EXHIBIT 99.2
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SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
(EXIM PROGRAM)
BORROWER: VERSO TECHNOLOGIES, INC.
NACT TELECOMMUNICATIONS, INC.
XXXXXXXX.XXX SOFTWARE, INC.
ADDRESS: 000 XXXXXXXX XXXXXXX, XXXXX 000
XXXXXXX, XXXXXXX 00000
DATE: FEBRUARY 12, 2003
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK, COMMERCIAL FINANCE DIVISION ("Silicon"), whose address is
0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and the borrower(s) named above
(jointly and severally, the "Borrower"), whose chief executive office is located
at the above address ("Borrower's Address"). The Schedule to this Agreement (the
"Schedule") shall for all purposes be deemed to be a part of this Agreement, and
the same is an integral part of this Agreement. (Definitions of certain terms
used in this Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 LOANS. Silicon will make loans to Borrower (the "Loans"), in
amounts determined by Silicon* 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*.
*IN ITS GOOD FAITH BUSINESS JUDGMENT
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. Regardless of the amount of
Obligations that may be outstanding from time to time, Borrower shall pay
Silicon minimum monthly interest during the term of this Agreement in the amount
set forth on the Schedule (the "Minimum Monthly Interest").
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 2% per annum.
1.4 FEES. Borrower shall pay Silicon the fee(s) 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* 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
sole 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, and in the
event at any time there are
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insufficient Loans available to Borrower for such reserve, Borrower shall
deposit and maintain with Silicon cash collateral in an amount at all times
equal to such deficiency, which shall be held as Collateral for all purposes of
this Agreement. Borrower shall pay all bank charges (including** charges of
Silicon) for the issuance of Letters of Credit, together with such 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.
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.
*GOOD FAITH BUSINESS JUDGMENT
**CUSTOMARY
***BUT NOTHING HEREIN SHALL RELIEVE SILICON FROM LIABILITY FOR ITS OWN
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of
all of the Obligations when due, Borrower hereby grants to Silicon a security
interest in all of Borrower's interest in the following, whether now owned or
hereafter acquired, and wherever located: All Inventory, Equipment, Receivables,
and General Intangibles, including, without limitation, all of Borrower's
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").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF 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), and (iii) do not violate Borrower's articles or
certificate of incorporation, or 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.
Borrower shall give Silicon 30 days' prior written notice before changing its
name or doing business under any other name. 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, or moving any of the Collateral to a location
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other than Borrower's Address or one of the locations set forth on the
Schedule.*
*BORROWER HAS ADVISED SILICON THAT UPON THE EFFECTIVE DATE (AS DEFINED
IN THE NON-EXIM AGREEMENT (AS DEFINED HEREIN)), BORROWER WILL HAVE ADDITIONAL
LOCATIONS IN LITTLETON, COLORADO AND MONTREAL, QUEBEC. NOTWITHSTANDING THE
FOREGOING, EXCEPT AS OTHERWISE PERMITTED BY SECTION 5.5 BELOW, SO LONG AS THIS
AGREEMENT IS IN EFFECT, BORROWER SHALL NOT TRANSFER ANY ASSETS OR COLLATERAL TO
ANY PARENT, SUBSIDIARY OR AFFILIATE OF BORROWER (UNLESS SUCH ENTITY IS A
CO-BORROWER UNDER THIS AGREEMENT) NOR SHALL BORROWER TRANSFER ANY ASSETS OR
COLLATERAL TO ANY LOCATION LOCATED OUTSIDE OF THE UNITED STATES (EXCEPT FOR
INVENTORY, FROM TIME TO TIME, TO BORROWER'S MONTREAL FACILITY) REGARDLESS OF
WHETHER OR NOT SUCH LOCATION IS SET FORTH ON THE SCHEDULE.
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** advise Silicon in writing of any
material loss or damage to the Collateral.
*(ORDINARY WEAR AND TEAR EXCEPTED)
**AS PROMPTLY AS PRACTICAL
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.
*IN ALL MATERIAL RESPECTS
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 (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) posts bonds or takes any other steps required to keep the
contested taxes from becoming a lien upon any 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*** 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.
*; PROVIDED, HOWEVER, BORROWER MAY DEFER PAYMENT OF ANY CONTESTED TAXES
IF
**EXCEPT AS SET FORTH IN THE SCHEDULE,
***WITHDRAWN, AND WILL NOT WITHDRAW,
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply,
in all material respects, with all provisions of
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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* 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** or more, or involving*** or more in the
aggregate.
*COULD REASONABLY BE EXPECTED TO
**$150,000
***$300,000
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used
solely for lawful business 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."
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.
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.
