LOAN AND SECURITY AGREEMENT
$1,000,000 WORKING CAPITAL LINE
$1,000,000 EQUIPMENT LINE
PROVIDED BY
SILICON VALLEY BANK
TO
MAKER COMMUNICATIONS, INC.
February 18, 1997
This LOAN AND SECURITY AGREEMENT is entered into as of February 18, 1997,
by and between SILICON VALLEY BANK, a California-chartered bank with its
principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000 and with
a loan production office located at Wellesley Office Park, 00 Xxxxxxx Xxxxxx,
Xxxxx 000, Xxxxxxxxx, XX 00000, doing business under the name Silicon Valley
East ("Bank"), and MAKER COMMUNICATIONS, INC., a Delaware corporation with its
principal place of business at 000 Xxxxxx Xxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxxx
00000 ("Borrower).
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms shall have
the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
imitation, the licensing of software and other technology) or the rendering
of services by Borrower, whether or not earned by performance, and any and
all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrowers Books
relating to any of the foregoing.
"Advance" or "Advances" means a loan advance under the Committed
Revolving Line.
"Affiliate" means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, partners and, for any Person
that is a limited liability company, such Persons, managers and members.
"Bank Expenses" means all reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents, (including fees and
expenses of appeal or review, or those incurred in any Insolvency
Proceeding) whether or not suit is brought
"Borrowers Books" means all of Borrowers books and records including,
without limitation: ledgers; records concerning Borrowers assets or
liabilities, the Collateral, business operations or financial condition;
and all computer programs, or tape files, and the equipment, containing
such information.
"Borrowing Base" means an amount equal to EIGHTY PERCENT (80%) of
Eligible Accounts, as determined by Bank with reference to the most recent
Borrowing Base Certificate delivered by Borrower.
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which banks in the State of California are authorized or required to
close.
"Closing Date" means the date of this Agreement
"Code" means the Massachusetts Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
hereto.
"Committed Revolving Line" means a credit extension of up to ONE
MILLION AND NO/100THS Dollars ($1,000,000).
"Committed Equipment Line" means a credit extension of up to SEVEN
HUNDRED FIFTY THOUSAND AND NO/100THS Dollars ($750,000); provided, however,
that effective the first day of the month following Bank's receipt of
Borrowers financial statements showing that Borrower has received an
additional ONE MILLION Dollars ($1,000,000) in outside equity capital, the
Committed Equipment Line shall be increased to ONE MILLION Dollars
($1,000,000).
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to
(i) any indebtedness, lease, dividend, letter of credit or other obligation
of another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices;
provided, however, that the term "Contingent Obligation" shall not include
endorsements for collection or deposit in the ordinary course of business.
The amount of any Contingent Obligation shall be deemed to be an amount
equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that
such amount shall not in any event exceed the maximum amount of the
obligations under the guarantee or other support arrangement
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished
and whether or not the same also constitutes a trade secret, now or
hereafter existing, created, acquired or held.
"Credit Extension" means each Advance, Equipment Advance, Letter of
Credit Term Loan, Exchange Contract or any other extension of credit by
Bank for the benefit of Borrower hereunder.
"Current Assets" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such
date.
