBOR Loans maturing on such Interest Payment Date into Prime Rate Loans.
Borrower shall deliver a Notice of Conversion/Continuation in accordance with Section 10 to be received by Bank prior to 12:00 p.m. Pacific time (i) at least three (3) Business Days in advance of the Conversion Date or Continuation Date, if any Advances or Term Loan are to be converted into or continued as LIBOR Loans; and (ii) on the Conversion Date, if any Advances or Term Loan are to be converted into Prime Rate Loans, in each case specifying the:
(1) proposed Conversion Date or Continuation Date;
(2) aggregate amount of the Advances or Term Loan to be converted or continued;
(3) nature of the proposed conversion or continuation; and
(4) duration of the requested Interest Period.
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If upon the expiration of any Interest Period applicable to any LIBOR Loans, Borrower shall have timely failed to select a new Interest Period to be applicable to such LIBOR Loans, Borrower shall be deemed to have elected to convert such LIBOR Loans into Prime Rate Loans.
At the end of the applicable Interest Period, any LIBOR Advances shall, at Bank’s option, convert into Prime Rate Loans in the event that (i) an Event of Default or Default shall exist, or (ii) the aggregate principal amount of the Prime Rate Advances which have been previously converted to LIBOR Advances, or the aggregate principal amount of existing LIBOR Advances continued, as the case may be, at the beginning of an Interest Period shall at any time during such Interest Period exceed the Revolving Line. Borrower agrees to pay Bank, upon demand by Bank (or Bank may, at its option, charge the Designated Deposit Account or any other account Borrower maintains with Bank) any amounts required to compensate Bank for any loss (including loss of anticipated profits), cost, or expense incurred by Bank, as a result of the conversion of LIBOR Loans to Prime Rate Loans pursuant to this paragraph.
Notwithstanding anything to the contrary contained herein, Bank shall not be required to purchase United States Dollar deposits in the London interbank market or other applicable LIBOR market to fund any LIBOR Loans, but the provisions hereof shall be deemed to apply as if Bank had purchased such deposits to fund the LIBOR Loans.
3.6 Special Provisions Governing LIBOR Loans.
Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to LIBOR Loans as to the matters covered:
(a) Determination of Applicable Interest Rate. As soon as practicable on each Interest Rate Determination Date, Bank shall determine (which determination shall, absent manifest error in calculation, be final, conclusive and binding upon all parties) the interest rate that shall apply to the LIBOR Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Borrower.
(b) Inability to Determine Applicable Interest Rate. In the event that Bank shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any LIBOR Loan, that by reason of circumstances affecting the London interbank market adequate and fair means do not exist for ascertaining the interest rate applicable to such LIBOR Loan on the basis provided for in the definition of LIBOR, Bank shall on such date give notice (by facsimile or by telephone confirmed in writing) to Borrower of such determination, whereupon (i) no Advances or Term Loan may be made as, or converted to, LIBOR Loans until such time as Bank notifies Borrower that the circumstances giving rise to such notice no longer exist, and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by Borrower and not yet in effect with respect to Advances or Term Loan in respect of which such determination was made shall be deemed to be rescinded by Borrower.
(c) Compensation for Breakage or Non-Commencement of Interest Periods. Borrower shall compensate Bank, upon written request by Bank (which request shall set forth the manner and method of computing such compensation), for all reasonable losses, expenses and liabilities, if any (including any interest paid by Bank to lenders of funds borrowed by it to make or carry its LIBOR Loans and any loss, expense or liability incurred by Bank in connection with the liquidation or re-employment of such funds) such that Bank may incur: (i) if for any reason (other than a default by Bank or due to any failure of Bank to fund LIBOR Loans due to impracticability or illegality under Sections 3.7(d) and 3.7(e)) a borrowing or a conversion to or continuation of any LIBOR Loan does not occur on a date specified in a Notice of Borrowing or a Notice of Conversion/Continuation, as the case may be, or (ii) if
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any principal payment or any conversion of any of its LIBOR Loans occurs on a date prior to the last day of an Interest Period applicable to that LIBOR Loan; provided that any request by Bank under this paragraph shall be delivered to Borrower within 6 months of the incurrence of any loss, expense or liability related thereto.
(d) Assumptions Concerning Funding of LIBOR Loans. Calculation of all amounts payable to Bank under this Section 3.6 and under Section 3.4 shall be made as though Bank had actually funded each of its relevant LIBOR Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to the definition of LIBOR Rate in an amount equal to the amount of such LIBOR Loan and having a maturity comparable to the relevant Interest Period; provided, however, that Bank may fund each of its LIBOR Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this Section 3.6 and under Section 3.4.
(e) LIBOR Loans After Default. After the occurrence and during the continuance of an Event of Default, (i) Borrower may not elect to have an Advance or Term Loan be made or continued as, or converted to, a LIBOR Loan after the expiration of any Interest Period then in effect for such Advance or Term Loan and (ii) subject to the provisions of Section 3.6(c), any Notice of Conversion/Continuation given by Borrower with respect to a requested conversion/continuation that has not yet occurred shall be deemed to be rescinded by Borrower and be deemed a request to convert or continue Advances or Term Loan referred to therein as Prime Rate Loans.
3.7 Additional Requirements/Provisions Regarding LIBOR Loans.
(a) If for any reason (including prepayment or acceleration hereunder), Bank receives all or part of the principal amount of a LIBOR Loan prior to the last day of the Interest Period for such LIBOR Loan, Borrower shall immediately notify Borrower’s account officer at Bank and, on demand by Bank, pay Bank the amount (if any) by which (i) the additional interest which would have been payable on the amount so received had it not been received until the last day of such Interest Period exceeds (ii) the interest which would have been recoverable by Bank by placing the amount so received on deposit in the certificate of deposit markets, the offshore currency markets, or United States Treasury investment products, as the case may be, for a period starting on the date on which it was so received and ending on the last day of such Interest Period at the interest rate determined by Bank in its reasonable discretion. Bank’s determination as to such amount shall be conclusive absent manifest error.
(b) Borrower shall pay Bank, upon demand by Bank, from time to time such amounts as Bank may reasonably determine to be necessary to compensate it for any costs incurred by Bank that Bank determines are attributable to its making or maintaining of any amount receivable by Bank hereunder in respect of any LIBOR Loans relating thereto (such increases in costs and reductions in amounts receivable being herein called “Additional Costs”), in each case resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to Bank under this Agreement in respect of any LIBOR Loans (other than changes which affect taxes measured by or imposed on the overall net income of Bank by the jurisdiction in which Bank has its principal office);
(ii) imposes or modifies any reserve, special deposit or similar requirements relating to any extensions of credit or other assets of, or any deposits with, or other liabilities of Bank (including any Advances, Term Loans or any deposits referred to in the definition of LIBOR); or
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(iii) imposes any other condition affecting this Agreement (or any of such extensions of credit or liabilities).
provided that any demand for compensation pursuant to this Section 3.7(b) shall be delivered to Borrower within 6 months of the incurrence of any Additional Cost related thereto.
Bank will notify Borrower of any event occurring after the Closing Date which will entitle Bank to compensation pursuant to this Section 3.7 as promptly as practicable after it obtains knowledge thereof and determines to request such compensation. Bank will furnish Borrower with a statement setting forth the basis and amount of each request by Bank for compensation under this Section 3.7. Determinations and allocations by Bank for purposes of this Section 3.7 of the effect of any Regulatory Change on its costs of maintaining its obligations to make Advances, of making or maintaining Advances, or on amounts receivable by it in respect of Advances, and of the additional amounts required to compensate Bank in respect of any Additional Costs, shall be conclusive absent manifest error.
(c) If Bank shall reasonably determine that the adoption or implementation of any applicable law, rule, regulation, or treaty regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by Bank (or its applicable lending office) with any respect or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank, or comparable agency, has or would have the effect of reducing the rate of return on capital of Bank or any person or entity controlling Bank (a “Parent”) as a consequence of its obligations to fund LIBOR Loans hereunder to a level below that which Bank (or its Parent) could have achieved but for such adoption, change, or compliance (taking into consideration policies with respect to capital adequacy) by an amount reasonably deemed by Bank to be material, then from time to time, within thirty (30) days after demand by Bank, Borrower shall pay to Bank such additional amount or amounts as will compensate Bank for such reduction. A statement of Bank claiming compensation under this Section 3.7(c) and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive absent manifest error. Any request for compensation under this paragraph shall be delivered to Borrower within 6 months of any change in applicable law, rule, regulation or treaty that serves as the basis for such request.
(d) If, at any time, Bank, in its reasonable discretion, determines that (i) the amount of LIBOR Loans for periods equal to the corresponding Interest Periods are not available to Bank in the offshore currency interbank markets, or (ii) LIBOR does not accurately reflect the cost to Bank of lending the LIBOR Loans, then Bank shall promptly give notice thereof to Borrower. Upon the giving of such notice, Bank’s obligation to make LIBOR Loans from the date of such notice shall terminate; provided, however, neither Advances nor the Term Loan shall terminate if Bank and Borrower agree in writing to a different interest rate applicable to LIBOR Loans.
(e) If it shall become unlawful for Bank to continue to fund or maintain any LIBOR Loans, or to perform its obligations hereunder, upon demand by Bank, Borrower shall, at its option, prepay the LIBOR Loans in full with accrued interest thereon and all other amounts payable by Borrower hereunder (including, without limitation, any amount payable in connection with such prepayment pursuant to Section 3.7(a)), or convert to Prime Rate Loans all LIBOR Loans then outstanding on the respective last days of the then-current Interest Periods with respect to such LIBOR Loans or within such earlier period (determined by Bank in its reasonable judgment) as required by law, and the commitment of Bank hereunder to thereafter make LIBOR Loans, continue LIBOR Loans as such and convert Prime Rate Loans to LIBOR Loans shall forthwith be suspended until such time as Bank may again lawfully make and maintain LIBOR Loans. Notwithstanding the foregoing, to the extent a determination by Bank as described above relates to a LIBOR Loan then being requested by Borrower pursuant to a Notice of
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Borrowing or a Notice of Conversion/Continuation, Borrower shall have the option, subject to the provisions of Section 3.6(c), to (i) rescind such Notice of Borrowing or Notice of Conversion/Continuation by giving notice (by facsimile or by telephone confirmed in writing) to Bank of such rescission on the date on which Bank gives notice of its determination as described above, or (ii) modify such Notice of Borrowing or Notice of Conversion/Continuation to obtain a Prime Rate Loan or to have outstanding Advances and Term Loan converted into or continued as Prime Rate Loans by giving notice (by facsimile or by telephone confirmed in writing) to Bank of such modification on the date on which Bank gives notice of its determination as described above.