*OF BORROWER'S
**(AND THE SIGNATURES AND ENDORSEMENTS OF OTHERS ON ALL DOCUMENTS,
INSTRUMENTS AND AGREEMENTS RELATING TO ALL RECEIVABLES ARE AND SHALL BE, TO THE
BEST OF BORROWER'S KNOWLEDGE, GENUINE)
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower
shall deliver to Silicon transaction reports and loan requests, 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. 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
furnish Silicon with copies (or, at Silicon's request, 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.
*PACIFIC STANDARD TIME
**UPON SILICON'S REQUEST,
4.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to
collect all Receivables, unless and until a Default or an Event of Default has
OCCURRED*. Borrower shall hold all payments on, and proceeds of, Receivables in
trust for Silicon, and Borrower shall immediately deliver all such payments and
proceeds to Silicon in their original form, duly endorsed in blank, to be
applied to the Obligations in such order as Silicon shall determine. Silicon
may, in its discretion, require that all proceeds of Collateral be de-
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posited by Borrower into a lockbox account, or such other "blocked account" as
Silicon may specify, pursuant to a blocked account agreement in such form as
Silicon may specify. **Silicon or its designee may, at any time, notify Account
Debtors that the Receivables have been assigned to Silicon.
*AND IS CONTINUING
**UPON THE OCCURRENCE AND DURING THE CONTINUATION OF A DEFAULT OR EVENT
OF DEFAULT,
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** 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 limits the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
*AND IS CONTINUING
**$50,000
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 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.
*, AND DURING THE CONTINUATION,
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.
*, AND DURING THE CONTINUATION,
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 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. * Such insurance policies shall name
Silicon as an additional insured and 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
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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.
*WITHIN FIVE (5) DAYS OF THE DATE HEREOF, ALL
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.
5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times,
and on* 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).
*THREE
**;PROVIDED, HOWEVER, UPON THE OCCURRENCE OF A DEFAULT OR EVENT OF
DEFAULT, SILICON, OR ITS AGENTS, SHALL HAVE THE RIGHT TO CONDUCT SUCH
INSPECTIONS AND/OR AUDITS ON ONE BUSINESS DAY'S NOTICE
***WITH RESPECT TO SILICON,
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) 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, which would
have a material, adverse effect on Borrower or on the prospect of repayment of
the Obligations; (ix) guarantee or otherwise become liable with respect to the
obligations of another******; (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 (xiv) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default would occur as a result of such
transaction.
*WHICH CONSENT, OR DENIAL THEREOF, WILL BE DETERMINED IN SILICON'S GOOD
FAITH BUSINESS JUDGMENT
**, EXCEPT AS OTHERWISE PERMITTED BY OTHER PROVISIONS OF THIS AGREEMENT
***, AND EXCEPT FOR THE ISSUANCE OF NON-EXCLUSIVE LICENSES AND SIMILAR
ARRANGEMENTS FOR THE USE OF THE PROPERTY OF BORROWER IN THE ORDINARY COURSE OF
BUSINESS
****, EXCEPT FOR SUCH WAREHOUSEMEN OR THIRD PARTIES FOR WHICH A NOTICE
OF SECURITY INTEREST TO BAILEE, OR SIMILAR AGREEMENT, IN FORM SATISFACTORY TO
SILICON, HAS BEEN EXECUTED BY SUCH WAREHOUSEMAN OR BAILEE AND PROVIDED FURTHER
THAT THE AMOUNT OF INVENTORY OR OTHER COLLATERAL STORED IN SUCH LOCATIONS DOES
NOT EXCEED $850,000 IN THE AGGREGATE, AND EXCEPT FOR INVENTORY THAT BORROWER, IN
THE ORDINARY COURSE OF ITS BUSINESS, HAS LOANED TO ITS CUSTOMERS OR IS HELD BY
ITS CUSTOMERS PENDING THE EXCHANGE OF SUCH INVENTORY, PROVIDED THAT THE
AGGREGATE VALUE OF SUCH INVENTORY DOES NOT EXCEED $1,000,000 AT ANYTIME WHILE
THIS AGREEMENT IS IN EFFECT, AND EXCEPT FOR THE COLLATERAL STORED OR MAINTAINED
AT APTO SOLUTIONS FOR PURPOSES OF LIQUIDATION PROVIDED THE AMOUNT OF SUCH
COLLATERAL DOES NOT AT ANY TIME EXCEED $1,000,000 IN THE AGGREGATE
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT (EXIM)
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*****, EXCEPT (A) LOANS OUTSTANDING AS OF THE DATE HEREOF AND DESCRIBED
ON THE SCHEDULE AND (B) LOANS CONSISTING OF (1) TRAVEL ADVANCES AND EMPLOYEE
RELOCATION LOANS AND OTHER EMPLOYEE LOANS AND ADVANCES IN THE ORDINARY COURSE OF
BUSINESS, PROVIDED THE AGGREGATE AMOUNT OF SUCH LOANS UNDER THIS SUBCLAUSE
(VII)(B)(1) DO NOT EXCEED $100,000 AT ANY ONE TIME OUTSTANDING, AND (2) LOANS TO
EMPLOYEES, OFFICERS OR DIRECTORS RELATING TO THE PURCHASE OF EQUITY SECURITIES
OF BORROWER PURSUANT TO EMPLOYEE STOCK PURCHASE PLANS OR AGREEMENTS APPROVED BY
BORROWER'S BOARD OF DIRECTORS, PROVIDED THE AGGREGATE AMOUNT OF SUCH LOANS UNDER