"Current Liabilities" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current liabilities on
the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding
Credit Extensions made under this Agreement including all Indebtedness that
is payable upon demand or within one year from the date of determination
thereof unless such Indebtedness is renewable or extendable at the option
of Borrower or any Subsidiary to a date more than one year from the date of
determination, but excluding Subordinated Debt
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrowers business that comply with all of Borrowers
representations and warranties to Bank set forth in Section 5.4; provided
that standards of eligibility, with respect to categories of accounts not
described in subparagraphs (a) through (j) immediately below, may be fixed
and revised from time to time by Bank in Bank's reasonable judgment and
upon thirty (30) days prior notification thereof to Borrower in accordance
with the provisions hereof. Unless otherwise agreed to by Bank in writing,
Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within ninety
(90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent (50%) of
whose Accounts the account debtor has failed to pay within ninety (90) days
of invoice date;
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(c) Accounts with respect to an account debtor, including Affiliates,
whose total obligations to Borrower exceed thirty percent (30%) of all
Accounts, except with respect to Cisco Systems and Fore Systems, as to
which the percentage shall be forty percent (40%), to the extent such
obligations exceed the aforementioned percentage, except as approved in
writing by Bank;
(d) Accounts with respect to which the account debtor does not have
its principal place of business in the United States or Canada;
(e) Accounts with respect to which the account debtor is a federal,
state, or local governmental entity or any department, agency, or
instrumentality thereof;
(f) Accounts with respect to which Borrower is liable to the account
debtor, but only to the extent of any amounts owing to the account debtor
(sometimes referred to as "contra" accounts, e.g. accounts payable,
customer deposits, credit accounts etc.);
(g) Accounts generated by demonstration or promotional equipment or
with respect to which goods are placed on consignment, guaranteed sale,
sale or return, sale on approval, xxxx and hold, or other terms by reason
of which the payment by the account debtor may be conditional;
(h) Accounts with respect to which the account debtor is an Affiliate,
officer, employee, or agent of Borrower;
(i) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or claim), or
is subject to any insolvency Proceeding, or becomes insolvent or goes out
of business; and
(j) Accounts the collection of which Bank reasonably determines to be
doubtful.
"Equipment" means all present and future machinery, equipment tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"Equipment Advance" has the meaning set forth in Section 2.1.2.
"Equipment Availability Date" has the meaning set forth in Section
2.1.2.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds
and letters of credit (b) all obligations evidenced by notes, bonds,
debentures or similar instruments, (c) all capital lease obligations and
(d) all Contingent Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or
proceedings seeking reorganization, arrangement or other relief.
"Inventory" means all present and future inventory in which Borrower
has any interest, including merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service,
of every kind and description now or at any time hereafter owned by or in
the custody or possession, actual or constructive, of Borrower, including
such inventory as is temporarily out of its custody or possession or in
transit and including
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any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing
and any documents of title representing any of the above.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance
or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other present or future agreement
entered into between Borrower and/or for the benefit of Bank in connection
with this Agreement, all as amended, extended or restated from time to
time.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and
its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay
the Obligations or otherwise perform its obligations under the Loan
Documents.
"Equipment Maturity Date" means JUNE 5, 2000.
"Negotiable Collateral" means all of Borrowers present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper.
"Obligations" means all debt, principal, interest Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising, including any interest that accrues after
the commencement of an Insolvency Proceeding and including any debt
liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise.
"Payment Date" means the FIFTH (5th) calendar day of each month
commencing on the first such date after the Closing Date.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document,
(b) Indebtedness existing on the Closing Date and disclosed in the
Schedule;
(c) Subordinated Debt
(d) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State
thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from
either Standard & Poor's Corporation or Xxxxx'x investors Service, Inc.,
and (iii) certificates of deposit maturing no more than one (1) year from
the date of investment therein issued by Bank.
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"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by
appropriate proceedings and as to which adequate reserves are maintained on
Borrowers Books in accordance with GAAP, provided the same have no priority
over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired or held by Borrower or
any of its Subsidiaries to secure the purchase price of such Equipment or
indebtedness incurred solely for the purpose of financing the acquisition
of such Equipment, or (ii) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment; and
(d) Liens on Equipment leased by Borrower or any Subsidiary pursuant
to an operating lease in the ordinary course of business (including
proceeds thereof and accessions thereto) incurred solely for the purpose of
financing the lease of such Equipment (including Liens pursuant to leases
permitted pursuant to Section 7.1 and Liens arising from UCC financing
statements regarding leases permitted by this Agreement).
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit
corporation, firm, joint stock company, estate, entity or governmental
agency.
"Prime Rate" means the variable rate of interest per annum, most
recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Quick Assets" means, as of any applicable date, the consolidated
cash, cash equivalents, accounts receivable and investments with maturities
of fewer than 90 days of Borrower determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" means February 17, 1998.
"Schedule" means the schedule of exceptions attached hereto, if any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to
Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means with respect to any Person, corporation,
partnership, company association, joint venture, or any other business
entity of which more than fifty percent (50%) of the voting stock or other
equity interests is owned or controlled, directly or indirectly, by such
Person or one or more Affiliates of such Person.