(f) In the event (i) Bank requests compensation pursuant to Section 3.6 or 3.7, (ii) Borrower is required to pay any additional amount to Bank or any other entity on account of Bank pursuant to Sections 3.6 or 3.7 or (iii) Bank makes a determination pursuant to Section 3.6 or 3.7 that LIBOR Loans are no longer available hereunder, then Bank shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of Bank, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Sections 3.6 or 3.7, as the case may be, in the future, and (ii) in each case, would not subject Bank to any unreimbursed cost or expense and would not otherwise be disadvantageous to Bank. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by Bank in connection with any such designation or assignment.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens that have superior priority to Bank’s Lien under this Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.
If this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash. Upon payment in full in cash of the Obligations and at such time as Bank’s obligation to make Credit Extensions has terminated, Bank shall, at Borrower’s sole cost and expense, release its Liens in the Collateral and all rights therein shall revert to Borrower.
4.2 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Bank’s interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of Bank under the Code. Such financing statements may indicate the Collateral as “all assets of the Debtor” or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Bank’s discretion.
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5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization, Authorization; Power and Authority. Borrower is duly existing and in good standing as a Registered Organization in its jurisdiction of formation and is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to have a material adverse effect on Borrower’s business. In connection with this Agreement, Borrower has delivered to Bank a completed certificate signed by Borrower, entitled “Perfection Certificate”. Borrower represents and warrants to Bank that (a) Borrower’s exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower is an organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s organizational identification number or accurately states that Borrower has none; (d) the Perfection Certificate accurately sets forth Borrower’s place of business, or, if more than one, its chief executive office as well as Borrower’s mailing address (if different than its chief executive office); (e) Borrower (and each of its predecessors) has not, in the past five (5) years, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete (it being understood and agreed that Borrower may from time to time update certain information in the Perfection Certificate after the Effective Date to the extent permitted by one or more specific provisions in this Agreement).
The execution, delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or any its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect) or (v) constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a material adverse effect on Borrower’s business.
5.2 Collateral. Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which it purports to xxxxx x Xxxx hereunder, free and clear of any and all Liens except Permitted Liens. Borrower has no deposit accounts other than the deposit accounts with Bank, the deposit accounts, if any, described in the Perfection Certificate delivered to Bank in connection herewith, or of which Borrower has given Bank notice and taken such actions as are necessary to give Bank a perfected security interest therein. The Accounts are bona fide, existing obligations of the Account Debtors, and the applicable service or property has been performed or delivered, as the case may be, by Borrower to the Account Debtor for immediate shipment to and unconditional acceptance by the Account Debtor.
The Collateral is not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection Certificate. None of the components of the Collateral shall be maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2. In the event that Borrower, after the date hereof, intends to store or otherwise deliver any portion of the Collateral having an aggregate value of $500,000 or more to a bailee, then Borrower will first receive the written consent of Bank and such bailee must execute and deliver a bailee agreement in form and substance satisfactory to Bank in its sole discretion.
All Inventory is in all material respects of good and marketable quality, free from material defects.
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Borrower is the sole owner of its intellectual property, except for non-exclusive licenses granted to its customers in the ordinary course of business. Each patent is valid and enforceable and no part of the intellectual property has been judged invalid or unenforceable, in whole or in part, and to the best of Borrower’s knowledge, no claim has been made that any part of the intellectual property violates the rights of any third party.
Except as noted on the Perfection Certificate, Borrower is not a party to, nor is bound by, any material license or other agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with the Bank’s right to sell any Collateral. Borrower shall provide written notice to Bank within ten (10) days of entering or becoming bound by any such license or agreement (other than over-the-counter software that is commercially available to the public). Borrower shall take such steps as Bank requests to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (x) all such licenses or agreements to be deemed “Collateral” and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such license or agreement, whether now existing or entered into in the future, and (y) Bank to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Bank’s rights and remedies under this Agreement and the other Loan Documents.
5.3 Accounts Receivable.
(a) For each Account with respect to which Advances are requested, on the date each Advance is requested and made, such Account shall be an Eligible Account.
(b) All statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing the Eligible Accounts are and shall be true and correct and all such invoices, instruments and other documents, and all of Borrower’s Books are genuine and in all respects what they purport to be. Whether or not an Event of Default has occurred and is continuing, Bank may contact any Account Debtor to verify the amount of such Eligible Account; provided, however, unless a Default or Event of Default then exists, Bank shall notify Borrower of its intention to contact any such Account Debtor at least 24 hours prior to contacting such Account Debtor. If an Event of Default has occurred and is continuing, Bank may notify any Account Debtor owing Borrower money of Bank’s security interest in such funds. All sales and other transactions underlying or giving rise to each Eligible Account shall comply in all material respects with all applicable laws and governmental rules and regulations. Borrower has no knowledge of any actual or imminent Insolvency Proceeding of any Account Debtor whose accounts are Eligible Accounts in any Transaction Report. To the best of Borrower’s knowledge, all signatures and endorsements on all documents, instruments, and agreements relating to all Eligible Accounts are genuine, and all such documents, instruments and agreements are legally enforceable in accordance with their terms.
5.4 Litigation. There are no actions or proceedings pending or, to the knowledge of the Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries involving more than Seven Hundred Fifty Thousand Dollars ($750,000).
5.5 No Material Deviation in Financial Statements. All consolidated financial statements for Borrower and any of its Subsidiaries delivered to Bank fairly present in all material respects Borrower’s consolidated financial condition and Borrower’s consolidated results of operations. There has not been any material deterioration in Borrower’s consolidated financial condition since the date of the most recent financial statements submitted to Bank.
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5.6 Solvency. The fair salable value of Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.
5.7 Regulatory Compliance. Borrower is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to have a material adverse effect on its business. None of Borrower’s or any of its Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Government Authorities that are necessary to continue their respective businesses as currently conducted.
5.8 Subsidiaries; Investments. Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments.
5.9 Tax Returns and Payments; Pension Contributions. Borrower has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower. Borrower may defer payment of any contested taxes, provided that Borrower (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Bank in writing of the commencement of, and any material development in, the proceedings, (c) posts bonds or takes any other steps required to prevent the governmental authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien”. Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years which could result in additional taxes becoming due and payable by Borrower. Borrower has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely as working capital, to pay off the White Oak Indebtedness and to fund its general business requirements and not for personal, family, household or agricultural purposes.
5.11 Full Disclosure. No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Bank, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).
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6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 Government Compliance.
Except as permitted by Section 7.3 and except for the dissolution of Calix Canada, maintain its and all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on Borrower’s business or operations. Borrower shall comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which could have a material adverse effect on Borrower’s business.
6.2 Financial Statements, Reports, Certificates.
(a) Borrower shall provide Bank with the following:
(i) within twenty (20) days after the end of each fiscal month, a Transaction Report (and any schedules related thereto), including a report as to all material disputes or claims relating to Borrower’s Accounts; provided, however, if, as of the most recent fiscal month end, Borrower’s Modified Quick Ratio is less than the Asset Based Threshold, then Borrower shall provide Bank with a Transaction Report weekly and upon each request for a Credit Extension;
(ii) within twenty (20) days after the end of each fiscal month, (A) monthly accounts receivable agings, aged by invoice date, (B) monthly accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, and (C) monthly reconciliations of accounts receivable agings (aged by invoice date), transaction reports and general ledger;
(iii) as soon as available, and in any event within thirty (30) days after the end of each fiscal month, monthly unaudited financial statements;
(iv) within thirty (30) days after the end of each fiscal month, a monthly Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such fiscal 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 Bank shall reasonably request, including, without limitation, a statement that at the end of such fiscal month there were no held checks;
(v) within thirty (30) days prior to the end of each fiscal year of Borrower, (A) annual operating budgets (including income statements, balance sheets and cash flow statements, by fiscal month) for the upcoming fiscal year of Borrower, and (B) annual financial projections for the following fiscal year (on a quarterly basis) as approved by Borrower’s board of directors, together with any related business forecasts used in the preparation of such annual financial projections; and
(vi) as soon as available, and in any event within one hundred fifty (150) days following the end of each fiscal year of Borrower, annual financial statements certified by, and with an unqualified opinion of, independent certified public accountants reasonably acceptable to Bank.
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(b) In the event that Borrower becomes subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, within five (5) days after filing, all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission or a link thereto on Borrower’s or another website on the Internet.
(c) Promptly after obtaining knowledge thereof, provide written notice to Bank of any event that materially adversely affects the value of the intellectual property.
6.3 Accounts Receivable.
(a) Schedules and Documents Relating to Accounts. Borrower shall deliver to Bank transaction reports and schedules of collections, as provided in Section 6.2, on Bank’s standard forms; provided, however, that Borrower’s failure to execute and deliver the same shall not affect or limit Bank’s Lien and other rights in all of Borrower’s Accounts, nor shall Bank’s failure to advance or lend against a specific Account affect or limit Bank’s Lien and other rights therein. If requested by Bank, Borrower shall furnish Bank with copies (or, at Bank’s request, originals which, unless an Event of Default has occurred and is continuing, may be made available for review at Borrower’s premises instead of being delivered to Bank) of all contracts, orders, invoices, and other similar documents, and all 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 Accounts. In addition, Borrower shall deliver to Bank, on its request, the originals of all instruments, chattel paper, security agreements, guarantees and other documents and property evidencing or securing any Accounts, in the same form as received, with all necessary endorsements, and copies of all credit memos.
(b) Disputes. Borrower may forgive (completely or partially), compromise, or settle any Account for less than payment in full, or agree to do any of the foregoing so long as (i) Borrower does so in good faith, in a commercially reasonable manner, in the ordinary course of business, in arm’s-length transactions, and reports the same to Bank in the regular reports provided to Bank; (ii) no Event of Default has occurred and is continuing; and (iii) after taking into account all such discounts, settlements and forgiveness, the total outstanding Advances will not exceed the lesser of the Revolving Line or the Aggregate Borrowing Base.
(c) Collection of Accounts. Borrower shall have the right to collect all Accounts, unless and until an Event of Default has occurred and is continuing. Whether or not an Event of Default has occurred and is continuing, Borrower shall hold all payments on, and proceeds of, Accounts in trust for Bank, and Borrower shall immediately deliver all such payments and proceeds to Bank in accordance with Section 6.12.
(d) Returns. Provided no Event of Default has occurred and is continuing, if any Account Debtor returns any Inventory to Borrower, Borrower shall promptly (i) determine the reason for such return, (ii) issue a credit memorandum to the Account Debtor in the appropriate amount, and (iii) provide a copy of such credit memorandum to Bank, upon request from Bank. In the event any attempted return occurs after the occurrence and during the continuance of any Event of Default, Borrower shall hold the returned Inventory in trust for Bank, and immediately notify Bank of the return of the Inventory.
