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EXHIBIT 10.24
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated as of February
28, 2001, between SILICON VALLEY BANK, a California-chartered bank, with its
principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000
and with a loan production office located at One Newton Executive Park, Suite
200, 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, doing business under
the name "Silicon Valley East" ("Bank") and (i) VISUAL NETWORKS, INC., a
Delaware corporation ("Visual"), (ii) VISUAL NETWORKS OPERATIONS, INC., a
Delaware corporation ("VNO"), (iii) VISUAL NETWORKS INVESTMENTS, INC., a
California corporation ("VNI"), (iv) VISUAL NETWORKS TECHNOLOGIES, INC., a
California corporation ("VNT"), (v) VISUAL NETWORKS OF TEXAS, L.P., a Texas
limited partnership ("Visual Texas"), (vi) VISUAL NETWORKS INSURANCE, INC., a
Vermont corporation ("Visual Insurance"), (vii) INVERSE NETWORK TECHNOLOGY, a
California corporation ("INT"), and (viii) AVESTA TECHNOLOGIES, INC., a Delaware
corporation ("Avesta") (hereinafter, Visual, VNO, VNI, VNT, Visual Texas, Visual
Insurance, INT, and Avesta are referred to jointly, severally and collectively
as the "Borrower" or "Borrowers" and Visual, as agent for each of Visual, VNO,
VNI, VNT, Visual Texas, Visual Insurance, INT, and Avesta is sometimes referred
to hereinafter in such capacity as the "Agent"), provides the terms on which
Bank shall lend to Borrowers and Borrowers shall repay Bank. The parties agree
as follows:
1 AGENTED LOAN ARRANGEMENT; ACCOUNTING AND OTHER TERMS
1.1 Designation of Agent. Each Borrower hereby designates Visual as
the agent of that Borrower to discharge the duties and responsibilities of the
Agent as provided herein.
1.2 Operation of Agreement. (a) Except as otherwise provided in this
Article, Credit Extensions hereunder shall be requested solely by the Agent as
agent for each Borrower.
(b) Confirmatory assignments of accounts and accounts
receivable and remittances on accounts and accounts receivable of each Borrower
shall be provided to the Bank or otherwise directed in accordance with the
Bank's instructions given from time to time to the Agent.
(c) Any Credit Extension which may be made by the Bank under
this Agreement and which is directed to the Agent is received by the Agent in
trust for that Borrower who is intended to receive such Credit Extension. The
Agent shall distribute the proceeds of any such Credit Extensions solely to the
Borrowers. Each Borrower shall be directly indebted to the Bank for each Credit
Extension distributed to that Borrower by the Agent, together with all accrued
interest thereon, as if that amount had been advanced directly by the Bank to
that Borrower (whether or not the subject Credit Extension was based upon the
accounts and/or inventory or other assets of the Borrower which actually
received such distribution), in addition to which each Borrower shall be liable
to the Bank for all Obligations under this Agreement.
(d) The Bank shall have no responsibility to inquire as to
the distribution of Credit Extensions made by the Bank through the Agent as
described herein.
1.3 CREDIT EXTENSIONS DIRECTLY TO BORROWER. (a) If, for any reason,
and at any time during the term of the within Agreement,
(i) any Borrower, including the Agent, as agent for
each Borrower, shall be unable to, or prohibited from carrying out the
terms and conditions of the within Agreement (as determined by the Bank
in the Bank's sole and absolute discretion); or
(ii) the Bank deems it inexpedient (in the Bank's
sole and absolute discretion) to continue making Credit Extensions to or
for the account of any particular Borrower, or to channel such loans and
Credit Extensions through the Agent, then the Bank may make Credit
Extensions directly to such
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Borrower as the Bank determines to be expedient, which Credit Extensions
may be made without regard to the procedures otherwise included in this
Article 1.
(b) In the event that the Bank determines to forgo the
procedures included herein pursuant to which Credit Extensions are to be
channeled through the Agent, then the Bank may designate one or more
Borrower to fulfill the financial and other reporting requirements
otherwise imposed herein upon the Agent.
(c) Each Borrower shall remain liable to the Bank for the
payment and performance of all Obligations (which payment and
performance shall continue to be secured by all Collateral)
notwithstanding any determination by the Bank to cease making Credit
Extensions to or for the benefit of any Borrower.
1.4 CONTINUATION OF AUTHORITY OF AGENT. The authority of the Agent
to request Credit Extensions on behalf of, and to bind, each Borrower, shall
continue unless and until the Bank acts as provided in Section 1.4, above, or
the Bank actually receives:
(a) written notice of: (i) the termination of such
authority, and (ii) the subsequent appointment of a successor Agent,
which notice is executed by the respective Presidents of each Borrower
(other than the President of the Agent being replaced) then eligible for
borrowing under this Agreement; and
(b) written notice from the successor Agent (i) accepting
such appointment; (ii) acknowledging that the removal and appointment
has been effected by the respective Presidents of each Borrower eligible
for borrowing under the within Agreement; and (iii) acknowledging that
from and after the date of appointment, the newly appointed Agent shall
be bound by the terms hereof, and that as used herein, the term "Agent"
shall mean and include the newly appointed Agent.