"Tangible Net Worth" means as of any applicable date, the consolidated
total assets of Borrower and its Subsidiaries minus, without duplication,
(i) the sum of any amounts attributable to (a) goodwill, (b) intangible
items such as unamortized debt discount and expense, patents, trade and
service marks and names, copyrights and research and development expenses
except prepaid expenses, and (c) all reserves not already deducted from
assets, and (ii) Total Liabilities.
"Total Liabilities" means as of any applicable date, any date as of
which the amount thereof shall be determined, all obligations that should,
in accordance with GAAP be classified as liabilities on the
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consolidated balance sheet of Borrower, including in any event all
Indebtedness, but specifically excluding Subordinated Debt
1.2 Accounting and Other Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
and determinations made hereunder shall be made in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. The terms "including"/ "includes" shall always be read as
meaning "including (or includes) without limitation", when used herein or in any
other Loan Document
2. LOAN AND TERMS OF PAYMENT
2.1 Credit Extensions. Borrower promises to pay to the order of Bank, in
lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower hereunder. Borrower
shall also pay interest on the unpaid principal amount of such Credit Extensions
at rates in accordance with the terms hereof.
2.1.1 Revolving Advances.
(a) Subject to and upon the terms and conditions of this Agreement, Bank
agrees to make Advances to Borrower in an aggregate outstanding amount not to
exceed the Committed Revolving Line or the Borrowing Base, whichever is less.
Subject to the terms and conditions of this Agreement, amounts borrowed pursuant
to this Section 2.1 may be repaid and reborrowed at any time during the term of
this Agreement.
(b) Whenever Borrower desires an Advance, Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. Pacific time, on the
Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank's discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1 to Borrower's deposit account
(c) The Committed Revolving Line shall terminate on the Revolving Maturity
Date, at which time all Advances under this Section 2.1 and other amounts due
under this Agreement (except as otherwise expressly specified herein) shall be
immediately due and payable.
2.1.2 Equipment Advances.
(a) Subject to and upon the terms and conditions of this Agreement at any
time from the date hereof through December 31, 1997 (the "Equipment Availability
End Date"), Bank agrees to make advances (each an "Equipment Advance" and
collectively, the "Equipment Advances") to Borrower in an aggregate outstanding
amount not to exceed the Committed Equipment Line. To evidence the Equipment
Advance or Equipment Advances, Borrower shall deliver to Bank, at the time of
each Equipment Advance request an invoice for the equipment to be purchased or
financed. The Equipment Advances shall be used only to purchase or finance
Equipment purchased on or after January 1, 1996 and shall not exceed ONE HUNDRED
Percent (100%) of the invoice amount of such equipment approved from time to
time by Bank, excluding taxes, shipping, warranty charges, freight discounts and
installation expense, provided, however, that tooling equipment may constitute
no more than THREE HUNDRED THOUSAND AND NO/100THS Dollars ($300,000) of
aggregate Equipment Advances. Software may constitute up to TWO HUNDRED FIFTY
THOUSAND AND NO/100THS Dollars ($250,000) of aggregate Equipment Advances.
(b) Interest on Equipment Advances made prior to JULY 1, 1997 shall accrue
from the date of each Equipment Advance at the rate specified in Section 2.3(a),
and shall be payable on the Payment Date of each month through JUNE, 1997. Any
Equipment Advances that are outstanding on JUNE 30,
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1997 will be payable in THIRTY SIX (36) equal monthly installments of principal,
plus all accrued and unpaid interest, beginning on the Payment Date of each
month starting JULY, 1997 and ending on the Equipment Maturity Date.
(c) Interest on Equipment Advances made after JUNE 30, 1997 shall accrue
from the date of each Equipment Advance at the rate specified in Section 2.3(a),
and shall be payable on the Payment Date of each month through the Equipment
Availability End Date. Any Equipment Advances made after JUNE 30, 1997 that are
outstanding on the Equipment Availability End Date falls will be payable in
THIRTY (30) equal monthly installments of principal, plus all accrued and unpaid
interest, beginning on the Payment Date of each month following the Equipment
Availability End Date and ending on the Equipment Maturity Date. Equipment
Advances may be repaid at any time, but once repaid, may not be reborrowed.
