EXHIBIT 10.16
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated as of December
5, 2001, between SILICON VALLEY BANK, a California chartered bank, with its
principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000
and with a loan production office located at One Newton Executive Park, Suite
200, 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, doing business under
the name "Silicon Valley East" ("Bank") and APPLIX, INC., a Massachusetts
corporation with its chief executive office at 000-000 Xxxxxxxx Xxxx, Xxxxxxxx,
Xxxxxxxxxxxxx 00000 ("Borrower"), provides the terms on which Bank shall lend to
Borrower and Borrower shall repay Bank. The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document. Capitalized terms in this Agreement
shall have the meanings set forth in Section 13.
2 LOAN AND TERMS OF PAYMENT
2.1 PROMISE TO PAY. Borrower hereby unconditionally promises to pay Bank
the unpaid principal amount of all Credit Extensions and interest on the unpaid
principal amount of the Credit Extensions as and when due in accordance with
this Agreement.
2.1.1 REVOLVING ADVANCES.
(a) Bank shall make Advances not exceeding (i) the Committed
Revolving Line or the Borrowing Base, whichever is less, minus (ii) the amount
of all outstanding Letters of Credit (including drawn but unreimbursed Letters
of Credit), minus (iii) the FX Reserve, and minus (iv) the aggregate outstanding
Advances hereunder (including any Cash Management Services). Amounts borrowed
under this Section may be repaid and reborrowed during the term of this
Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 3:00 p.m. Eastern time on the Business Day the Advance is to be
made. If such notification is by telephone, Borrower must promptly confirm the
notification by delivering to Bank a completed Payment/Advance Form in the form
attached as EXHIBIT B. Bank shall credit Advances to Borrower's deposit account.
Bank may make Advances under this Agreement based on instructions from a
Responsible Officer or his or her designee or without instructions if the
Advances are necessary to meet Obligations which have become due. Bank may rely
on any telephone notice given by a person whom Bank reasonably believes is a
Responsible Officer or designee. Borrower shall indemnify Bank for any loss Bank
suffers due to such reliance.
(c) The Committed Revolving Line terminates on the Revolving
Maturity Date, when the principal amount of all Advances and the unpaid interest
thereon, shall be immediately payable.
2.1.2 LETTERS OF CREDIT.
(a) Bank shall issue or have issued Letters of Credit for Borrower's
account not exceeding (i) the lesser of the Committed Revolving Line or the
Borrowing Base minus (ii) the outstanding principal balance of any Advances
(including any Cash Management Services), minus (iii) the amount of all Letters
of Credit (including drawn but unreimbursed Letters of Credit), plus an amount
equal to any Letter of Credit Reserves. The face amount of outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve) may not exceed $2,500,000.00. Each Letter of Credit shall have
an expiry date no later than 180 days after the Revolving Maturity Date provided
Borrower's Letter of Credit reimbursement obligation shall be secured by cash on
terms acceptable to Bank on and after (i) the Revolving Maturity Date if the
term of this Agreement is not extended by Bank, or (ii) the occurrence of an
Event of Default hereunder. 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 form of standard Application and Letter of Credit
Agreement. Borrower agrees to execute any further documentation in connection
with the Letters of Credit as Bank may reasonably request.
(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 and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend, protect, and hold Bank harmless from any loss,
cost, expense or liability, including, without limitation, reasonable attorneys'
fees, arising out of or in connection with any Letters of Credit.
(c) Borrower may request that Bank issue a Letter of Credit payable
in a currency other than United States Dollars. 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 cable charges) in United
States currency at the then prevailing rate of exchange in San Francisco,
California, for sales of that other currency for cable transfer to the country
of which it is the currency.
(d) Upon the issuance of any letter of credit payable in a currency
other than United States Dollars, Bank shall create a reserve (the "Letter of
Credit Reserve") under the Committed Revolving Line for letters of credit
against fluctuations in currency exchange rates, in an amount equal to ten
percent (10%) of the face amount of such letter of credit. The amount of such
reserve may be amended by Bank from time to time to account for fluctuations in
the exchange rate. The availability of funds under the Committed Revolving Line
shall be reduced by the amount of such reserve for so long as such letter of
credit remains outstanding.
2.1.3 FOREIGN EXCHANGE SUBLIMIT. If there is availability under the
Committed Revolving Line and the Borrowing Base, then Borrower may enter in
foreign exchange forward contracts with the Bank under which Borrower commits to
purchase from or sell to Bank a set amount of foreign currency more than one
business day after the contract date (the "FX Forward Contract"). Bank shall
subtract 10% of each outstanding FX Forward Contract from the foreign exchange
sublimit which is a maximum of $2,500,000.00 (the "FX Reserve"). The total FX
Forward Contracts at any one time may not exceed 10 times the amount of the FX
Reserve. Bank may terminate the FX Forward Contracts if an Event of Default
occurs.
2.1.4 CASH MANAGEMENT SERVICES SUBLIMIT. Borrower may use up to
$2,500,000.00 for the Bank's Cash Management Services, which may include
merchant services, direct deposit of payroll, business credit card, and check
cashing services identified in the various cash management services agreements
related to such services Cash Management Services Agreement (the "Cash
Management Services"). Such aggregate amounts utilized under the Cash Management
Services Sublimit shall at all times reduce the amount otherwise available for
Credit Extensions under the Committed Revolving Line. Any amounts Bank pays for
any Cash Management Services on behalf of Borrower that are not paid by Borrower
as required by the applicable terms thereof will be treated as Advances under
the Committed Revolving Line and will accrue interest at the interest rate
applicable to Advances.
2.1.5 UNDISBURSED CREDIT EXTENSIONS. The Bank's obligation to lend the
undisbursed portion of the Credit Extensions shall terminate if there has been a
material adverse change in the general affairs, management, results of
operation, condition (financial or otherwise) or the prospects of Borrower,
whether or not arising from transactions in the ordinary course of business, or
there has been any material adverse deviation by Borrower from the most recent
business plan of Borrower presented to and accepted by Bank prior to the
execution of this Agreement.