1.5 INDEMNIFICATION. The Agent and each Borrower respectively shall
indemnify, defend, and save and hold the Bank harmless from and against any
liabilities, claims, demands, expenses, or losses made against or suffered by
the Bank on account of, or arising out of, this Agreement, the Bank's reliance
upon Credit Extension requests made by the Agent, or any other action taken by
the Bank hereunder or under any of the Bank's various agreements with the Agent
and/or any Borrower and/or any other person arising under this Agreement, except
for any liability, claim, demand, expense, or loss as to which a final judicial
determination is made and from which no appeal is available (in a proceeding in
which the Bank has had an opportunity to be heard) that the Bank had acted in a
grossly negligent manner or in actual bad faith.
1.6 ACCOUNTING AND OTHER TERMS. Accounting terms not defined in this
Agreement shall be construed following GAAP. Calculations and determinations
must be made following GAAP. The term "financial statements" includes the notes
and schedules. The terms "including" and "includes" always mean "including (or
includes) without limitation" in this or any Loan Document. Capitalized terms in
this Agreement shall have the meanings set forth in Section 13. This agreement
shall be construed to impart upon Bank a duty to act in a commercially
reasonable manner at all times.
2 LOAN AND TERMS OF PAYMENT
2.1 Credit Extensions. Borrowers shall pay Bank the unpaid principal
amount of all Credit Extensions made by Bank to Agent or any Borrowers and
interest on the unpaid principal amount of the Credit Extensions as and when due
in accordance with this Agreement.
2.1.1 Equipment Advances.
(a) Through June 30, 2001 (the "Equipment Availability End
Date"), Bank shall make advances ("Equipment Advance" and, collectively,
"Equipment Advances") not exceeding the Committed Equipment Line. The Equipment
Advances may only be used to purchase or refinance Eligible Equipment
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purchased within ninety (90) days (determined based upon the applicable invoice
date of such equipment) of the requested Equipment Advance, and no Equipment
Advances may exceed 100% of the equipment invoice for the Eligible Equipment,
excluding taxes, shipping, warranty charges, freight discounts and installation
expense. Each Equipment Advance must be for a minimum of Twenty Five Thousand
Dollars ($25,000.00). There shall be a maximum of six (6) Equipment Advances
hereunder.
(b) Interest accrues from the date of each Equipment Advance
at the rate in Section 2.2(a) and is payable monthly. Equipment Advances
outstanding on the Equipment Availability End Date are payable in equal monthly
installments of principal, plus accrued interest, beginning on the Payment Date
of each month following the Equipment Availability End Date and ending on the
Equipment Maturity Date. Equipment Advances when repaid may not be reborrowed.
(c) To obtain an Equipment Advance, Agent must notify Bank
(the notice is irrevocable) by facsimile no later than 3:00 p.m. Eastern time
one (1) Business Day before the day on which the Equipment Advance is to be
made. The notice in the form of EXHIBIT B (Payment/Advance Form) must be signed
by a Responsible Officer or designee and include a copy of the invoice for the
Equipment being financed.
2.2 Interest Rate; Payments.
(a) Interest Rate. Advances accrue interest on the
outstanding principal balance at a per annum rate equal to the aggregate of the
Prime Rate plus two percent (2.0%) per annum. After an Event of Default,
Obligations shall bear interest at five percent (5.0%) above the rate effective
immediately before the Event of Default. The interest rate shall increase or
decrease when the Prime Rate changes. Interest is computed on the basis of a 360
day year for the actual number of days elapsed.
(b) Payments. Interest is payable on the Payment Date of
each month. Bank may debit any Borrowers' deposit accounts including Account
Number [__________] for principal and interest payments or any amounts Borrowers
owe Bank. Bank shall notify Agent when it debits Borrowers' accounts. These
debits are not a set-off. Payments received after 12:00 noon Eastern time are
considered received at the opening of business on the next Business Day. When a
payment is due on a day that is not a Business Day, the payment is due the next
Business Day and additional fees or interest, as applicable, shall continue to
accrue.
2.3 Fees. Borrowers shall pay to Bank:
(a) Facility Fee. A fully earned, non-refundable facility
fee of Five Thousand Dollars ($5,000.00) due on the Closing Date; and
(b) Bank Expenses. All Bank Expenses (including reasonable
attorneys' fees and expenses incurred through and after the Closing Date) when
due.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of each Borrower with
respect to articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of this Agreement;
(c) an Intellectual Property Security Agreement;
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(d) landlord's waivers for the Borrowers' offices at 2092
and 0000 Xxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxx, provided, however, that in
the event that the Borrowers seek any Credit Extension to purchase
Equipment to be used in any other location, then the Borrowers shall be
required to produce a relevant landlord's waiver in advance of and as a
condition precedent to such Credit Extension;
(e) an opinion of Borrowers' counsel;
(f) financing statements (Forms UCC-1);
(g) evidence of insurance;
(h) payment of the fees and Bank Expenses then due specified
in Section 2.3 hereof;
(i) Certificate of Foreign Qualification (if applicable);
(j) Certificate of Good Standing/Legal Existence for each
Borrower; and
(k) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. Bank's
obligations to make each Credit Extension, including the initial Credit
Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 shall be
materially true on the date of the Payment/Advance Form and on the effective
date of each Credit Extension (except to the extent that such representations
and warranties expressly relate to an earlier date) and no Event of Default
shall have occurred and be continuing, or result from the Credit Extension. Each
Credit Extension is each Borrower's representation and warranty on that date
that the representations and warranties in Section 5 remain true.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrowers grant Bank a continuing
security interest in all presently existing and later acquired Collateral to
secure all Obligations and performance of each of Borrowers' duties under the
Loan Documents. Any security interest shall be a first priority security
interest in the Collateral. Except as disclosed on the Schedule, no Borrower is
a party to, nor is bound by, any license or other agreement that prohibits or
otherwise restricts any Borrower from granting a security interest in Borrowers'
interest in such license or agreement or any other property. Without prior
notice to Bank, no Borrower shall enter into, or become bound by, any such
license or agreement which is reasonably likely to have a material adverse
impact on Borrowers' business or financial condition. Borrowers shall take such
steps as Bank requests to obtain the consent of, or waiver by, any person whose
consent or waiver is necessary for such licenses or contract rights to be deemed
"Collateral" and for Bank to have a security interest in it that might otherwise
be restricted or prohibited by law or by the terms of any such license or
agreement, whether now existing or entered into in the future. If the Agreement
is terminated, Bank's lien and security interest in the Collateral shall
continue until Borrowers fully satisfies their Obligations. Upon termination of
this Agreement and satisfaction of the Obligations, Bank shall release its
security interest in all Collateral, and shall execute all documents and take
actions reasonably requested by Agent in connection therewith.