(d) When Borrower desires to obtain an Equipment Advance, Borrower shall
notify Bank (which notice shall be irrevocable) by facsimile transmission to be
received no later than 3:00 p.m. Pacific time one (1) Business Day before the
day on which the Equipment Advance is to be made. Such notice shall be
substantially in the form of Exhibit B. The notice shall be signed by a
Responsible Officer or its designee and include a copy of the invoice(s) for the
Equipment to be financed.
2.2 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Section 2.1.1 of this Agreement
is greater than the lesser of (i) the Committed Revolving Line or (ii) the
Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount of
such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. (i) Except as set forth in Section 2.3(b), any Advances
shall bear interest, on the average daily balance thereof at a per annum rate
equal to ONE QUARTER (0.25) percentage points above the Prime Rate.
(ii) Except as set forth in Section 2.3(b), any Equipment Advances shall
bear interest, on the average daily balance thereof, at a per annum rate equal
to ONE (1.0) percentage point above the Prime Rate.
(b) Default Rate. All Obligations shall bear interest, from and after the
occurrence of an Event of Default at a rate equal to five (5) percentage points
above the interest rate applicable immediately prior to the occurrence of the
Event of Default
(c) Payments. Interest hereunder shall be due and payable on each Payment
Date. Borrower hereby authorizes Bank to debit any accounts with Bank,
including, without limitation, Account Number 700786870 for payments of
principal and interest due on the Obligations and any other amounts owing by
Borrower to Bank Bank will notify Borrower of all debits which Bank has made
against Borrower's accounts. Any such debits against Borrower's accounts in no
way shall be deemed a set-off. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to time
hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of Default,
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment, whether directed to Borrower's deposit account
with Bank or to the Obligations or otherwise, shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment in
respect of the Obligations unless such payment is of immediately available
federal funds or unless
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and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon Pacific time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. (i) A Committed Revolving Line Facility Fee equal to FIVE
THOUSAND AND NO/100THS Dollars ($5,000), which fee shall be due on the Closing
Date and on each anniversary thereof on which Advances are outstanding, and
shall be fully earned and non-refundable;
(ii) An Equipment Line Facility Fee equal to FIVE THOUSAND AND NO/100THS
Dollars ($5,000), which fee shall be due on the Closing Date and shall be fully
earned and non-refundable;
(b) Financial Examination and Appraisal Fees. Bank's customary fees and
out-of-pocket expenses for Bank's audits of Borrower's Accounts, and for each
appraisal of Collateral and financial analysis and examination of Borrower
performed from time to time by Bank or its agents;
(c) Bank Expenses. Upon demand from Bank, including, without limitation,
upon the date hereof, all Bank Expenses incurred through the date hereof,
including reasonable attorneys' fees and expenses, and, after the date hereof,
all Bank Expenses, including reasonable attorneys fees and expenses, as and when
they become due.
2.6 Additional Costs. In case any law, regulation, treaty or official
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of principal or
interest or any other amounts payable hereunder by Borrower or otherwise
with respect to the transactions contemplated hereby (except for taxes on
the overall net income of Bank imposed by the United States of America or
any political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof Borrower agrees to pay to Bank the
amount of such increase in cost, reduction in income or additional expense as
and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 Term. Except as otherwise set forth herein, this Agreement shall become
effective on the Closing Date and, subject to Section 12.7, shall continue in
full force and effect for a term ending on the Revolving Maturity Date.
Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default Notwithstanding termination of this Agreement, Bank's lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.
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3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. The obligation of
Bank to make the initial Credit Extension is subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:
(a) this Agreement, the Revolving Promissory Note and the Equipment
Line Promissory Note each duly executed by Borrower;
(b) a certificate of the Secretary of Borrower with respect to
charter, bylaws, incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(c) financing statements (Forms UCC-1);
(d) insurance certificate;
(e) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof and
(f) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The obligation of Bank
to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as provided in
Section 2.1; and
(b) the representations and warranties contained in Section 5 shall be
true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Credit Extension. The
making of each Credit Extension shall be deemed to be a representation and
warranty by Borrower on the date of such Credit Extension as to the
accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt payment of any and all Obligations
and in order to secure prompt performance by Borrower of each of its covenants
and duties under the Loan Documents. Except as set forth in the Schedule, such
security interest constitutes a valid, first priority security interest in the
presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof Borrower
acknowledges that Bank may place a "hold" on any Deposit Account pledged as
Collateral to secure the Obligations. Notwithstanding termination of this
Agreement, Bank's Lien on the Collateral shall remain in effect for so long as
any Obligations are outstanding.