2.2 OVERADVANCES. If Borrower's Obligations under Section 2.1.1, 2.1.2,
2.1.3 and 2.1.4 exceed the lesser of either (i) the Committed Revolving Line or
(ii) the Borrowing Base, Borrower must immediately pay in cash to Bank the
excess.
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2.3 INTEREST RATE; PAYMENTS.
(a) INTEREST RATE. Advances accrue interest on the outstanding
principal balance at a per annum rate equal to the aggregate of the Bank's Prime
Rate plus one and one-quarter percent (1.25%). After an Event of Default,
Obligations shall bear interest at four percent (4.0%) above the rate effective
immediately before the Event of Default. The interest rate shall increase or
decrease when the Prime Rate changes. Interest is computed on the basis of a 360
day year for the actual number of days elapsed.
(b) PAYMENTS. Interest is payable on the Payment Date of each month.
Bank may debit any of Borrower's deposit accounts (unless prohibited by law)
including Account Number __________ for principal and interest payments or any
amounts Borrower owes Bank. Bank shall promptly notify Borrower when it debits
Borrower's accounts. These debits are not a set-off. Payments received after
3:00 p.m. Eastern time are considered received at the opening of business on the
next Business Day. When a payment is due on a day that is not a Business Day,
the payment is due the next Business Day and additional fees or interest, as
applicable, shall continue to accrue.
(c) ADDITIONAL PAYMENTS. Whenever Borrower is obliged to make a
deduction in respect of Tax from any payment under any Obligation:
(i) it shall promptly pay the amount deducted to the appropriate
Government Agency;
(ii) within 30 days of the end of the month in which the deduction
is made, it shall deliver to Bank official receipts or other evidence of
payment acceptable to Bank; and
(iii) unless the Tax is an Excluded Tax, it shall pay Bank on the
due date of the payment any additional amounts necessary (as determined by
Bank) to ensure that Bank receives when due a net amount (after payment of
any Taxes in respect of those additional amounts) in the relevant currency
equal to the full amount which it would have received had a deduction not
been made. It shall indemnify Bank against the Tax and any amounts
recoverable from Bank in respect of the Tax. Borrower waives any statutory
right to recover from Bank any amount paid under this clause.
The obligations of Borrower under this clause survive the payment of all
moneys owing under this Agreement or discharge of any Letter of Credit and
the termination of this Agreement or any Letter of Credit.
2.4 FEES. Borrower shall pay to Bank:
(a) FACILITY FEE. A fully earned, non-refundable facility fee of
$18,750.00 due on the Closing Date; and
(b) BANK EXPENSES. All Bank Expenses (including reasonable
attorneys' fees and expenses incurred through and after the Closing Date) when
due.
3 CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The obligation of
Bank to make the initial Credit Extension is subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
articles, bylaws, incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(c) Negative Pledge Agreement covering Intellectual Property;
(d) landlord's waiver;
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(e) a legal opinion of Borrower's counsel, in form and substance
acceptable to Bank;
(f) Exim Agreement;
(g) Exim Borrower Agreement;
(h) Exim Promissory Note;
(i) an Initial Audit of Borrower's Accounts as described in
Section 6.2;
(j) financing statements (Forms UCC-1);
(k) Account Control Agreement/ Investment Account Control Agreement
(l) insurance certificate;
(m) payment of the fees and Bank Expenses then due specified in
Section 2.4 hereof;
(n) Certificate of Foreign Qualification (if applicable);
(o) Certificate of Good Standing/Legal Existence; and
(p) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. Bank's obligations to
make each Credit Extension, including the initial Credit Extension, is subject
to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 shall be
materially true on the date of the Payment/Advance Form and on the effective
date of each Credit Extension 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.
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 and the
performance of each of Borrower's duties under the Loan Documents, a continuing
security interest in the Collateral, wherever located, whether now owned or
hereafter acquired or arising, and all proceeds and products thereof. Borrower
warrants and represents that the security interest granted herein shall be a
first priority security interest in the Collateral, except as otherwise provided
herein. The Collateral may also be subject to Permitted Liens. If the Agreement
is terminated, Bank's lien and security interest in the Collateral shall
continue until Borrower fully satisfies its Obligations. Notwithstanding the
foregoing, it is expressly acknowledged and agreed that the security interest
created in this Agreement only with respect to Exim Eligible Foreign Accounts
(as such term is defined in the Exim Agreement) is subject to and subordinate to
the security interest granted to the Bank in the Exim Agreement with respect to
such Exim Eligible Foreign Accounts, but only to the extent any Advances are
actually made to the Borrower based upon such Exim Eligible Foreign Accounts.
Borrower agrees that Bank may file (with the UCC Financing Statements to be
filed hereunder) a notice that any disposition of the Collateral in violation of
this Agreement, by either the Borrower or any other Person, shall be deemed to
violate the rights of the Bank under the Code. If the Borrower shall at any time
have knowledge that it has acquired a material commercial tort claim, Borrower
shall use best efforts to promptly notify Bank in a writing signed by Borrower
of the brief details thereof and
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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 satisfactory to Bank. Notwithstanding the foregoing, the security
interest granted herein does not extend to and the term "Collateral" does not
include any portion of any license or contract solely to the extent (i) the
granting of a security interest in such license or contract would be contrary to
applicable law, or (ii) that such licenses or contracts are nonassignable by
their terms (but only to the extent the prohibition is enforceable under
applicable law, including, without limitation, the Code) without the consent of
the licensor or other party (but only to the extent such consent has not been
obtained). Bank agrees to subordinate its security interest in certain specific
Equipment financed by Borrower (or release its security interest in such
financed Equipment if reasonably required by Borrower or such financing party),
up to an aggregate fair market value (as reasonably determined by Bank and
Borrower) of such Equipment not to exceed $1,000,000 for all such financing
transactions.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION. Borrower and each Subsidiary is
duly existing and in good standing in its state of formation and qualified and
licensed to do business in, and in good standing in, any state in which the
conduct of its business or its ownership of property requires that it be
qualified except where the failure to do so could not reasonably be expected to
cause a Material Adverse Change. The Borrower has previously delivered to the
Bank a certificate signed by the Borrower and entitled "Perfection Certificate".