4.2 Concerning Revised Article 9 of the Uniform Commercial Code. In
anticipation of the possible application, in one or more jurisdictions to the
transactions contemplated hereby, of the revised Article 9 of the Uniform
Commercial Code in the form or substantially in the form approved by the
American Law Institute and the National Conference of Commissioners on Uniform
State Law and contained in the 1999 Official Text of the
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Uniform Commercial Code ("Revised Article 9"), it is hereby agreed that applying
the law of any jurisdiction in which Revised Article 9 is in effect, the
Collateral is all assets of Borrowers, whether or not within the scope of
Revised Article 9. The Collateral shall include, without limitation, the
following categories of assets as defined in Revised Article 9: goods (including
inventory, equipment and any accessions thereto), instruments (including
promissory notes), documents, accounts (including health-care-insurance
receivables, and license fees), chattel paper (whether tangible or electronic),
deposit accounts, letter-of-credit rights (whether or not the letter of credit
is evidenced by a writing), commercial tort claims, securities and all other
investment property, general intangibles (including payment intangibles and
software), supporting obligations and any and all proceeds of any thereof,
wherever located, whether now owned or hereafter acquired. If Borrowers shall at
any time, whether or not Revised Article 9 is in effect in any particular
jurisdiction, acquire a commercial tort claim, as defined in Revised Article 9,
the Agent shall promptly notify the Bank in a writing signed by the Agent of the
brief details thereof and grant to the Bank in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with
such writing to be in form and substance satisfactory to the Bank.
5 REPRESENTATIONS AND WARRANTIES
Borrowers represent and warrant that, except as set forth in the
Disclosure Schedules attached hereto, the following statements are true and
correct:
5.1 Due Organization and Authorization. Borrowers and their
Subsidiaries are duly existing and in good standing in their respective state of
formation and qualified and licensed to do business in, and in good standing in,
any state in which the conduct of its business or its ownership of property
requires that each be qualified except where the failure to do so could not
reasonably be expected to cause a Material Adverse Change.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrowers' organizational documents,
nor constitute an event of default under any material agreement by which any
Borrower is bound. No Borrower is in default under any agreement to which or by
which it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.
5.2 Collateral. Borrowers have good title to the Collateral, free of
Liens except Permitted Liens. Borrowers are the sole owner of the Intellectual
Property, except for non-exclusive licenses granted to its customers in the
ordinary course of business. Each Patent is valid and enforceable and no part of
the Intellectual Property has been judged invalid or unenforceable, in whole or
in part, and no claim has been made that any part of the Intellectual Property
violates the rights of any third party.
5.3 Litigation. There are no actions or proceedings pending or, to
Borrowers' knowledge, threatened by or against any Borrower or any Subsidiary in
which an adverse decision could reasonably be expected to cause a Material
Adverse Change.
5.4 No Material Adverse Change in Financial Statements. All
consolidated financial statements for Visual and its Subsidiaries delivered to
Bank fairly present in all material respects Visual's consolidated financial
condition and Visual's consolidated results of operations. There has not been
any material deterioration in Visual's financial condition since the date of the
most recent financial statements submitted to Bank.
5.5 Solvency. Borrowers are able to pay their debts (including trade
debts) as they mature.
5.6 Regulatory Compliance. No Borrower is an "investment company" or
a company "controlled" by an "investment company" under the Investment Company
Act. Borrower is not engaged as one of its important activities in extending
credit for margin stock (under Regulations T and U of the Federal Reserve Board
of Governors). Borrowers have complied in all material respects with the Federal
Fair Labor Standards Act. Borrowers have not violated any laws, ordinances or
rules, the violation of which could reasonably be expected to cause a Material
Adverse Change. None of Borrowers' or any Subsidiary's properties or assets has
been used by any Borrower or any Subsidiary or, to the best of Borrowers'
knowledge, by previous Persons, in disposing, producing,
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storing, treating, or transporting any hazardous substance other than legally.