THIS SUBCLAUSE (VII)(B)(2) DO NOT EXCEED $100,000 AT ANY ONE TIME OUTSTANDING
******PERSON
*******OR DIVIDENDS OR DISTRIBUTIONS MADE IN RESPECT OF A BORROWER TO
THE PARENT OF SUCH BORROWER, PROVIDED THAT SUCH PARENT IS ALSO A BORROWER
HEREUNDER
********, EXCEPT FOR THE REPURCHASES OF STOCK FROM THE CANCELLATION OF
INDEBTEDNESS AND FROM FORMER EMPLOYEES OR DIRECTORS OF BORROWER UNDER THE TERMS
OF APPLICABLE REPURCHASE OR SIMILAR AGREEMENTS BETWEEN BORROWER AND SUCH
EMPLOYEES OR DIRECTORS ALL IN AN AGGREGATE AMOUNT NOT TO EXCEED $100,000 WHILE
THIS AGREEMENT IS IN EFFECT
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.
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"), subject to
Section 6.3 below.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to
the Maturity Date as follows: (i) by Borrower, effective three Business Days
after written notice of termination is given to Silicon; or (ii) by Silicon at
any time after the occurrence* of an Event of Default, without notice, effective
immediately. If this Agreement is terminated by Borrower or by Silicon under
this Section 6.2, Borrower shall pay to Silicon a termination fee in an amount
equal to** of the Maximum Credit Limit, provided that no termination fee shall
be charged if the credit facility hereunder is replaced with a new facility from
another division of Silicon Valley Bank. The termination fee shall be due and
payable on the effective date of termination and thereafter shall bear interest
at a rate equal to the highest rate applicable to any of the Obligations.
*, AND DURING THE CONTINUATION,
**ONE PERCENT (1.0%)
6.3 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 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, without limiting the fact that Loans are subject to the discretion of
Silicon, 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
termination of this Agreement, 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
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT (EXIM)
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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 which is not cured within 10 days after the occurrence of the same;
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** 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*** 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**** 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
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 a
material adverse change in Borrower's business or financial condition. Silicon
may cease making any Loans hereunder during any of the above cure periods, and
thereafter if an Event of Default has occurred******.
*AND SUCH OVERADVANCE IS NOT IMMEDIATELY REPAID IN ACCORDANCE WITH THE
TERMS OF SECTION 1.3 HEREOF
**OR INSOLVENCY
***60
****35%
*****HELD BY ANY ONE PERSON
******AND IS CONTINUING
7.2 REMEDIES. Upon the occurrence of any Event of Default, 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 desig-
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT (EXIM)
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nated 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 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 per annum.
*DURING THE CONTINUATION THEREOF
**AND DURING THE CONTINUATION THEREOF
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* days prior to the sale, and, in the case of a public sale,
notice of the sale is published at least* 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.
*10
**AND
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 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
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT (EXIM)
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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.
*AND DURING THE CONTINUATION THEREOF
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 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 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.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
"continuing" when used with reference to a Default or an Event of
Default means that the Default or Event of Default has occurred and has not been
either waived in writing by Silicon or cured within any applicable cure period.
"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 9102(a) of the
Code.
"Eligible Inventory" means Inventory which Silicon, in its* deems
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 Inventory is eligible for borrowing is a matter of Silicon's*, Inventory
which does not meet the following requirements will not be deemed to be Eligible
Inventory: Inventory which (i) consists of finished goods, in good, new and
salable condition which is not perishable, not obsolete or unmerchantable, and
is not comprised of raw materials, work in process, packaging materials or
supplies; (ii) meets all applicable governmental standards; (iii) has been
manufactured in compliance with the Fair Labor Standards Act; (iv) conforms in
all respects to the warranties and representations set forth in this Agreement;
(v) is at all times subject to Silicon's duly perfected, first priority security
interest; and (vi) is situated at a one of the locations set forth on the
Schedule.
