EXHIBIT 10.7
LOAN AND SECURITY AGREEMENT
by and between
SILICON VALLEY BANK
as Bank
and
ONYX SOFTWARE CORPORATION
as Borrower
Credit Amount: $15,000,000
TABLE OF CONTENTS
Page
1. ACCOUNTING AND OTHER TERMS .............................................. 1
2. LOAN AND TERMS OF PAYMENT ............................................... 1
2.1 Credit Extensions .................................................. 1
2.1.1 Revolving Advances ........................................... 1
2.2 Letters of Credit Sublimit ......................................... 2
2.3 Intentionally Omitted .............................................. 2
2.4 Overadvances ....................................................... 2
2.5 Interest Rate, Payments ............................................ 3
2.6 Fees ............................................................... 3
3. CONDITIONS OF LOANS ..................................................... 3
3.1 Conditions Precedent to Initial Credit Extension ................... 3
3.2 Conditions Precedent to all Credit Extensions ...................... 3
4. CREATION OF SECURITY INTEREST ........................................... 4
4.1 Grant of Security Interest ......................................... 4
5. REPRESENTATIONS AND WARRANTIES .......................................... 4
5.1 Due Organization and Authorization ................................. 4
5.2 Collateral ......................................................... 4
5.3 Litigation ......................................................... 5
5.4 No Material Adverse Change in Financial Statements ................. 5
5.5 Solvency ........................................................... 5
5.6 Regulatory Compliance .............................................. 5
5.7 Subsidiaries ....................................................... 5
5.8 Full Disclosure .................................................... 6
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6. AFFIRMATIVE COVENANTS .................................................. 6
6.1 Government Compliance ............................................. 6
6.2 Financial Statements, Reports, Certificates ....................... 6
6.3 Inventory; Returns ................................................ 7
6.4 Taxes ............................................................. 7
6.5 Insurance ......................................................... 7
6.6 Primary Accounts .................................................. 8
6.7 Financial Covenants ............................................... 8
6.8 Registration of Intellectual Property Rights ...................... 9
6.9 Further Assurances ................................................ 9
7. NEGATIVE COVENANTS ...................................................... 9
7.1 Dispositions ...................................................... 9
7.2 Changes in Business, Ownership, Management or Business Locations .. 9
7.3 Mergers or Acquisitions ........................................... 9
7.4 Indebtedness ...................................................... 10
7.5 Encumbrance ....................................................... 10
7.6 Distributions; Investments ........................................ 10
7.7 Transactions with Affiliates ...................................... 10
7.8 Subordinated Debt ................................................. 10
7.9 Compliance ........................................................ 10
8. EVENTS OF DEFAULT ...................................................... 11
8.1 Payment Default ................................................... 11
8.2 Covenant Default .................................................. 11
8.3 Material Adverse Change ........................................... 11
8.4 Attachment ........................................................ 11
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8.5 Insolvency ........................................................ 12
8.6 Other Agreements .................................................. 12
8.7 Judgments ......................................................... 12
8.8 Misrepresentations ................................................ 12
9. BANK'S RIGHTS AND REMEDIES ............................................. 12
9.1 Rights and Remedies ............................................... 12
9.2 Power of Attorney ................................................. 13
9.3 Accounts Collection ............................................... 13
9.4 Bank Expenses ..................................................... 13
9.5 Bank's Liability for Collateral ................................... 14
9.6 Remedies Cumulative ............................................... 14
9.7 Demand Waiver ..................................................... 14
10. NOTICES ................................................................ 14
11. CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER ............................ 14
12. GENERAL PROVISIONS ..................................................... 15
12.1 Successors and Assigns ............................................ 15
12.2 Indemnification ................................................... 15
12.3 Time of Essence ................................................... 15
12.4 Severability of Provision ......................................... 15
12.5 Amendments in Writing, Integration ................................ 15
12.6 Counterparts ...................................................... 16
12.7 Survival .......................................................... 16
12.8 Confidentiality ................................................... 16
12.9 Attorneys' Fees, Costs and Expenses ............................... 16
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13. DEFINITIONS ............................................................ 16
13.1 Definitions ....................................................... 16
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This LOAN AND SECURITY AGREEMENT dated September 30, 2001, by and between
SILICON VALLEY BANK ("Bank"), whose address is 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx,
Xxxxxxxxxx 00000 with a loan production office located at 0000 Xxxxxxxx Xxxxx,
Xxxxxxxx, Xxxxxxxxxx 00000 and ONYX SOFTWARE CORPORATION ("Borrower"), whose
address is 0000 000xx Xxxxxx XX, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000.
The parties agree as follows:
1. ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement will 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. This Agreement shall be construed to
impart upon Bank a duty to act reasonably at all times.
2. LOAN AND TERMS OF PAYMENT
2.1 Credit Extensions.
Borrower will pay Bank when due the unpaid principal amount of
all Credit Extensions and interest on the unpaid principal amount of the Credit
Extensions.
2.1.1 Revolving Advances.
(a) Bank agrees to make Advances not exceeding (i) the
lesser of (A) the Committed Revolving Line or (B) the Borrowing Base, minus (ii)
the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit). Amounts borrowed under this Section may be
repaid without premium or penalty and reborrowed during the term of this
Agreement.