Each Borrower and each Subsidiary has timely filed all required tax returns and
paid, or made adequate provision to pay, all material taxes, except those being
contested in good faith with adequate reserves under GAAP. Each Borrower and
each Subsidiary has obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all government
authorities that are necessary to continue its business as currently conducted
except where the failure to make such declarations, notices or filings would not
reasonably be expected to result in a Material Adverse Change.
5.7 Subsidiaries. No Borrower owns any stock, partnership interest
or other equity securities except for Permitted Investments.
5.8 Full Disclosure. No representation, warranty or other statement
of Borrowers in any certificate or written statement given to Bank taken
together with all such certificates and written statements given to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained in the certificates or
statements not misleading.
6 AFFIRMATIVE COVENANTS
Borrowers shall do all of the following:
6.1 Government Compliance. Each Borrower shall maintain its and all
Subsidiaries' corporate existence and good standing in its jurisdiction of
formation and maintain qualification in each jurisdiction in which the failure
to so qualify could have a material adverse effect on Borrowers' business or
operations. Borrowers shall comply, and have each Subsidiary comply, with all
laws, ordinances and regulations to which it is subject, noncompliance with
which could have a material adverse effect on Borrowers' business or operations
or cause a Material Adverse Change.
6.2 Financial Statements, Reports, Certificates.
(a) Agent shall deliver to Bank: (i) as soon as available,
but no later than thirty (30) days after the last day of each month, a company
prepared consolidated balance sheet and income statement covering Borrowers'
consolidated operations during the period, in a form acceptable to Bank and
certified by a Responsible Officer; (ii) as soon as available, but no later than
ninety (90) days after the end of Visual's fiscal year, audited annual
consolidated financial statements prepared under GAAP, consistently applied,
together with an unqualified opinion, on the financial statements from an
independent certified public accounting firm acceptable to Bank; (iii) within
five (5) days of filing, copies of all statements, reports and notices made
available to Visual's security holders or to any holders of Subordinated Debt
and all reports on Form 10-K, 10-Q and 8-K filed with the Securities and
Exchange Commission; (iv) a prompt report of any legal actions pending or
threatened against any Borrower or any Subsidiary that could result in damages
or costs to any Borrower or any Subsidiary of Two Hundred Thousand Dollars
($200,000.00) or more; (vi) within thirty (30) days after the last day of each
month, aged listings of accounts receivable (by invoice date) and; (vii) other
financial information Bank reasonably requests. Bank acknowledges that some of
the materials provided pursuant to this Section 6.2(a) may contain non-public
information ("Non-Public Information"), and Bank shall (except as provided in
this Agreement): (i) keep all Non-Public Information confidential; (ii) refrain
from purchasing, selling, or taking any market position with respect to Visual
stock while in receipt of Non-Public Information; and (iii) take all actions
required to prevent Bank employees with access to Non-Public Information from
purchasing, selling, or taking any market position with respect to Visual stock
while in receipt of Non-Public Information.
(b) Within thirty (30) days after the last day of each month
and within ninety (90) days after the end of Visual's fiscal year, Borrower
shall deliver to Bank, with the monthly and annual financial statements, a
Compliance Certificate signed by a Responsible Officer in the form of Exhibit C.
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6.3 Inventory; Returns. Borrowers shall keep all Inventory in good
and marketable condition, free from material defects. Returns and allowances
between Borrowers and its account debtors shall follow Borrowers' customary
practices as they exist at the Closing Date. Borrowers must promptly notify Bank
of all returns, recoveries, disputes and claims that involve more than Two
Hundred Thousand Dollars ($200,000.00).
6.4 Taxes. Borrowers shall make, and cause each Subsidiary to make,
timely payment of all material federal, state, and local taxes or assessments
owing by Borrowers and shall deliver to Bank, on demand, appropriate
certificates attesting to such payments.
6.5 Insurance. Borrowers shall keep their business and the
Collateral insured for risks and in amounts, as Bank requests. Insurance
policies shall be in a form, with companies, and in amounts that are reasonably
satisfactory to Bank. All property policies shall have a lender's loss payable
endorsement showing Bank as an additional loss payee and all liability policies
shall show the Bank as an additional insured and all policies shall provide that
the insurer must give Bank at least twenty (20) days notice before canceling its
policy. At Bank's request, Borrowers shall deliver certified copies of policies
and evidence of all premium payments. Proceeds payable under any policy shall,
at Bank's option, be payable to Bank on account of the Obligations.
Notwithstanding the foregoing, so long as no Event of Default has occurred and
is continuing, Borrowers shall have the option of applying the proceeds of any
casualty policy up to Twenty Five Thousand Dollars ($25,000.00), in the
aggregate, toward the replacement or repair of destroyed or damaged property;
provided that (i) any such replaced or repaired property (a) shall be of equal
or like value as the replaced or repaired Collateral and (b) shall be deemed
Collateral in which Bank has been granted a first priority security interest and
(ii) after the occurrence and during the continuation of an Event of Default all
proceeds payable under such casualty policy shall, at the option of the Bank, be
payable to Bank on account of the Obligations. If Borrowers fail to obtain
insurance as required under this Section 6.5 or to pay any amount or furnish any
required proof of payment to third persons and the Bank, Bank may make all or
part of such payment or obtain such insurance policies required in this Section
6.5, and take any action under the policies Bank deems prudent.