The Borrower represents and warrants to the Bank that: (a) the Borrower's exact
legal name is that indicated on the Perfection Certificate and on the signature
page hereof; and (b) the Borrower is an organization of the type, and is
organized in the jurisdiction, set forth in the Perfection Certificate; and (c)
the Perfection Certificate accurately sets forth the Borrower's organizational
identification number or accurately states that the Borrower has none; and (d)
the Perfection Certificate accurately sets forth the Borrower's place of
business, or, if more than one, its chief executive office as well as the
Borrower's mailing address if different, and (e) all other information set forth
on the Perfection Certificate pertaining to the Borrower is accurate and
complete. If the Borrower does not now have an organizational identification
number, but later obtains it, Borrower shall forthwith notify the Bank or such
organizational identification number.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's organizational documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which or by
which it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.
5.2 COLLATERAL. Borrower has good title to the Collateral, free of Liens
except Permitted Liens. Borrower has no other deposit account, other than the
deposit accounts with Bank and deposit accounts described in the Perfection
Certificate delivered to the Bank in connection herewith. The Accounts are bona
fide, existing obligations, and the service or property has been performed or
delivered to the account debtor or its agent 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). In the event that
Borrower, after the date hereof, intends to store or otherwise deliver any
portion of the Collateral to a bailee, then Borrower will first receive the
written consent of Bank and such bailee must acknowledge in writing that the
bailee is holding such Collateral for the benefit of Bank. Borrower has no
actual knowledge of any actual or imminent Insolvency Proceeding of any account
debtor whose accounts are an Eligible Account in any Borrowing Base Certificate
that has not been superceded. All Inventory is in all material respects of good
and marketable quality, free from material defects.
5.3 LITIGATION. Except as shown in the Schedule, there are no actions or
proceedings pending or, to the knowledge of Borrower's Responsible Officers,
threatened by or against Borrower or any Subsidiary in which an adverse decision
could reasonably be expected to cause a Material Adverse Change.
5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All consolidated
financial statements for Borrower and any Subsidiary delivered to Bank fairly
present in all material respects Borrower's consolidated financial
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condition and Borrower's consolidated results of operations as of the date of
such financial statements. There has not been any material deterioration in
Borrower's consolidated financial condition since the date of the most recent
financial statements submitted to Bank.
5.5 SOLVENCY. Borrower is able to pay its debts (including trade debts)
as they mature.
5.6 REGULATORY COMPLIANCE. Borrower is not an "investment company" or a
company "controlled" by an "investment company" under the Investment Company
Act. Borrower is not engaged as one of its important activities in extending
credit for margin stock (under Regulations T and U of the Federal Reserve Board
of Governors). Borrower has complied in all material respects with the Federal
Fair Labor Standards Act. Borrower has not violated any laws, ordinances or
rules, the violation of which could reasonably be expected to cause a Material
Adverse Change. None of Borrower's or any Subsidiary's properties or assets has
been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge,
by previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Borrower and each Subsidiary has
timely filed all required tax returns and paid, or made adequate provision to
pay, all material taxes, except those being contested in good faith with
adequate reserves under GAAP. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all government authorities that are necessary to
continue its business as currently conducted except where the failure to make
such declarations, notices or filings would not reasonably be expected to cause
a Material Adverse Change.
5.7 SUBSIDIARIES. Borrower does not own any stock, partnership interest
or other equity securities except for Permitted Investments.
5.8 FULL DISCLOSURE. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank
contains any untrue statement of a material fact when made or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading when made.
6 AFFIRMATIVE COVENANTS
Until Borrower satisfies all obligations under this Agreement and Bank has
no obligation to lend hereunder, Borrower shall do all of the following:
6.1 GOVERNMENT COMPLIANCE. Borrower shall maintain its and all
Subsidiaries' legal existence and good standing in its jurisdiction of formation
and maintain qualification in each jurisdiction in which the failure to so
qualify would reasonably be expected to cause a material adverse effect on
Borrower's business or operations. Borrower shall comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, noncompliance with which could have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower shall deliver to Bank: (i) as soon as available, but no
later than thirty (30) days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during the period certified by a Responsible Officer and in a form
acceptable to Bank; (ii) as soon as available, but no later than forty-five (45)
days after the last day of each quarter, a company prepared consolidated balance
sheet and income statement covering Borrower's consolidated operations during
the previous quarter certified by a Responsible Officer and in a form acceptable
to Bank; (iii) as soon as available, but no later than one hundred twenty (120)
days after the last day of Borrower's fiscal year, audited consolidated
financial statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm reasonably acceptable to Bank; (iv) within five (5) days
of filing, copies of all statements, reports and notices made available to
Borrower's security holders or to any holders of Subordinated Debt and all
reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission; (iv) a prompt report of any legal actions pending or threatened
against Borrower or any Subsidiary that is reasonably
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likely to result in damages or costs awarded against Borrower or any Subsidiary
of One Hundred Thousand Dollars ($100,000.00) or more; and (v) budgets, sales
projections, operating plans or other financial information reasonably requested
by Bank.
(b) Within thirty (30) days after the last day of each month (during
any month in which Borrower has outstanding Advances or is seeking an Advance),
Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in the form of EXHIBIT C, with aged listings of accounts
receivable (by invoice date).
(c) Within thirty (30) days after the last day of each month,
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in the form of EXHIBIT D.
(d) Within forty-five (45) days after the last day of each fiscal
quarter, Borrower shall deliver to Bank with the quarterly financial statements
a Compliance Certificate signed by a Responsible Officer in the form of EXHIBIT
D.
(e) Within one hundred twenty (120) days after the last day of
Borrower's fiscal year, Borrower shall deliver to Bank with the audit annual
financial statements a Compliance Certificate signed by a Responsible Officer in
the form of EXHIBIT D.
(f) Borrower shall allow Bank to audit Borrower's Collateral at
Borrower's expense. Such audits shall be conducted no more often than once every
six (6) months unless an Event of Default has occurred and is continuing.
