EXHIBIT 10.41
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SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
BORROWER: SATCON TECHNOLOGY CORPORATION
SATCON POWER SYSTEMS, INC.
SATCON ELECTRONICS, INC.
SATCON APPLIED TECHNOLOGY, INC.
SATCON POWER SYSTEMS CANADA LTD.
ADDRESS: 000 XXXXX XXXXXX
XXXXXXXXX, XXXXXXXXXXXXX 00000
DATE: SEPTEMBER 13, 2002
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date 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 Xxxxxx Executive Park, Suite 200, 0000
Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 ("Silicon") and the borrowers
named above (jointly and severally the "Borrower"), with offices located at the
above address ("Borrower's Address"). The Schedule and Exhibits to this
Agreement (the "Schedule" and the "Exhibits," respectively) shall for all
purposes be deemed to be part of this Agreement, and the same are integral parts
of this Agreement. (Definitions of certain terms used in this Agreement are set
forth in Section 8 below.)
RECITALS
Each of the entities comprising the Borrower wishes to obtain credit from
time to time from Silicon, and Silicon desires to extend credit to each and/or
any one of the entities comprising the Borrower. This Agreement sets forth the
terms on which Silicon will advance credit to Borrower, and Borrower, jointly
and several, will repay the amounts owing to Silicon.
1. LOANS.
1.1 LOANS. Silicon will make loans to Borrower (the "Loans") up to the
amounts (the "Credit Limit") shown on the Schedule, provided no Default or Event
of Default has occurred and is continuing, and subject to deduction of any
Reserves for accrued interest and such other Reserves as Silicon deems proper
from time to time, upon notice to Borrower. Amounts borrowed may be repaid and
reborrowed during the term of this Agreement.
1.2 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Silicon's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans. Silicon may, in its discretion, charge interest to
Borrower's Deposit Accounts maintained with Silicon.
1.3 OVERADVANCES. If at any time or for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit (an
"Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay
Silicon interest on the outstanding amount of any Overadvance, on demand, at a
rate equal to the interest rate which would otherwise be applicable to the
Overadvance, plus an additional two percent (2%) per annum.
1.4 FEES. Borrower shall pay Silicon the fees shown on the Schedule,
which are in addition to all interest and other sums payable to Silicon and are
not refundable.
1.5 LETTERS OF CREDIT. At the request of Borrower, Silicon may, in its
commercially reasonable discretion, issue or arrange for the issuance of letters
of credit for the account of Borrower, in each case in form and substance
satisfactory to Silicon in its commercially reasonable discretion (collectively,
"Letters of Credit"). The aggregate face amount of all outstanding Letters of
Credit from time to time shall not exceed the amount shown on the Schedule (the
"Letter of Credit Sublimit"), and shall be reserved against Loans which would
otherwise be available hereunder. Borrower shall pay all bank charges (including
charges of Silicon) for the issuance of Letters of Credit, together with such
commercially reasonable additional fee as Silicon's letter of credit department
shall charge in connection with the issuance of the Letters of Credit. Any
payment by Silicon under or in connection with a Letter of Credit shall
constitute a Loan hereunder on the date such payment is made. Each Letter of
Credit shall have an expiry date no later than thirty days prior to the Maturity
Date. Borrower hereby agrees to indemnify, save, and hold Silicon harmless from
any loss, cost, expense, or liability, including payments made by Silicon,
expenses, and reasonable attorneys' fees incurred by Silicon arising out of or
in connection with any Letters of Credit, excluding gross negligence or willful
misconduct by Silicon. Borrower agrees to be bound by the regulations and
interpretations of the issuer of any Letters of Credit guarantied by Silicon and
opened for Borrower's account or by Silicon's interpretations of any Letter of
Credit issued by Silicon for Borrower's account, and Borrower understands and
agrees that Silicon shall not be liable for any error, negligence, or mistake,
whether of omission or commission, in following Borrower's instructions or those
contained in the Letters of Credit or any modifications, amendments, or
supplements thereto. Borrower understands that Letters of Credit may require
Silicon to indemnify the issuing bank for certain costs or liabilities arising
out of claims by Borrower against such issuing bank. Borrower hereby agrees to
indemnify and hold Silicon harmless with respect to any loss, cost, expense, or
liability incurred by Silicon under any Letter of Credit as a result of
Silicon's indemnification of any such issuing bank. The provisions of this Loan
Agreement, as it pertains to Letters of Credit, and any other present or future
documents or agreements between Borrower and Silicon relating to Letters of
Credit are cumulative.
1.6 FOREIGN EXCHANGE SUBLIMIT. Borrower may use up to the amount set
forth on the Schedule for foreign exchange forward contracts with Silicon under
which Borrower commits to purchase from or sell to Silicon a set amount of
foreign currency more than one business day after the contract date (the "FX
Forward Contract"). Silicon shall subtract 10% of each outstanding FX Forward
Contract from the foreign exchange sublimit. Silicon may terminate the FX
Forward Contracts if an Event of Default occurs.
1.7 CASH MANAGEMENT SERVICES SUBLIMIT. Borrower may use up to the
amount set forth on the Schedule for Cash Management Services. Such aggregate
amounts utilized under the Cash Management Services Sublimit shall at all times
reduce the amount otherwise available for Loans hereunder. Any amounts Silicon
pays on behalf of Borrower or any amounts that are not paid by Borrower for any
Cash Management Services will be treated as Loans hereunder and will accrue
interest at the interest rate applicable to Loans.
1.8 DESIGNATION OF AGENT. Each Borrower hereby designates Satcon
Technology Corporation (the"Agent") as the agent of that Borrower to discharge
the duties and responsibilities of the Agent as provided herein.
1.9 OPERATION OF AGREEMENT. (a) Except as otherwise permitted by
Silicon, loans hereunder shall be requested solely by the Agent as agent for
each Borrower.
(b) Any Loan which may be made by Silicon under this Agreement
and which is directed to the Agent is received by the Agent in trust for that
Borrower who is intended to receive such Loan. The Agent shall distribute the
proceeds of any such Loan solely to that Borrower. Each Borrower shall be
directly indebted to Silicon for each Loan distributed to any Borrower by the
Agent, together with all accrued interest thereon, as if that amount had been
advanced directly by Silicon to a Borrower (whether or not the subject Loan was
based upon the accounts and/or inventory or other assets of the Borrower which
actually received such distribution), in addition to
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which each Borrower shall be liable to Silicon for all Obligations under this
Agreement, whether or not the proceeds of the Loan are distributed to any
particular Borrower.
(c) Silicon shall have no responsibility to inquire as to the
distribution of Loans made by Silicon through the Agent as described herein.
1.10 LOANS DIRECTLY TO BORROWER. (a) If, for any reason, and at any time
during the term of this Agreement,
(i) any Borrower, including the Agent, as agent for each
Borrower, shall be unable to, or prohibited from carrying out the terms and
conditions of this Agreement (as determined by Silicon in Silicon's sole
and absolute discretion); or
(ii) Silicon deems it inexpedient (in Silicon's sole and
absolute discretion) to continue making Loans to or for the account of any
particular Borrower, or to channel such loans and Loans through the Agent,
then Silicon may make Loans directly to such Borrower as Silicon determines
to be expedient, which Loans may be made without regard to the procedures
otherwise included in this Article 1.
(b) In the event that Silicon determines to forgo the procedures
included herein pursuant to which Loans are to be channeled through the
Agent, then Silicon may designate one or more Borrower to fulfill the
financial and other reporting requirements otherwise imposed herein upon
the Agent.
(c) Each Borrower shall remain liable to Silicon for the payment
and performance of all Obligations (which payment and performance shall
continue to be secured by all Collateral) notwithstanding any determination
by Silicon to cease making Loans to or for the benefit of any Borrower.