(e) Verification. Bank may, from time to time, verify directly with the respective Account Debtors the validity, amount and other matters relating to the Accounts, either in the name of Borrower or Bank or such other name as Bank may choose.
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(f) No Liability. Bank shall not 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 an Account, or for any error, act, omission, or delay of any kind occurring in the settlement, failure to settle, collection or failure to collect any Account, or for settling any Account in good faith for less than the full amount thereof, nor shall Bank be deemed to be responsible for any of Borrower’s obligations under any contract or agreement giving rise to an Account. Nothing herein shall, however, relieve Bank from liability for its own gross negligence or willful misconduct.
6.4 Remittance of Proceeds. Except as otherwise provided in Section 6.3(c), deliver, in kind, all proceeds arising from the disposition of any Collateral to Bank 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 pursuant to the terms of Section 9.4 hereof; provided that, if no Default or Event of Default has occurred and is continuing, Borrower shall not be obligated to remit to Bank 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 $25,000 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 Bank. Nothing in this Section limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.
6.5 Taxes; Pensions. Timely file, and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely file, all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.9 hereof, and shall deliver to Bank, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms.
6.6 Access to Collateral; Books and Records. At reasonable times, on one (1) Business Day’s notice (provided no notice is required if an Event of Default has occurred and is continuing), Bank, or its agents, shall have the right to inspect the Collateral and the right to audit and copy Borrower’s Books. The foregoing inspections and audits shall be at Borrower’s expense, and the charge therefor shall be $850 per person per day (or such higher amount as shall represent Bank’s then-current standard charge for the same), plus reasonable out-of-pocket expenses; provided, however, unless an Event of Default shall then exist, Borrower shall not be obligated to pay the costs and expenses of more than two such audits and inspections per year. In the event Borrower and Bank schedule an audit more than ten (10) days in advance, and Borrower cancels or seeks to reschedules the audit with less than ten (10) days written notice to Bank, then (without limiting any of Bank’s rights or remedies), Borrower shall pay Bank a fee of $1,000 plus any out-of-pocket expenses incurred by Bank to compensate Bank for the anticipated costs and expenses of the cancellation or rescheduling.
6.7 Insurance. Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrower’s industry and location and as Bank may reasonably request. Insurance policies shall be in a form, with companies, and in amounts that are satisfactory to Bank. All property policies shall have a lender’s loss payable endorsement showing Bank as a lender loss payee (as its interests may appear) and waive subrogation against Bank, and all liability policies shall show, or have endorsements showing, Bank as an additional insured. All policies (or the loss payable and additional insured endorsements) shall provide that the insurer shall endeavor to give Bank at least twenty (20) days notice before canceling, amending, or declining to renew its policy. At Bank’s request, Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any property policy shall, at Bank’s option, be payable to Bank on account of the Obligations. If Borrower fails to obtain insurance as required under this Section 6.7 or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or part of such payment or obtain such insurance policies required in this Section 6.7, and take any action under the policies Bank deems prudent.
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6.8 Operating Accounts. Provide Bank five (5) days’ prior written notice before establishing any Collateral Account at or with any bank or financial institution other than Bank or Bank’s Affiliates. For each Collateral Account that Borrower at any time maintains, Borrower shall cause the applicable bank or financial institution (other than Bank) at or with which any Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Bank’s Lien in such Collateral Account in accordance with the terms hereunder. The provisions of the previous sentence shall not apply to deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s employees and identified to Bank by Borrower as such.
6.9 Financial Covenants.
Borrower shall maintain, when tested as of each applicable date set forth below, on a consolidated basis with respect to Borrower and its Subsidiaries:
(a) Minimum Modified Quick Ratio: A Modified Quick Ratio of at least 1.50:1.00 when measured as of the last day of each fiscal month.
(b) Maximum Leverage Ratio: A Leverage Ratio no greater than that set forth in the table below when measured for the period ending on the date set forth opposite thereto:
| Period |
Maximum Leverage | |
| Annualized 6 months ending March 27, 2010 |
3.0:1.0 | |
| Annualized 9 months ending June 26, 2010 |
2.75:1.0 | |
| 12 months ending September 25, 2010 |
2.50:1.0 | |
| 12 months ending December 31, 2010 |
2.25:1.0 | |
| 12 months ending March 27, 2011 and at each fiscal quarter end thereafter for the 12 months then ended |
2.00:1.0 |
(c) Minimum Consolidated Adjusted EBITDA: Consolidated Adjusted EBITDA of an amount greater than that set forth in the table below when measured for the fiscal quarter ending on the end-of-quarter date set forth opposite thereto:
| Fiscal Quarter Ending |
Consolidated Adjusted EBITDA Amount |
|||
| September 26, 2009 |
$ | (1,350,000 | ) | |
| December 31, 2009 |
$ | 6,000,000 | ||
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(d) Minimum Fixed Charge Coverage Ratio: A Fixed Charge Coverage Ratio not less than that set forth in the table below when measured for the period ending on the date set forth opposite thereto:
| Period Ending |
Minimum Fixed Charge Coverage Ratio | |
| 6 months ending March 27, 2010 |
1.25:1.0 | |
| 9 months ending June 26, 2010 |
1.25:1.0 | |
| 12 months ending September 25, 2010 and at each fiscal quarter ending thereafter, for the 12 months then ended |
1.25:1.0 |
6.10 Protection and Registration of Intellectual Property Rights. Borrower shall: (a) protect, defend and maintain the validity and enforceability of its intellectual property; (b) promptly advise Bank in writing of material infringements of its intellectual property; and (c) not allow any intellectual property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Bank’s written consent. If Borrower (i) obtains any patent, registered trademark or servicemark, registered copyright, registered mask work, or any pending application for any of the foregoing, whether as owner, licensee or otherwise, or (ii) applies for any patent or the registration of any trademark or servicemark, then Borrower shall provide written notice thereof to Bank within five (5) days after making such registration with respect to any copyright and thirty (30) days after the end of each quarter with respect to registrations of patents and trademarks, and shall execute such intellectual property security agreements and other documents and take such other actions as Bank shall request in its good faith business judgment to perfect and maintain a first priority perfected security interest in favor of Bank in such property.
6.11 Litigation Cooperation. From the date hereof and continuing through the termination of this Agreement, make available to Bank, without expense to Bank, Borrower and its officers, employees and agents and Borrower’s books and records, to the extent that Bank may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank with respect to any Collateral or relating to Borrower.
6.12 Lockbox; Account Collection Services. Borrower shall direct each Account Debtor (and each depository institution where proceeds of Accounts are on deposit) to remit payments with respect to the Accounts to a lockbox established with Bank or to direct wire transfer payments to a deposit account with Bank (such lockbox and deposit account, collectively, the “Lockbox and Collection Account”). So long as Borrower’s Modified Quick Ratio is more than the Asset Based Threshold and no Event of Default has occurred and is continuing, then all available amounts in the Lockbox and Collection Account shall be remitted on a daily basis to the Designated Deposit Account. In the event Borrower’s Modified Quick Ratio is less than the Asset Based Threshold, or if an Event of Default has occurred and is continuing, all available amounts in the Lockbox and Collection Account shall be debited by Bank on a daily basis and applied to prepay all outstanding Advances and accrued interest thereon.
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6.13 Further Assurances. Execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral or to effect the purposes of this Agreement. Deliver to Bank, within five (5) days after the same are sent or received, copies of all material correspondence, reports, documents and other filings with any Governmental Authority regarding compliance with or maintenance of any Governmental Approvals material to the conduct of Borrower’s business or Requirements of Law or that could reasonably be expected to have a material adverse effect on the operations of Borrower or any of its Subsidiaries.
6.14 Conditions Subsequent to Closing. Borrower shall use commercially reasonably efforts to obtain and deliver to Bank, within 90 days after the Effective Date, the landlords’ consent (in form and substance reasonably satisfactory to Bank) executed by RNM Lakeville, LLC in favor of Bank.
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without Bank’s prior written consent:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out or obsolete Equipment; (c) in connection with Permitted Liens and Permitted Investments; (d) pursuant to an agreement a condition of which is the repayment in full of all Obligations in accordance with the terms of this Agreement and the termination of this Agreement; and (e) otherwise permitted by Section 7.3.
7.2 Changes in Business, Management or Business Locations. (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower and such Subsidiary, as applicable, or reasonably related thereto or (b) liquidate or dissolve. Borrower shall not, without at least thirty (30) days prior written notice to Bank: (1) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than Five Hundred Thousand Dollars ($500,000) in the aggregate in Borrower’s assets or property), (2) change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5) change any organizational number (if any) assigned by its jurisdiction of organization.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person except for Permitted Acquisitions. A Subsidiary may merge or consolidate into another Subsidiary or into Borrower.
7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority security interest granted herein, or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s or any Subsidiary’s intellectual property, except as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted Lien” herein.
7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.8 hereof.
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7.7 Distributions; Investments. (a) Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock; provided, however, Borrower may (i) declare and make dividend payments or other distributions payable (A) solely in Equity Interests of Borrower or out of proceeds received from the substantially concurrent issue of new shares of Equity Interests or (B) in cash if no Default or Event of Default then exists or would arise after giving effect thereto and if consented to in writing by Bank (such consent to be granted or withheld by Bank in its reasonable discretion) and (ii) purchase, redeem or otherwise acquire shares of its Equity Interests or warrants or options to acquire any such Equity Interests from its stockholders consistent with the requirements of existing equity agreements of Borrower to the extent the consideration paid in respect thereof is paid (A) solely in Equity Interests of Borrower or out of proceeds received from the substantially concurrent issue of new shares of Equity Interests or (B) in cash if no Default or Event of Default then exists or would arise after giving effect thereto and if consented to in writing by Bank (such consent to be granted or withheld by Bank in its reasonable discretion) or (b) directly or indirectly make any Investment other than Permitted Investments, or permit any of its Subsidiaries to do so.
7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower, except for transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person.
7.9 Subordinated Debt. Except as permitted under the applicable subordination, intercreditor or other similar agreement: (a) make or permit any payment on any Subordinated Debt, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof or adversely affect the subordination thereof to Obligations owed to Bank.
7.10 Compliance. Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
8 EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:
8.1 Payment Default. Borrower fails to (a) make any payment of principal or interest on any Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) day grace period shall not apply to payments due on the Revolving Line Maturity Date). During the cure period, the failure to cure the payment default is not an Event of Default (but no Credit Extension will be made during the cure period);
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8.2 Covenant Default.