(b) Whenever Borrower desires Bank to make an Advance,
Borrower must notify Bank of such proposed Advance and the date on which it
desires Bank to make such Advance by facsimile or telephone no later than 3 p.m.
two (2) Business Days prior to the Funding Date. Borrower must promptly confirm
the notification by delivering to Bank the Payment/Advance Form attached as
Exhibit B hereto. Such notice shall (i) be made at least two (2) Business Days
in advance of the desired Funding Date, and (ii) be irrevocable. Bank will
credit Advances to Borrower's deposit account. Borrower's request for an Advance
shall be deemed to be a representation and warranty by Borrower that no Default
or Event of Default has occurred and is continuing, and that the representations
and warranties set forth in Section 5 are true and correct in all material
respects as of the time of such notice as if made at such time, provided that
those representations and warranties expressly referring to another date shall
be true, correct and complete in all material respects as of that date. Bank's
obligation to make Credit Extensions shall be expressly subject to: (x) in the
case of the initial Credit Extension the satisfaction of the conditions set
forth in Sections 3.1 and 3.2, and (y) in the case of all subsequent Credit
Extensions, the satisfaction of the conditions set forth in Section 3.2.
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(c) The Committed Revolving Line terminates on the Revolving
Maturity Date, when all Advances are immediately payable.
2.2 Letters of Credit Sublimit.
(a) Bank will issue or has issued Letters of Credit (each a
"Letter 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 the Advances; however, the face amount of outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit) may not
exceed $15,000,000. Each Letter of Credit will have an expiry date of no later
than 180 days after the Revolving Maturity Date, but Borrower's reimbursement
obligation will be secured by cash on terms acceptable to Bank at any time after
the Revolving Maturity Date if the term of this Agreement is not extended by
Bank. Borrower agrees to execute any further documentation in connection with
the Letters of Credit as Bank may reasonably request.
(b) If Bank is obligated to advance funds under a Letter of
Credit (an "L/C Disbursement"), Borrower immediately shall reimburse any L/C
Disbursement to Bank by paying to Bank an amount equal to the L/C Disbursement
not later than 11:00 a.m., Pacific time, on the date that such L/C Disbursement
is made. In the absence of such reimbursement, such L/C Disbursement immediately
and automatically shall be deemed to be an Advance hereunder and, thereafter,
shall bear interest at the rate then applicable to Advances. To the extent an
L/C Disbursement is deemed to be an Advance hereunder, Borrower's obligation to
reimburse such L/C Disbursement shall be discharged and replaced by the
resulting Advance.
(c) Borrower will indemnify, defend and hold harmless Bank and
its officers, employees, and agents against: (a) all obligations, demands,
claims, and liabilities asserted by any other party arising out of or in
connection with any Letter of Credit; and (b) all losses or Bank Expenses
incurred, or paid by Bank arising from any error, negligence, or mistake,
whether of omission or commission, in following Borrower's instructions or those
contained in the Letter of Credit, or any modification, amendment, or
supplements thereto (including reasonable attorneys fees and expenses), except
for losses caused by Bank's gross negligence or willful misconduct. Borrower
agrees to be bound by Bank's regulations and interpretations of any Letter of
Credit issued by it or for Borrower's account, even though this interpretation
may be different from Borrower's own, provided, such regulations, and
interpretations do not depart from Bank's regulations and interpretations
applicable to borrowers generally.
(d) Any and all charges, commissions, fees, and costs incurred by
Bank relating to a Letter of Credit shall be Bank Expenses for purposes of this
Agreement and immediately shall be reimbursable by Borrower to Bank.
2.3 Intentionally Omitted.
2.4 Overadvances.
If Borrower's Obligations under Section 2.1.1 and 2.2 exceed the
lesser of either (i) the Committed Revolving Line or (ii) the Borrowing Base,
Borrower must immediately pay Bank the excess.
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2.5 Interest Rate, Payments.
(a) Interest Rate. Advances accrue interest on the outstanding
principal balance at a per annum rate equal to one percentage point (1%) above
the Prime Rate. After an Event of Default, Obligations accrue interest at 5
percent above the rate effective immediately before the Event of Default. The
interest rate increases or decreases when the Prime Rate changes. Interest is
computed on a 360 day year for the actual number of days elapsed.
(b) Payments. Interest due on the Committed Revolving Line is
payable in arrears on the last day of each month. Bank may debit any of
Borrower's deposit accounts including Account Number 3300272391 for principal
and interest payments owing or any amounts Borrower owes Bank. Bank will
promptly notify Borrower when it debits Borrower's accounts. These debits are
not a set-off. Payments received after 12:00 noon Pacific time are considered
received at the opening of business on the next Business Day. When a payment is
due on a day that is not a Business Day, the payment is due the next Business
Day and additional interest will accrue.