1.11 CONTINUATION OF AUTHORITY OF AGENT. The authority of the Agent to
request Loans on behalf of, and to bind, each Borrower, shall
continue unless and until Silicon acts as provided in Section 1.8,
above, or Silicon actually receives:
(a) written notice of: (i) the termination of such authority, and
(ii) the subsequent appointment of a successor Agent, which notice is
executed by the respective Presidents of each Borrower (other than the
President of the Agent being replaced) then eligible for borrowing under
this Agreement; and
(b) written notice from the successor Agent (i) accepting such
appointment; (ii) acknowledging that the removal and appointment has been
effected by the respective Presidents of each Borrower eligible for
borrowing under the within Agreement; and (iii) acknowledging that from and
after the date of appointment, the newly appointed Agent shall be bound by
the terms hereof, and that as used herein, the term "Agent" shall mean and
include the newly appointed Agent.
1.12 INDEMNIFICATION. The Agent and each Borrower respectively shall
indemnify, defend, and save and hold Silicon harmless from and against any
liabilities, claims, demands, expenses, or losses made against or suffered by
Silicon on account of, or arising out of, this Agreement, Silicon's reliance
upon Loan requests made by the Agent, or any other action taken by Silicon
hereunder or under any of Silicon's various agreements with the Agent and/or any
Borrower and/or any other person arising under this Agreement.
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of all of
the Obligations when due, and the performance of each of the Borrower's duties
under this Agreement and all documents executed in connection
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herewith, Borrower hereby grants to Silicon a continuing security interest in
all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located: All Inventory, Equipment, Payment Intangibles,
Letter-of-Credit Rights, Supporting Obligations, Receivables, General
Intangibles, Deposit Accounts, and all money, and all property now or at any
time in the future in Silicon's possession (including claims and credit
balances), and all proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties), all products and all
books and records related to any of the foregoing (all of the foregoing,
together with all other property in which Silicon may now or in the future be
granted a lien or security interest, is referred to herein, collectively, as the
"Collateral"). The security interest granted herein shall be a first priority
security interest in the Collateral. The Collateral may also be subject to
Permitted Liens. Silicon may, while an event of default exists, place a "hold"
on any Deposit Account pledged as collateral. If the Borrower shall at any time
acquire a commercial tort claim, Borrower shall promptly notify Silicon in a
writing signed by Borrower of the brief details thereof and grant to Silicon 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 Silicon. Notwithstanding the foregoing, the Collateral does not
include: any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work, whether
published or unpublished, now owned or later acquired; any patents, trademarks,
service marks and applications therefor; any trade secret rights, including any
rights to unpatented inventions, now owned or hereafter acquired.
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.
2.2. RELEASE OF CERTAIN COLLATERAL. Provided no Event of Default then
exists, Silicon agrees to enter into an amendment to this Agreement in form and
substance reasonably satisfactory to Silicon (the "Amendment") to modify the
Collateral to a first priority security interest only on Borrower's Inventory,
Payment Intangibles and Receivables and proceeds thereof, upon (i) receipt by
Borrower of at least $10,000,000 after the date hereof as a result of the
issuance by Borrower of equity or subordinated debt and (ii) Borrower
maintaining deposits with Silicon of at least $5,000,000 at all times. Any such
modification of the Collateral shall only be effective upon execution of the
Amendment by Silicon and Borrower.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation, is and
will continue to be, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. Borrower is and will continue
to be qualified and licensed to do business in all jurisdictions in which any
failure to do so would have a material adverse effect on Borrower. The
execution, delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (i) have been duly and validly authorized, (ii)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), (iii) do not violate Borrower's articles or certificate of
incorporation, Borrower's by-laws, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names
during the past five (5) years. Borrower shall give Silicon 30 days' prior
written notice before changing its name or doing business under any other name.
The Borrower will be deemed to be in compliance with this provision by
furnishing Silicon with notice of acquiring any new trade name within fifteen
(15) days after such acquisition provided that prior notice, as otherwise
required hereunder, was prohibited by a confidentiality
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agreement to which the Borrower is a party. Borrower has complied, and will in
the future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give Silicon at least 30 days prior
written notice before opening any additional place of business, changing its
chief executive office, changing its state of formation or moving any of the
Collateral to a location other than Borrower's Address or one of the locations
set forth on the Schedule except for the movement of goods in the ordinary
course of business. The Borrower will be deemed in to be in compliance with this
provision by furnishing Silicon with notice of a new location where Collateral
may be located within fifteen (15) days after establishing such location
provided that prior notice, as otherwise required hereunder, was prohibited by a
confidentiality agreement to which the Borrower is a party.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at
all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. Silicon now has,
and will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Silicon and the Collateral against all claims
of others. None of the Collateral now is or will be affixed to any real property
in such a manner, or with such intent, as to become a fixture. Borrower is not
and will not become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's
right to remove any Collateral from the leased premises. Whenever any Collateral
is located upon premises in which any third party has an interest (whether as
owner, mortgagee, beneficiary under a deed of trust, lien or otherwise),
Borrower shall, whenever requested by Silicon, use its best efforts to cause
such third party to execute and deliver to Silicon, in form acceptable to
Silicon, such waivers and subordinations as Silicon shall specify, so as to
ensure that Silicon's rights in the Collateral are, and will continue to be,
superior to the rights of any such third party. Borrower will keep in full force
and effect, and will comply with all the terms of, any lease of real property
where any of the Collateral now or in the future may be located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in
good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Silicon in writing of any
material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements
now or in the future delivered to Silicon have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and accurately reflect the financial condition of
Borrower, at the times and for the periods therein stated. Between the last date
covered by any such statement provided to Silicon and the date hereof, there has
been no material adverse change in the financial condition or business of
Borrower. Borrower is now and will continue to be solvent.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Silicon in
writing of the commencement of, and any material development in, the
proceedings, and (iii) takes all reasonable steps required to keep the contested
taxes from becoming a lien upon any
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of the Collateral. Borrower is unaware of any claims or adjustments proposed for
any of Borrower's prior tax years which could result in additional taxes
becoming due and payable by Borrower. Borrower has paid, and shall continue to
pay all amounts necessary to fund all present and future pension, profit sharing
and deferred compensation plans in accordance with their terms, and Borrower has
not and will not withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
such plan which could result in any liability of Borrower, including any
liability to the Pension Benefit Guaranty Corporation or its successors or any
other governmental agency. Borrower shall, at all times, utilize the services of
an outside payroll service providing for the automatic deposit of all payroll
taxes payable by Borrower.
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to Borrower, including, but not limited to, those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, and all environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Silicon in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower involving any single claim of
$50,000 or more, or involving $100,000 or more in the aggregate.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
working capital purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
3.12 WITHHOLDING FOR SATCON POWER SYSTEMS CANADA LTD. In the event any
payments are received by Silicon from SatCon Power Systems Canada Ltd. (the "Cdn
Borrower") hereunder such payments will be made subject to applicable
withholding for any taxes, levies, fees, deductions, withholding, restrictions
or conditions of any nature whatsoever. Specifically, if at any time any
governmental authority, applicable law, regulation or international agreement
requires the Cdn Borrower to make any such withholding or deduction from any
such payment or other sum payment hereunder to Silicon, the Cdn Borrower hereby
covenants and agrees that the amount due from the Cdn Borrower with respect to
such payment or other sum payable hereunder will be increased to the extent
necessary to ensure that, after the making of such required withholding or
deduction, Silicon receives a net sum equal to the sum which it would have
received had no withholding or deduction been required and the Cdn Borrower
shall pay the full amount withheld or deducted to the relevant governmental
authority. The Cdn Borrower will, upon request, furnish Silicon with proof
satisfactory to Silicon indicating that the Cdn Borrower has made such
withholding payment provided, however, that the Cdn Borrower need not make any
withholding payment if the amount or validity of such withholding payment is
contested in good faith by appropriate and timely proceedings and as to which
payment in full is bonded or reserved against by the Cdn Borrower. The
agreements and obligations of the Cdn Borrower contained in this Section shall
survive the Maturity Date.
4. RECEIVABLES.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to Silicon as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made, (i)
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services in the ordinary course of Borrower's business, and (ii)
meet the Minimum Eligibility Requirements set forth in Section 8 below.