(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.5, 6.6, 6.7, 6.8, 6.9 or 6.12, or violates any covenant in Section 7; or
(b) Borrower fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Grace periods provided under this section shall not apply, among other things, to financial covenants or any other covenants set forth in subsection (a) above;
8.3 Material Adverse Change. A Material Adverse Change occurs;
8.4 Attachment; Levy; Restraint on Business. (a) (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under control of Borrower (including a Subsidiary) on deposit with Bank or any Bank Affiliate, or (ii) a notice of lien, levy, or assessment is filed against any of Borrower’s other material assets by any government agency, and the same under subclauses (i) and (ii) hereof are not, within thirty (30) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during such thirty (30) day cure period; and (b) (i) any material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower from conducting any part of its business;
8.5 Insolvency. (a) Borrower is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within forty-five (45) days (but no Credit Extensions shall be made while of any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);
8.6 Other Agreements. There is a default in any agreement to which Borrower or any Guarantor is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of Seven Hundred Fifty Thousand Dollars ($750,000);
8.7 Judgments. One or more judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least Seven Hundred Fifty Thousand Dollars ($750,000) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower and shall remain unsatisfied, unvacated, or unstayed for a period of thirty (30) days after the entry thereof (provided that no Credit Extensions will be made prior to the satisfaction, vacation, or stay of such judgment, order, or decree);
8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;
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8.9 Subordinated Debt. A default or breach occurs under any agreement between Borrower and any creditor (other than Bank) of Borrower that signed a subordination, intercreditor, or other similar agreement with Bank, or any such creditor that has signed such an agreement with Bank breaches any terms of such agreement;
8.10 Guaranty. (a) Any guaranty of any Obligations terminates or ceases for any reason to be in full force and effect; (b) subject to all applicable cure periods, any Guarantor does not perform any obligation or covenant under any guaranty of the Obligations; (c) any circumstance described in (i) Section 8.4 occurs with respect to all or any material part of any Guarantor’s assets, or (ii) Sections 8.5, 8.7 or 8.8. occurs with respect to any Guarantor; (d) except to the extent permitted under Sections 7.1 or 7.3, the liquidation, winding up, or termination of existence of any Guarantor; or (e) (i) a material impairment in the perfection or priority of Bank’s Lien in the collateral provided by Guarantor or in the value of such collateral or (ii) any Guarantor revokes or seeks to revoke or otherwise deny any liability with respect to its guaranty of the Obligations or any portion thereof;
8.11 Governmental Approvals. Any Governmental Approval material to the conduct of Borrower’s business shall have been (a) revoked, rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a full term or (b) subject to any decision by a Governmental Authority that designates a hearing with respect to any applications for renewal of any of such Governmental Approval or that could result in the Governmental Authority taking any of the actions described in clause (a) above; or
8.12 Change in Control. A Change in Control occurs.
9 BANK’S RIGHTS AND REMEDIES
9.1 Rights and Remedies. While an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following:
(a) declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);
(b) stop advancing money or extending credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Bank;
(c) demand that Borrower (i) deposits cash with Bank in an amount equal to the aggregate amount of any Letters of Credit remaining undrawn, as collateral security for the repayment of any future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in advance all Letter of Credit fees scheduled to be paid or payable over the remaining term of any Letters of Credit;
(d) terminate any FX Forward Contracts;
(e) settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Bank considers advisable, notify any Person owing Borrower money of Bank’s security interest in such funds, and verify the amount of such account;
(f) make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral if Bank requests and make it available as Bank designates. Bank may enter premises where the Collateral
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is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights or remedies;
(g) apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of Borrower;
(h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s labels, patents, copyrights, mask works, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section, Borrower’s rights under all licenses and all franchise agreements inure to Bank’s benefit;
(i) place a “hold” on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;
(j) demand and receive possession of Borrower’s Books; and
(k) exercise all rights and remedies available to Bank under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).
9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s name on any checks or other forms of payment or security; (b) sign Borrower’s name on any invoice or xxxx of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Bank or a third party as the Code permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect or continue the perfection of Bank’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations have been satisfied in full and Bank is under no further obligation to make Credit Extensions hereunder. Bank’s foregoing appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Bank’s obligation to provide Credit Extensions terminates.
9.3 Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.7 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document, Bank may obtain such insurance or make such payment, and all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then highest applicable rate, and secured by the Collateral. Bank will provide Borrower with notice of Bank obtaining such insurance at the time it is obtained or within a reasonable time thereafter. No payments by Bank are deemed an agreement to make similar payments in the future or Bank’s waiver of any Event of Default.
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9.4 Application of Payments and Proceeds. Bank shall apply all payments received from Borrower or otherwise received under the terms of this Agreement to the Obligations as follows: (i) first, to pay all costs, expenses and indemnities then due to Bank under the terms of the Loan Documents until paid in full, (ii) second, to pay all fees then due to Bank under the Loan Documents until paid in full, (iii) third, to pay interest then due in respect of the Obligations until paid in full, (iv) to pay the principal of the then outstanding Obligations until paid in full; provided, however, if an Event of Default has occurred and is continuing, Bank may apply any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations in such order as Bank shall determine in its sole discretion. Any surplus shall be paid to Borrower by credit to the Designated Deposit Account or to other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If Bank, in its good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash therefor.
9.5 Bank’s Liability for Collateral. So long as Bank complies with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Bank, Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the Collateral.
9.6 No Waiver; Remedies Cumulative. Bank’s failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Bank thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by Bank and then is only effective for the specific instance and purpose for which it is given. Bank’s rights and remedies under this Agreement and the other Loan Documents are cumulative. Bank has all rights and remedies provided under the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an election, and Bank’s waiver of any Event of Default is not a continuing waiver. Bank’s delay in exercising any remedy is not a waiver, election, or acquiescence.
9.7 Demand Waiver. To the extent permitted by applicable laws, Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable.
10 NOTICES
All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail or facsimile transmission on a Business Day and during normal business hours of the recipient and if sent at any other time, then on the next Business Day; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid and instructions to deliver the next business day; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below. Bank or Borrower may change its mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10.
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| If to Borrower: | Calix Networks, Inc. 0000 X. XxXxxxxx Xxxxxxxxx Xxxxxxxx, XX 00000 Attn: Xxxxx Xxxxxxx-Xxx
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| If to Bank: | Silicon Valley Bank 000 Xxxxx Xxxxxx, Xxxxx 0000 Xxx Xxxxxxxxx, XX 00000 Attn: Xxxx Xxxxxxx
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11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE
California law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Santa Xxxxx County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank. Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) Business Days after deposit in the U.S. mails, proper postage prepaid.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Xxxxx County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Xxxxx County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive.
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The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Xxxxx County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and order applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.
12 GENERAL PROVISIONS
12.1 Termination. This Agreement shall terminate (A) with respect to the Revolving Line, (i) pursuant to Section 2.1.1(c) or (ii) prior to the Revolving Line Maturity Date, upon three (3) Business Days after written notice of termination is given to Bank and (B) with respect to the Term Loans, (i) upon repayment of the Term Loans pursuant to Section 2.1.5(b) or (ii) upon prepayment of all outstanding Terms Loans pursuant to Section 2.1.5(c). Notwithstanding any such termination, Bank’s lien and security interest in the Collateral shall continue until Borrower fully satisfies its Obligations.
12.2 Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights or obligations under it without Bank’s prior written consent (which may be granted or withheld in Bank’s discretion). Bank has the right to sell, assign, transfer, negotiate, or grant participation (each, an “assignment”) in all or any part of, or any interest in, Bank’s obligations, rights, and benefits under this Agreement and the other Loan Documents if an Event of Default has occurred and is continuing at the time such assignment is to be made or at any time to an Eligible Assignee, and Bank shall provide written notice of any such assignment to Borrower. No assignment shall be made except in accordance with this Section 12.2, or as otherwise approved in advance in writing by Borrower. In the event that more than one Person shall hold the commitments under this Agreement or outstanding Obligations, then any action to be taken by Bank and any amendment to this Agreement, or consent or waiver requested with respect hereto may be taken by Bank with the consent of those Persons holding 50.1% or more of the commitments hereunder or, if such commitments have been terminated, 50.1% of the principal amount of the Obligations outstanding hereunder; provided, however, in the event only two Persons hold commitments under this Agreement or outstanding Obligations, then both such Persons must agree upon any such action to be taken by Bank and any amendment to this Agreement, or consent or waiver requested with respect hereto.
12.3 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank (each, an “Indemnified Person”) harmless against: (a) all obligations, demands, claims, and liabilities (collectively, “Claims”) asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses incurred, or paid by such Indemnified Person from, following, or arising from transactions between Bank and Borrower (including reasonable attorneys’ fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct.
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12.4 Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement.
12.5 Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.
12.6 Correction of Loan Documents. Bank may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent with the agreement of the parties.
12.7 Amendments in Writing; Integration. All amendments to this Agreement must be in writing and signed by both Bank and Borrower. This Agreement and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan Documents.
12.8 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken together, constitute one Agreement.
12.9 Survival. All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been satisfied. The obligation of Borrower in Section 12.2 to indemnify Bank shall survive until the statute of limitations with respect to such claim or cause of action shall have run.
12.10 Confidentiality. In handling any confidential information, Bank shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (a) to Bank’s Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, Bank shall obtain such prospective transferee’s or purchaser’s agreement to the terms of this provision); (c) as required by law, regulation, subpoena, or other order; (d) to Bank’s regulators or as otherwise required in connection with Bank’s examination or audit; (e) as Bank considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party service providers of Bank so long as such service providers have executed a confidentiality agreement with Bank with terms no less restrictive than those contained herein. Confidential information does not include information that either: (i) is in the public domain or in Bank’s possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank; or (ii) is disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information.
Bank may use confidential information for any purpose, including, without limitation, for the development of client databases, reporting purposes, and market analysis, so long as Bank does not disclose Borrower’s identity or the identity of any person associated with Borrower unless otherwise expressly permitted by this Agreement. The provisions of the immediately preceding sentence shall survive the termination of this Agreement.
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12.11 Attorneys’ Fees, Costs and Expenses. In any action or proceeding between Borrower and Bank arising out of or relating to the Loan Documents, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled.
13 DEFINITIONS
13.1 Definitions. As used in this Agreement, the following terms have the following meanings:
“Account” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower.
“Account Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.
“Additional Costs” is defined in Section 3.7(b).
“Advance” or “Advances” is an advance (or advances) under the Revolving Line.
“Affiliate” of any Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.
“Agreement” is defined in the preamble hereof.
“Asset Based Threshold” is, as of any date of determination, 1.60:1.00.
“Availability Amount” is (a) the lesser of (i) the Revolving Line or (ii) the amount available under the Borrowing Base minus (b) the sum, without duplication, of (i) the amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit) plus an amount equal to the Letter of Credit Reserve, (ii) the FX Reserve, (iii) any amounts used for Cash Management Services, (iv) all other Reserves and (v) the outstanding principal balance of all Advances.