4.2 Delivery of Additional Documentation Required. Borrower shall from time
to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of or any other
matter relating to, the Collateral.
9
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary is a
corporation duly existing and in good standing under the laws of its state of
incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles/Certificate of Incorporation or
Bylaws, nor will they constitute an event of default under any material
agreement to which Borrower is a party or by which Borrower is bound Borrower is
not in default under any agreement to which it is a party or by which it is
bound, which default could have a Material Adverse Effect
5.3 No Prior Encumbrances. Borrower has good and indefeasible title to the
Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
existing obligations. The service or property giving rise to such Eligible
Accounts has been performed or delivered to the account debtor or to the account
debtor's agent for immediate shipment to and unconditional acceptance by the
account debtor. Borrower has not received notice of actual or imminent
Insolvency Proceeding of any account debtor whose accounts are included in any
Borrowing Base Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects of
good and marketable quality, free from all material defects.
5.6 Name; Location of Chief Executive Office. Except as disclosed in the
Schedule, Borrower has not done business and will not without at least thirty
(30) days prior written notice to Bank do business under any name other than
that specified on the signature page hereof The chief executive office of
Borrower is located at the address indicated in Section 10 hereof
5.7 Litigation. Except as set forth in the Schedule, there are no actions
or proceedings pending, or, to Borrower's knowledge, threatened by or against
Borrower or any Subsidiary before any court or administrative agency in which an
adverse decision could have a Material Adverse Effect or a material adverse
effect on Borrower's interest or Bank's security interest in the Collateral.
5.8 No Material Adverse Change in Financial Statements. All consolidated
financial statements related to Borrower and any Subsidiary that have been
delivered by Borrower to Bank fairly present in all material respects Borrower's
consolidated financial condition as of the date thereof and Borrower's
consolidated results of operations for the period then ended. There has not been
a material adverse change in the consolidated financial condition of Borrower
since the date of the most recent of such financial statements submitted to Bank
on or about the Closing Date.
5.9 Solvency. The fair saleable value of Borrower's assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities; the
Borrower is not left with unreasonably small capital after the transactions
contemplated by this Agreement and Borrower is able to pay its debts (including
trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect Borrower is not an
"investment company" or a company `controlled" by an "investment company within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors
10
of the Federal Reserve System). Borrower has complied with all the provisions of
the Federal Fair Labor Standards Act Borrower has not violated any statutes,
laws, ordinances or rules applicable to it violation of which could have a
Material Adverse Effect
5.11 Environmental Condition. None of Borrower's or any Subsidiary's
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency concerning any action or
omission by Borrower or any Subsidiary resulting in the release, or other
disposition of hazardous waste or hazardous substances into the environment
5.12 Taxes. Borrower and each Subsidiary has filed or caused to be filed
all tax returns required to be filed on a timely basis, and has paid, or has
made adequate provision for the payment of, all taxes reflected therein.
5.13 Subsidiaries. Borrower does not own any stock, partnership interest or
other equity securities of any Person, except for Permitted Investments.
5.14 Government Consents. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted.
5.15 Full Disclosure. No representation, warranty or other statement made
by Borrower in any certificate or written statement furnished to Bank contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that until payment in full of all outstanding
Obligations, and for so long as Bank may have any commitment to make a Credit
Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect
6.2 Government Compliance. Borrower shall meet, and shall cause each
Subsidiary to meet the minimum funding requirements of ERISA with respect to any
employee benefit plans subject to ERISA. Borrower shall comply, and shall cause
each Subsidiary to comply, with all statutes, laws, ordinances and government
rules and regulations to which it is subject, noncompliance with which could
have a Material Adverse Effect or a material adverse effect on the Collateral or
the priority of Bank's Lien on the Collateral.