Borrower shall provide Bank with reasonable access to all its records and
financial information so that the next such audit (the "Initial Audit") of
Borrower's Collateral shall be completed by Bank prior to the initial Advance
under the Committed Revolving Line.
6.3 TAXES. Borrower shall make, and cause each Subsidiary to make,
timely payment of all material federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting in good faith,
with adequate reserves maintained in accordance with GAAP) and will deliver to
Bank, on demand, appropriate certificates attesting to such payments.
6.4 INSURANCE. Borrower shall keep its business and the Collateral
insured for risks and in amounts, standard for Borrower's industry, and as Bank
may reasonably request in Bank's reasonable discretion. Insurance policies shall
be in a form, with companies, and in amounts that are reasonably satisfactory to
Bank. All property policies shall have a lender's loss payable endorsement
showing Bank as an additional loss payee and all liability policies shall show
the Bank as an additional insured and all policies shall provide that the
insurer must give Bank at least twenty (20) days notice before canceling its
policy. At Bank's request, Borrower shall deliver certified copies of policies
and evidence of all premium payments. Proceeds payable under any policy shall,
at Bank's option, be payable to Bank on account of the Obligations.
Notwithstanding the foregoing, so long as no Event of Default has occurred and
is continuing, Borrower shall have the option of applying the proceeds of any
casualty policy up to $250,000.00, in the aggregate, toward the replacement or
repair of destroyed or damaged property; provided that (i) any such replaced or
repaired property (a) shall be of equal or like value as the replaced or
repaired Collateral and (b) shall be deemed Collateral in which Bank has been
granted a first priority security interest and (ii) after the occurrence and
during the continuation of an Event of Default all proceeds payable under such
casualty policy shall, at the option of the Bank, be payable to Bank on account
of the Obligations.
6.5 PRIMARY ACCOUNTS. Borrower shall maintain its primary depository and
operating accounts and securities accounts with Bank, and a majority of the
Borrower's cash or securities in excess of that amount used for Borrower's
operations shall be maintained or administered through the Bank. Borrower shall
identify to Bank, in writing, any bank or securities account opened by Borrower
with any institution other than Bank. In addition, for each such account that
the Borrower at any time opens or maintains, Borrower shall, at the Bank's
request and option, pursuant to an agreement in form and substance acceptable to
the Bank, cause the depositary bank or securities intermediary to agree that
such account is the collateral of the Bank pursuant to the terms hereunder. The
provisions of this paragraph shall not apply to deposit accounts exclusively
used for payroll, payroll taxes and other employee wage
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and benefit payments to or for the benefit of the Borrower's employees.
6.6 FINANCIAL COVENANTS.
Borrower shall maintain at all times, to be tested as of the last day of
each month, unless otherwise noted:
(a) ADJUSTED QUICK RATIO. A ratio of Quick Assets to Current
Liabilities minus Deferred Maintenance Revenue of at least 1.50 to 1.0.
(b) TANGIBLE NET WORTH. A Tangible Net Worth of (i) at the end of
each month, which month is not also the end of a fiscal quarter, at least
$7,000,000.00 and (ii) at the end of each fiscal quarter, at least
$10,000,000.00.
(c) EBITDA. Borrower shall not suffer quarterly EBITDA losses for
two (2) consecutive quarters.
6.7 FURTHER ASSURANCES. Borrower shall execute any further instruments
and take further action as Bank reasonably requests to perfect or continue
Bank's security interest in the Collateral or to effect the purposes of this
Agreement.
7 NEGATIVE COVENANTS
Until Borrower satisfies all obligations under this Agreement and Bank has
no obligation to lend hereunder, Borrower shall not do any of the following
without the Bank's prior written consent:
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of
(collectively a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, except for Transfers (i) of Inventory
in the ordinary course of business; (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; (iii) of worn-out or obsolete Equipment or (iv)
transfers of Equipment which are the subject of a sale/leaseback transaction
otherwise permitted hereunder (subject to the limitations and restrictions for
all such transactions set forth herein).
7.2 CHANGES IN BUSINESS, MANAGEMENT OR BUSINESS LOCATIONS. Engage in or
permit any of its Subsidiaries to engage in any business other than the
businesses currently engaged in by Borrower or have a material change in its
management. Borrower shall not, without at least thirty (30) days prior written
notice to Bank: (i) relocate its chief executive office, or add any new offices
or business locations (unless such new offices or business locations contain
less than Twenty- Five Thousand Dollars ($25,000.00) in Borrower's assets or
property), or (ii) change its jurisdiction of organization, or (iii) change its
organizational structure or type, or (iv) change its legal name, or (v) 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.
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, or allow 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, or permit any Collateral not to be subject to the first priority security
interest granted herein. The Collateral may also be subject to Permitted Liens.
7.6 DISTRIBUTIONS; INVESTMENTS. (i) Directly or indirectly acquire or
own any Person, or make any Investment in any Person, other than Permitted
Investments, or permit any of its Subsidiaries to do so; or (ii) pay any
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dividends or make any distribution or payment or redeem, retire or purchase any
capital stock.
7.7 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter or permit
any material transaction with any Affiliate, except 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. Notwithstanding the foregoing,
Borrower may make loans and other advances to its Subsidiaries up to an
aggregate outstanding amount of $500,000 at any time.
7.8 SUBORDINATED DEBT. Make or permit any payment on any Subordinated
Debt, except under the terms of the Subordinated Debt, or amend any provision in
any document relating to the Subordinated Debt, without Bank's prior written
consent.
7.9 COMPLIANCE. Become an "investment company" or a company controlled
by an "investment company", under the Investment Company Act of 1940 or
undertake as one of its important activities extending credit to purchase or
carry margin stock, 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 operations or would reasonably be
expected to cause a Material Adverse Change, or permit any of its Subsidiaries
to do so.