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4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and endorsements on all documents, instruments, and agreements
relating to all Receivables are and shall be genuine, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall
deliver to Silicon transaction reports and loan requests (including, without
limitation, a statement setting forth the intended use of each requested Loan),
schedules and assignments of all Receivables, and schedules of collections, all
on Silicon's standard forms; provided, however, that Borrower's failure to
execute and deliver the same shall not affect or limit Silicon's security
interest and other rights in all of Borrower's Receivables, nor shall Silicon's
failure to advance or lend against a specific Receivable affect or limit
Silicon's security interest and other rights therein. In the event Borrower has
elected to be on "non-borrowing reporting status" (see Section 6 of the
Schedule), Borrower shall furnish Silicon with a Loan request at least thirty
(30) days prior to the requested funding date. Otherwise, Loan requests received
after 12:00 Noon will not be considered by Silicon until the next Business Day.
Together with each such schedule and assignment, or later if requested by
Silicon, Borrower shall, at Silicon's request, furnish Silicon with copies or
originals of all contracts, orders, invoices, and other similar documents, and
all original shipping instructions, delivery receipts, bills of lading, and
other evidence of delivery, for any goods the sale or disposition of which gave
rise to such Receivables, and Borrower warrants the genuineness of all of the
foregoing. Borrower shall also furnish to Silicon an aged accounts receivable
trial balance in such form and at such intervals as Silicon shall request. In
addition, Borrower shall deliver to Silicon the originals of all instruments,
chattel paper, security agreements, guarantees and other documents and property
evidencing or securing any Receivables, immediately upon receipt thereof and in
the same form as received, with all necessary indorsements, all of which shall
be with recourse. Borrower shall also provide Silicon with copies of all credit
memos within two days after the date issued.
4.4 COLLECTION OF RECEIVABLES. Borrower shall cause the Account Debtors
to remit all Receivables to Silicon and Silicon shall hold all payments on, and
proceeds of, Receivables in a lockbox account, or such other "blocked account"
as Silicon may specify, pursuant to a blocked account agreement in such form as
Silicon may reasonably specify. All such payments on, and proceeds of,
Receivables shall be applied to the Obligations in such order as Silicon shall
determine. Silicon or its designee may, at any time, notify Account Debtors that
the Receivables have been assigned to Silicon.
4.5. REMITTANCE OF PROCEEDS. All proceeds arising from the disposition of
any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in such
order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred, Borrower shall not be obligated to remit to Silicon the
proceeds of the sale of worn out or obsolete equipment disposed of by Borrower
in good faith in an arm's length transaction for an aggregate purchase price of
$50,000 or less (for all such transactions in any fiscal year). Borrower agrees
that it will not commingle proceeds of Collateral with any of Borrower's other
funds or property, but will hold such proceeds separate and apart from such
other funds and property and in an express trust for Silicon. Nothing in this
Section 4.5 limits the restrictions on disposition of Collateral set forth
elsewhere in this Agreement.
4.6 DISPUTES. Borrower shall notify Silicon promptly of all disputes or
claims relating to Receivables. Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in full,
or agree to do any of the foregoing, except that Borrower may do so, provided
that: (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm's length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of
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Default has occurred and is continuing; and (iii) taking into account all such
discounts settlements and forgiveness, the total outstanding Loans will not
exceed the Credit Limit. Silicon may, at any time after the occurrence of an
Event of Default, settle or adjust disputes or claims directly with Account
Debtors for amounts and upon terms which Silicon considers advisable in its
reasonable credit judgment and, in all cases, Silicon shall credit Borrower's
Loan account with only the net amounts received by Silicon in payment of any
Receivables.
4.7 RETURNS. Provided no Event of Default has occurred and is continuing,
if any Account Debtor returns any Inventory to Borrower in the ordinary course
of its business, Borrower shall promptly determine the reason for such return
and promptly issue a credit memorandum to the Account Debtor in the appropriate
amount (sending a copy to Silicon). In the event any attempted return occurs
after the occurrence of any Event of Default, Borrower shall (i) hold the
returned Inventory in trust for Silicon, (ii) segregate all returned Inventory
from all of Borrower's other property, (iii) conspicuously label the returned
Inventory as Silicon's property, and (iv) immediately notify Silicon of the
return of any Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on Silicon's request deliver such
returned Inventory to Silicon.
4.8 VERIFICATION. Silicon may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Receivables, by means of mail, telephone or otherwise, either in the name
of Borrower or Silicon or such other name as Silicon may choose.
4.9 NO LIABILITY. Silicon shall not under any circumstances be
responsible or liable for any shortage or discrepancy in, damage to, or loss or
destruction of, any goods, the sale or other disposition of which gives rise to
a Receivable, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall Silicon be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Silicon from liability for
its own gross negligence or willful misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times
comply with the financial and other covenants set forth in the Schedule.
5.2 INSURANCE. Borrower shall, at all times insure all of the
tangible personal property Collateral and carry such other business insurance,
with insurers reasonably acceptable to Silicon, in such form and amounts as
Silicon may reasonably require, and Borrower shall provide evidence of such
insurance to Silicon, so that Silicon is satisfied that such insurance is, at
all times, in full force and effect. All such insurance policies shall name
Silicon as an additional loss payee, and shall contain a lenders loss payee
endorsement in form reasonably acceptable to Silicon. Upon receipt of the
proceeds of any such insurance, Silicon shall apply such proceeds in reduction
of the Obligations as Silicon shall determine in its sole discretion, except
that, provided no Default or Event of Default has occurred and is continuing,
Silicon shall release to Borrower insurance proceeds with respect to Equipment
totaling less than $100,000, which shall be utilized by Borrower for the
replacement of the Equipment with respect to which the insurance proceeds were
paid. Silicon may require reasonable assurance that the insurance proceeds so
released will be so used. If Borrower fails to provide or pay for any insurance,
Silicon may, but is not obligated to, obtain the same at Borrower's expense.
Borrower shall promptly deliver to Silicon copies of all reports made to
insurance companies.
5.3 REPORTS. Borrower, at its expense, shall provide Silicon with
the written reports set forth in the Schedule, and such other written reports
with respect to Borrower (including budgets, sales projections, operating plans
and other financial documentation), as Silicon shall from time to time
reasonably specify.
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5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times,
and on one Business Day's notice, Silicon, or its agents, shall have the right
to inspect the Collateral, and the right to audit and copy Borrower's books and
records. Silicon shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit, but Silicon shall have the
right to disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $750 per person per day (or such higher amount as shall represent
Silicon's then current standard charge for the same), plus reasonable out of
pocket expenses. Borrower will not enter into any agreement with any accounting
firm, service bureau or third party to store Borrower's books or records at any
location other than Borrower's Address, without first obtaining Silicon's
written consent, which may be conditioned upon such accounting firm, service
bureau or other third party agreeing to give Silicon the same rights with
respect to access to books and records and related rights as Silicon has under
this Loan Agreement. Borrower waives the benefit of any accountant-client
privilege or other evidentiary privilege precluding or limiting the disclosure,
divulgence or delivery of any of its books and records (except that Borrower
does not waive any attorney-client privilege).
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule,
Borrower shall not, without Silicon's prior written consent, do any of the
following: (i) merge or consolidate with another corporation or entity; (ii)
acquire any assets, except in the ordinary course of business; (iii) enter into
any other transaction outside the ordinary course of business; (iv) sell or
transfer any Collateral, except for the sale of finished Inventory in the
ordinary course of Borrower's business, and except for the sale of obsolete or
unneeded Equipment in the ordinary course of business; (v) except as shown on
the Schedule, store any Inventory or other Collateral with any warehouseman or
other third party; (vi) sell any Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis; (vii) make any loans of any money or
other assets; (viii) incur any debts outside the ordinary course of business;
(ix) guarantee or otherwise become liable with respect to the obligations of
another party or entity; (x) pay or declare any dividends on Borrower's stock
(except for dividends payable solely in stock of Borrower); (xi) redeem, retire,
purchase or otherwise acquire, directly or indirectly, any of Borrower's stock;
(xii) make any change in Borrower's capital structure which would have a
material adverse effect on Borrower or on the prospect of repayment of the
Obligations; or (xiii) dissolve or elect to dissolve. Transactions permitted by
the foregoing provisions of this Section 5.5 are only permitted if no Default or
Event of Default would occur as a result of such transaction.