“Bank” is defined in the preamble hereof.
“Bank Expenses” are all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower.
“Borrower” is defined in the preamble hereof.
“Borrower’s Investment Policy” means Borrower’s investment policy for its Securities Accounts, as in effect from time to time, and disclosed to Bank in writing.
“Borrower’s Books” are all Borrower’s books and records including ledgers, federal and state tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.
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“Borrowing Base” is 80% of Eligible Accounts, as determined by Bank from Borrower’s most recent Transaction Report; provided, however, that (a) Eligible Foreign Accounts may not account for more than 20% of the total Borrowing Base as of any date of determination, and (b) Bank may decrease the foregoing percentages in its good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank in its good faith business judgment, may adversely affect Collateral; provided, further, that Bank shall consult with Borrower prior to implementing any such change but such consultation shall in no way impair Bank’s right to make such changes as provided above.
“Borrowing Resolutions” are, with respect to any Person, those resolutions adopted by such Person’s Board of Directors and delivered by such Person to Bank approving the Loan Documents to which such Person is a party and the transactions contemplated thereby, together with a certificate executed by its secretary on behalf of such Person certifying that (a) such Person has the authority to execute, deliver, and perform its obligations under each of the Loan Documents to which it is a party, (b) that attached as Exhibit A to such certificate is a true, correct, and complete copy of the resolutions then in full force and effect authorizing and ratifying the execution, delivery, and performance by such Person of the Loan Documents to which it is a party, (c) the name(s) of the Person(s) authorized to execute the Loan Documents on behalf of such Person, together with a sample of the true signature(s) of such Person(s), and (d) that Bank may conclusively rely on such certificate unless and until such Person shall have delivered to Bank a further certificate canceling or amending such prior certificate.
“Business Day” is any day other than a Saturday, Sunday or other day on which banking institutions in the State of California are authorized or required by law or other governmental action to close, except that if any determination of a “Business Day” shall relate to a LIBOR Loan, the term “Business Day” shall also mean a day on which dealings are carried on in the London interbank market, and if any determination of a “Business Day” shall relate to an FX Forward Contract, the term “Business Day” shall mean a day on which dealings are carried on in the country of settlement of the foreign (i.e., non-Dollar) currency.
“Calix Canada” is Calix Networks Canada, Inc., a company organized under the laws of Canada.
“Cash Equivalents” is (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Xxxxx’x Investors Service, Inc.; (c) Bank’s certificates of deposit issued maturing no more than one (1) year after issue; (d) money market funds at least ninety-five percent (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition, and (e) Investments pursuant to Borrower’s Investment Policy.
“Cash Management Services” is defined in Section 2.1.4.
“Change in Control” is an event or series of events by which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as an amended (the “Exchange Act”), but excluding any employee benefit plan of such person or its subsidiaries, and any Person acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right an “Option Right”)), directly or indirectly, of thirty-seven and one-half percent (37.50%) or more of the Equity Interests of Borrower entitled to vote for members of the board of directors or equivalent governing body of Borrower on a fully-diluted basis (and taking into account all such
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securities that such person or group has the right to acquire pursuant to any Option Right; provided, that no Change of Control shall occur as a result of any transfer, whether direct or indirect, of any Equity Interests in Borrower by any of Borrower’s venture capital investors in existence as of July 1, 2008, to any person who, prior to such transfer, held Equity Interests in borrower as of July 1, 2008 or any Affiliate of such Person in existence as of July 1, 2008.
“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes on the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.
“Claims” is defined in Section 12.3.
“Collateral” is any and all properties, rights and assets of Borrower described on Exhibit A.
“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account.
“Commodity Account” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.
“Compliance Certificate” is that certain certificate in the form attached hereto as Exhibit B.
“Consolidated Adjusted EBITDA” is, for any period of determination, for Borrower and its Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income for such period plus (a) the following to the extent deducted in calculating Consolidated Net Income: (i) Consolidated Interest Expense for such period, (ii) the provision for Federal, state, local and foreign income taxes payable by Borrower and its Subsidiaries for such period, (iii) depreciation and amortization expense (including amortization expense arising from the amortization of existing warrants for Borrower’s capital stock), (iv) all non-cash expenses related to stock-based compensation deducted to arrive at Consolidated Net Income, (v) other non-recurring expenses of Borrower and its Subsidiaries reducing such Consolidated Net Income which do not represent a cash item in such period or any future period and minus (b) the following the extent included in calculating such Consolidated Net Income: (i) interest income, (ii) extraordinary or non-recurring non-cash income or gains, (iii) Federal, state, local and foreign income tax credits of Borrower and its Subsidiaries for such period and (iv) all non-cash items increasing Consolidated Net Income for such period.
“Consolidated Funded Debt” is, as of any date of determination, for Borrower and its Subsidiaries on a consolidated basis, the sum of (without duplication) the outstanding principal amount of all obligations (except any Letters of Credit), whether current or long-term, for borrowed money (and irrespective of whether evidenced by bonds, debentures, notes, loan agreements or other similar instruments) arising under the Loan Documents.
“Consolidated Interest Expense” is, for any period of determination, for Borrower and its Subsidiaries on a consolidated basis, an amount equal to the sum of all interest charges (including imputed interest charges with respect to capitalized lease obligations and all amortization of debt discount and expense) of such Person for such period.
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“Consolidated Net Income” is, for any period of determination, for Borrower and its Subsidiaries on a consolidated basis, the net income of Borrower and its Subsidiaries from continuing operations (excluding gains or losses from dispositions of assets) for such period.
“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.
“Continuation Date” means any date on which Borrower elects to continue a LIBOR Loan into another Interest Period.
“Control Agreement” is any control agreement entered into among the depository institution at which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit Account, Securities Account, or Commodity Account.
“Conversion Date” means any date on which Borrower elects to convert a Prime Rate Loan to a LIBOR Loan or a LIBOR Loan to a Prime Rate Loan.
“Credit Extension” is any Advance, Letter of Credit, FX Forward Contract, amount utilized for Cash Management Services, Term Loan or any other extension of credit by Bank for Borrower’s benefit.
“Credit Rating” shall mean a short-term or a senior long-term unsecured rating from Standard & Poor’s Ratings Services, a division of The XxXxxx-Xxxx Companies, Inc. or any successor thereto or Xxxxx’x Investors Service, Inc. or any successor thereto.
“Default” is any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
“Default Rate” is defined in Section 2.3(b).
“Deferred Revenue” shall be defined in accordance with GAAP.
“Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.
“Designated Deposit Account” is Borrower’s deposit account, account number maintained with Bank.
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“Dollars,” “dollars” and “$” each are lawful money of the United States.
“Domestic Subsidiary” is a Subsidiary organized under the laws of the United States or any state or territory thereof or the District of Columbia.
“Effective Date” is the date Bank executes this Agreement as indicated on the signature page hereof.
“Eligible Accounts” are Accounts which arise in the ordinary course of Borrower’s business that meet all Borrower’s representations and warranties in Section 5.3. Bank reserves the right at any time after the Effective Date to adjust any of the criteria set forth below and to establish new criteria in its good faith business judgment. Eligible Accounts shall not include:
(a) Accounts that the Account Debtor has not paid within ninety (90) days of invoice date regardless of invoice payment period terms;
(b) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose Accounts have not been paid within ninety (90) days of invoice date;
(c) Accounts, other than Eligible Foreign Accounts, billed in the United States and owing from an Account Debtor which does not have its principal place of business in the United States or Canada unless such Accounts are otherwise Eligible Accounts and are either (i) covered in full by credit insurance satisfactory to Bank, less any deductible, (ii) supported by letter(s) of credit acceptable to Bank, (iii) supported by a guaranty from the Export-Import Bank of the United States, or (iv) that Bank otherwise approves of in writing, provided, however, items (i) through (iv) of this paragraph taken as a whole and together with all Eligible Foreign Accounts shall not exceed 20% of the Borrowing Base;
(d) Accounts billed and payable outside of the United States unless the Bank has a first priority, perfected security interest or other enforceable Lien in such Accounts;
(e) Accounts owing from an Account Debtor to the extent that Borrower is indebted or obligated in any manner to the Account Debtor (as creditor, lessor, supplier or otherwise - sometimes called “contra” accounts, accounts payable, customer deposits or credit accounts), with the exception of customary credits, adjustments and/or discounts given to an Account Debtor by Borrower in the ordinary course of its business;
(f) Accounts for which the Account Debtor is Borrower’s Affiliate, officer, employee, or agent;
(g) Accounts with credit balances over ninety (90) days from invoice date;
(h) Accounts owing from an Account Debtor, including Affiliates, whose total obligations to Borrower exceed twenty-five (25%) of all Accounts, for the amounts that exceed that percentage, unless Bank approves in writing;
(i) Accounts owing from an Account Debtor which is a United States government entity or any department, agency, or instrumentality thereof unless Borrower has assigned its payment rights to Bank and the assignment has been acknowledged under the Federal Assignment of Claims Act of 1940, as amended;
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(j) Accounts for demonstration or promotional equipment, or in which goods are consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on approval”, or other terms if Account Debtor’s payment may be conditional;
(k) Accounts owing from an Account Debtor that has not been invoiced or where goods or services have not yet been rendered to the Account Debtor (sometimes called memo xxxxxxxx or pre-xxxxxxxx);
(l) Accounts (other than RUS Accounts subject to the ordinary course requirements of the RUS) subject to contractual arrangements between Borrower and an Account Debtor where payments shall be scheduled or due according to completion or fulfillment requirements where the Account Debtor has a right of offset for damages suffered as a result of Borrower’s failure to perform in accordance with the contract (sometimes called contracts accounts receivable, progress xxxxxxxx, milestone xxxxxxxx, or fulfillment contracts);
(m) Accounts (other than RUS Accounts subject to the ordinary course requirements of the RUS) owing from an Account Debtor the amount of which may be subject to withholding based on the Account Debtor’s satisfaction of Borrower’s complete performance (but only to the extent of the amount withheld; sometimes called retainage xxxxxxxx);
(n) Accounts (other than RUS Accounts subject to the ordinary course requirements of the RUS) subject to trust provisions, subrogation rights of a bonding company, or a statutory trust;
(o) Accounts owing from an Account Debtor that has been invoiced for goods that have not been shipped to the Account Debtor unless Bank, Borrower, and the Account Debtor have entered into an agreement acceptable to Bank in its sole discretion wherein the Account Debtor acknowledges that (i) it has title to and has ownership of the goods wherever located, (ii) a bona fide sale of the goods has occurred, and (iii) it owes payment for such goods in accordance with invoices from Borrower (sometimes called “xxxx and hold” accounts);
(p) [reserved];
(q) Accounts for which the Account Debtor has not been invoiced;
(r) Accounts that represent non-trade receivables or that are derived by means other than in the ordinary course of Borrower’s business;
(s) Accounts for which Borrower has permitted Account Debtor’s payment to extend beyond 90 days;
(t) Accounts subject to chargebacks or others payment deductions taken by an Account Debtor (but only to the extent the chargeback is not determined to be invalid and is subsequently collected by Borrower);
(u) Accounts in which the Account Debtor disputes liability or makes any claim (but only up to the disputed or claimed amount), or if the Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business; and
(v) Accounts for which Bank in its good faith business judgment determines collection to be doubtful.