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT. Borrower fails to pay any of the Obligations within
three (3) days after their due date. During the additional period the failure to
cure the default is not an Event of Default (but no Credit Extension shall be
made during the cure period);
8.2 COVENANT DEFAULT. Borrower does not perform any obligation in
Section 6 or violates any covenant in Section 7 or does not perform or observe
any other material term, condition or covenant in this Agreement, any Loan
Documents, or in any agreement between Borrower and Bank and as to any default
under a term, condition or covenant that can be cured, has not cured the default
within ten (10) days after it occurs, or if the default cannot be cured within
ten (10) days or cannot be cured after Borrower's attempts in the ten (10) day
period, and the default may be cured within a reasonable time, then Borrower
shall have additional time, (of not more than thirty (30) days) to attempt to
cure the default. Grace periods provided under this section shall not apply,
among other things, to financial covenants or any other covenants that are
required to be satisfied, completed or tested by a date certain. During the
additional period the failure to cure the default is not an Event of Default
(but no Credit Extensions shall be made during the cure period);
8.3 MATERIAL ADVERSE CHANGE. A Material Adverse Change occurs;
8.4 ATTACHMENT. (i) Any material portion of Borrower's assets is
attached, seized, levied on, or comes into possession of a trustee or receiver
and the attachment, seizure or levy is not removed in ten (10) days; (ii) the
service of process upon the Borrower seeking to attach, by trustee or similar
process any funds of the Borrower in excess of $100,000 in the aggregate on
deposit with the Bank; (iii) Borrower is enjoined, restrained, or prevented by
court order from conducting a material part of its business; (iv) a judgment or
other claim becomes a Lien on a material portion of Borrower's assets; or (v) a
notice of lien, levy, or assessment is filed against any of Borrower's assets by
any government agency and not paid within ten (10) days after Borrower receives
notice. These are not Events of Default if stayed or if a bond is posted pending
contest by Borrower (but no Credit Extensions shall be made during the cure
period);
8.5 INSOLVENCY, ADMINISTRATION, WINDING UP. (i) Borrower becomes
insolvent; (ii) Borrower begins an Insolvency Proceeding; or (iii) an Insolvency
Proceeding is begun against Borrower and not dismissed or stayed within
forty-five (45) days (but no Credit Extensions shall be made before any
Insolvency Proceeding is dismissed);
9
8.6 OTHER AGREEMENTS. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that is reasonably likely to result in a Material Adverse Change;
8.7 JUDGMENTS. If a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least Two Hundred Thousand
Dollars ($200,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment);
8.8 MISREPRESENTATIONS. If Borrower or any Person acting for Borrower
makes any material misrepresentation or material misstatement now or later in
any warranty or representation in this Agreement or in any writing delivered to
Bank or to induce Bank to enter this Agreement or any Loan Document.
8.9 EXIM AGREEMENT. An Event of Default under the Exim Agreement or any
other agreement or instrument executed in connection therewith.
9 BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. When an Event of Default occurs and continues
Bank may, without prior notice or demand, do any or all of the following:
(a) Declare all Obligations (including, without limitation, all
obligations under the EXIM Agreement) 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) Settle or adjust disputes and claims directly with account
debtors for amounts, on terms and in any order that Bank considers
advisable;
(d) Make any payments and do any acts it considers reasonably
necessary to protect its security interest in the Collateral. Borrower
shall assemble the Collateral if Bank requests and make it available as
Bank designates. Subject to the rights of third parties, prohibitions or
limitations in agreements with third parties, and applicable law, Bank may
enter premises where the Collateral is located, take and maintain
possession of any part of the Collateral, and pay, purchase, contest, or
compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Subject to the rights of third
parties, prohibitions or limitations in agreements with third parties, and
applicable law, Borrower grants Bank a license to enter and occupy any of
its premises, without charge, to exercise any of Bank's rights or
remedies;
(e) 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;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral in accordance with
the Code or other applicable law. Subject to the rights of third parties,
prohibitions or limitations in agreements with third parties, and
applicable law, Bank is 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, subject
to the rights of third parties, prohibitions or limitations in agreements
with third parties, and applicable law; and
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(g) Otherwise dispose of the Collateral according to the Code.
9.2 POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, to be effective upon the occurrence and during the
continuance of an Event of Default, to: (i) endorse Borrower's name on any
checks or other forms of payment or security; (ii) sign Borrower's name on any
invoice or xxxx of lading for any Account or drafts against account debtors;
(iii) settle and adjust disputes and claims about the Accounts directly with
account debtors, for amounts and on terms Bank determines reasonable; (iv) make,
settle, and adjust all claims under Borrower's insurance policies; and (v)
transfer the Collateral into the name of Bank or a third party as the Code
permits. Borrower hereby appoints Bank its power of attorney to sign Borrower's
name on any documents necessary to perfect or continue the perfection of any
security interest regardless of whether an Event of Default has occurred until
all Obligations have been satisfied in full and Bank is under no further
obligation to make Credit Extensions hereunder. Bank's foregoing appointment as
Borrower's attorney in fact, and all of Bank's rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.
9.3 ACCOUNTS COLLECTION. In the event that an Event of Default occurs
and is continuing, Bank may notify any Person owing Borrower money of Bank's
security interest in the funds and verify and/or collect the amount of the
Account. After Borrower is notified that Bank has demanded that all such funds
be paid directly to Bank following an Event of Default, any amounts received by
Borrower shall be held in trust by Borrower for Bank, and, if requested by Bank,
Borrower shall immediately deliver such receipts to Bank in the form received
from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES. All Bank Expenses are immediately due and payable,
and shall bear interest at the then applicable rate and be secured by the
Collateral. No payments by Bank shall be deemed an agreement to make similar
payments in the future or Bank's waiver of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL. So long as the Bank complies with
reasonable banking practices regarding the safekeeping of collateral, the Bank
shall not be liable or responsible for: (a) the safekeeping of the Collateral;
(b) any loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or
other person. Except for the foregoing, Borrower bears all risk of loss, damage
or destruction of the Collateral.