5.6 LITIGATION COOPERATION. Should any third-party suit or
proceeding be instituted by or against Silicon with respect to any Collateral or
in any manner relating to Borrower, Borrower shall, without expense to Silicon,
make available Borrower and its officers, employees and agents and Borrower's
books and records, to the extent that Silicon may deem them reasonably necessary
in order to prosecute or defend any such suit or proceeding, provided, however,
that such cooperation by Borrower shall not be construed as a waiver of its
attorney-client privilege.
5.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request
by Silicon, to execute all documents and take all actions, as Silicon may deem
reasonably necessary or useful in order to perfect and maintain Silicon's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until
the maturity date set forth on the Schedule (the "Maturity Date"); provided that
the Maturity Date may be extended upon written agreement of the parties hereto.
6.2 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or on
any earlier effective date of termination, there are any
9
outstanding Letters of Credit issued by Silicon or issued by another institution
based upon an application, guarantee, indemnity or similar agreement on the part
of Silicon, then on such date Borrower shall provide to Silicon cash collateral
in an amount equal to the face amount of all such Letters of Credit plus all
interest, fees and cost due or to become due in connection therewith, to secure
all of the Obligations relating to said Letters of Credit, pursuant to Silicon's
then standard form cash pledge agreement. Notwithstanding any termination of
this Agreement, all of Silicon's security interests in all of the Collateral and
all of the terms and provisions of this Agreement shall continue in full force
and effect until all Obligations have been paid and performed in full; provided
that Silicon may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of Silicon, nor shall any such termination relieve Borrower of any
Obligation to Silicon, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and written
termination of this Agreement by Silicon, Silicon shall promptly deliver to
Borrower termination statements, requests for reconveyances and such other
documents as may be required to fully terminate Silicon's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default" under this Agreement, and Borrower
shall give Silicon immediate written notice thereof: (a) Any warranty,
representation, statement, report or certificate made or delivered to Silicon by
Borrower or any of Borrower's officers, employees or agents, now or in the
future, shall be untrue or misleading in a material respect; or (b) Borrower
shall fail to pay when due any Loan or any interest thereon or any other
monetary Obligation; or (c) the total Loans and other Obligations outstanding at
any time shall exceed the Credit Limit; or (d) Borrower shall fail to comply
with any of the financial covenants set forth in the Schedule or shall fail to
perform any other non-monetary Obligation which by its nature cannot be cured;
or (e) Borrower shall fail to perform any other non-monetary Obligation, which
failure is not cured within 5 Business Days after the date due; or (f) any levy,
assessment, attachment, seizure, lien or encumbrance (other than a Permitted
Lien) is made on all or any part of the Collateral , including, without
limitation, the service of process upon Silicon seeking to attach by trustee,
mesne, or other process, Borrower's funds on deposit with, or assets of the
Borrower in the possession of, Silicon in an amount in excess of $100,000; or
(g) any default or event of default occurs under any obligation secured by a
Permitted Lien, which is not cured within any applicable cure period or waived
in writing by the holder of the Permitted Lien; or (h) Borrower breaches any
material contract or obligation, which has or may reasonably be expected to have
a material adverse effect on Borrower's business or financial condition; or (i)
Dissolution, termination of existence, insolvency or business failure of
Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; or (j) the
commencement of any proceeding against Borrower or any guarantor of any of the
Obligations under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 30 days after the date commenced; or (k) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing, or commencement of
proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (l) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or (m) Borrower makes any payment on account of any indebtedness
or obligation which has been subordinated to the Obligations other than as
permitted in the applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way limits
his subordination agreement; or (n) there shall be a change in the record or
beneficial ownership of an aggregate of more than 35% of the outstanding shares
of stock of Borrower, in one or more transactions, compared to the ownership of
outstanding shares of stock of Borrower in effect on the date hereof, without
the prior written consent of Silicon; or (o) Borrower shall generally not pay
its debts as they become due, or Borrower shall conceal, remove or transfer any
part of its property, with intent to hinder, delay or defraud its creditors, or
make or
10
suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or (p) there shall be (i) a
material impairment in the perfection or priority of Silicon's security interest
in the Collateral or in the value of such Collateral; (ii) a material adverse
change in the business, operations, or condition (financial or otherwise) of the
Borrower; (iii) a material impairment of the prospect of repayment of any
portion of the Obligations; or (iv) Silicon determines, based upon information
available to it and in its reasonable judgment, that there is significant
likelihood that Borrower shall fail to comply with one or more of the financial
covenants in Section 5.1 during the next succeeding financial reporting period;
or (q) Silicon, acting in good faith and in a commercially reasonable manner,
deems itself insecure because of the occurrence of a materially adverse event
prior to the effective date hereof of which Silicon had no knowledge on the
effective date or because of the occurrence of an event on or subsequent to the
effective date; or (r) Borrower shall breach any term of the Negative Pledge
Agreement or the Warrant executed in connection herewith. Silicon may cease
making any Loans hereunder during any of the above cure periods, and thereafter
if an Event of Default has occurred.
7.2 REMEDIES. Upon the occurrence of any Event of Default which
has not been timely cured, and at any time thereafter, Silicon, at its option,
and without notice or demand of any kind (all of which are hereby expressly
waived by Borrower), may do any one or more of the following: (a) Cease making
Loans or otherwise extending credit to Borrower under this Agreement or any
other document or agreement; (b) Accelerate and declare all or any part of the
Obligations to be immediately due, payable, and performable, notwithstanding any
deferred or installment payments allowed by any instrument evidencing or
relating to any Obligation; (c) Take possession of any or all of the Collateral
wherever it may be found, and for that purpose Borrower hereby authorizes
Silicon without judicial process to enter onto any of Borrower's premises
without interference to search for, take possession of, keep, store, or remove
any of the Collateral, and remain on the premises or cause a custodian to remain
on the premises in exclusive control thereof, without charge for so long as
Silicon deems it reasonably necessary in order to complete the enforcement of
its rights under this Agreement or any other agreement; provided, however, that
should Silicon seek to take possession of any of the Collateral by Court
process, Borrower hereby irrevocably waives: (i) any bond and any surety or
security relating thereto required by any statute, court rule or otherwise as an
incident to such possession; (ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (iii) any
requirement that Silicon retain possession of, and not dispose of, any such
Collateral until after trial or final judgment; (d) Require Borrower to assemble
any or all of the Collateral and make it available to Silicon at places
designated by Silicon which are reasonably convenient to Silicon and Borrower,
and to remove the Collateral to such locations as Silicon may deem advisable;
(e) Complete the processing, manufacturing or repair of any Collateral prior to
a disposition thereof and, for such purpose and for the purpose of removal,
Silicon shall have the right to use Borrower's premises, vehicles, hoists,
lifts, cranes, equipment and all other property without charge; (f) Sell, lease
or otherwise dispose of any of the Collateral, in its condition at the time
Silicon obtains possession of it or after further manufacturing, processing or
repair, at one or more public and/or private sales, in lots or in bulk, for
cash, exchange or other property, or on credit, and to adjourn any such sale
from time to time without notice other than oral announcement at the time
scheduled for sale. Silicon shall have the right to conduct such disposition on
Borrower's premises without charge, for such time or times as Silicon deems
reasonable, or on Silicon's premises, or elsewhere and the Collateral need not
be located at the place of disposition. Silicon may directly or through any
affiliated company purchase or lease any Collateral at any such public
disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale; (g) Demand payment
of, and collect any Receivables and General Intangibles comprising Collateral
and, in connection therewith, Borrower irrevocably authorizes Silicon to endorse
or sign Borrower's name on all collections, receipts, instruments and other
documents, to take possession of and open mail addressed to Borrower and remove
therefrom payments made with respect to any item of the Collateral or proceeds
thereof, and, in Silicon's sole discretion, to grant extensions of time to pay,
compromise claims and settle Receivables and the like for less than face value;
(h) Offset against any sums in any of Borrower's general, special or other
Deposit Accounts with Silicon; and (i) Demand and receive possession of any of
Borrower's federal and state income tax returns and the books and records
utilized in the preparation thereof or referring thereto. All reasonable
attorneys' fees, expenses, costs, liabilities and obligations incurred by
Silicon with respect to the foregoing shall be added to and become part of the
Obligations, shall be due on demand, and shall bear interest at a
11
rate equal to the highest interest rate applicable to any of the Obligations.