6.6 Bank Accounts. Borrowers shall maintain all operating accounts
with the Bank including, without limitation, all depository and disbursement
accounts.
6.7 Financial Covenants.
Borrowers shall maintain as of the last day of each month unless
otherwise noted:
(a) Quick Ratio. A ratio of Quick Assets to Current Liabilities
of at least .90 to 1.0 through June 30, 2001; and ratio of Quick Assets
to Current Liabilities of at least 1.0 to 1.0 thereafter.
(b) Maximum Net Loss/Minimum Net Profit. (i) quarterly Net
Losses not to exceed (A) Nineteen Million Five Hundred Thousand Dollars
(19,500,000.00) for the quarter ending December 31, 2000, (B) Seven
Million Two Hundred Fifty Thousand Dollars ($7,250,000.00) for the
quarter ending March 31, 2001, (C) Three Million Five Hundred Thousand
Dollars ($3,500,000.00) for the quarter ending June 30, 2001; (D) One
Million Two Hundred Fifty Thousand Dollars ($1,250,000.00) for the
quarter ending September 30, 2001; (ii) quarterly Net Profit of at least
One Million Dollars ($1,000,000.00) for the quarter ending December 31,
2001; and (iii) a quarterly Net Profit of at least One Dollar ($1.00),
for each quarter thereafter.
6.8 Further Assurances. Borrowers shall execute any further
instruments and take further action as Bank reasonably requests to perfect or
continue Bank's security interest in the Collateral or to effect the purposes of
this Agreement.
7 NEGATIVE COVENANTS
No Borrower shall do any of the following without the Bank's prior
written consent:
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7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
of (collectively a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than a Transfer (i) of
Inventory in the ordinary course of business; (ii) of non-exclusive licenses and
similar arrangements for the use of the property of Borrowers or their
Subsidiaries in the ordinary course of business; (iii) of worn-out or obsolete
Equipment; or (iv) technical equipment employed in the Visual Benchmark and
Visual IP software hosting businesses up to an aggregate amount of $500,000.00
of such assets' book value; or (v) office furniture located at the Borrower's
Sunnyvale, California, and New York, New York, locations. Notwithstanding the
foregoing, the Borrowers may Transfer assets or liabilities between and among
Borrower entities without the consent of the Bank, provided that no such
Transfer causes a material impairment in the perfection or priority of Bank's
security interest in the Collateral or in the value of such Collateral.
7.2 Changes in Business, Ownership, Management or Business
Locations. Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrowers or reasonably
related thereto, or have a material change in its management. Borrowers shall
not, without at least thirty (30) days prior written notice to Bank, relocate
its principal executive office or add any new offices or business locations, or
change its state of formation or its legal name.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person unless (i) a Borrower will be or
will control the surviving entity, (ii) no Event of Default has occurred or is
continuing or would result, either due to the passage of time or otherwise, and
(iii) no Material Adverse Change will be caused by such merger or consolidation,
either due to the passage of time or otherwise.
7.4 Indebtedness. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.
7.5 Encumbrance. Create, incur, or allow any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to Bank's first priority
security interest.
7.6 Investments; Distributions. Except as permitted by Section 7.3
above, (i) directly or indirectly acquire or own any Person, or make any
Investment in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so; or (ii) pay any dividends or make any distribution or
payment or redeem, retire or purchase any capital stock, except for repurchases
of stock or stock options from former employees or directors of Borrowers under
the terms of applicable repurchase agreements in an aggregate amount not to
exceed Two Hundred Thousand Dollars ($200,000.00) in the aggregate in any fiscal
year, provided that no Event of Default has occurred, is continuing or would
exist after giving effect to the repurchases.
7.7 Transactions with Affiliates. Directly or indirectly enter or
permit any material transaction with any Affiliate, except transactions that are
in the ordinary course of Borrowers' business, on terms no less favorable to
Borrowers than would be obtained in an arm's length transaction with a
non-affiliated Person.
7.8 Subordinated Debt. Make or permit any payment on any
Subordinated Debt, except under the terms of the Subordinated Debt, or amend any
provision in any document relating to the Subordinated Debt, without Bank's
prior written consent.