2.6 Fees.
Borrower will pay:
(a) Facility Fee. A fully earned, non-refundable Facility Fee of
$37,500 for the Committed Revolving Line due on the Closing Date plus a fee of
0.25% per annum on the unused portion of the facility, paid quarterly in
arrears; and
(b) Bank Expenses. All Bank Expenses (including reasonable
attorneys' fees and reasonable expenses) incurred through this Agreement, are
payable at closing.
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 it receives the agreements, documents and fees
it requires.
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) and the representations and warranties in Section 5 must be
materially true on the date of the Payment/Advance Form and on the effective
date of each Credit Extension (provided that those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of that date.) and no Event of Default may
have occurred and be continuing, or result from the Credit Extension. Each
Credit Extension is Borrower's representation and warranty on that date that the
representations and warranties of
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Section 5 remain true, provided that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of that date.
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest.
Borrower grants Bank a continuing security interest in all
presently existing and later acquired Collateral to secure all Obligations and
performance of each of Borrower's duties under the Loan Documents. Except for
Permitted Liens, any security interest will be a first priority security
interest in the Collateral. Upon an Event of Default or in connection with
Section 2.2, Bank may place a "hold" on any deposit account pledged as
Collateral. If this Agreement is terminated, Bank's lien and security interest
in the Collateral, will continue until Borrower fully satisfies its Obligations.
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 execution, delivery and performance of the Loan Documents
have been duly authorized, and do not conflict with Borrower's formation
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. The Accounts are bona fide, existing obligations, and the
service or property has been performed or delivered to the account debtor or its
Bank for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has no notice of any actual or imminent Insolvency Proceeding
of any account debtor whose accounts are an Eligible Account in any Borrowing
Base Certificate. All Inventory is in all material respects of good and
marketable quality, free from material defects. Borrower is the sole owner of
the 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 no claim has been made that any part of
the Intellectual Property violates the rights of any third party, except to the
extent such claim could not reasonably be expected to cause a Material Adverse
Change.
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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 and
general counsel, threatened by or against Borrower or any Subsidiary in which a
likely 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 condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 Solvency.
The fair salable value of Borrower's assets (including goodwill
minus disposition costs) exceeds the fair value of its liabilities; the 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.
5.6 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 do so could 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.
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5.8 Full Disclosure.
No written representation, warranty or other statement of
Borrower in any certificate or written statement given to Bank (taken together
with all such written certificates and written statements 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 and forecasted
results.
6. AFFIRMATIVE COVENANTS
Borrower will do all of the following:
6.1 Government Compliance.
Borrower will 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 will 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 will deliver to Bank: (i) as soon as available, but
no later than 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, in a form and certified by a Responsible Officer
acceptable to Bank; (ii) as soon as available, but not later than 45 days after
the last day of each fiscal quarter of Borrower, copies of Borrower's 10-Q
report to the Securities and Exchange Commission ("SEC"); (iii) as soon as
available, but no later than 90 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 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 SEC; (v) a prompt report of any legal actions pending or threatened
against Borrower or any Subsidiary that could result in damages or costs to
Borrower or any Subsidiary of $100,000 or more; (vi) budgets, sales projections,
operating plans or other financial information Bank reasonably requests; and
(vii) prompt notice of any material change in the composition of the
Intellectual Property, including any subsequent ownership right of Borrower in
or to any Copyright, Patent or Trademark not shown in any intellectual property
security agreement between Borrower and Bank, or knowledge of an event that
materially adversely affects the value of the Intellectual Property.
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(b) Within 20 days after the last day of each month, Borrower
will deliver to Bank a Borrowing Base Certificate signed by a Responsible
Officer in the form of Exhibit C, with aged listings of accounts receivable and
accounts payable.
(c) Within 30 days after the last day of each month, Borrower
will deliver to Bank with the monthly financial statements a Compliance
Certificate signed by a Responsible Officer in the form of Exhibit D; provided,
however, that if the Borrower prepared monthly financial statement for the last
month of any fiscal quarter of Borrower differs significantly from the 10-Q
submitted to the SEC, Borrower will submit an additional Compliance Certificate
signed by a responsible officer at the time such 10-Q report is submitted.
(d) Bank has the right to audit Borrower's Collateral at
Borrower's reasonable expense, but the audits will be conducted no more often
than once every year unless an Event of Default has occurred and is continuing
or the most recently conducted Collateral audit is deemed unacceptable by Bank
in its sole discretion.
6.3 Inventory; Returns.
Borrower will keep all Inventory in good and marketable
condition, free from material defects. Returns and allowances between Borrower
and its account debtors will follow Borrower's customary practices as they exist
at execution of this Agreement. Borrower must promptly notify Bank of all
returns, recoveries, disputes and claims, that involve more than $50,000.
6.4 Taxes.
Borrower will make, and cause each Subsidiary to make, timely
payment of all material federal, state, and local taxes or assessments and will
deliver to Bank, on demand, appropriate certificates attesting to the payment.
6.5 Insurance.
Borrower will keep its business and the Collateral insured for
risks and in amounts, as Bank may reasonably request, provided, however,
Borrower shall not be required to maintain insurance coverage in amounts of
excess of that required for other businesses of a similar size and nature.