Without limiting any of Silicon's rights and remedies, from and after the
occurrence of any Event of Default, the interest rate applicable to the
Obligations shall be increased by an additional four percent (4%) per annum.
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower
and Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in
cash or by cashier's check or wire transfer is required; (vi) With respect to
any sale of any of the Collateral, Silicon may (but is not obligated to) direct
any prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. Silicon shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
7.4 POWER OF ATTORNEY. Upon the occurrence of any Event of Default,
without limiting Silicon's other rights and remedies, Borrower grants to Silicon
an irrevocable limited power of attorney coupled with an interest, authorizing
and permitting Silicon (acting through any of its employees, attorneys or
agents) at any time, at its option, but without obligation, with or without
notice to Borrower, and at Borrower's expense, to do any or all of the
following, in Borrower's name or otherwise, but Silicon agrees to exercise the
following powers in a commercially reasonable manner: (a) Execute on behalf of
Borrower any documents that Silicon may, in its sole discretion, deem advisable
in order to perfect and maintain Silicon's security interest in the Collateral,
or in order to exercise a right of Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
present and future agreements; (b) Execute on behalf of Borrower any document
exercising, transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property which
is part of Silicon's Collateral or in which Silicon has an interest; (c) Execute
on behalf of Borrower, any invoices relating to any Receivable, any draft
against any Account Debtor and any notice to any Account Debtor, any proof of
claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or
other lien, or assignment or satisfaction of mechanic's, materialman's or other
lien; (d) Take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into Silicon's
possession; (e) Endorse all checks and other forms of remittances received by
Silicon; (f) Pay, contest or settle (upon commercially reasonable terms) any
lien, charge, encumbrance, security interest and adverse claim in or to any of
the Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; (g) Grant extensions of time to pay, compromise
claims and settle Receivables and General Intangibles for less than face value
and execute all releases and other documents in connection therewith; (h) Pay
any sums required on account of Borrower's taxes or to secure the release of any
liens therefor, or both; (i) Settle and adjust, and give releases of, any
insurance claim that relates to any of the Collateral and obtain payment
therefor; (j) Instruct any third party having custody or control of any books or
records belonging to, or relating to, Borrower to give Silicon the same rights
of access and other rights with respect thereto as Silicon has under this
Agreement; and (k) Take any action or pay any sum required of Borrower pursuant
to this Agreement and any other present or future agreements. Any and all
reasonable sums paid and any and all reasonable costs, expenses, liabilities,
obligations and attorneys' fees incurred by Silicon with respect to the
foregoing shall be added to and become part of the Obligations, shall be payable
on demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. In no event shall Silicon's rights under
the foregoing power of attorney or any of Silicon's other rights under this
Agreement be deemed to indicate that Silicon is in control of the business,
management or properties of Borrower. The irrevocable limited power of attorney
shall cease if and when the Event of Default is cured by Borrower and Silicon is
reimbursed all reasonable costs occasioned by the Event of Default.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of
any sale of the Collateral shall be applied by Silicon first to the reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
12
Silicon in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Silicon shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in its
sole discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Silicon shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of purchase price or deferring
the reduction of the Obligations until the actual receipt by Silicon of the cash
therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, Silicon shall have all the other rights and remedies
accorded a secured party under the Massachusetts Uniform Commercial Code and
under all other applicable laws, and under any other instrument or agreement now
or in the future entered into between Silicon and Borrower, and all of such
rights and remedies are cumulative and none is exclusive. Exercise or partial
exercise by Silicon of one or more of its rights or remedies shall not be deemed
an election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
8. DEFINITIONS.
As used in this Agreement, the following terms have the following meanings:
"ACCOUNT DEBTOR" means the obligor on a Receivable.
"AFFILIATE" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"BUSINESS DAY" means a day on which Silicon is open for business.
"CASH MANAGEMENT SERVICES" means Silicon's cash management services, direct
deposit of payroll, business credit card, and check cashing services as may be
further identified in the various cash management services agreements related to
such Cash Management Services.
"CODE" means the Uniform Commercial Code as adopted and in effect in the
Commonwealth of Massachusetts from time to time.
"COLLATERAL" has the meaning set forth in Section 2.1 above.
"DEFAULT" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"DEPOSIT ACCOUNT" has the meaning set forth in Section 9-102 of the Code.
"ELIGIBLE RECEIVABLES" means Receivables arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services, which
Silicon, in its sole judgment, shall deem eligible for borrowing, based on such
considerations as Silicon may from time to time deem appropriate. Without
limiting the fact that the determination of which Receivables are eligible for
borrowing is a matter of Silicon's discretion, the following (the "MINIMUM
ELIGIBILITY REQUIREMENTS") are the minimum requirements for a Receivable to be
an Eligible Receivable: (i) the Receivable must not be outstanding for more than
90 days from its invoice date, (ii) the Receivable must not represent progress
xxxxxxxx, or be due under a fulfillment or requirements contract with the
Account Debtor, (iii) the Receivable must not be subject to any contingencies
(including Receivables arising from sales on consignment, guaranteed sale or
other terms pursuant to which payment by the Account Debtor may be conditional,
except as may
13
otherwise be acceptable to Silicon in its discretion), (iv) the Receivable must
not be owing from an Account Debtor with whom the Borrower has any dispute
(whether or not relating to the particular Receivable), (v) the Receivable must
not be owing from an Affiliate of Borrower, (vi) the Receivable must not be
owing from an Account Debtor which is subject to any insolvency or bankruptcy
proceeding, or whose financial condition is not acceptable to Silicon, or which,
fails or goes out of a material portion of its business, (vii) the Receivable
must not be owing from the United States or any department, agency or
instrumentality thereof (unless there has been compliance, to Silicon's
satisfaction, with the United States Assignment of Claims Act), (viii) the
Receivable must not be owing from an Account Debtor located outside the United
States or Canada (unless pre-approved by Silicon in its discretion in writing,
or backed by a letter of credit satisfactory to Silicon, or FCIA insured
satisfactory to Silicon), and (ix) the Receivable must not be owing from an
Account Debtor to whom Borrower is or may be liable for goods purchased from
such Account Debtor or otherwise. Receivables owing from one Account Debtor will
not be deemed Eligible Receivables to the extent they exceed 25% of the total
Receivables outstanding. In addition, if more than 50% of the Receivables owing
from an Account Debtor are outstanding more than 90 days from their invoice date
(without regard to unapplied credits) or are otherwise not eligible Receivables,
then all Receivables owing from that Account Debtor will be deemed ineligible
for borrowing. Silicon may, from time to time, in its discretion, revise the
Minimum Eligibility Requirements, upon written notice to the Borrower. The
Borrower acknowledges and agrees that Receivables generated by SatCon Applied
Technology, Inc. will not be deemed Eligible Receivables unless an arrangement
acceptable to Silicon, in its commercially reasonable discretion, is reached.
"EQUIPMENT" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"EVENT OF DEFAULT" means any of the events set forth in Section 7.1 of this
Agreement.