*GOOD FAITH BUSINESS JUDGMENT
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**AND WHICH CONSTITUTES "ELIGIBLE EXPORT-RELATED INVENTORY" (AS DEFINED
IN THE EXIM BORROWER AGREEMENT REFERRED TO IN THE SCHEDULE)
"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*, 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*, the following (the "Minimum Eligibility
Requirements") are the minimum requirements for a Receivable to be an Eligible
Receivable: (i) the Receivable must***, (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), (iv) the Receivable must not be owing from an Account
Debtor with whom 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) (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*, revise the Minimum
Eligibility Requirements, upon written notice to Borrower.****
*GOOD FAITH BUSINESS JUDGMENT
**AND WHICH CONSTITUTE "ELIGIBLE EXPORT-RELATED ACCOUNTS RECEIVABLE"
(AS DEFINED IN THE EXIM BORROWER AGREEMENT REFERRED TO IN THE SCHEDULE).
***BE DUE AND PAYABLE WITHIN 90 DAYS OF ITS INVOICE DATE AND MUST NOT
BE OUTSTANDING FOR MORE THAN 60 DAYS FROM ITS ORIGINAL DUE DATE;
****WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, DEFERRED REVENUE
SHALL BE REVIEWED BY SILICON MONTHLY AND ASSOCIATED POTENTIAL OFFSETS BY ACCOUNT
DEBTORS WILL BE DEDUCTED FROM THE RECEIVABLES OWING FROM SUCH ACCOUNT DEBTORS.
"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, causes of action, corporate or other
business records, 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 or might be
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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.
"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, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, 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
monitoring fees, closing fees, facility fees, termination 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.
"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; (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 subparagraph (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 agrees that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
*OR LIENS FOR TAXES BEING CONTESTED IN GOOD FAITH BY APPROPRIATE
PROCEEDINGS FOR WHICH ADEQUATE RESERVES HAVE BEEN ESTABLISHED AND ARE MAINTAINED
PROVIDED SUCH LIENS DO NOT HAVE PRIORITY OVER ANY SECURITY INTEREST OF SILICON
**AND (IX) LIENS ON ASSETS ACQUIRED BY BORROWER IN ACCORDANCE WITH
SECTION 5.5 HEREOF, PROVIDED SUCH LIENS WOULD OTHERWISE BE PERMITTED PURSUANT TO
CLAUSES (I) OR (II) OF THE DEFINITION OF PERMITTED LIENS
"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.
*LIMITED LIABILITY COMPANY
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), 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 (i) the
Collateral or any other property which is security for the Obligations or 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.
*IN ITS GOOD FAITH BUSINESS JUDGMENT
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
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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, 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 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.
*(EXCEPT WITH RESPECT TO WIRE TRANSFERS WHICH SHALL BE DEEMED APPLIED
BY SILICON ON ACCOUNT OF THE OBLIGATIONS THE SAME BUSINESS DAY AS DEEMED
RECEIVED BY SILICON)
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.
*THREE
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
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nothing herein shall relieve Silicon* from liability for its own gross
negligence or willful misconduct.
*NOR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR
ANY OTHER PERSON AFFILIATED WITH OR REPRESENTING SILICON
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, Levy, Small & Xxxxxx, but Borrower acknowledges and agrees that Levy,
Small & Xxxxxx 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, the prevailing party in such
action 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 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 Paragraph 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.
*EXCEPT AS EXPRESSLY PROVIDED BY THE PENULTIMATE SENTENCE OF THIS
SECTION 9.12,
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 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.
9.15 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* after 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** period is a reasonable and sufficient
time for Borrower to investigate and act upon any such claim or cause of action.
The** 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.
*TWO YEARS
**TWO-YEAR
9.16 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph 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
paragraph, 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.
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9.17 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 State of California. 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 courts located within
California, and that the exclusive venue therefor shall be Santa Xxxxx County;
(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.
9.18 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.
BORROWER:
VERSO TECHNOLOGIES, INC.
BY /s/ Xxxxx X. Xxxxxxx
---------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/ Xxxxxx Xxxxxxx
---------------------------------
SECRETARY OR ASS'T SECRETARY
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT (EXIM)
-------------------------------------------------------------------------------
BORROWER:
NACT TELECOMMUNICATIONS, INC.
BY /s/ Xxxxxx Xxxxxxx
---------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/ Xxxxx Xxxx
---------------------------------
SECRETARY OR ASS'T SECRETARY
BORROWER:
XXXXXXXX.XXX SOFTWARE, INC.
BY /s/ Xxxxx X. Xxxxxxx
---------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/ Xxxxxx Xxxxxxx
---------------------------------
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY /s/ Xxxxx X. Xxxxxxxx
---------------------------------
TITLE Xxxxx X. Xxxxxxxx
------------------------------
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SILICON VALLEY BANK
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
(EXIM PROGRAM)
BORROWER: VERSO TECHNOLOGIES, INC.
NACT TELECOMMUNICATIONS, INC.