Insurance policies will be in a form, with companies, and in amounts that are
satisfactory to Bank in Bank's reasonable discretion. All property policies will
have a Bank's loss payable endorsement showing Bank as an additional loss payee
and all liability policies will show Bank as an additional insured and provide
that the insurer must give Bank at least 20 days notice before canceling its
policy. At Bank's request, Borrower will deliver certified copies of policies
and evidence of all premium payments. Proceeds payable under any policy will, at
Bank's option, be payable to Bank on account of the Obligations. Statutory
notice regarding insurance:
WARNING
Unless you provide us with evidence of the insurance coverage as
required by our contract or loan agreement, we may purchase insurance at your
expense to protect our interest.
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This insurance may, but need not, also protect your interest. If the collateral
becomes damaged, the coverage we purchase may not pay any claim you make or any
claim made against you. You may later cancel this coverage by providing evidence
that you have obtained property coverage elsewhere.
You are responsible for the cost of any insurance purchased by
us. The cost of this insurance may be added to your contract or loan balance. If
the cost is added to your contract or loan balance, the interest rate on the
underlying contract or loan will apply to this added amount. The effective date
of coverage may be the date your prior coverage lapsed or the date you failed to
provide proof of coverage.
This coverage we purchased may be considerably more expensive
than insurance you can obtain on your own and may not satisfy any need for
property damage coverage or any mandatory liability insurance requirements
imposed by applicable law.
6.6 Primary Accounts.
Borrower will maintain its primary depository and operating
accounts with Bank.
6.7 Financial Covenants.
Borrower will maintain as of the last day of each quarter:
(i) Quick Ratio (Adjusted). A ratio of Quick Assets to Current
Liabilities minus Deferred Maintenance Revenue and Notes Payable to Shareholders
in the form of Onyx Software common stock related to the acquisition of Market
Solutions Limited of at least 2.00 to 1.00.
(ii) Profitability. Borrower shall not incur a maximum quarterly
"Loss", as defined below, in excess of the following amounts for the period set
forth opposite to such amounts:
Fiscal Quarter Ending Net Income/(Loss)
--------------------- -----------------
September 30, 2001 ($6,000,000)
December 31, 2001 ($2,000,000)
March 31, 2002 and net income of no less
every fiscal quarter thereafter than $0.00.
For purposes of this Section, "Loss" means net income after taxes of less than
$0.00, as reported on Borrower's financial statements, and as adjusted to
exclude non-cash, non-recurring charges and non-cash amortization expenses, fees
and expenses associated with mergers and acquisitions, and that certain lease
agreement between Borrower and Bellevue Xxxxx Development LLC, which provides
for a lease term of 10 years, dated as of June 6, 2001 (other non-recurring
items not to be excluded). Amortization expenses associated with mergers and
acquisitions will also be excluded.
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6.8 Registration of Intellectual Property Rights.
Borrower will register its Patents, Copyrights and Trademarks
with the United States Patent and Trademark Office or the United States
Copyright Office within 30 days of the Closing Date and, thereafter, within 30
days of the date of acquiring or creating such Patents, Copyrights or
Trademarks, in each case which its Board of Directors of Borrower deems, in good
faith, appropriate for the development of Borrower's business, together with
additional Patents, Copyrights and Trademarks rights developed or acquired
including revisions or additions with any product before the sale or licensing
of the product to any third party.
Borrower will (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in writing
of material infringements and (ii) not allow any Intellectual Property to be
abandoned, forfeited or dedicated to the public without Bank's written consent.
6.9 Further Assurances.
Borrower will 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
Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld:
7.1 Dispositions.
Convey, sell, lease, sublease, transfer or otherwise dispose of
(collectively "Transfer"), or permit any of its Subsidiaries to Transfer, all or
any part of its business or property, other than 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; or (iii) of worn-out or obsolete Equipment.
7.2 Changes in Business, Ownership, Management or Business Locations.
Engage in or permit any of its Subsidiaries to engage in any
business other than the businesses currently engaged in by Borrower or
reasonably related thereto or have a material change in its ownership or
management (other than the sale of Borrower's equity securities in a public
offering or to venture capital investors approved by Bank) of greater than 40%.
Borrower will not, without at least 30 days prior written notice, relocate its
chief executive office, add any new offices or business locations where material
Collateral is located or change its state of formation.
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
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substantially all of the capital stock or property of another Person, except
where (i) no Event of Default has occurred and is continuing or would result
from such action during the term of this Agreement; (ii) such transaction would
not result in a decrease of more than 25% of Tangible Net Worth; and (iii) the
surviving entity of any such transaction will be formed under the laws of
Borrower's current state of incorporation. 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, 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 here, subject to Permitted Liens.
7.6 Distributions; Investments.
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. Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock, except for repurchases of stock
from former employees or directors of Borrower under the terms of applicable
repurchase agreements in an aggregate amount not to exceed $250,000 in any
fiscal year, provided that no Event of Default has occurred, is continuing or
would exist after giving effect to the repurchases.
7.7 Transactions with Affiliates.
Directly or indirectly enter into or permit any material
transaction with any Affiliate except transactions that are in the ordinary
course of Borrower's business, on terms less favorable to Borrower than would be
obtained in an arm's length transaction with a non-affiliated Person.