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“Eligible Assignee” is (A) any commercial bank, insurance company, investment or mutual fund or other entity that is an “accredited investor” (as defined in Regulation D under the Securities Act) and which extends credit or buys loans as one of its businesses and (i) has at least $500,000,000 of Tier 1 Capital and a Credit Rating of at least A1/P1 or equivalent or single A or equivalent, (ii) is not a vulture fund or distressed debt fund as reasonably determined by Bank and (iii) is not a competitor of Borrower as reasonably determined by Borrower or (B) a Federal Reserve Bank; provided that neither the Borrower nor any Subsidiary of the Borrower shall be an Eligible Assignee.
“Eligible Foreign Accounts” are Accounts which would otherwise constitute Eligible Accounts but for the fact that the Account Debtor with respect to such Accounts are any of Puerto Rico Telephone Company, Cable & Wireless (Barbados) Limited, Cable & Wireless (Cayman Islands) Limited, Cable and Wireless Jamaica, Limited, The Bahamas Telecommunications Company Limited, Telecommunications Services of Trinidad and Tobago Limited, or any other Account Debtor approved by Bank from time to time in writing.
“Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.
“Equity Interests” are, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
“ERISA” is the Employee Retirement Income Security Act of 1974, and its regulations.
“Event of Default” is defined in Section 8.
“First Effective Date” shall have the meaning set forth in the recitals hereto.
“Fixed Charge Coverage Ratio” is, as of any date of determination, the ratio of (a) Consolidated Adjusted EBITDA less (i) 25% of capital expenditures and less (ii) cash taxes, to (b) the current portion of Indebtedness (exclusive of Indebtedness under the Revolving Line) plus accrued interest expense on all Consolidated Funded Debt as shown on Borrower’s income statement for such period, in each case for the period then ended. For the period ending March 27, 2010, the current portion of Indebtedness shall be multiplied by .50, and for the period ending June 26, 2010, by .75.
“Foreign Currency” is lawful money of a country other than the United States.
“Foreign Subsidiary” is any Subsidiary which is not a Domestic Subsidiary.
“Funding Date” is any date on which a Credit Extension is made to or on account of Borrower which shall be a Business Day.
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“FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is conducting its normal business and (b) the Foreign Currency being purchased or sold by Borrower is available to Bank from the entity from which Bank shall buy or sell such Foreign Currency.
“FX Forward Contract” is defined in Section 2.1.3.
“FX Reserve” is defined in Section 2.1.3.
“GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.
“General Intangibles” is all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, any trade secret rights, including any rights to unpatented inventions, payment intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income and other tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.
“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
“Governmental Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
“Guarantor” is any present or future guarantor of the Obligations.
“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.
“Indemnified Person” is defined in Section 12.3.
“Initial Audit” is Bank’s initial inspection of Borrower’s Accounts, the other Collateral and Borrower’s Books.
“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
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“Interest Payment Date” means, with respect to any LIBOR Loan, the last day of each Interest Period applicable to such LIBOR Loan, and, with respect to any Prime Rate Loan, the last day of each month, and each date a Prime Rate Loan is converted into a LIBOR Loan to the extent of the amount converted to a LIBOR Loan.
“Interest Period” means, as to any LIBOR Loan, the period commencing on the date of such LIBOR Loan, or on the conversion/continuation date on which the LIBOR Loan is converted into or continued as a LIBOR Loan, and ending on the date that is one (1), two (2), three (3) or six (6) months thereafter, in each case as Borrower may elect in the applicable Notice of Borrowing or Notice of Conversion/Continuation; provided, however, that (a) no Interest Period with respect to any LIBOR Advance shall end later than the Revolving Line Maturity Date, (b) no Interest Period with respect to the Term Loan shall end later than the Term Loan Maturity Date, (c) the last day of an Interest Period shall be determined in accordance with the practices of the LIBOR interbank market as from time to time in effect, (d) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of a LIBOR Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day, (e) any Interest Period pertaining to a LIBOR Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period, and (f) interest shall accrue from and include the first Business Day of an Interest Period but exclude the last Business Day of such Interest Period.
“Interest Rate Determination Date” means each date for calculating the LIBOR for purposes of determining the interest rate in respect of an Interest Period. The Interest Rate Determination Date shall be the second Business Day prior to the first day of the related Interest Period for a LIBOR Loan.
“Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.
“Investment” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance or capital contribution to any Person.
“IP Agreement” is that certain Intellectual Property Security Agreement executed and delivered by Borrower to Bank dated as of the First Effective Date.
“Letter of Credit” is a standby letter of credit issued by Bank or another institution based upon an application, guarantee, indemnity or similar agreement on the part of Bank as set forth in Section 2.1.2.
“Letter of Credit Application” is defined in Section 2.1.2(a).
“Letter of Credit Reserve” is defined in Section 2.1.2(d).
“Leverage Ratio” is, as of any date of determination, the ratio of (a) Consolidated Funded Debt as of such date to (b) Consolidated Adjusted EBITDA for the periods specified in Section 6.9(b) for purposes of calculating the covenant in Section 6.9(b) and on a trailing twelve-month basis for purposes of determining the Prime Rate Margin or LIBOR Rate Margin.
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“LIBOR” means, for any Interest Rate Determination Date with respect to an Interest Period for any Advance or Term Loans to be made, continued as or converted into a LIBOR Loan, the rate of interest per annum equal to (i) the “British Bankers Association LIBOR Rate”, as published by Reuters (or other commercially available source providing quotations of “British Bankers Association LIBOR Rate” as designated by Bank from time to time) at approximately 11:00 a.m., London time, two (2) Business Days prior to the first day of such Interest Period, for deposits in Dollars with a term equivalent to such Interest Period, or (ii) if rate in (i) of this definition is not available at such time for any reason, then the rate determined by to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in the approximate amount of LIBOR Loan being made, continued or converted by Bank and with a term equivalent to such Interest Period would be offered by Bank to major banks in the London or other offshore interbank market for Dollars at approximately 11:00 a.m. (London time) two (2) Business Days prior to first day of such Interest Period, but not less than 1.25%.
“LIBOR Advance” means an Advance that bears interest based on the LIBOR Rate.
“LIBOR Loan(s)” means a LIBOR Advance or LIBOR Term Loan.
“LIBOR Rate” means, for each Interest Period in respect of LIBOR Loans comprising part of the same Advances or Term Loan, respectively, an interest rate per annum (rounded upward, if necessary, to the nearest 1/10,000th of one percent (0.0001%)) equal to LIBOR for such Interest Period divided by one (1) minus the Reserve Requirement for such Interest Period.
“LIBOR Rate Margin” is:
| If Borrower’s trailing 12 month Leverage Ratio is: |
LIBOR Rate Margin applicable to Advances |
LIBOR Rate Margin applicable to the Term Loan | ||
| Greater than or equal to 2.00:1.00 |
4.50 | 6.50 | ||
| Less than 2.00:1.00 and greater than or equal to 1.00:1.00 |
3.50 | 4.50 | ||
| Less than 1.00:1.00 |
3.00 | 3.00 |
provided however, that (i) each change in the LIBOR Rate Margin shall be effective on the first day of each applicable Interest Period, (ii) if an Event of Default has occurred and is continuing, the LIBOR Rate Margin shall be at the highest level set forth in the table, and (iii) if any information provided by Borrower to Bank for purposes of determining the Leverage Ratio shall prove to be false or incorrect such that the LIBOR Rate Margin would have been higher than was otherwise in effect during any period, without constituting a waiver of any Event of Default arising as a result thereof, interest due under this Agreement during such previous period shall immediately be recalculated at such higher rate (or, if the Leverage Ratio upon which the LIBOR Rate Margin is to be calculated cannot be determined, then the LIBOR Rate Margin shall be at the highest level set forth in the table) for all applicable previous periods and such excess interest shall be due and payable on demand; provided that, in no case shall the Leverage Ratio be tested for purposes of this definition more often than required under Section 6.9(b) so that each calculation of the Leverage Ratio pursuant to the requirements of Section 6.9(b) shall satisfy the requirements of this definition.
“LIBOR Term Loan” means a portion of the Term Loan that bears interest based on the LIBOR Rate.
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“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.
“Loan Documents” are, collectively, this Agreement, the Perfection Certificate, the IP Agreement, any note, or notes or guaranties executed by Borrower or any Guarantor, and any other present or future agreement between Borrower any Guarantor and/or for the benefit of Bank in connection with this Agreement, all as amended, restated, or otherwise modified.
“Lockbox and Collection Account” is defined in Section 6.12.
“Material Adverse Change” is (a) a material impairment in the perfection or priority of Bank’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; (c) a material impairment of the prospect of repayment of any portion of the Obligations.
“Modified Quick Ratio” is, as of any date of determination, the ratio of (a) the sum of (i) Borrower’s unrestricted cash and Cash Equivalents and all cash and Cash Equivalents held at Bank (including both restricted and unrestricted cash and Cash Equivalents) to secure the Obligations in favor of Bank held as of such date (A) in Collateral Accounts at Bank and (B) in any other Collateral Account which is subject to a Control Agreement, and (ii) Borrower’s net Accounts to (b) the sum of (i) Borrower’s current liabilities (excluding Deferred Revenue and non-cash warrant liabilities) and (ii) the long-term portion of Consolidated Funded Debt.
“Notice of Borrowing” means a notice given by Borrower to Bank in accordance with Section 3.4(a), substantially in the form of Exhibit D-1, with appropriate insertions.
“Notice of Conversion/Continuation” means a notice given by Borrower to Bank in accordance with Section 3.5, substantially in the form of Exhibit D-2, with appropriate insertions.
“Obligations” are Borrower’s obligation to pay when due any debts, principal, interest, Bank Expenses and other amounts Borrower owes Bank now or later, whether under this Agreement, the Loan Documents, or otherwise, including, without limitation, all obligations relating to letters of credit (including reimbursement obligations for drawn and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and the performance of Borrower’s duties under the Loan Documents.
“Operating Documents” are, for any Person, such Person’s formation documents, as certified with the Secretary of State of such Person’s state of formation on a date that is no earlier than 30 days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.