XXXXXXXX.XXX SOFTWARE, INC.
ADDRESS: 000 XXXXXXXX XXXXXXX, XXXXX 000
XXXXXXX, XXXXXXX 00000
DATE: FEBRUARY 12, 2003
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 total of $4,000,000 at any one time outstanding
(the "Maximum Credit Limit"), or the sum of (a) and
(b) below:
(a) 90% (the "Advance Rate") of the amount
of Borrower's Eligible Receivables (as
defined in Section 8 above), plus
(b) 70% (the "Advance Rate") of the value of
Borrower's Eligible Inventory (as defined in
Section 8 above).
Notwithstanding the foregoing, the total outstanding
Obligations under this Loan Agreement and under the
Non-Exim Agreement (as defined below) shall not at
any time exceed $10,000,000 (the "Overall Credit
Limit").
Moreover, Borrower shall at all times ensure that the
outstanding principal balance of the Credit
Accommodations (as defined in the Exim Borrower
Agreement, as defined below) that is supported by
Export-Related Inventory does not exceed sixty
percent (60%) of the sum of the total outstanding
principal balance of the Disbursements (as defined in
the Exim Borrower Agreement) and the undrawn face
amount of all outstanding Commercial Letters of
Credit (as defined in the Exim Borrower Agreement).
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Additionally, Loans made pursuant to subclause (b)
above will be made based upon Borrower's export sales
as a percentage of its total sales, which percentage
will be updated by Borrower on a monthly basis, as
determined by Borrower's sales during the preceding
six months. Silicon will conduct quarterly
examinations, at a minimum, of Borrower's books and
records to verify Borrower's reporting of its export
sales as a percentage of total sales.
Silicon may, from time to time, modify the Advance
Rates, in its good faith business judgment, upon
notice to the Borrower, based on changes in
collection experience with respect to Receivables,
its evaluation of the Inventory or other issues or
factors relating to the Receivables, Inventory or
other Collateral.
Loans will be made to each Borrower based on the
Eligible Receivables and Eligible Inventory of each
Borrower, subject to the Maximum Credit Limit set
forth above for all Loans to all Borrowers combined.
LETTER OF CREDIT SUBLIMIT
(Section 1.5): $1,000,000; provided, however, that the total Letter
of Credit Sublimit and the Foreign Exchange Contract
Sublimit shall not, at any time, exceed $1,000,000 in
the aggregate under this Agreement and the Non-Exim
Agreement.
FOREIGN EXCHANGE
CONTRACT SUBLIMIT $1,000,000; provided, however, that the total Letter
of Credit Sublimit and Foreign Exchange Contract
Sublimit shall not, at any time, exceed $1,000,000 in
the aggregate under this Agreement and the Non-Exim
Agreement.
Borrower may enter into foreign exchange forward
contracts with Silicon, on its standard forms, 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 Contracts"); provided that (1) at the time
the FX Forward Contract is entered into Borrower has
Loans available to it under this Agreement in an
amount at least equal to 10% of the amount of the FX
Forward Contract; and (2) the total FX Forward
Contracts at any one time outstanding may not exceed
10 times the amount of the Foreign Exchange Contract
Sublimit set forth above; and (3) the total Letter of
Credit Sublimit and the Foreign Exchange Contract
Sublimit shall not, at any time, exceed $1,000,000.
Silicon shall have the right to withhold, from the
Loans otherwise available to Borrower under this
Agreement, a reserve (which shall be in addition to
all other reserves) in an amount equal to 10% of the
total FX Forward Contracts from
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time to time outstanding, and in the event at any
time there are insufficient Loans available to
Borrower for such reserve, Borrower shall deposit and
maintain with Silicon cash collateral in an amount at
all times equal to such deficiency, which shall be
held as Collateral for all purposes of this
Agreement. Silicon may, in its discretion, terminate
the FX Forward Contracts at any time that an Event of
Default occurs and is continuing. Borrower shall
execute all standard form applications and agreements
of Silicon in connection with the FX Forward
Contracts, and without limiting any of the terms of
such applications and agreements, Borrower shall pay
all standard fees and charges of Silicon in
connection with the FX Forward Contracts.
================================================================================
2. INTEREST.
INTEREST RATE
(Section 1.2):
A rate equal to the "Prime Rate" in effect from time
to time, plus 2.0% per annum; provided, however, that
the interest rate shall be reduced to a rate equal to
the "Prime Rate" in effect from time to time, plus
1.50% per annum at such time as Borrower has received
at least $10,000,000 in cash consideration for the
issuance, after the date hereof, of equity securities
of Borrower. Any such rate reduction shall go into
effect following Silicon's review of Borrower's
financial statements showing Borrower is entitled to
such rate reduction.