6.3 Financial Statements Records. Certificates. Borrower shall deliver to
Bank:
(a) as soon as available, but in any event within fifteen (15) days
after the end of each month, a company prepared consolidated balance sheet
and income statement covering Borrower's consolidated operations during
such period, in a form and certified by an officer of Borrower reasonably
acceptable to Bank;
11
(b) as soon as available, but in any event within ninety (90) days
after the end of Borrower's fiscal year, audited consolidated financial
statements of Borrower prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such financial statements
of an independent certified public accounting firm reasonably acceptable to
Bank;
(c) within five (5) days of filing, copies of all statements, reports
and notices sent or made available generally by Borrower to its security
holders or to any holders of Subordinated Debt and all reports on Form
10-K, 10-Q and 8-K filed with the Securities and Exchange Commission;
(d) promptly upon receipt of notice thereof, a report of any legal
actions pending or threatened against Borrower or any Subsidiary that could
result in damages or costs to Borrower or any Subsidiary of One Hundred
Thousand Dollars ($100,000) or more;
(e) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time.
Within fifteen (15) days after the last day of each month, Borrower shall
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings of
accounts receivable.
Within fifteen (15) days after the last day of each month, Borrower shall
deliver to Bank with the monthly financial statements a Compliance Certificate
signed by a Responsible Officer in substantially the form of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that such audits will be conducted no
more often than every six (6) months unless an Event of Default has occurred and
is continuing.
6.4 Inventory Returns. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects. Returns and allowances, if
any, as between Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist at
the time of the execution and delivery of this Agreement Borrower shall promptly
notify Bank of all returns and recoveries and of all disputes and claims, where
the return, recovery, dispute or claim involves more than Fifty Thousand Dollars
($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to make,
due and timely payment or deposit of all material federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof and Borrower will make, and will cause each Subsidiary to make,
timely payment or deposit of all material tax payments and withholding taxes
required of it by applicable laws, including, but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrower or a Subsidiary has made such payments or
deposits; provided that Borrower or a Subsidiary need not make any payment if
the amount or validity of such payment is (i) contested in good faith by
appropriate proceedings, (ii) is reserved against (to the extent required by
GAAP) by Borrower and (iii) no lien other than a Permitted Lien results.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the Collateral insured against
loss or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as ordinarily insured against by other owners in
similar businesses conducted in the locations where Borrower's business is
conducted on the date hereof. Borrower shall also maintain insurance relating to
Borrower's ownership and use of the Collateral in amounts and of a type that are
customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as are reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable endorsement
in a form satisfactory to Bank, showing Bank as an additional loss payee
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thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. At Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal depository
and operating accounts with Bank.
6.8 Adjusted Quick Ratio. Borrower shall maintain, as of the last day of
each calendar month, a ratio of (i) Quick Assets to (ii) Current Liabilities
less current deferred revenues of at least 2.0 to 1.0.
6.9 Adjusted Debt-Net Worth Ratio. Borrower shall maintain, as of the last
day of each calendar month, a ratio of (i) Total Liabilities less Subordinated
Debt and deferred revenues to (ii) Tangible Net Worth plus Subordinated Debt of
not more than 1.0 to 1.0.
6.10 Tangible Net Worth. Borrower shall maintain, as of the last day of
each calendar month through December 31,1996, a Tangible Net Worth of not less
than FOUR MILLION AND NO/100THS Dollars ($4,000,000), as of the last day of each
calendar month from January 31, 1997 through March 31, 1997, a Tangible Net
Worth of not less than THREE MILLION TWO HUNDRED FIFTY THOUSAND AND NO/100THS
Dollars ($3,250,000), as of the last day of each calendar month from April 30,
1997 through June 30, 1997, a Tangible Net Worth of not less than TWO MILLION
FIVE HUNDRED THOUSAND AND NO/100THS Dollars ($2,500,000), as of the last day of
each calendar month from July 31, 1997 and thereafter, a Tangible Net Worth of
not less than ONE MILLION FIVE HUNDRED THOUSAND AND NO/100THS Dollars
($1,500,000).