“Overadvance” is defined in Section 2.2.
“Parent” is defined in Section 3.7(c).
“Perfection Certificate” is defined in Section 5.1.
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“Permitted Acquisitions” are the acquisition by Borrower of all or substantially all of the capital stock or property of another Person with respect to which (a) no Event of Default exists prior to or after giving effect to such acquisition, (b) Bank has received, at least five Business Days prior to the consummation of such acquisition, evidence, in form and substance reasonably satisfactory to Bank that, on a pro forma basis (as determined by Bank) after giving effect to such acquisition, Borrower will be in compliance with the covenants set forth in Section 6.9, (c) the cash portion of the purchase price of all such acquisitions does not exceed $10,000,000 in the aggregate, and (d) if requested by Bank, Borrower has or has caused the subject of such acquisition to deliver to Bank all documentation requested by Bank to perfect Bank’s security interest in the assets so acquired or make the subject of such acquisition a party to the Loan Documents as a Guarantor.
“Permitted Indebtedness” is:
(a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan Documents;
(b) Indebtedness existing on the Effective Date and shown on the Perfection Certificate;
(c) Subordinated Debt
(d) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
(e) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;
(f) Indebtedness secured by Permitted Liens; provided, however, Indebtedness secured by pursuant to the Security Agreement with Xxxxx Fargo Bank, N.A. set forth in Section 5 of the Perfection Certificate is permitted only to the extent (i) such Indebtedness is comprised of reimbursement obligations with respect to letters of credit issued by Xxxxx Fargo Bank, N.A. for the account of Borrower as of the Effective Date and (ii) the face amount of such letters of credit do not exceed, in the aggregate, $4,900,000.
(g) [reserved];
(h) other unsecured Indebtedness in an aggregate amount not to exceed Seven Hundred Fifty Thousand Dollars ($750,000) at any time outstanding; and
(f) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (h) above, provided that, (i) without the prior written consent of Bank, the principal amount thereof is not increased and the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiaries, as the case may be and (ii) if any such Indebtedness is subject to a subordination, intercreditor or other such agreement, such Indebtedness continues to be subject to a subordination, intercreditor or other such agreement on the same terms as previously applied to such Indebtedness.
“Permitted Investments” are:
(a)(i) Investments shown on the Perfection Certificate and existing on the Effective Date and (ii) Investments similar to those reflected in subclause (i) of this clause (a) and made following the Effective Date by Borrower or its Subsidiaries pursuant to Borrower’s Investment Policy;
(b) Investments in Cash Equivalents;
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(c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;
(d) Investments consisting of Collateral Accounts in which Bank has a perfected Lien in accordance with the provisions hereof;
(e) Investments accepted in connection with Transfers permitted by Section 7.1;
(f)(i) Investments of Borrower and its Subsidiaries in existence on the Effective Date and set forth on Schedule P-1, (ii) Investments made on or after the Effective Date by Borrower, any Guarantor or any other Subsidiary, as applicable, in or to Borrower or any other Guarantor, as applicable, (iii) Investments made on or after the Effective Date by Borrower or any Guarantor, as applicable, in any Subsidiary that is not a Guarantor; provided that the aggregate amount of all such Investments in all Subsidiaries that are not Guarantors does not exceed Seven Hundred Fifty Thousand Dollars ($750,000) from and after the Effective Date, (iv) Permitted Acquisitions and (v) Investments made on or after the Effective Date by any Subsidiary that is not a Guarantor in any Person that is not Borrower or a Guarantor; provided that the aggregate amount of all such Investments by all such Subsidiaries does not exceed Seven Hundred Fifty Thousand Dollars ($750,000) from and after the Effective Date; provided that, for purposes of determining compliance with any of the Dollar limitations contained in this clause (f), any Investments made by Borrower or any Subsidiary by issuing Equity Interests (in lieu of cash) to another Person shall not be considered;
(g) Investments consisting of travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business;
(h) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business; and
(i) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (i) shall not apply to Investments of Borrower in any Subsidiary.
“Permitted Liens” are:
(a) Liens existing on the Effective Date and shown on the Perfection Certificate (other than the Liens described in clause (l) below) or arising under this Agreement and the other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;
(c) purchase money Liens (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than Seven Hundred Fifty Thousand Dollars ($750,000) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired, so long as such Lien is confined to the property and improvements and the proceeds of the Equipment;
(d) Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;
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(e) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);
(f) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c) and (l); provided that any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;
(g) leases or subleases of real property granted in the ordinary course of business, and leases, subleases, non-exclusive licenses or sublicenses of property (other than real property or intellectual property) granted in the ordinary course of Borrower’s business, if the leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest;
(h) non-exclusive license of intellectual property granted to third parties in the ordinary course of business;
(i) zoning restrictions, easements, licenses or other restrictions on the use of real estate or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value or marketability of such real estate;
(j) Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Section 8;
(k) Liens in favor of other financial institutions arising in connection with Borrower’s Collateral Accounts held at such institutions, provided that Bank has a perfected security interest in the amounts held in such Collateral Accounts; and
(l) cash deposits not to exceed the aggregate amount of One Million Dollars ($1,000,000) for the purpose of securing performance bonds for sales into rural communities under the Rural Utilities Service of the United States Department of Agriculture.
“Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.
“Prime Rate” is the greater of (a) 4.00% per annum or (b) Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest rate.
“Prime Rate Advance” means an Advance that bears interest based at the Prime Rate.
“Prime Rate Loan(s)” means a Prime Rate Advance or Prime Rate Term Loan.
“Prime Rate Term Loan” means any portion of the Term Loan that bears interest based at the Prime Rate.
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“Prime Rate Margin” is:
| If Borrower’s trailing 12 month Leverage Ratio is: |
Prime Rate Margin applicable to Advances |
Prime Rate Margin applicable to the Term Loan | ||
| Greater than or equal to 2.00:1.00 | 2.00 | 4.00 | ||
| Less than 2.00:1.00 and greater than or equal to 1.00:1.00 | 1.00 | 2.00 | ||
| Less than 1.00:1.00 | 0.50 | 0.50 |
provided however, that (i) each change in the Prime Rate Margin shall be effective on the first day of each applicable fiscal month, (ii) if an Event of Default has occurred and is continuing, the Prime Rate Margin shall be at the highest level set forth in the table, and (iii) if any information provided by Borrower to Bank for purposes of determining the Leverage Ratio shall prove to be false or incorrect such that the Prime Rate Margin would have been higher than was otherwise in effect during any period, without constituting a waiver of any Default or Event of Default arising as a result thereof, interest due under this Agreement during such previous period shall immediately be recalculated at such higher rate (or, if the Leverage Ratio upon which the Prime Rate Margin is to be calculated cannot be determined, then the Prime Rate Margin shall be at the highest level set forth in the table) for all applicable previous periods and such excess interest shall be due and payable on demand; provided that, in no case shall the Leverage Ratio be tested for purposes of this definition more often than required under Section 6.9(b) so that each calculation of the Leverage Ratio pursuant to the requirements of Section 6.9(b) shall satisfy the requirements of this definition.
“Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.
“Regulatory Change” means, with respect to Bank, any change on or after the date of this Agreement in United States federal, state, or foreign laws or regulations, including Regulation D, or the adoption or making on or after such date of any interpretations, directives, or requests applying to a class of lenders including Bank, of or under any United States federal or state, or any foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof.
“Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Reserve Requirement” means, for any Interest Period, the average maximum rate at which reserves (including any marginal, supplemental, or emergency reserves) are required to be maintained during such Interest Period under Regulation D against “Eurocurrency liabilities” (as such term is used in Regulation D) by member banks of the Federal Reserve System. Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by Bank by reason of any Regulatory Change against (a) any category of liabilities which includes deposits by reference to which the LIBOR Rate is to be determined as provided in the definition of LIBOR or (b) any category of extensions of credit or other assets which include Advances or the Term Loan.
“Reserves” are, as of any date of determination, such amounts as Bank may from time to time establish and revise in its good faith business judgment, reducing the amount of Advances and other
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financial accommodations which would otherwise be available to Borrower (a) to reflect events, conditions, contingencies or risks which, as determined by Bank in its good faith business judgment, do or may adversely 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 Accounts), (ii) the assets, business or prospects of Borrower or any Guarantor, or (iii) the security interests and other rights of Bank in the Collateral (including the enforceability, perfection and priority thereof); or (b) to reflect Bank’s good faith belief that any collateral report or financial information furnished by or on behalf of Borrower or any Guarantor to Bank is or may have been incomplete, inaccurate or misleading in any material respect; or (c) in respect of any state of facts which Bank determines in good faith constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default.
“Responsible Officer” is any of the Chief Executive Officer, President, Chief Financial Officer and Controller of Borrower.
“Revolving Line” is an Advance or Advances in an amount equal to up to Thirty Million Dollars ($30,000,000) outstanding at any time.
“Revolving Line Maturity Date” is June 30, 2013.
“RUS” is the Rural Utilities Service of the United States Department of Agriculture.
“RUS Accounts” are Accounts owed by an Account Debtor to Borrower with respect to which the Account Debtor receives funding from the RUS.
“Securities Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made.
“Settlement Date” is defined in Section 2.1.3.
“Subordinated Debt” is all indebtedness incurred by Borrower that is subordinated to all or any part of Borrower’s now existing or hereafter incurred indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank.
“Subsidiary” is, with respect to any Person, any Person of which more than 50.0% of the voting stock or other equity interests (in the case of Persons other than corporations) is owned or controlled directly or indirectly by such Person.
“Term Loan” is a loan made by Bank pursuant to the terms of Section 2.1.5 hereof.
“Term Loan Amount” is an amount equal to Twenty Million Dollars ($20,000,000).
“Term Loan Maturity Date” is June 30, 2013.
“Term Loan Payment” is defined in Section 2.1.5(b).
“Term Loan Termination Fee” is defined in Section 2.1.5(c).
“Tier 1 Capital” shall have the meaning set forth in 12 C.F.R. Part 225, Appendix D (“Bank Holding Company Act”)
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“Transaction Report” is that certain report of transactions and schedule of collections in the form attached hereto as Exhibit C.
“Transfer” is defined in Section 7.1.
“Unused Revolving Line Facility Fee” is defined in Section 2.4(c).
“White Oak” is White Oak Global Advisors, LLC, a Delaware limited liability company, in its capacity as agent for the lenders party to the White Oak Agreements.
“White Oak Agreements” are that certain Loan and Security Agreement, dated July 1, 2008, among Borrower, its Subsidiaries from time to time party thereto as guarantors, White Oak and the lenders from time to time party thereto, all agreements and documents entered into in connection therewith, in each case as amended from time to time as permitted under this Agreement.