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;" provided that
the "Prime Rate" in effect on any day shall not be
less than 4.25% per annum; 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.
MINIMUM MONTHLY
INTEREST
(Section 1.2): Not Applicable.
================================================================================
3. FEES (Section 1.4):
Loan Fee: $90,000, payable concurrently herewith, which fee
Silicon acknowledges has been paid by Borrower and
received by Silicon.
Collateral
Monitoring Fee: $2,000, per month in the aggregate as between this
Agreement and the Non-Exim Agreement, payable in
arrears (prorated for any partial
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month at the beginning and at termination of this
Agreement); provided, however, whenever Borrower's
aging reports (as provided for herein) are
consolidated, such fee shall be $1,000 per month in
the aggregate as between this Agreement and the
Non-Exim Agreement, payable in arrears (prorated for
any partial month at the beginning and at termination
of this Agreement).
Unused Line Fee: The Borrower shall pay Silicon an Unused Line Fee as
set forth in the Non-Exim Agreement (as defined
below).
===============================================================================
4. MATURITY DATE
(Section 6.1): August 12, 2004.
===============================================================================
5. FINANCIAL COVENANTS
(Section 5.1): Borrower shall comply with each of the financial
covenants set forth in the Non-Exim Agreement (as
defined below).
===============================================================================
6. REPORTING.
(Section 5.3): Borrower shall comply with the reporting requirements
of the Non-Exim Agreement, as in effect from time to
time. Further, Borrower shall provide to Silicon such
reports and other information as may be required in
connection with the Exim Guarantee, the Exim Borrower
Agreement and as Silicon may in its discretion
determine to be necessary or desirable in connection
with this Agreement.
===============================================================================
7. COMPENSATION
(Section 5.5): Not Applicable.
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT (EXIM)
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8. BORROWER INFORMATION:
Borrower represents and warrants that the information
set forth in the Non-Exim Agreement and the
Representations and Warranties of the Borrower dated
December 14, 2001, previously submitted to Silicon
(the "Representations") is true and correct as of the
date hereof.
===============================================================================
9. OTHER COVENANTS
(Section 5.1): Borrower shall at all times comply with all of the
following additional covenants:
(1) BANKING RELATIONSHIP. Borrower shall at all
times maintain its primary banking
relationship with Silicon.
(2) SUBORDINATION OF INSIDE DEBT. All present
and future indebtedness of 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. 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. As provided for in
the Non-Exim Agreement, Borrower shall use
its commercially reasonable best efforts to
cause each holder of Verso Technologies,
Inc.'s 7.50% Convertible Debentures Due
November 22, 2005 (the "November 2005
Debentures") to execute and deliver to
Silicon Subordination Agreements, or such
other documents as are satisfactory to
Silicon in its sole discretion, all in such
form as Silicon shall specify, subordinating
to the Obligations the indebtedness of
Borrower to such persons, and Borrower shall
cause said Subordination Agreements (or
other documents) to continue in full force
and effect at all times during the term of
this Agreement.
(4) BAILEE AGREEMENT. As provided for in the
Non-Exim Agreement, Borrower shall cause
Xxxxxx Moving & Storage, Team Air and any
other bailee or warehouseman at which
Borrower maintains any Collateral to execute
and deliver to Silicon, on Silicon's
standard form (with such changes as shall be
acceptable to Silicon in its discretion), a
Notice to Bailee of Security Interest with
respect to all Collateral maintained by
Borrower at such bailee or warehouseman.
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(5) INACTIVE SUBSIDIARIES. The following are
subsidiaries of Borrower, but the same are,
and will remain throughout the term of this
Agreement, inactive, with assets having an
aggregate value of less than $350,000 (in
the aggregate for all such subsidiaries):
(a) MessageClick, Inc.; (b) Eltrax
International, Inc.; (c) Eltrax Hospitality
Technologies PTE Ltd.; (d) Eltrax (Malaysia)
SBD. BHD.; (e) Eltrax Hospitality
Scandinavia, AS; (f) Eltrax (Australia) Pty.
Ltd.; (g) Eltrax Hospitality Ltd.; (h)
Eltrax Holdings AG; (i) Eltrax AG; (j)
Eltrax Hospitality U.K. Ltd., and (k) World
Access (U.K.), Ltd.; provided, however, that
Borrower is in the process of dissolving
substantially all of the foregoing foreign
subsidiaries, some of which may have already
been dissolved.
(6) DISSOLVING SUBSIDIARIES. Borrower represents
and warrants to Silicon that the following
formerly wholly owned subsidiaries of
Borrower have been merged into Eltrax
International, Inc.: (a) Eltrax ASP Group,
LLC; (b) Cereus Bandwidth, LLC; (c) Cereus
Technology, Inc.; (d) XxxxxxxXxxxx.xxx,
Inc.; (e) Victory Fax Communications, Inc.;
(f) American Internet Media, Inc.; (g)
Cereus Technology Partners, Inc.; (h) Eltrax
Customer Care Group, Inc.; (i) Eltrax
Technology Services Group, Inc.; (j) Eltrax
Hospitality Group, Inc.; and (k) Eltrax
Group, Inc.