9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements are cumulative. Bank has
all rights and remedies provided under the Code, by law, or in equity. Bank's
exercise of one right or remedy is not an election, and Bank's waiver of any
Event of Default is not a continuing waiver. Bank's delay is not a waiver,
election, or acquiescence. No waiver hereunder shall be effective unless signed
by Bank and then is only effective for the specific instance and purpose for
which it was given.
9.7 DEMAND WAIVER. Except as otherwise expressly set forth herein or as
required by applicable law, 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 or demands by any party to this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile at the addresses listed below. Either Bank or Borrower may
change its notice address by giving the other written notice.
If to Borrower: APPLIX, INC.
000-000 Xxxxxxxx Xxxx
00
Xxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Chief Financial Officer
FAX: (000) 000-0000
with a copy to: Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esquire
FAX: (000) 000-0000
If to Bank: Silicon Valley Bank
One Newton Executive Park, Suite 200
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Mr. Xxxxxxxx Xxxx, Senior Vice President
Fax: (000) 000-0000
with a copy to: Xxxxxx & Xxxxxxxxxx LLP
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esquire
FAX: (000) 000-0000
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Massachusetts law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Massachusetts; provided, however, that if for
any reason Bank cannot avail itself of such courts in the Commonwealth of
Massachusetts, Borrower accepts jurisdiction of the courts and venue in Santa
Xxxxx County, California. NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR
APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE
BANK'S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. This Agreement binds and is for the benefit
of the successors and permitted assigns of each party. Borrower may not assign
this Agreement or any rights or Obligations under it without Bank's prior
written consent which may be granted or withheld in Bank's discretion. Bank has
the right, without the consent of or prior notice to Borrower, to sell,
transfer, negotiate, or grant participation in all or any part of, or any
interest in, Bank's obligations, rights and benefits under this Agreement, the
Loan Documents or any related agreement.
12.2 INDEMNIFICATION. Borrower hereby indemnifies, defends and holds the
Bank and its officers, employees and agents harmless against: (a) all
obligations, demands, claims, and liabilities asserted by any other party in
connection with the transactions contemplated by the Loan Documents; and (b) all
losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and Borrower contemplated by the Loan
Documents (including reasonable attorneys' fees and expenses), except in each
case for losses caused by Bank's
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gross negligence or willful misconduct.
12.3 RIGHT OF SET-OFF. Borrower and any guarantor hereby grant to Bank, a
lien, security interest and right of setoff as security for all Obligations to
Bank, whether now existing or hereafter arising upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of the Bank or in
transit to any of them. At any time after the occurrence and during the
continuance of an Event of Default, without demand or notice, Bank may set off
the same or any part thereof and apply the same to any liability or obligation
of Borrower and any guarantor even though unmatured and regardless of the
adequacy of any other collateral securing the loan. ANY AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY
GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.4 TIME OF ESSENCE. Time is of the essence for the performance of all
Obligations in this Agreement.
12.5 SEVERABILITY OF PROVISION. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
12.6 AMENDMENTS IN WRITING; INTEGRATION. All amendments to this Agreement
must be in writing signed by both Bank and Borrower. This Agreement and the Loan
Documents represent the entire agreement about this subject matter, and
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.
12.7 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.
12.8 SURVIVAL. All covenants, representations and warranties made in this
Agreement continue in full force while any Obligations remain outstanding. 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.
12.9 CONFIDENTIALITY. In handling any confidential information, Bank
shall exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (i) to Bank's
subsidiaries or affiliates in connection with their business with Borrower; (ii)
to prospective transferees or purchasers of any interest in the Credit
Extensions (provided, however, Bank shall use commercially reasonable efforts in
obtaining such prospective transferee's or purchaser's agreement to the terms of
this provision); (iii) as required by law, regulation, subpoena, or other order,
(iv) as required in connection with Bank's examination or audit; and (v) as Bank
considers reasonably necessary in exercising remedies under this Agreement.
Confidential information does not include information that either: (a) is in the
public domain or in Bank's possession when disclosed to Bank, or becomes part of
the public domain after disclosure to Bank; or (b) is disclosed to Bank by a
third party, if Bank does not know that the third party is prohibited from
disclosing the information.
13 DEFINITIONS
13.1 DEFINITIONS.
"ACCOUNTS" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.
13
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs or
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings) with respect to Borrower.
"BORROWER'S BOOKS" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.
"BORROWING BASE" is 75.0% of Eligible Accounts as determined by Bank from
Borrower's most recent Borrowing Base Certificate.
"BORROWING BASE CERTIFICATE" is set forth on Exhibit C hereto.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the Uniform Commercial Code as adopted in Massachusetts, as
amended and as may be amended and in effect from time to time.
"COLLATERAL" is any and all properties, rights and assets of the Borrower
granted by the Borrower to Bank or arising under the Code, now, or in the
future, in which the Borrower obtains an interest, or the power to transfer
rights, including, without limitation, the property described on EXHIBIT A.
"COMMITTED REVOLVING LINE" is Two Million Five Hundred Thousand Dollars
($2,500,000.00).
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"CREDIT EXTENSION" is each Advance, Letter of Credit, FX Forward Contract,
or any other extension of credit by Bank for Borrower's benefit.
"CURRENT ASSETS" are amounts that under GAAP should be included on that
date as current assets on Borrower's consolidated balance sheet.
"CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year, which shall include, without
limitation, all obligations and liabilities of Borrower to Bank.
14
"DEFERRED MAINTENANCE REVENUE" is all amounts received in advance of
performance under maintenance contracts and not yet recognized as revenue.
"EBITDA" means earnings before interest, taxes, depreciation and
amortization in accordance with GAAP.
"ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5.2;
but Bank may change eligibility standards by giving Borrower thirty (30) days
prior written notice. Unless Bank agrees otherwise in writing, Eligible Accounts
shall not include:
(a) Accounts that the account debtor has not paid within ninety (90)
days of invoice date;
(b) Accounts for an account debtor, fifty percent (50%) or more of
whose Accounts have not been paid within ninety (90) days of invoice date;
(c) Credit balances over ninety (90) days from invoice date;
(d) Accounts for 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;
(e) Accounts for which the account debtor does not have its
principal place of business in the United States;
(f) Accounts for which the account debtor is a federal, state or
local government entity or any department, agency, or instrumentality
thereof;
(g) Accounts for which Borrower owes the account debtor, but only up
to the amount owed (sometimes called "contra" accounts, accounts payable,
customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on approval,
xxxx and hold, or other terms if account debtor's payment may be
conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes
any claim and Bank believes there may be a basis for dispute (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;
(k) Accounts for which Bank reasonably determines after inquiry and
consultation with Borrower collection to be doubtful.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"EXCLUDED TAX" means a Tax imposed by a jurisdiction on the net income of
Bank because Bank has a connection with that jurisdiction but not a Tax: (i)
calculated by reference to the gross amount of a payment under the Obligations
(without the allowance of a deduction); or (ii) imposed because Bank is taken to
be connected with that jurisdiction solely because it is party to a document
constituting the Obligations or a transaction contemplated by the Obligations.
15
"EXIM AGREEMENT" is that certain Export-Import Bank Loan and Security
Agreement of even date herewith by and between the Borrower and the Bank and all
documents, instruments and agreements executed in conjunction therewith, each as
may be amended from time to time.
"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.
"GOVERNMENT AGENCY" means any government or any governmental,
semi-governmental or judicial entity or authority. It also includes any
self-regulatory organisation established under statute or any stock exchange.
"INDEBTEDNESS" is present and future (a) indebtedness for borrowed money
or the deferred price of property or services, such as reimbursement and other
obligations for surety bonds and letters of credit, (b) obligations evidenced by
notes, bonds, debentures or similar instruments, (c) capital lease obligations
and (d) Contingent Obligations.
"INSOLVENCY PROCEEDING" is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law of
any State, country or jurisdiction, including assignments for the benefit of
creditors, compositions, administrations, winding up, receivership, liquidation
dissolution, extensions generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"INTELLECTUAL PROPERTY" is any and all copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work thereof, whether published or unpublished; any
and all trade secrets, and any and all intellectual property rights in computer
software and computer software products; any and all design rights which may be
available to Borrower; all mask work or similar rights available for the
protection of semiconductor chips; all patents, patent applications and like
protections; any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections; all
licenses or other rights to use any of the foregoing; or any claims for damages
by way of any past, present and future infringement of any of the foregoing.
"INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"LETTER OF CREDIT" means a letter of credit or similar undertaking issued
by Bank pursuant to Section 2.1.2.
"LETTER OF CREDIT RESERVE" has the meaning set forth in Section 2.1.2.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
"MATERIAL ADVERSE CHANGE " is: (i) A material impairment in the perfection
or priority of Bank's security interest in the Collateral or in the value of
such Collateral; (ii) a material adverse change in the business, operations, or
16
condition (financial or otherwise) of the Borrower; (iii) a material impairment
of the prospect of repayment of any portion of the Obligations ;or (iv) Bank
determines, based upon information available to it and in its reasonable
judgment, that there is a reasonable likelihood that Borrower shall fail to
comply with one or more of the financial covenants in Section 6 during the next
succeeding financial reporting period.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit, cash
management services, and foreign exchange contracts, if any, including, without
limitation, all Obligations under the Exim Agreement, and including interest
accruing after Insolvency Proceedings begin.
"PAYMENT DATE" is the first day of each calendar month.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or the Loan
Documents;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course
of business;
(e) Indebtedness incurred for the purchase, lease, or other
financing (including a sale/leaseback transaction) of Equipment not to
exceed $1,000,000.00 in the aggregate during the term hereof, which
Indebtedness may be secured in accordance with subsection (c) of the
definition of Permitted Liens;
(f) Indebtedness secured by Permitted Liens other than subsection
(c) thereof;
(g) Other Indebtedness not otherwise permitted by Section (a)- (f)
above not exceeding $100,000 in the aggregate outstanding at any time; and
(h) Extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (f) above,
provided that the principal amount thereof is not increased or the terms
thereof are not modified to impose more burdensome terms upon Borrower or
its Subsidiary, as the case may be.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Investments Schedule and existing on
the Closing Date;
(b) Loans or advances to Borrower's employees as determined by
Borrower's management up to an aggregate outstanding amount of $100,000 at
any time or loans or advances to its Subsidiaries up to an aggregate
outstanding amount of $500,000 at any time; and
(c) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any state maturing within
1 year from its acquisition, (ii) commercial paper maturing no more than 1
year after its creation and having the highest rating from either Standard
& Poor's Corporation or Xxxxx'x Investors Service, Inc., (iii) Bank's
certificates of deposit issued maturing no more than 1 year after issue;
and (iv) any other investments administered through the Bank.
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this
17
Agreement or 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, if they have no
priority over any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by
Borrower incurred for financing the acquisition of the Equipment, or (ii)
existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;
(d) Carriers', warehousemen's, mechanics', materialmen's repairmen's
or other like liens arising in the ordinary course of business which are
not overdue for a period of more than ninety (90) days or which are being
contested in good faith by appropriate proceedings;
(e) Leases or subleases and non-exclusive licenses or sublicenses
granted by Borrower in the ordinary course of Borrower's business, if the
leases, subleases, licenses and sublicenses permit granting Bank a
security interest;
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (e), but any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the
indebtedness may not increase.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.
"QUICK ASSETS" is, on any date, the Borrower's consolidated, unrestricted
cash, cash equivalents, net billed accounts receivable and investments with
maturities of fewer than 12 months determined according to GAAP.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, President,
Chief Financial Officer and Controller of Borrower.
"REVOLVING MATURITY DATE" is one day prior to the one year anniversary of
the Closing Date.
"SCHEDULE" is any attached schedule of exceptions.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (pursuant to a subordination agreement entered into
between the Bank, the Borrower and the subordinated creditor), on terms
acceptable to Bank.
"SUBSIDIARY" is any Person, joint venture, or any other business entity of
which more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by Borrower.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus (i) any amounts attributable to (a)
goodwill, (b) intangible items including unamortized debt discount and expense,
patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, minus (ii) Total Liabilities, plus (iii) Subordinated
Debt.