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 in a manner adverse to Bank 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
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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.
If Borrower fails to pay any of the Obligations within 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 will be made during
the cure period);
8.2 Covenant Default.
If 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 10
days after Borrower becomes aware of such default, or if the default cannot be
cured within 10 days or cannot be cured after Borrower's attempts within 10 day
period, and the default may be cured within a reasonable time, then Borrower has
an additional period (of not more than 30 days) to attempt to cure the default.
During the additional time, the failure to cure the default is not an Event of
Default (but no Credit Extensions will be made during the cure period);
8.3 Material Adverse Change.
If there (i) occurs a material adverse change in the business,
operations, or condition (financial or otherwise) of the Borrower, or (ii) is a
material impairment of the prospect of repayment of any portion of the
Obligations;
8.4 Attachment.
If 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 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 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 will be
made during the cure period);
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8.5 Insolvency.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);
8.6 Other Agreements.
If there is a default in any agreement between Borrower and a
third party that gives the third party the right to accelerate any Indebtedness
exceeding $250,000 or that could cause a Material Adverse Change;
8.7 Judgments.
If any final, single judgment of $250,000 or more or a
combination of final judgments aggregating $250,000 or more is entered against
Borrower and is not covered by insurance or any attachment or levy of execution
against any substantial part of Borrower's properties for any amount (not
covered by insurance) remains unpaid, unstayed on appeal, undischarged, unbonded
or undismissed for a period of ten (10) days or more; or
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 into this Agreement or any Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies.
When an Event of Default occurs and continues Bank may, without
notice or demand, do any or all of the following:
(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) 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 necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the
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Collateral is located, take and maintain possession of any part of the
Collateral, and pay, purchase, contest, or compromise any Lien which appears to
be prior or superior to its security interest and pay all expenses incurred.
Borrower grants Bank a license to enter and occupy any of its premises, without
charge, to exercise any of Bank's rights or remedies;
(e) Apply to the Obligations any (i) balances and deposits of
Borrower Bank 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. 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 its rights under this Section, Borrower's rights
under all licenses and all franchise agreements inure to Bank's benefit; and
(g) Dispose of the Collateral according to the Code.
9.2 Power of Attorney.
Effective only when an Event of Default occurs and continues,
Borrower irrevocably appoints Bank, as its lawful attorney 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) make, settle, and adjust all claims under
Borrower's insurance policies; (iv) settle and adjust disputes and claims about
the Accounts directly with account debtors, for amounts and on terms Bank
determines are reasonable; and (v) transfer the Collateral into the name of Bank
or a third party as the Code permits. Bank may exercise the 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. Bank's 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.
When an Event of Default occurs and continues, Bank may notify
any Person owing Borrower money of Bank's security interest in the funds and
verify the amount of the Account. Borrower must collect all payments in trust
for Bank and, if requested by Bank, immediately deliver the payments to Bank in
the form received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses.
If Borrower fails to pay any amount or furnish any required proof
of payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any
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amounts paid by Bank are Bank Expenses and immediately due and payable, bearing
interest at the then applicable rate and secured by the Collateral. No payments
by Bank are deemed an agreement to make similar payments in the future or Bank's
waiver of any Event of Default.
9.5 Bank's Liability for Collateral.
If Bank complies with reasonable banking practices and Section
9-207 of the Code, Bank is not liable 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 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 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 delay is not a waiver, election, or acquiescence.
No waiver is effective unless signed by Bank and then is only effective for the
specific instance and purpose for which it was given.
9.7 Demand Waiver.
Borrower waives demand, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
10. NOTICES
All notices or demands by any party about 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 to the addresses set forth at the beginning of
this Agreement. A party may change its notice address by giving the other party
written notice.
11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Washington 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 King County, Washington.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF 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
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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 under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank shall have the right, without the consent of
or notice to Borrower, to sell, transfer, negotiate, or grant participation in
all or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.
12.2 Indemnification.
Borrower will indemnify, defend and hold harmless each Bank and
its officers, employees, and Bank against: (a) all obligations, demands, claims,
and liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys' fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence.
Time is of the essence for the performance of all obligations in
this Agreement.
12.4 Severability of Provision.
Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.
12.5 Amendments in Writing, Integration.
All amendments to this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge into this
Agreement and the Loan Documents. UNDER WASHINGTON AND OREGON LAW, MOST
AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK AFTER OCTOBER 3, 1989
CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY
OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN
WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY US TO BE ENFORCEABLE.
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12.6 Counterparts.
This Agreement may be executed in any number of counterparts and
by different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 Survival.
All covenants, representations and warranties made in this
Agreement continue in full force while any Obligations remain outstanding. The
obligations of Borrower in Section 12.2 to indemnify Bank will survive until all
statutes of limitations for actions that may be brought against Bank have run.
12.8 Confidentiality.
In handling any confidential information, Bank will 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 loans, (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with Bank's
examination or audit and (v) as Bank consider appropriate 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.