“White Oak Indebtedness” is all indebtedness owing by Borrower pursuant to the White Oak Agreements.
[Signature pages follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.
BORROWER:
CALIX NETWORKS, INC.
| By | /s/ Xxxxx Xxxxxxx-Xxx | |
| Name: | Xxxxx Xxxxxxx-Xxx | |
| Title: | Executive Vice President and Chief | |
| Financial Officer |
Amended and Restated Loan and Security Agreement
BANK:
SILICON VALLEY BANK
| By | /s/ Xxxxxx Xxxxxxxxx | |
| Name: | Xxxxxx Xxxxxxxxx | |
| Title: | Managing Director |
| Effective Date: | August 21, 2009 | |
Amended and Restated Loan and Security Agreement
EXHIBIT A – COLLATERAL DESCRIPTION
The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:
All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles, commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and
all Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral does not include more than 66% of the presently existing and hereafter arising issued and outstanding shares of capital stock owned by Borrower of any Foreign Subsidiary which shares entitle the holder thereof to vote for directors or any other matter.
EXHIBIT B – FORM OF COMPLIANCE CERTIFICATE
| TO: | SILICON VALLEY BANK | Date: | ||||
| FROM: | CALIX NETWORKS, INC. |
The undersigned authorized officer of Calix Networks, Inc. (“Borrower”) certifies that under the terms and conditions of the Amended and Restated Loan and Security Agreement between Borrower and Bank (as amended from time to time, the “Loan Agreement”), (1) Borrower is in complete compliance for the period ending with all required covenants except as noted below, (2) there are no Events of Default, (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank. Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Loan Agreement.
Please indicate compliance status by circling Yes/No under “Complies” column.
| Reporting Covenant |
Required |
Complies | ||
| Monthly financial statements with Compliance Certificate | Monthly within 30 days | Yes No | ||
| Annual financial statement (CPA Audited) + XX | XXX within 150 days | Yes No | ||
| 10-Q, 10-K and 8-K | Within 5 days after filing with SEC | Yes No | ||
| Transaction Report, A/R & A/P Agings | Monthly within 20 days or weekly if the Modified Quick Ratio as of the most recent month end is less than the Asset Based Threshold | Yes No | ||
| [The following Intellectual Property was registered (or a registration application submitted) after the Effective Date (if no registrations, state “None”)]1 |
| Financial Covenant |
Required | Actual | Complies | |||
| Minimum Modified Quick Ratio (measured monthly) |
1.50:1.0 | :1.0 | Yes No | |||
| Maximum Leverage Ratio |
2:1.0 | :1.0 | Yes No | |||
| Minimum Consolidated Adjusted EBITDA |
$ 3 | $ | Yes No | |||
| Minimum Fixed Charge Coverage Ratio |
4:1.0 | :1.0 | Yes No |
| 1 | Include if certificate is delivered within 30 days after the end of a quarter |
| 2 | Insert as applicable from Section 6.9(b). |
| 3 | Insert as applicable from Section 6.9(c). |
| 4 | Insert as applicable from Section 6.9(d). |
| Performance Pricing |
Applies | |||||||||
| Applicable Margins | ||||||||||
| Term Loan | Advances | |||||||||
| Leverage Ratio |
LIBOR | Prime | LIBOR | Prime | ||||||
| Greater than or equal to 2.00:1.00 |
6.50 | 4.00 | 4.50 | 2.00 | Yes No | |||||
| Less than 2.00:1.00 but greater than or equal to 1.00:1.00 |
4.50 | 2.00 | 3.50 | 1.00 | Yes No | |||||
| Less than 1.00:1.00 |
3.00 | 0.50 | 3.00 | 0.50 | Yes No | |||||
The following financial covenant analyses and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.
The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)
| CALIX NETWORKS, INC. | BANK USE ONLY | |||||||
| Received by: |
| |||||||
| By: |
|
AUTHORIZED SIGNER | ||||||
| Name: |
|
Date: |
| |||||
| Title: |
|
|||||||
| Verified: |
| |||||||
| AUTHORIZED SIGNER | ||||||||
| Date: |
| |||||||
| Compliance Status: Yes No | ||||||||
Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.
Dated:
| I. | Modified Quick Ratio (Section 6.9(a)) |
| Required: | 1.50:1.00 | |
| Actual: | :1.00 | |
| A. | Unrestricted cash and Cash Equivalents and all cash and Cash Equivalents held at Bank (including both restricted and unrestricted cash and Cash Equivalents) to secure the Obligations in favor of Bank held in Collateral Accounts at Bank or otherwise subject to a Control Agreement | $ | ||
| B. | Net Accounts | $ | ||
| C. | Line A plus line B | $ | ||
| D. | Current Liabilities (excluding Deferred Revenue and non-cash warrant liabilities) | $ | ||
| E. | Long-term portion of Consolidated Funded Debt | $ | ||
| F. | Line D plus line E | $ | ||
| G. | Ratio of Line C to Line F | :1.00 | ||
Is line G equal to or greater than :1.00?
No, not in compliance Yes, in compliance
| II. | Leverage Ratio (Section 6.9(b)) |
| Required: | :1.00 | |
| Actual: | :1.00 | |
| A. | Consolidated Funded Debt (pursuant to detailed calculation on Schedule 2) | $ | ||
| B. | Consolidated Adjusted EBITDA for the periods specified in Section 6.9(b) of the Loan Agreement (pursuant to detailed calculation on Schedule 3) | $ | ||
| C. | Ratio of Line A to Line B | :1.00 | ||
Is line C equal to or greater than :1.00?
No, not in compliance Yes, in compliance
| III. | Consolidated Adjusted EBITDA (Section 6.9(c)) |
| Required: | $ | |
| Actual: | $ | |
| A. | Consolidated Adjusted EBITDA for required fiscal quarters (pursuant to detailed calculation on Schedule 3) | $ |
Is line A equal to or greater than $ ?
No, not in compliance Yes, in compliance
IV. Fixed Charge Coverage Ratio (Section 6.9(d))
| Required: | :1.00 | |
| Actual: | :1.00 | |
| A. | Consolidated Adjusted EBITDA (pursuant to detailed calculation on Schedule 3) | $ | ||
| B. | Capital expenditures ($ ) multiplied by 25% | $ | ||
| C. | Cash taxes | $ | ||
| D. | Current portion of Indebtedness (exclusive of Indebtedness under the Revolving Line) ($ ) multiplied by 50% at March 27, 2010 and by 75% at June 26, 2010 | $ | ||
| E. | Accrued interest expense on all Consolidated Funded Debt as shown on Borrower’s income statement for such period | $ | ||
| F. | Line A less Line B less Line C | $ | ||
| G. | Line D plus Line E | $ | ||
| H. | Ratio of Line F to Line G | :1.0 | ||
Is line H equal to or greater than :1.00?
No, not in compliance Yes, in compliance
Schedule 2 to Compliance Certificate
Calculation of Consolidated Funded Debt
Schedule 3 to Compliance Certificate
Calculation of Consolidated Adjusted EBITDA
EXHIBIT C
Transaction Report
[Excel spreadsheet to be provided separately from lending officer.]
EXHIBIT D-1
FORM OF NOTICE OF BORROWING
Calix Networks, Inc.
Date:
| TO: | SILICON VALLEY BANK |
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attention: Corporate Services Department
| RE: | Amended and Restated Loan and Security Agreement dated as of August , 2009 (as amended, modified, supplemented or restated from time to time, the “Loan Agreement”), by and between CALIX NETWORKS, INC. (“Borrower”), and Silicon Valley Bank (the “Bank”) |
Ladies and Gentlemen:
The undersigned refers to the Loan Agreement, the terms defined therein and used herein as so defined, and hereby gives you notice irrevocably, pursuant to Section 3.4(a) of the Loan Agreement, of the borrowing of an [Advance] / [Term Loan].
1. The Funding Date, which shall be a Business Day, of the requested borrowing is .
2. The aggregate amount of the requested borrowing is $ .
3. The requested [Advance] / [Term Loan] shall consist of $ of Prime Rate [Advances] / [Term Loans] and $ of LIBOR [Advances] / [Term Loans].
4. The duration of the Interest Period for the LIBOR Advances included in the requested [Advance] / [Term Loan] shall be months.
The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed [Advance] / [Term Loan] before and after giving effect thereto, and to the application of the proceeds therefrom, as applicable:
(a) all representations and warranties of Borrower contained in the Loan Agreement are true, accurate and complete in all material respects as of the date hereof; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date;
(b) no Default or Event of Default has occurred and is continuing, or would result from such proposed Advance; and
(c) the requested [Advance] / [Term Loan] will not cause the aggregate principal amount of the outstanding [Advances] / [Term Loans] to exceed, as of the designated Funding Date, the Availability Amount.
| BORROWER | CALIX NETWORKS, INC. | |||
| By: |
| |||
| Name: |
| |||
| Title: |
| |||
For internal Bank use only
| LIBOR Pricing Date |
LIBOR |
LIBOR Variance |
Maturity Date | |||
| % |
EXHIBIT D-2
FORM OF NOTICE OF CONVERSION/CONTINUATION
Calix Networks, Inc.
Date:
| TO: | SILICON VALLEY BANK |
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attention:
| RE: | Amended and Restated Loan and Security Agreement dated as of August , 2009 (as amended, modified, supplemented or restated from time to time, the “Loan Agreement”), by and between CALIX NETWORKS, INC. (“Borrower”), and Silicon Valley Bank (“Bank”) |
Ladies and Gentlemen:
The undersigned refers to the Loan Agreement, the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 3.5 of the Loan Agreement, of the [conversion] [continuation] of the [Advances] / [Term Loan] specified herein, that:
1. The date of the [conversion] [continuation] is , 20 .
2. The aggregate amount of the proposed [Advances] / [Term Loan] to be [converted] is $ or [continued] is $ .
3. The [Advances] / [Term Loan] are to be [converted into] [continued as] [LIBOR] [Prime Rate] Loans.
4. The duration of the Interest Period for the LIBOR Loans included in the [conversion] [continuation] shall be months.
The undersigned, on behalf of Borrower, hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed [conversion] [continuation], before and after giving effect thereto and to the application of the proceeds therefrom:
(a) all representations and warranties of Borrower stated in the Loan Agreement are true, accurate and complete in all material respects as of the date hereof; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; and
(b) no Default or Event of Default has occurred and is continuing, or would result from such proposed [conversion] [continuation].
| BORROWER | CALIX NETWORKS, INC. | |||
| By: |
| |||
| Name: |
| |||
| Title: |
| |||
For internal Bank use only
| LIBOR Pricing Date |
LIBOR |
LIBOR Variance |
Maturity Date | |||
| % |