"TAX" includes any tax, levy, impost, deduction, charge, rate, duty,
compulsory loan or withholding which is levied or imposed by a Government
Agency, and any related interest, penalty, charge, fee or other amount.
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"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion of Subordinated Debt permitted to be paid
by Bank, but excluding all Subordinated Debt.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first above written.
BORROWER:
APPLIX, INC.
By /s/ Xxxx Xxxxxxxxxxx
----------------------------------------
Name: CEO
----------------------------------------
Title: 12/5/01
----------------------------------------
BANK:
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By /s/ R. Xxxxx Xxxxx
---------------------------------------
Name: R. Xxxxx Xxxxx
---------------------------------------
Title: Vice President
---------------------------------------
SILICON VALLEY BANK
By /s/ Xxxxxx Xxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxx
---------------------------------------
Title: Loan Admin. Team Leader
---------------------------------------
(Signed in Santa Xxxxx County, California)
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SCHEDULE
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
APPLIX, INC. ("Applix")
AND
SILICON VALLEY BANK
December 5, 2001
SECTION 5.3
LITIGATION
1. OneSource Information Services, Inc., ("OneSource") has alleged that
Applix is liable to OneSource for the payment of license fees in the
approximate amount of $42,000. Applix has disputed such liability.
OneSource and Applix are in the process of settling this dispute.
2. Mehta Corporation ("Mehta") has alleged that Applix has infringed on
a trademark or trade name of Mehta. Applix has disputed such
liability.
3. Computer Associates ("CA") has filed a complaint against Applix with
respect to a contract between CA and Applix. Applix has denied the
allegations set forth in the complaint. Applix and CA are in the
process of settling the dispute.
4. Parallax Capital Partners LLC ("Parallax") has alleged that Applix
is liable to Parallax for amounts related to the sale of assets by
Applix to Parallax. Applix has disputed such liability. Applix and
Parallax have reached a settlement of this dispute.
5. The Massachusetts Department of Revenue ("DOR") has alleged that
certain tax credits claimed by Applix, in the approximate amount of
$90,000, should be disallowed. Applix has disputed such
disallowance. Applix and DOR are in the process of settling this
dispute.
6. United Information Technologies, Inc. ("UIT") has alleged that
Applix is liable for amounts due under an agreement between UIT and
Applix. Applix has disputed such liability.
SECTION 13.1
PERMITTED INDEBTEDNESS
1. Letter of Credit, dated July 31, 2001, issued by Citizens Bank to
secure a commercial lease under which Applix is lessee; Payments by
Citizens Bank to the lessor under the Letter of Credit are secured
by $1,050,000 account with Citizens Bank (see Permitted Liens and
Permitted Investments).
2. Payment obligations outstanding with respect to acquisition of
Dynamic Decisions Pty Ltd (27 monthly payments aggregating
$10,610,000, contingent upon continued employment of certain
individuals by Dynamic Decisions Pry Ltd).
3. Intercompany payables to the following subsidiaries of Applix in the
corresponding amounts (as of 10/31/01): Applix Netherlands,
$120,000; Applix UK, $599,238; Applix Germany, $554,479; Applix
Switzerland, $343,611; Applix Australia, $253,773.
SECTION 13.1
PERMITTED INVESTMENTS
1. 342,466 shares of Series B Preferred Stock of Turbo Linux.
2. 190,000 shares of common stock of Real-Time International, Inc.
3. Notes Receivable in the approximate aggregate amount of $1,120,000
pursuant to the executive stock purchase loan program of Applix. As
previously agreed by Silicon Valley Bank, Applix plans to make
future advances, up to an additional $500,000, under this executive
stock purchase loan program and to take additional notes receivable
in return for such advances.
4. Money market account (marketable securities) with Citizens Bank in
the approximate amount of $1,050,000 to secure Letter of Credit (see
Permitted Liens and Permitted Indebtedness).
5. Intercompany receivables based on advances made to the following
subsidiaries of Applix in the corresponding amounts (as of
10/31/01): Applix Netherlands, $120,000; Applix UK, $581,912; Applix
Germany, $554,480; Applix Switzerland, $355,730; Applix Australia,
$233,103.
SECTION 13.1
PERMITTED LIENS
1. Letter of Credit, dated July 31, 2001, issued by Citizens Bank to
secure a commercial lease under which Applix is lessee; Payments by
Citizens Bank to the lessor under the Letter of Credit are secured
by $1,050,000 in cash on deposit with Citizens Bank (see Permitted
Indebtedness and Permitted Investments).
EXHIBIT A
The Collateral consists of all right, title and interest of Borrower in
and to the following:
All goods, equipment, inventory, contract rights or rights to payment of
money, franchise agreements, general intangibles (including payment
intangibles), accounts (including health-care receivables), 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), commercial tort claims,
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 in any
event:
Any and all copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished; any and all trade secrets, and any and all
intellectual property rights in computer software and computer software
products; any and all design rights which may be available to Borrower; all mask
work or similar rights available for the protection of semiconductor chips; all
patents, patent applications and like protections; any trademark and servicemark
rights, whether registered or not, applications to register and registrations of
the same and like protections; all licenses or other rights to use any of the
foregoing; or any claims for damages by way of any past, present and future
infringement of any of the foregoing. Notwithstanding the foregoing, the
Collateral shall include all accounts, license and royalty fees and other
revenues, proceeds, or income arising out of or relating to any of the foregoing
intellectual property. To the extent a court of competent jurisdiction holds
that a security interest in any Intellectual Property is necessary to have a
security interest in any accounts, license and royalty fees and other revenues,
proceeds, or income arising out of or relating to any of the foregoing
Intellectual Property, then the Collateral shall, effective as of the Closing
Date, include the Intellectual Property, to the extent necessary to permit
perfection of the Bank's security interest in such accounts, license and royalty
fees and other revenues, proceeds, or income arising out of or relating to any
of the Intellectual Property and to the extent such inclusion is not violative
of, prohibited by or would trigger an adverse consequence under any material
agreement relating to such Intellectual Property or applicable law.
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