12.9 Attorneys' Fees, Costs and Expenses.
In any action or proceeding between Borrower and Bank arising out
of the Loan Documents, the prevailing party will be entitled to recover its
reasonable attorneys' fees and other reasonable costs and expenses incurred, in
addition to any other relief to which it may be entitled.
13. DEFINITIONS
13.1 Definitions.
In this Agreement:
"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.
"Advance" or "Advances" is a loan advance (or advances)
under the Committed Revolving Line.
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"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" means all reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, documentation, administration, funding, and
enforcement of the Loan Documents; and Bank's reasonable attorneys' fees and
expenses incurred in amending, modifying, enforcing or defending the Loan
Documents, including the exercise of any rights or remedies afforded hereunder
or under applicable law, whether or not suit is brought.
"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 (i) 80% of Eligible Accounts as determined by
Bank from Borrower's most recent Borrowing Base Certificate; provided, however,
that Bank may lower the percentage of the Borrowing Base after performing an
audit of Borrower's Collateral.
"Business Day" is any day that is not a Saturday, Sunday or a day
on which Bank is closed.
"Closing Date" is the date of this Agreement.
"Code" is the Washington Uniform Commercial Code.
"Collateral" is the property described on Exhibit.
"Committed Revolving Line" is an Advance of up to $15,000,000.
"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.
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"Copyrights" are all copyright rights, applications or
registrations and like protections in each work or authorship or derivative
work, whether published or not (whether or not it is a trade secret) now or
later existing, created, acquired or held.
"Credit Extension" is each Advance, Letter of Credit, Term Loan,
or any other extension of credit by Bank for Borrower's benefit.
"Current Liabilities" are the aggregate amount of Borrower's
Total Liabilities which mature within one (1) year.
"Deferred Maintenance Revenue" is all amounts received in advance
of performance under maintenance contract and not yet recognized as revenue.
"Eligible Accounts" are Accounts in the ordinary course of
Borrower's business that meet all Borrower's representations and warranties in
Section 5; but Bank may change eligibility standards by giving Borrower notice.
Unless Bank agrees otherwise in writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has not paid within 90 days
of invoice date, or 120 days if extended terms have been granted to account
debtor (provided that Accounts granted on extended terms not paid within 91 and
120 days may not exceed 20% of the total borrowing Base);
(b) Accounts for an account debtor, 50% or more of whose
Accounts have not been paid within 90 days of invoice date, or 120 days if
extended terms have been granted to account debtor;
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose
total obligations to Borrower exceed 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, if such Accounts exceed 20% of
Eligible Accounts;
(f) Accounts for which the account debtor is a federal, state or
local government entity or any department, agency, or instrumentality;
(g) Accounts or 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;
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(i) Accounts for which the account debtor is Borrower's
Affiliate, officer, employee, or Bank;
(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 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.
"Funding Date" means any date on which an Advance is made to or
on account of Borrower under this Agreement.
"GAAP" is generally accepted accounting principles.
"Indebtedness" is (a) indebtedness for borrowed money or the
deferred price of property or services, such as reimbursement and other
obligations for surety bonds and letters of credit, (b) obligations evidenced by
notes, bonds, debentures or similar instruments, (c) capital lease obligations
and (d) Contingent Obligations.
"Insolvency Proceeding" are proceedings 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.
"Intellectual Property" is:
(a) Copyrights, Trademarks, Patents, and Mask Works including
amendments, renewals, extensions, and all licenses or other rights to use and
all license fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in
computer software and computer software products now or later existing, created,
acquired or held;
(c) All design rights which may be available to Borrower now or
later created, acquired or held;
(d) Any claims for damages (past, present or future) for
infringement of any of the rights above, with the right, but not the obligation,
to xxx and collect damages for use or infringement of the intellectual property
rights above; and
19
All proceeds and products of the foregoing, including all
insurance, indemnity or warranty payments.
"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" is defined in Section 2.2.
"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 Bank or for the benefit of Bank in
connection with this Agreement, all as amended, extended or restated.
"Mask Works" are all mask works or similar rights available for
the protection of semiconductor chips, now owned or later acquired.
"Material Adverse Change" is defined in Section 8.3.
"Obligations" means all debt, principal, interest, fees, charges,
expenses and attorneys' fees and costs and other amounts, obligations,
covenants, and duties owing by Borrower to Bank of any kind and description
(whether pursuant to or evidenced by the Loan Documents, or by any other
agreement between Bank and Borrower, and whether or not for the payment of
money), whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, including the principal, interest,
Letter of Credit fees, and cash management fees (if any) due with respect to the
Credit Extensions, interest accruing after Insolvency Proceedings begin, debt
liabilities or obligations of Borrower assigned to Bank and further including
all Bank's Expenses Borrower is required to pay or reimburse by the Loan
Documents, by law, or otherwise.
"Patents" are patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues, extensions
and continuations-in-part of the same.