6.11 Further Assurances. At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any Credit Extension
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than Transfers: (i) of inventory
in the ordinary course of business, (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business, (iii) that constitute payment of normal and usual
operating expenses in the ordinary course of business, or (iv) of worn-out or
obsolete Equipment
7.2 Chances in Business, Ownership, or Management Business Locations.
Engage in any business, or permit any of its Subsidiaries to engage in any
business, other than the businesses currently engaged in by Borrower and any
business substantially similar or related thereto (or incidental thereto), or
suffer a change in Borrower's ownership or management. Borrower will not without
at least thirty (30) days prior written notification to Bank, relocate its chief
executive office or add any new offices or business locations.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable with respect
to any Indebtedness, or permit any Subsidiary so to do, other than Permitted
Indebtedness.
13
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien with
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distibutions. Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock
7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-affiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any Subordinated
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any provision
contained in any documentation relating to the Subordinated Debt without Bank's
prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman, or similar
party unless Bank has received a pledge of any warehouse receipt covering such
Inventory. Except for Inventory sold in the ordinary course of business and
except for such other locations as Bank may approve in writing, Borrow& shall
keep the inventory only at the location set forth in Section 10 hereof and such
other locations of which Borrower gives Sank prior written notice and as to
which Borrower signs and files a financing statement where needed to perfect
Bank's security interest
7.11 Compliance. Become an "investment company" or a company controlled by
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose or purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose; fail
to meet the minimum funding requirements of ERISA; permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral; or permit any
of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement
8.1 Payment Default. If Borrower fails to pay, when due, any of the
Obligations.
8.2 Covenant Default
(a) If Borrower fails to perform any obligation under Sections 6.3, 6.6,
6.7, 6.8, 6.9 or 6.10 or violates any of the covenants contained in Article 7 of
this Agreement or
(b) If Borrower fails or neglects to perform, keep, or observe any other
material term, provision, condition, covenant, or agreement contained in this
Agreement, in any of the Loan Documents, or in any other present or future
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after the occurrence thereof provided,
however, that if the default cannot by its nature be cured within the ten (10)
day period or cannot after diligent attempts by Borrower be cured within such
ten (10) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional reasonable period (which shall not
in any case exceed thirty (30) days) to attempt to cure such default, and within
such
14
reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Advances will be required to be
made during such cure period);
8.3 Material Adverse Change. If there (i) occurs a material adverse change
in the business, operations, or condition (financial or otherwise) of the
Borrower, or (ii) is a material impairment of the prospect of repayment of any
portion of the Obligations, or (iii) is a material impairment of the value or
priority of Bank's security interests in the Collateral;
8.4 Attachment. If any material portion of Borrower's assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof provided that none of the foregoing shall
constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within 30 days (provided that no
Advances will be made prior to the dismissal of such Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could have a Material Adverse Effect
8.7 Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least Fifty Thousand Dollars
($50,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period often (10) days (provided that no Credit Extensions will
be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate or writing delivered to. Bank by Borrower or any
Person acting on Borrower's behalf pursuant to this Agreement or to induce Bank
to enter into this Agreement or any other Loan Document
8.10 Guaranty Any guaranty of all or a portion of the Obligations ceases
for any reason to be in full force and effect, or any Guarantor fails to perform
any obligation under any guaranty of all or a portion of the Obligations, or any
material misrepresentation or material misstatement exists now or hereafter in
any warranty or representation set forth in any guaranty of all or a portion of
the Obligations or in any certificate delivered to Bank in connection with such
guaranty, or any of the circumstances described in Sections 8.4, 8.5 or 8.8
occur with respect to any Guarantor.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the continuance of
an Event of Default, Bank may, at its election, without notice of its election
and without demand, do any one or more of the following, all of which are
authorized by Borrower:
15
(a) Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable
without any action by Bank);
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement or under any other agreement between Borrower
and Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Without notice to or demand upon Borrower, make such payments and
do such acts as Bank considers necessary or reasonable to protect its
security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to
Bank as Bank may designate. Borrower authorizes Bank to enter the premises
where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise
any encumbrance, charge, or lien which in Bank's determination appears to