7.9 Compliance. Undertake as one of its important activities
extending credit to purchase or carry margin stock, or use the proceeds of any
Advance for that purpose; fail to meet the minimum funding requirements of
ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA,
to occur; fail to comply with the Federal Fair Labor Standards Act or violate
any other law or regulation, if the violation could have a material
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adverse effect on Borrowers' business or operations or cause a Material Adverse
Change, or permit any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 Payment Default. Borrowers fail to pay any of the Obligations
within three (3) days after their due date. During the additional period the
failure to cure the default is not an Event of Default (but no Credit Extensions
shall be made during the cure period);
8.2 Covenant Default. Borrowers do not perform any obligation in
Section 6 or violates any covenant in Section 7 or does not perform or observe
any other material term, condition or covenant in this Agreement, any Loan
Documents, or in any agreement between Borrowers and Bank and as to any default
under a term, condition or covenant that can be cured, has not cured the default
within ten (10) days after it occurs, or if the default cannot be cured within
ten (10) days or cannot be cured after Borrowers' attempts in the ten (10) day
period, and the default may be cured within a reasonable time, then Borrowers
shall have additional time, (of not more than thirty (30) days) to attempt to
cure the default. During the additional period the failure to cure the default
is not an Event of Default (but no Credit Extensions shall be made during the
cure period);
8.3 Material Adverse Change. A Material Adverse Change occurs;
8.4 Attachment. (i) Any material portion of Borrower's assets is
attached, seized, levied on, or comes into possession of a trustee or receiver
and the attachment, seizure or levy is not removed in ten (10) days; (ii) the
service of process upon the Borrower seeking to attach, by trustee or similar
process any funds of the Borrower on deposit with the Bank.; (iii) any Borrower
is enjoined, restrained, or prevented by court order from conducting any part of
its business; (iv) a judgment or other claim becomes a Lien on a material
portion of Borrowers' assets; or (v) a notice of lien, levy, or assessment is
filed against a material portion of Borrowers' assets by any government agency
and not paid within ten (10) days after Agent receives notice. With the
exception of subsection (ii) above, these are not Events of Default if stayed or
if a bond is posted pending contest by Borrowers (but no Credit Extensions shall
be made during the cure period);
8.5 Insolvency. (i) Any Borrower becomes insolvent; (ii) Any
Borrower begins an Insolvency Proceeding; or (iii) an Insolvency Proceeding is
begun against any Borrower and not dismissed or stayed within forty-five (45)
days (but no Credit Extensions shall be made before any Insolvency Proceeding is
dismissed);
8.6 Other Agreements. If there is a default in any agreement to
which Borrowers are a party with a third party or parties resulting in a right
by such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of Two Hundred Thousand
Dollars ($200,000.00) or that could result in a Material Adverse Change;
8.7 Judgments. If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least Two Hundred Thousand
Dollars ($200,000.00) shall be rendered against Borrowers and shall remain
unsatisfied and unstayed for a period of thirty (30) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment);
8.8 Misrepresentations. If Borrowers or any Persons acting for
Borrowers make any material misrepresentation or material misstatement now or
later in any warranty or representation in this Agreement or in any
communication delivered to Bank or to induce Bank to enter this Agreement or any
Loan Document.
Security Interest. If there is a material impairment in the perfection or
priority of Bank's security interest in the Collateral.
-9-
10
8.9 Financing Agreement. The occurrence of an event of default under
the Financing Agreement.
9 BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. When an Event of Default occurs and
continues Bank may, without notice or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but
if an Event of Default described in Section 8.5 occurs all Obligations
are immediately due and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrowers'
benefit under this Agreement or under any other agreement between
Borrowers and Bank;
(c) Settle or adjust disputes and claims directly with
account debtors for amounts, on terms and in any order that Bank
considers advisable;
(d) Make any payments and do any acts it considers necessary
or reasonable to protect its security interest in the Collateral.
Borrowers shall assemble the Collateral if Bank requests and make it
available as Bank designates. Bank may enter premises where the
Collateral is located, take and maintain possession of any part of the
Collateral, and pay, purchase, contest, or compromise any Lien which
appears to be prior or superior to its security interest and pay all
expenses incurred. Borrowers grant Bank a license to enter and occupy
any of its premises, without charge, to exercise any of Bank's rights or
remedies;
(e) Apply to the Obligations any (i) balances and deposits
of Borrowers it holds, or (ii) any amount held by Bank owing to or for
the credit or the account of Borrowers;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell the Collateral. Bank is
granted a non-exclusive, royalty-free license or other right to use,
without charge, Borrowers' labels, Patents, Copyrights, Mask Works,
rights of use of any name, trade secrets, trade names, Trademarks,
service marks, and advertising matter, or any similar property as it
pertains to the Collateral, in completing production of, advertising for
sale, and selling any Collateral and, in connection with Bank's exercise
of its rights under this Section, Borrowers' rights under all licenses
and all franchise agreements inure to Bank's benefit; and
(g) Dispose of the Collateral according to the Code.
9.2 Power of Attorney. Each Borrower hereby irrevocably appoints
Bank as its lawful attorney-in-fact, to be effective upon the occurrence and
during the continuance of an Event of Default, to: (i) endorse such Borrower's
name on any checks or other forms of payment or security; (ii) sign such
Borrower's name on any invoice or xxxx of lading for any Account or drafts
against account debtors; (iii) settle and adjust disputes and claims about the
Accounts directly with account debtors, for amounts and on terms Bank determines
reasonable; (iv) make, settle, and adjust all claims under such Borrower's
insurance policies; and (v) transfer the Collateral into the name of Bank or a
third party as the Code permits. Each Borrower hereby appoints Bank its
attorney-in-fact to sign such Borrower's name on any documents necessary to
perfect or continue the perfection of any security interest regardless of
whether an Event of Default has occurred until all Obligations have been
satisfied in full and Bank is under no further obligation to make Credit
Extensions hereunder. Bank's foregoing appointment as Borrowers' attorney in
fact, and all of Bank's rights and powers, coupled with an interest, are
irrevocable until all Obligations have been fully repaid and performed and
Bank's obligation to provide Credit Extensions terminates.
9.3 Accounts Collection. In the event that an Event of Default
occurs and is continuing, Bank may notify any Person owing any Borrower money of
Bank's security interest in the funds and verify or collect the amount of the
Account. Borrowers shall collect all payments in trust for Bank and, if
requested by Bank,
-10-
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immediately deliver the payments to Bank in the form received from the account
debtor, with proper endorsements for deposit.