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"Permitted Indebtedness" is:
(a) Borrower's indebtedness to Bank under this Agreement or any
other Loan Document;
(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 secured by Permitted Liens;
(f) Indebtedness of Borrower to any Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of Borrower (provided
that the primary obligations are not prohibited hereby), and Indebtedness of any
Subsidiary to any other Subsidiary and Contingent Obligations of any Subsidiary
with respect to obligations of any other Subsidiary (provided that the primary
obligations are not prohibited hereby);
(g) Extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (f) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be; and
(h) Interest rate and foreign currency hedge agreements, not to
exceed an aggregate of Three Million Dollars ($3,000,000.00); and
(i) Other Indebtedness not otherwise permitted by Section 7.4
not exceeding Five Hundred Thousand Dollars ($500,000) in the aggregate
outstanding at any time.
"Permitted Investments" are:
(a) Investments shown on the Schedule and existing on the
Closing Date; and
(b) (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
Investments permitted by Borrower's investment policy, as amended from time to
time, provided that such investment policy (and any such amendment thereto) has
been approved by Bank (such approval not to be unreasonably withheld);
(c) Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of Borrower;
21
(d) Investments accepted in connection with Transfers permitted
by Section 7.1;
(e) Investments otherwise permitted by Section 7.3;
(f) Investments of Subsidiaries in other Subsidiaries or
Borrower and Investments by Borrower in Subsidiaries not to exceed Five Hundred
Thousand Dollars ($500,000) in the aggregate in any fiscal year;
(g) Investments consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plans or agreements approved by Borrower's Board of
Directors;
(h) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of business;
(i) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business; provided that this paragraph (h)
shall not apply to Investments of Borrower in any Subsidiary;
(j) Joint ventures or strategic alliances in the ordinary course
of Borrower's business consisting of the non-exclusive licensing of technology,
the development of technology or the providing of technical support, provided
that any cash investments by Borrower do not exceed One Million Dollars
($1,000,000) in the aggregate in any fiscal year; and
(k) Other Investments not otherwise permitted by Section 7.6 not
exceeding Five Hundred Thousand Dollars ($500,000) in the aggregate outstanding
at any time.
"Permitted Liens" are:
(a) Liens existing on the Closing Date and shown on the Schedule
or arising under this 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 or its Subsidiaries 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;
22
(d) Licenses or sublicenses granted in the ordinary course of
Borrower's business and any interest or title of a licensor or under any license
or sublicense, if the licenses and sublicenses permit granting Bank, a security
interest;
(e) Leases or subleases granted in the ordinary course of
Borrower's business, including in connection with Borrower's leased premises or
leased property;
(f) Liens incurred in the extension, renewal or refinancing of
the indebtedness secured by Liens described in (a) through (c), but any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness may
not increase.
(g) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.4 or 8.7;
(h) Liens in favor of other financial institutions arising in
connection with Borrower's deposit accounts held at such institutions, provided
that Bank has a perfected security interest in the amounts held in such deposit
accounts; and
(i) Other Liens not described above arising in the ordinary
course of business and not having or not reasonably likely to have a material
adverse effect on Borrower and its Subsidiaries taken as a whole.
"Person" is any individual, sole proprietorship, partnership,
limited liability company, joint venture, company association, 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, plus accounts receivable.
"Responsible Officer" is each of the Chief Executive Officer, the
President, the Chief Financial Officer, Treasurer, and the Controller of
Borrower.
"Revolving Maturity Date" is August 31, 2002.
"Schedule" is any attached schedule of exceptions.
"Subordinated Debt" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form reasonably acceptable to Bank and approved by
Bank in writing such approval will not be reasonably withheld.
23
"Subsidiary" is for any Person, or any other business entity of
which more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person.
"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 such as 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, and (ii) Total Liabilities.
"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 Subordinated Debt allowed to be
paid, but excluding all other Subordinated Debt.
"Trademarks" are trademark and servicemark rights, registered or
not, applications to register and registrations and like protections, and the
entire goodwill of the business of Assignor connected with the trademarks.
BORROWER:
ONYX SOFTWARE CORPORATION
By: /s/ Xxxxx X. Xxxx
-------------------------------------
Title: Treasurer
---------------------------------
BANK:
SILICON VALLEY BANK
By: /s/ Xxxx X. Xxxxxx
-------------------------------------
Title: Senior Vice President
---------------------------------
24
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest in
and to the following:
All goods and equipment now owned or hereafter acquired, including, without
limitation, all machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; 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
and accessions to and proceeds thereof.