be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's
premises, Borrower hereby grants Bank a license to enter such premises and
to occupy the same, without charge in order to exercise any of Banks rights
or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower set off and apply to the Obligations
any and all (i) balances and deposits of Borrower held by Bank, or (ii)
indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(h) Ship, reclaim, recover, store, finish; maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein)
the Collateral. Bank is hereby granted a non-exclusive, royalty-free
license or other right, solely pursuant to the provisions of this Section
9.1, to use, without charge, Borrower's labels, patents, copyrights, mask
works, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any property of a similar nature,
as it pertains to the Collateral, in completing production of, advertising
for sale, and selling any Collateral and, in connection with Bank's
exercise of its rights under this Section 9.1, Borrower's rights under all
licenses and all franchise agreements shall inure to Bank's benefit;
(i) Sell the Collateral at either a public or private sale, or both,
by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply the proceeds thereof to
the Obligations in whatever manner or order it deems appropriate;
(j) Bank may credit bid and purchase at any public sale, or at any
private sale as permitted by law; and
(k) Any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Banks possession; (c) sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrowers policies of insurance; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; (f) to file, in its sole
discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of Borrower
where permitted by law; provided Bank may exercise such power of attorney to
sign the name of Borrower on any of the documents described in
16
Section 4.2 regardless of whether an Event of Default has occurred. The
appointment of Bank as Borrowers attorney in fact, and each and every one of
Banks rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and Bank's
obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. Upon the occurrence and during the continuance of
an Event of Default, Bank may notify any Person owing funds to Borrower of
Bank's security interest in such funds and verify the amount of such Account
Borrower shall collect all amounts owing to Borrower for Bank, receive in trust
all payments as Bank's trustee, and if requested or required by Bank,
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following: (a)
make payment of the same or any part thereof (b) set up such reserves under the
Committed Revolving Line as Bank deems necessary to protect Bank from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement
9.5 Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this Agreement,
the Loan Documents, and all other agreements shall be cumulative. Bank shall
have all other rights and remedies not expressly set forth herein as provided
under the Code, by law, or in equity. No exercise by Bank of one right or remedy
shall be deemed an election, and no waiver by Bank of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be
effective unless made in a written document signed on behalf of Bank and then
shall be effective only in the specific instance and for the specific purpose
for which it was given.
9.7 Demand: Protest Borrower waives demand, protest, notice of protest
notice of default or dishonor, notice of payment and nonpayment notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower Maker Communications, Inc.
000 Xxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx, President
FAX: 000-000-0000
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If to Bank Silicon Valley Bank
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx
FAX: 000-000-0000
The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.
11. CHOICE OF LAW AND VENUE
The laws of the Commonwealth of Massachusetts shall apply to this Agreement
BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
UNCONDITIONALLY. THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT,
OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF
THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER ACCEPTS JURISDICTION
OF THE COURTS AND VENUE IN SANTA XXXXX COUNTY, CALIFORNIA. BORROWER AND BANK
EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS. AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY
RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall indemnify, defend, protect and hold
harmless Bank and its officers, employees, and agents against (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct
12.3 Time of Essence. Time is of the essence for the performance of all
obligations set forth in this Agreement
12.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
12.5 Amendments in Writing Integration. This Agreement cannot be amended or
terminated except by a writing signed by Borrower and Bank. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this Agreement,
if any, are merged into this Agreement and the Loan Documents.
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12.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement
12.7 Survival. All covenants, representations and warranties made in this
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding. The obligations of Borrower to indemnify Bank with respect
to the expenses, damages, losses, costs and liabilities described in Section
12.2 shall survive until all applicable statute of limitations periods with
respect to actions that may be brought against Bank have run.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument as of the date first set forth above.
"Borrower" "Bank"
MAKER COMMUNICATIONS, INC. SILICON VALLEY BANK, doing business
as SILICON VALLEY EAST
By: /s/ Xxxxxxx Xxxxxxx By:
---------------------------- -------------------------------
Xxxxxxx Xxxxxxx, President Xxxxxx X. Xxxxxx
By: SILICON VALLEY BANK
----------------------------
By:
------------------------------
Title:
---------------------------
(Signed in Santa Xxxxx County, California)
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