9.4 Bank Expenses. Any amounts paid by Bank as provided herein are
Bank Expenses and are immediately due and payable, and shall bear interest at
the then applicable rate and be secured by the Collateral. No payments by Bank
shall be deemed an agreement to make similar payments in the future or Bank's
waiver of any Event of Default.
9.5 Bank's Liability for Collateral. So long as the Bank complies
with reasonable banking practices regarding the safekeeping of collateral, the
Bank shall not be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the
value of the Collateral; or (d) any act or default of any carrier, warehouseman,
bailee, or other person. Borrowers bear all risk of loss, damage or destruction
of the Collateral.
9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements are cumulative. Bank has
all rights and remedies provided under the Code, by law, or in equity. Bank's
exercise of one right or remedy is not an election, and Bank's waiver of any
Event of Default is not a continuing waiver. Bank's delay is not a waiver,
election, or acquiescence. No waiver hereunder shall be effective unless signed
by Bank and then is only effective for the specific instance and purpose for
which it was given.
9.7 Demand Waiver. Borrowers and Agent waive demand, notice of
default or dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guaranties held by Bank
on which Borrowers are liable.
10 NOTICES
Notices and other communications provided for herein shall be in
writing and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by facsimile, as follows:
If to Agent: Visual Networks, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxx, Director, Treasury Operations
FAX: (000) 000-0000
If to any Borrower: c/o Visual Networks, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxx, Director, Treasury Operations
FAX: (000) 000-0000
with a copy to: Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
0000 Xxxxxxxxxx Xxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
-11-
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If to Bank: Silicon Valley Bank
00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxxxx, Senior Vice-President
FAX: (000) 000-0000
with a copy to: Xxxxxx & Xxxxxxxxxx LLP
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esquire
FAX: (000) 000-0000
All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given (i) two (2) business days after being sent by registered or certified
mail, return receipt requested, postage prepaid, or (ii) one (1) business day
after being sent via a reputable nationwide overnight courier service
guaranteeing next business day deliver, or (iii) on the date on which it is sent
by facsimile transmission with acknowledgment of receipt at the number to which
it is required to be sent in each case to the intended recipient as set forth
above.
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Massachusetts law governs the Loan Documents without regard to
principles of conflicts of law. Borrowers and Bank each submit to the exclusive
jurisdiction of the State and Federal courts in Massachusetts; provided,
however, that if for any reason Bank cannot avail itself of such courts in the
Commonwealth of Massachusetts, Borrowers accept jurisdiction of the courts and
venue in Santa Xxxxx County, California.
BORROWERS AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement binds and is for the
benefit of the successors and permitted assigns of each party. Except as
permitted in Section 7.3 above, Borrowers may not assign this Agreement or any
rights or Obligations under it without Bank's prior written consent which may be
granted or withheld in Bank's discretion. Bank has the right, without the
consent of or notice to Agent, to sell, transfer, negotiate, or grant
participation in all or any part of, or any interest in, Bank's obligations,
rights and benefits under this Agreement, the Loan Documents or any related
agreement.
12.2 Indemnification. Each Borrower hereby indemnifies, defends and
holds the Bank and its officers, employees and agents harmless against: (a) all
obligations, demands, claims, and liabilities asserted by any other party in
connection with the transactions contemplated by the Loan Documents; and (b) all
losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and Borrowers (including reasonable
attorneys' fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.
12.3 Right of Set-Off. Borrower and any guarantor hereby grant to
Bank a lien, security interest and right of setoff as security for all
Obligations to Bank (up to the amount of such Obligations), whether now existing
or hereafter arising upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of
Bank or any entity under the control of Silicon Valley Bank or in transit to any
of them. At any time after the occurrence and during the continuance of an Event
of Default, without demand or notice, Bank may set off the same or any part
thereof and apply the same to any liability or obligation of Borrower
-12-
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and any guarantor even though unmatured and regardless of the adequacy of any
other collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.4 Time of Essence. Time is of the essence for the performance of
all Obligations in this Agreement.
12.5 Severability of Provision. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
12.6 Amendments in Writing, Integration. All amendments to this
Agreement must be in writing signed by both Bank and Borrowers. This Agreement
and the Loan Documents represent the entire agreement about this subject matter,
and supercede prior or contemporaneous negotiations or agreements. All prior or
contemporaneous agreements, understandings, representations, warranties, and
negotiations between the parties about the subject matter of this Agreement and
the Loan Documents merge into this Agreement and the Loan Documents.
12.7 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, are one
Agreement.
12.8 Survival. All covenants, representations and warranties made in
this Agreement continue in full force while any Obligations remain outstanding.
The obligation of Borrowers in Section 12.2 to indemnify Bank shall survive
until the statute of limitations with respect to such claim or cause of action
shall have run.