(7) LANDLORD WAIVERS. Within 30 days after the
date hereof, Borrower shall cause the record
owners (other than Borrower) of Borrower's
Georgia facility to execute and deliver to
Silicon, on Silicon's standard form (with
such changes as shall be acceptable to
Silicon in its discretion), a landlord
waiver containing such other terms and
conditions as Silicon may require.
(8) CONDITIONS PRECEDENT RE CANADIAN INVENTORY.
Prior to any Loans being made with respect
to any Inventory maintained in Canada, the
following must occur: (i) Silicon must
receive evidence, satisfactory to Silicon in
its good faith business judgment, of its
first priority, perfected security interest
in such Inventory, (ii) the Inventory must
constitute Eligible Export Related Inventory
(as defined in the Exim Agreement), (iii)
Borrower shall have executed all such
documents that Silicon deems necessary, in
its good faith business judgment, to grant
Silicon a security interest therein and to
perfect the same, (iv) Silicon shall have
received a legal opinion, satisfactory to
Silicon in its good faith business judgment,
from Canadian counsel with regard to the
enforceability of Silicon's first priority
security interest and (v) Silicon shall have
received a landlord agreement, in form and
substance satisfactory to Silicon in its
good faith
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT (EXIM)
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business judgment, executed by the lessor
of the facility(ies) in Canada at which
the Inventory is maintained.
===============================================================================
10. EXIM PROVISIONS:
(1) EXIM GUARANTY. Prior to the first
disbursement of any Loans hereunder,
Borrower shall cause the Export Import Bank
of the United States (the "Exim Bank") to
guarantee the Loans made under this
Agreement, pursuant to a Master Guarantee
Agreement, Loan Authorization Agreement and
(to the extent applicable) Delegated
Authority Letter Agreement (collectively,
the "Exim Guaranty"), and Borrower shall
cause the Exim Guaranty to be in full force
and effect throughout the term of this
Agreement and so long as any Loans hereunder
are outstanding. If, for any reason, the
Exim Guaranty shall cease to be in full
force and effect, or if the Exim Bank
declares the Exim Guaranty void or revokes
any obligations thereunder or denies
liability thereunder, any such event shall
constitute an Event of Default under this
Agreement. Nothing in any confidentiality
agreement in this Agreement or in any other
agreement shall restrict Silicon's right to
make disclosures and provide information to
the Exim Bank in connection with the Exim
Guaranty.
(2) EXIM BORROWER AGREEMENT; COSTS. Borrower
shall, concurrently execute and deliver a
Borrower Agreement, in the form specified by
the Exim Bank, in favor of Silicon and the
Exim Bank (the "Exim Borrower Agreement").
This Agreement is subject to all of the
terms and conditions of the Exim Borrower
Agreement, all of which are hereby
incorporated herein by this reference.
Borrower expressly agrees to perform all of
the obligations and comply with all of the
affirmative and negative covenants and all
other terms and conditions set forth in the
Exim Borrower Agreement as though the same
were expressly set forth herein. In the
event of any conflict between the terms of
the Exim Borrower Agreement and the other
terms of this Agreement, whichever terms are
more restrictive shall apply. Borrower
acknowledges and agrees that it has received
a copy of the Loan Authorization Agreement
which is referred to in the Exim Borrower
Agreement. Borrower agrees to be bound by
the terms of the Loan Authorization
Agreement, including, without limitation, by
any additions or revisions m made prior to
its execution on behalf of Exim Bank. Upon
the execution of the Loan Authorization
Agreement by Exim Bank and Silicon, it shall
become an attachment to the Exim Borrower
Agreement. Borrower shall reimburse Silicon
for all fees and all out of pocket costs and
expenses incurred by Silicon with respect to
the Exim Guaranty and the Exim Borrower
Agreement, including,
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT (EXIM)
--------------------------------------------------------------------------------
without limitation, all facility fees and
usage fees, and Silicon is authorized to
debit Borrower's account with Silicon for
such fees, costs and expenses when paid by
Silicon.