"GENERAL INTANGIBLES" means all general intangibles of Borrower, whether
now owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, rights to payment for credit extended, amounts
due to Borrower, credit memoranda in favor of Borrower, warranty claims, causes
of action, corporate or other business records, deposits, Deposit Accounts,
inventions, designs, drawings, blueprints, patents, patent applications,
trademarks and the goodwill of the business symbolized thereby, names, trade
names, trade secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, security and other deposits, rights in all litigation presently
or hereafter pending for any cause or claim (whether in contract, tort or
otherwise), and all judgments now or hereafter arising therefrom, all claims of
Borrower against Silicon, rights to purchase or sell real or personal property,
rights as a licensor or licensee of any kind, royalties, telephone numbers,
proprietary information, purchase orders, and all insurance policies and claims
(including without limitation life insurance, key man insurance, credit
insurance, liability insurance, property insurance and other insurance), tax
refunds and claims, computer programs, discs, tapes and tape files, claims under
guaranties, security interests or other security held by or granted to Borrower,
all rights to indemnification and all other intangible property of every kind
and nature (other than Receivables).
"INVENTORY" means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including without limitation
all raw materials, work in process, finished goods and goods in transit), and
all materials and supplies of every kind, nature and description which are owned
by Borrower and are intended for use or are used or consumed in Borrower's
business or used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such goods, merchandise or other personal
property, and all warehouse receipts, documents of title and other documents
representing any of the foregoing.
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"LETTER-OF-CREDIT RIGHTS" means all letter-of-credit rights including,
without limitation, "letter-of-credit rights" as defined in the Code and also
any right to payment or performance under a letter of credit, whether or not the
beneficiary has demanded or is at the time entitled to demand payment or
performance.
"OBLIGATIONS" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, including, without limitation, the
Borrower's obligations pursuant to the Negative Pledge Agreement and the
Warrant, whether arising from an extension of credit, opening of a letter of
credit, banker's acceptance, FX Forward Contracts, loan, Cash Management
Services, guaranty, indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment and any
participation by Silicon in Borrower's debts owing to others), absolute or
contingent, due or to become due, including, without limitation, all interest,
charges, expenses, fees, attorney's fees, expert witness fees, audit fees,
letter of credit fees, Collateral Handling Fees, closing fees, facility fees,
Cancellation Fees, minimum interest charges and any other sums chargeable to
Borrower under this Agreement or under any other present or future instrument or
agreement between Borrower and Silicon.
"PAYMENT INTANGIBLES" means all payment intangibles including, without
limitation, "payment intangibles" as defined in the Code and also any general
intangible under which the Account Debtor's primary obligation is a monetary
obligation.
"PERMITTED LIENS" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens consented to in writing by Silicon, which consent shall not
be unreasonably withheld; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; and
(viii)liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. Silicon will have
the right to require, as a condition to its consent under subsection (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement on Silicon's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"RECEIVABLES" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), accounts receivable,
health-care insurance receivables, rights to payment, letters of credit,
contract rights, chattel paper, instruments, securities, securities accounts,
investment property, documents and all other forms of obligations at any time
owing to Borrower, all guaranties and other security therefor, all merchandise
returned to or repossessed by Borrower, and all rights of stoppage in transit
and all other rights or remedies of an unpaid vendor, lienor or secured party.
"RESERVES" means, as of any date of determination, such amounts as Silicon
may from time to time establish and revise in good faith reducing the amount of
Loans, Letters of Credit and other financial accommodations which would
otherwise be available to Borrower under the lending formula(s) provided in the
Schedule: (a) to reflect events, conditions, contingencies or risks which, as
determined by Silicon in good faith, do or may affect in any material respect
(i) the Collateral or any other property which is security for the Obligations
or
15
its value (including without limitation any increase in delinquencies of
Receivables), (ii) the assets, business or prospects of Borrower or any
Guarantor, or (iii) the security interests and other rights of Silicon in the
Collateral (including the enforceability, perfection and priority thereof); or
(b) to reflect Silicon's good faith belief that any collateral report or
financial information furnished by or on behalf of Borrower or any guarantor to
Silicon is or may have been incomplete, inaccurate or misleading in any material
respect; or (c) in respect of any state of facts which Silicon determines in
good faith constitutes an Event of Default or may, with notice or passage of
time or both, constitute an Event of Default.
"SUPPORTING OBLIGATIONS" means all supporting obligations including,
without limitation, "supporting obligations" as defined in the Code and also any
letter-of-credit right or secondary obligations which supports the payment or
performance of an account, chattel paper, a document, a general intangible, an
instrument, or investment property.
OTHER TERMS. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Silicon (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by Silicon on account of the Obligations two (2) Business Days after
receipt by Silicon of immediately available funds, and, for purposes of the
foregoing, any such funds received after 12:00 Noon on any day shall be deemed
received on the next Business Day. Silicon shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to Silicon in its sole discretion, and Silicon may charge
Borrower's loan account for the amount of any item of payment which is returned
to Silicon unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the Obligations
may be applied, and in Silicon's sole discretion reversed and re-applied, to the
Obligations, in such order and manner as Silicon shall determine in its sole
discretion.
9.3 CHARGES TO ACCOUNTS. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable to the Loans. Silicon may also, in its discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.
9.4 MONTHLY ACCOUNTINGS. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within thirty days after each
account is rendered, describing the nature of any alleged errors or admissions.
9.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to Silicon or Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party. Notices to Silicon shall be directed to the Commercial
Finance Division, to the attention of the Division Manager or the Division
Credit Manager. All notices shall be deemed to have been given upon delivery in
the case of notices personally delivered, or at the expiration of one Business
Day following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.
16
9.6 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
9.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Silicon and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There are
no oral understandings, representations or agreements between the parties which
are not set forth in this Agreement or in other written agreements signed by the
parties in connection herewith.
9.8 WAIVERS. The failure of Silicon at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and Silicon shall not waive
or diminish any right of Silicon later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Silicon shall be deemed to have been
waived by any act or knowledge of Silicon or its agents or employees, but only
by a specific written waiver signed by an authorized officer of Silicon and
delivered to Borrower. Borrower waives demand, protest, notice of protest and
notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time held
by Silicon on which Borrower is or may in any way be liable, and notice of any
action taken by Silicon, unless expressly required by this Agreement.
9.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Silicon, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon, but nothing herein shall relieve Silicon from
liability for its own gross negligence or willful misconduct.
9.10 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Silicon.
9.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.12 ATTORNEYS FEES AND COSTS. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and the documents relating to this Agreement; obtain legal advice in
connection with this Agreement or Borrower; enforce, or seek to enforce, any of
its rights; prosecute actions against, or defend actions by, Account Debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim; examine,
audit, copy, and inspect any of the Collateral or any of Borrower's books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon's security interest in, the Collateral; and otherwise represent Silicon
in any litigation relating to Borrower. In satisfying Borrower's obligation
hereunder to reimburse Silicon for attorneys fees, Borrower may, for
convenience, issue checks directly to Silicon's attorneys, Xxxxxx & Xxxxxxxxxx,
LLP, but Borrower acknowledges and agrees that Xxxxxx & Xxxxxxxxxx, LLP is
representing only Silicon and not Borrower in connection with this Agreement. If
either Silicon or Borrower files any lawsuit against the other predicated on a
breach of this Agreement, Silicon shall be entitled to recover its reasonable
costs and attorneys' fees, including (but not LIMITED to) reasonable attorneys'
fees and costs incurred in the enforcement
17
of, execution upon or defense of any order, decree, award or judgment. All
attorneys' fees and costs to which Silicon may be entitled pursuant to this
Section 9.12 shall immediately become part of Borrower's Obligations, shall be
due on demand, and shall bear interest at a rate equal to the highest interest
rate applicable to any of the Obligations.
9.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Silicon; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Silicon, and any prohibited
assignment shall be void. No consent by Silicon to any assignment shall release
Borrower from its liability for the Obligations.
9.14 RIGHT OF SET-OFF. Borrower and any guarantor hereby grant to Silicon,
a lien, security interest and right of setoff as security for all Obligations to
Silicon, 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 Silicon or any entity under the control of
Silicon Valley 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, Silicon 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 SILICON 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.