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR TWO BUSINESS DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
--------------------
FAX#: (000) 000-0000 TIME:
--------------------
-------------------------------------------------------------------------------
FROM: ONYX SOFTWARE CORPORATION
--------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
----------------------------------------------------------
PHONE NUMBER:
------------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
------------------------- ----------------------
FUNDING DATE
---------------------------
REQUESTED TRANSACTION TYPE REQUESTED DOLLAR AMOUNT
-------------------------- -----------------------
PRINCIPAL INCREASE (ADVANCE) $
--------------------------------------
PRINCIPAL PAYMENT (ONLY) $
--------------------------------------
INTEREST PAYMENT (ONLY) $
--------------------------------------
PRINCIPAL AND INTEREST (PAYMENT) $
--------------------------------------
OTHER INSTRUCTIONS:
------------------------------------------------------------
-------------------------------------------------------------------------------
All Borrower's representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone request for and Advance confirmed by this Borrowing Certificate; but
those representations and warranties expressly referring to another date shall
be true, correct and complete in all material respects as of that date.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Bank USE ONLY
TELEPHONE REQUEST:
-----------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
------------------------------------- ----------------------------------
Authorized Requester Phone #
------------------------------------- ----------------------------------
Received By (Bank) Phone #
--------------------------------------
Authorized Signature (Bank)
-------------------------------------------------------------------------------
EXHIBIT C
BORROWING BASE CERTIFICATE
--------------------------------------------------------------------------------
Borrower: ONYX SOFTWARE CORPORATION Bank: Silicon Valley Bank
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Commitment Amount: $15,000,000
--------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ________ $
----------------------
2. Additions (please explain on reverse) $
----------------------
3. TOTAL ACCOUNTS RECEIVABLE $
----------------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days (standard terms) $
----------------------
5. Balance of 20% over 90 day but less than 120 day accounts
(extended terms) $
----------------------
6. 50% of Accounts for single account debtor over 120 days
(extended terms) or 90 days (standard terms) $
----------------------
7. Credit balances over 90 days $
----------------------
8. Concentration Limits $
----------------------
9. Foreign Accounts* $
----------------------
10. Governmental Accounts $
----------------------
11. Contra Accounts $
----------------------
12. Promotion or Demo Accounts $
----------------------
13. Intercompany/Employee Accounts $
----------------------
14. Other (please explain on reverse) $
----------------------
15. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
----------------------
16. Eligible Accounts (#3minus #15) $
----------------------
17. LOAN VALUE OF ACCOUNTS (80% of #16) $
----------------------
*limited to 20% of total Borrowing Base
BALANCES
18. Maximum Loan Amount $
----------------------
19. Total Funds Available (Lesser of #18 or #17) $
----------------------
20. Present balance owing on Line of Credit $
----------------------
21. Outstanding under Sublimits (LC) $
----------------------
22. RESERVE POSITION (#19minus #20 and #21) $
----------------------
The undersigned represents and warrants that this is true, complete and
correct, and that the information in this Borrowing Base Certificate complies
with the representations and warranties in the Loan and Security Agreement
between the undersigned, and Silicon Valley Bank.
COMMENTS:
ONYX SOFTWARE CORPORATION
BANK USE ONLY
Rec'd By:
-------------
Auth. Signer
Date:
-----------------
Verified:
-------------
Auth. Signer
Date:
-----------------
By:
---------------------------
Authorized Signer
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
FROM: ONYX SOFTWARE CORPORATION
The undersigned authorized officer of ONYX SOFTWARE CORPORATION
("Borrower") certifies that under the terms and conditions of the Loan and
Security Agreement, dated as of September 30, 2001 between Borrower and Bank
(the "Agreement"), (i) Borrower is in complete compliance for the period ending
_______________ with all required covenants except as noted below and (ii) all
representations and warranties in the Agreement are true and correct in all
material respects on this date. Attached are the required documents supporting
the certification. The Officer certifies that these are prepared in accordance
with Generally Accepted Accounting Principles (GAAP) consistently applied from
one period to the next except as explained in an accompanying letter or
footnotes. The Officer acknowledges that no borrowings may be requested at any
time or date of determination that Borrower is not in compliance with any of the
terms of the Agreement, and that compliance is determined not just at the date
this certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies
------------------ -------- --------
Monthly financial statements + CC Quarterly within 30 days Yes No
Annual (Audited) FYE within 90 days Yes No
10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No
A/R & A/P Agings Monthly within 20 days Yes No
Borrowing Base Certificate Monthly within 20 days Yes No
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Minimum Quick Ratio (Adjusted) 2.00:1.00 _____:1.00 Yes No
Profitability: Quarterly $_________ Yes No
"Loss" not to exceed: (i) ($6,000,000) for fiscal quarter ending Yes No
September 30, 2001; (ii) ($2,000,000) for fiscal
quarter ending December 31, 2001, and (iii) $0.00
for every quarter thereafter.
Have there been updates to Borrower's intellectual property, if appropriate? Yes / No
1
Comments Regarding Exceptions: See Attached.
Sincerely,
ONYX SOFTWARE CORPORATION
---------------------------------------
SIGNATURE
---------------------------------------
TITLE
---------------------------------------
DATE
BANK USE ONLY
Received by:
----------------------------
AUTHORIZED SIGNER
Date:
----------------------------------
Verified:
------------------------------
AUTHORIZED SIGNER
Date:
----------------------------------
Compliance Status: Yes No
2
[SILICON VALLEY BANK LOGO]
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: ONYX SOFTWARE CORPORATION
LOAN OFFICER: Xxxx Xxxxxx
DATE: September 30, 2001
Revolving Loan Fee $37,500
Documentation Fee _________
Legal Fees _________
TOTAL FEE DUE $
=======
Please indicate the method of payment:
{ } A check for the total amount is attached.
{ } Debit DDA # __________________ for the total amount.
{ } Loan proceeds
Borrower:
By:________________________________________
(Authorized Signer)
___________________________________________
Silicon Valley Bank, as Bank Date)
Account Officer's Signature