(3) NON-EXIM AGREEMENT; CROSS-COLLATERALIZATION;
CROSS-DEFAULT. Silicon and the Borrower are
parties to that certain Loan and Security
Agreement dated December 14, 2001 (as
amended from time to time, the "Non-Exim
Agreement"). Both this Agreement and the
Non-Exim Agreement shall continue in full
force and effect, and all rights and
remedies under this Agreement and the
Non-Exim Agreement are cumulative. The term
"Obligations" as used in this Agreement and
in the Non-Exim Agreement shall include
without limitation the obligation to pay
when due all Loans made pursuant to this
Agreement (the "Exim Loans") and all
interest thereon and the obligation to pay
when due all Loans made pursuant to the
Non-Exim Agreement (the "Non-Exim Loans")
and all interest thereon. Without limiting
the generality of the foregoing, all
"Collateral" as defined in this Agreement
and as defined in the Non-Exim Agreement
shall secure all Exim Loans and all Non-Exim
Loans and all interest thereon, and all
other Obligations. Any Event of Default
under this Agreement shall also constitute
an Event of Default under the Non-Exim
Agreement, and any Event of Default under
the Non-Exim Agreement shall also constitute
an Event of Default under this Agreement. In
the event Silicon assigns its rights under
this Agreement and/or under any Note
evidencing Exim Loans and/or its rights
under the Non-Exim Agreement and/or under
any Note evidencing Non-Exim Loans, to any
third party, including without limitation
the Exim Bank, whether before or after the
occurrence of any Event of Default, Silicon
shall have the right (but not any
obligation), in its sole discretion, to
allocate and apportion Collateral to the
Agreement and/or Note assigned and to
specify the priorities of the respective
security interests in such Collateral
between itself and the assignee, all without
notice to or consent of the Borrower.
===============================================================================
11. EFFECTIVE DATE:
(1) Reference is made to that certain Asset
Purchase Agreement dated as of December 13,
2002 (the "Purchase Agreement") among Verso
Technologies, Inc. ("Verso") and Clarent
Corporation (the "Seller"), pursuant to
which Verso will purchase from Seller the
Assets (as defined in the Purchase
Agreement), other than the Excluded Assets
(as defined in the Purchase Agreement). Such
Assets, exclusive of the Excluded Assets,
are hereinafter referred to the "Acquired
Assets."
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT (EXIM)
--------------------------------------------------------------------------------
Borrower has also informed Silicon that
provided the necessary conditions precedent
as set forth in the Purchase Agreement are
satisfied, Verso intends to enter into the
Ancillary Documents (as defined in the
Purchase Agreement) with Seller, including a
Loan Agreement (the "Seller Loan Agreement")
pursuant to which, among other things, Verso
will issue promissory notes in favor of
Seller and, if applicable, will grant Seller
a security interest in the Acquired Assets
as security for the promissory notes. The
Purchase Agreement and the Ancillary
Documents, including the Seller Loan
Agreement, are hereinafter collectively
referred to as the "Purchase Transaction."
(2) For the purposes of this hereof, the term
"Effective Date" shall mean the date on
which the last of the following occurs: (i)
the conditions precedent (for Verso and
Seller) set forth in the Purchase Agreement
are satisfied; and (ii) the Acquired Assets
are free and clear of all liens,
encumbrances and security interests (other
than any security interests in favor of
Seller subordinated in favor of Silicon as
described below); and (iii) the Bankruptcy
Court (as defined in the Purchase Agreement)
has issued the Sale Order (as defined in the
Purchase Agreement), which Sale Order shall
be final and not subject to appeal nor shall
it have been reversed, rescinded, stayed,
modified or amended; and (iv) Silicon has a
first priority perfected security interest
in the Acquired Assets; and (v) Seller shall
have executed Silicon's standard form of
subordination agreement (in the form
previously agreed upon between Silicon and
Seller) in favor of Silicon, pursuant to
which Seller will subordinate in favor of
Silicon the lien(s), if any, granted by
Verso to Seller and the obligations of Verso
to Seller incurred under the Purchase
Transaction.
(3) In addition to all other conditions set
forth in this Agreement and the Non-Exim
Agreement, Borrower understands and agrees
that no Loans will be disbursed hereunder
prior to the Effective Date.
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT (EXIM)
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Borrower: Silicon:
VERSO TECHNOLOGIES, INC. SILICON VALLEY BANK
By /s/ Xxxxx X. Xxxxxxx By /s/ Xxxxx X. Xxxxxxxx
---------------------------- ---------------------------
President or Vice President Title Vice President
------------------------
By /s/ Xxxxxx Xxxxxxx
----------------------------
Secretary or Ass't Secretary
Borrower:
NACT TELECOMMUNICATIONS, INC.
By /s/ Xxxxxx Xxxxxxx
----------------------------
President or Vice President
By /s/ Xxxxx Xxxx
----------------------------
Secretary or Ass't Secretary
Borrower:
XXXXXXXX.XXX SOFTWARE, INC.
By /s/ Xxxxx Xxxxxxx
----------------------------
President or Vice President
By /s/ Xxxxxx Xxxxxxx
----------------------------
Secretary or Ass't Secretary
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