9.15. JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.16 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower
against Silicon, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other present or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by Silicon, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of an
action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after Borrower's knowledge of the first act,
occurrence or omission upon which such claim or cause of action, or any part
thereof, is based, and the service of a summons and complaint on an officer of
Silicon, or on any other person authorized to accept service on behalf of
Silicon, within thirty (30) days thereafter. Borrower agrees that such one-year
period is a reasonable and sufficient time for Borrower to investigate and act
upon any such claim or cause of action. The one-year period provided herein
shall not be waived, tolled, or extended except by the written consent of
Silicon in its sole discretion. This provision shall survive any termination of
this Loan Agreement or any other present or future agreement.
9.17 SECTION HEADINGS; CONSTRUCTION. Section headings are only used in
this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
section, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Silicon or Borrower under any rule
of construction or otherwise.
9.18 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the Commonwealth of
18
Massachusetts. As a material part of the consideration to Silicon to enter into
this Agreement, Borrower (i) agrees that all actions and proceedings relating
directly or indirectly to this Agreement shall, at Silicon's option, be
litigated in state or federal courts located within Massachusetts; (ii) consents
to the jurisdiction and venue of any such court and consents to service of
process in any such action or proceeding by personal delivery or any other
method permitted by law; and (iii) waives any and all rights Borrower may have
to object to the jurisdiction of any such court, or to transfer or change the
venue of any such action or proceeding, provided, however, that if for any
reason Silicon cannot avail itself of such courts in the Commonwealth of
Massachusetts, Borrower accepts jurisdiction of the courts and venue in Santa
Clara, California.
9.19 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND SILICON EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
19
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:
SATCON TECHNOLOGY CORPORATION
BY /s/XXXXXXX X. XXXXXXXX
PRESIDENT OR VICE PRESIDENT
BY /s/XXXXXX X. XXXXX
SECRETARY OR ASS'T SECRETARY
BORROWER:
SATCON POWER SYSTEMS, INC.
BY /s/XXXXXXX X. XXXXXXXX
PRESIDENT OR VICE PRESIDENT
BY /s/XXXXXX X. XXXXX
SECRETARY OR ASS'T SECRETARY
BORROWER:
SATCON ELECTRONICS, INC.
BY /s/XXXXXXX X. XXXXXXXX
PRESIDENT OR VICE PRESIDENT
BY /s/XXXXXX X. XXXXX
SECRETARY OR ASS'T SECRETARY
BORROWER:
SATCON APPLIED TECHNOLOGY, INC.
BY /s/XXXXXXX X. XXXXXXXX
PRESIDENT OR VICE PRESIDENT
BY /s/XXXXXX X. XXXXX
SECRETARY OR ASS'T SECRETARY
20
BORROWER:
SATCON POWER SYSTEMS CANADA LTD.
BY /s/XXXXXXX X. XXXXXXXX
PRESIDENT OR VICE PRESIDENT
BY /s/XXXXXX X. XXXXX
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK, D/B/A
SILICON VALLEY EAST
BY /s/XXXX X. XXXX
TITLE VICE PRESIDENT
21
SILICON VALLEY BANK
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: SATCON TECHNOLOGY CORPORATION
SATCON POWER SYSTEMS, INC.
SATCON ELECTRONICS, INC.
SATCON APPLIED TECHNOLOGY, INC.
SATCON POWER SYSTEMS CANADA LTD.
ADDRESS: 000 XXXXX XXXXXX
XXXXXXXXX, XXXXXXXXXXXXX 00000
DATE: SEPT. 13, 2002
This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.
1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of (A) or (B), below:
(A) (i) $5,000,000 at any one time outstanding (the "Maximum
Credit Limit"); MINUS
(ii) the aggregate amounts then undrawn on all outstanding
letters of credit, Cash Management Services, FX Forward
Contracts, or any other accommodations issued or incurred, or
caused to be issued or incurred by Silicon for the account
and/or benefit of the Borrower.
(B) (i) 75% of the amount of Borrower's Eligible Receivables
(as defined in Section 8 above) (the "Receivables Loans");
MINUS
(ii) the aggregate amounts then undrawn on all outstanding
letters of credit, Cash Management Services, FX Forward
Contracts, or any other accommodations issued or incurred, or
caused to be issued or incurred by Silicon for the account
and/or benefit of the Borrower.
Notwithstanding the foregoing, Silicon shall not be obligated to make
any Loans hereunder, and no Borrower shall distribute the proceeds of any Loans,
to any Borrower to the extent the amount received by such Borrower exceeds 75%
of such Borrower's Eligible Receivables. The foregoing shall not limit each
Borrower's obligation to repay all Loans and Obligations, jointly and severally
with each other Borrower, as described herein, including, without limitation,
pursuant to Section 1.9.
LETTER OF CREDIT/FOREIGN EXCHANGE CONTRACT/CASH MANAGEMENT SUBLIMIT
(Sections 1.5, 1.6, 1.7): $2,000,000
1
2. INTEREST.
INTEREST RATE (Section 1.2):
A rate equal to the greater of (i) 6.75% per annum or (ii) the "Prime
Rate" in effect from time to time, plus 2.00% per annum. Interest shall be
calculated on the basis of a 360-day year for the actual number of days elapsed.
"Prime Rate" means the rate announced from time to time by Silicon as its "prime
rate;" it is a base rate upon which other rates charged by Silicon are based,
and it is not necessarily the best rate available at Silicon. The interest rate
applicable to the Obligations shall change on each date there is a change in the
Prime Rate.
3. FEES (Section 1.4):
Loan Fee: $50,000.00 (paid by Borrower upon execution of Silicon's
commitment letter).
Collateral Handling Fee: $1,500.00 ($750.00 when not borrowing and
Borrower has advised Silicon that it has elected to be on "non-borrowing
reporting status" pursuant to Section 6, below) per month, payable in arrears.
Unused Line Fee: In the event, in any calendar month (or portion thereof
at the beginning and end of the term hereof), the average daily principal
balance of the Loans outstanding during the month is less than the amount of the
Maximum Credit Limit, Borrower shall pay Silicon an unused line fee in an amount
equal to 0.50% per annum on the difference between the amount of the Maximum
Credit Limit and the average daily principal balance of the Loans outstanding
during the month, which unused line fee shall be computed and paid monthly, in
arrears, on the first day of the following month.
Cancellation Fee: If the Obligations are voluntarily or involuntarily
(in the event of bankruptcy) prepaid or if this Agreement is otherwise
terminated prior to its maturity (a "Cancellation Event"), the Borrower shall
pay to Silicon a termination fee (the "Cancellation Fee") in the amount equal to
(i) 1.0% of the Maximum Credit Limit if a Cancellation Event occurs on or before
six (6) months from the date hereof or (ii) 0.50% of the Maximum Credit Limit if
a Cancellation Event occurs after six (6) months from the date hereof but prior
to the Maturity Date, provided that no such Cancellation Fee shall be charged if
the credit facility hereunder is replaced or transferred to another division of
Silicon. The Cancellation Fee shall be due and payable upon prepayment by the
Borrower in the case of voluntary prepayments or upon demand by Silicon in the
event of involuntary prepayment, and if not paid immediately shall bear interest
at a rate equal to the highest rate applicable to any of the Obligations.
4. MATURITY DATE
(Section 6.1): 364 days from the date of this Agreement.
5. FINANCIAL COVENANTS
(Section 5.1): Borrower shall comply with each of the following
covenant(s). Compliance shall be determined as of the end of each month, except
as otherwise specifically provided below:
a. MINIMUM ADJUSTED TANGIBLE NET WORTH:
Borrower shall maintain an Adjusted Tangible Net Worth of not less than
the sum of (i) plus (ii) below:
2
(i) (a) from the date hereof through and including September 30, 2002
- $18,650,000.00
(b) from October 1, 2002 through and including November 30,
2002 - $17,000,000.00
(c) from December 1, 2002 through and including December 31, 2002 -
$18,700,000.00
(d) from January 1, 2003 through and including March 31, 2003 -
$17,600,000.00
(e) from April 1, 2003 and thereafter - $17,200,000.00
(ii) 50% of all consideration received in addition to those amount to
be received pursuant to the Capitalization Event from proceeds from the
issuance of any equity securities of the Borrower and/or subordinated
debt incurred by the Borrower.
Notwithstanding the forgoing, Silicon agrees to decrease the Adjusted
Tangible Net Worth covenant by an amount not to exceed $500,000 for actual
restructuring charges occurring between July 1, 2002 and December 31, 2002, for
such period in which such restructuring charges were taken by Borrower.
b. MINIMUM CASH OR EXCESS AVAILABILITY:
The Borrower shall at all times maintain $300,000.00 in (i) cash
deposits maintained at Silicon, and/or (ii) excess "availability" under
this Agreement (net of Loans, Letters of Credit or other indebtedness
under this Agreement), as determined by Silicon based upon the Credit
Limit restrictions set forth in Section 1 above).
c. CAPITALIZATION EVENT. The Borrower shall cause a Capitalization
Event to occur on or before December 1, 2002.
DEFINITIONS. For purposes of the foregoing financial covenants, the
following term shall have the following meaning:
"Adjusted Tangible Net Worth" shall mean the excess of total
assets over total liabilities, determined in accordance with generally accepted
accounting principles, with the following adjustments:
(A) there shall be excluded from assets: (i) notes, accounts
receivable and other obligations owing to the Borrower from its officers or
other Affiliates, (ii) all assets which would be classified as intangible assets
under generally accepted accounting principles, including without limitation
goodwill, licenses, patents, trademarks, trade names, copyrights, capitalized
software and organizational costs, licenses and franchises, (iii) the value of
the Borrower's investment in Beacon Power Corporation and (iv) the value of the
Borrower's warrants to purchase Beacon Power Corporation.
(B) there shall be excluded from liabilities: all indebtedness
which is subordinated to the Obligations under a subordination agreement in form
specified by Silicon or by language in the instrument evidencing the
indebtedness which is acceptable to Silicon in its discretion.
"Capitalization Event" is the issuance by Borrower of equity or
subordinated debt to investors acceptable to Silicon resulting in the net
proceeds to Borrower of at least Four Million Dollars ($4,000,000.00) in cash.
"Liabilities" shall have the meaning ascribed thereto by generally
accepted accounting principles.
3
6. REPORTING.
(Section 5.3):
Borrower shall provide Silicon with the following:
1. Weekly (monthly, if no amounts are outstanding under this Agreement
and Borrower has advised Silicon in writing that it has elected to be on
"non-borrowing reporting status"), and upon each loan request, borrowing base
certificates and transaction reports, which certificates and reports shall
specifically delineate which Borrower generated each Receivable.
2. Monthly Receivable agings, aged by invoice date, and receivable
reconciliations, within fifteen days after the end of each month.
3. Monthly accounts payable agings, aged by invoice date, and
outstanding or held check registers, if any, within fifteen days after the end
of each month.
4. Monthly unaudited financial statements, as soon as available, and
in any event within thirty days after the end of each month.
5. Monthly Compliance Certificates, within thirty days after the end
of each month, in such form as Silicon shall reasonably specify, signed by the
Chief Financial Officer of Borrower, certifying that as of the end of such month
Borrower was in full compliance with all of the terms and conditions of this
Agreement, and setting forth calculations showing compliance with the financial
covenants set forth in this Agreement and such other information as Silicon
shall reasonably request, including, without limitation, a statement that at the
end of such month there were no held checks.
6. Quarterly unaudited financial statements along with Borrower's 10Q
filed with the SEC, as soon as available, and in any event within forty-five
days after the end of each fiscal quarter of Borrower.
7. Annual operating budgets and projections (including income
statements, balance sheets and cash flow statements, by month) for the upcoming
fiscal year of Borrower within thirty days after the end of each fiscal year of
Borrower.
8. Annual audited financial statements along with Borrower's 10K filed
with the SEC, as soon as available, and in any event within 90 days following
the end of Borrower's fiscal year, certified by independent certified public
accountants acceptable to Silicon.
9. Such additional reports and information as Silicon may from time to
time reasonably specify.
7. BORROWER INFORMATION:
PRIOR NAMES OF
BORROWER
(Section 3.2): See Perfection Certificate of even date herewith.
PRIOR TRADE
NAMES OF BORROWER
(Section 3.2): See Perfection Certificate of even date herewith.
4
EXISTING TRADE
NAMES OF BORROWER
(Section 3.2): See Perfection Certificate of even date herewith.
OTHER LOCATIONS AND
ADDRESSES (Section 3.3): See Perfection Certificate of even date
herewith.
MATERIAL ADVERSE
LITIGATION (Section 3.10): None
8. OTHER COVENANTS
(Section 5.1): Borrower shall at all times comply with all of the
following additional covenants:
(1) BANKING RELATIONSHIP. In order for Silicon to properly monitor its
loan arrangement with the Borrower, Borrower shall at all times maintain all of
its depository, operating (other than payroll and operating accounts maintained
in Canada) and securities accounts with Silicon (or an affiliate of Silicon with
respect to securities accounts).
(2) SUBORDINATION OF INSIDE DEBT. All present and future indebtedness
(excluding reasonable salary, bonus and expense reimbursement) of the Borrower
to its officers, directors and shareholders,("Inside Debt") shall, at all times,
be subordinated to the Obligations pursuant to a subordination agreement on
Silicon's standard form. Borrower represents and warrants that there is no
Inside Debt presently outstanding, except for the following: NONE. Prior to
incurring any Inside Debt in the future, Borrower shall cause the person to whom
such Inside Debt will be owed to execute and deliver to Silicon a subordination
agreement on Silicon's standard form.
(3) SUBORDINATION AGREEMENTS. Borrower shall concurrently cause
N/A to execute and deliver a Subordination Agreements in such form as Silicon
shall specify, subordinating to the Obligations the indebtedness of Borrower to
such persons, in the amount of $ N/A, which Borrower represents and warrants
represent the present unpaid balances of the indebtedness of Borrower to such
persons, and Borrower shall cause said Subordination Agreements to continue in
full force and effect at all times during the term of this Agreement.
(4) NEGATIVE PLEDGE REGARDING INTELLECTUAL PROPERTY. As a condition
precedent to the effectiveness of this Agreement, Borrower shall have executed
and delivered a Negative Pledge Agreement (the "Negative Pledge Agreement")
regarding Borrower's intellectual property, substantially in the form attached
hereto as Exhibit B.
BORROWER: SILICON:
SATCON TECHNOLOGY CORPORATION SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By /s/Xxxxx X. Xxxxxxxxxx By/s/Xxxx X. Xxxx
------------------------------ ---------------------------
President or Vice President Title Vice President
-----------------------------
By /s/Xxxxxx X. Xxxxx
------------------------------
Secretary or Ass't Secretary
5
Borrower:
SATCON POWER SYSTEMS, INC.
By /s/Xxxxx X. Xxxxxxxxxx
President or Vice President
By /s/Xxxxxx X. Xxxxx
Secretary or Ass't Secretary
Borrower:
SATCON ELECTRONICS, INC.
By /s/Xxxxx X. Xxxxxxxxxx
President or Vice President
By /s/Xxxxxx X. Xxxxx
Secretary or Ass't Secretary
Borrower:
SATCON APPLIED TECHNOLOGY, INC.
By /s/Xxxxx X. Xxxxxxxxxx
President or Vice President
By /s/Xxxxxx X. Xxxxx
Secretary or Ass't Secretary
Borrower:
SATCON POWER SYSTEMS CANADA LTD.
By /s/Xxxxx X. Xxxxxxxxxx
President or Vice President
By /s/Xxxxxx X. Xxxxx
Secretary or Ass't Secretary
6