12.9 Confidentiality. In handling any confidential information, Bank
shall exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (i) to Bank's
subsidiaries or affiliates in connection with their present or prospective
business relations with Borrowers; (ii) to prospective transferees or purchasers
of any interest in the Credit Extensions; (iii) as required by law, regulation,
subpoena, or other order, (iv) as required in connection with Bank's examination
or audit; and (v) as Bank considers appropriate in exercising remedies under
this Agreement. Confidential information does not include information that
either: (a) is in the public domain or in Bank's possession when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank; or (b) is
disclosed to Bank by a third party, if Bank does not know that the third party
is prohibited from disclosing the information. The obligation set forth in this
Section 12.9 shall survive the termination of this Agreement for a period of
three (3) years from the Equipment Maturity Date.
13 DEFINITIONS
13.1 Definitions.
"Accounts" are all existing and later arising accounts, contract
rights, and other obligations owed Borrowers in connection with its sale or
lease of goods (including licensing software and other technology) or provision
of services, all credit insurance, guaranties, other security and all
merchandise returned or reclaimed by Borrowers and Borrowers' Books relating to
any of the foregoing.
"Affiliate" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
-13-
14
"Bank Expenses" are all audit fees and expenses and reasonable costs or
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"Borrowers' Books" are all Borrowers' books and records including
ledgers, records regarding Borrowers' assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.
"Business Day" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed in the Commonwealth of Massachusetts or the State of
California.
"Closing Date" is the date of this Agreement.
"Code" is the Uniform Commercial Code as adopted in Massachusetts, as
amended and in effect from time to time.
"Collateral" is any and all collateral granted by Borrowers to Bank or
arising under the Code, now, or in the future, including, without limitation,
the property described on Exhibit A.
"Committed Equipment Line" represents the Equipment Advances of up to
Two Million Dollars ($2,000,000.00).
"Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"Copyrights" are all copyright rights, applications or registrations and
like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"Credit Extension" is each Equipment Advance or any other extension of
credit by Bank for Borrowers' benefit.
"Current Liabilities" are the aggregate amount of Borrowers' Total
Liabilities which mature within one (1) year (excluding all deferred revenue),
which shall include, without limitation, all obligations and liabilities of
Borrowers to Bank, including all Obligations.
"Eligible Equipment" is (a) general purpose computer equipment, office
equipment, test and laboratory equipment, assembly equipment, telephone and
networking equipment, furnishings, and, subject to the limitations set forth
herein, (b) Other Equipment that complies with all of Borrowers' representations
and warranties to Bank and which is reasonably acceptable to Bank in all
respects.
"Equipment" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrowers have any interest. "Equipment Advance" is defined in Section
2.1.1.
-14-
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"Equipment Availability End Date" is defined in Section 2.1.1.
"Equipment Maturity Date"shall be June 1, 2004.
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"Financing Agreement": means that certain Accounts Receivable Financing
Agreement dated February 28, 2001, between Borrowers and Bank.
"GAAP" is generally accepted accounting principles.
"Indebtedness" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"Insolvency Proceeding" is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Intellectual Property" is:
(a) Copyrights, Trademarks, Patents, and Mask Works
including amendments, renewals, extensions, and all licenses or other
rights to use and all license fees and royalties from the use;
(b) Any trade secrets and any Intellectual Property Rights
in computer software and computer software products now or later
existing, created, acquired or held;
(c) All design rights which may be available to Borrowers
now or later created, acquired or held;
(d) Any claims for damages (past, present or future) for
infringement of any of the rights above, with the right, but not the
obligation, to xxx and collect damages for use or infringement of the
intellectual property rights above;
All proceeds and products of the foregoing, including all insurance, indemnity
or warranty payments.
"Inventory" is present and future inventory in which Borrowers have any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrowers, including inventory temporarily out of its custody
or possession or in transit and including returns on any accounts or other
proceeds (including insurance proceeds) from the sale or disposition of any of
the foregoing and any documents of title.
"Investment" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person (including any subsidiary),
or any loan, advance or capital contribution to any Person.
"Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Documents" are, collectively, this Agreement, any note, or notes
or guaranties executed by Borrowers or Guarantor, and any other present or
future agreement between Borrowers and/or for the benefit of Bank in connection
with this Agreement, all as amended, extended or restated.
-15-
16
"Mask Works" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"Material Adverse Change " is: (i) A material impairment in the
perfection or priority of Bank's security interest in the Collateral or in the
value of such Collateral which is not covered by adequate insurance; or (ii)
Bank determines, based upon information available to it and in its reasonable
judgment, that there is a reasonable likelihood that Borrowers shall fail to
comply with one or more of the financial covenants in Section 6 during the next
succeeding financial reporting period.
"Net Loss" is a reconciled amount that is calculated as the net loss of
Borrowers (on a consolidated basis) as determined by GAAP, and adjusted by (i)
non-cash charges including, without limitation, intangible amortization and
depreciation, and (ii) non-recurring costs including, without limitation,
restructuring charges and asset write-downs.
"Net Profit" is a reconciled amount that is calculated as the net income
of Borrowers (on a consolidated basis) as determined by GAAP, and adjusted by
(i) non-cash charges including, without limitation, intangible amortization and
depreciation, and (ii) non-recurring costs including, without limitation,
restructuring charges and intangible asset write-downs.
"Obligations" are debts, principal, interest, Bank Expenses and other
amounts Borrowers owe Bank now or later, including letters of credit (drawn and
undrawn), and foreign exchange contracts, if any, and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrowers assigned to Bank, and including the Financing
Agreement.
"Other Equipment" is leasehold improvements, intangible property such as
transferable software licenses and other similar property and soft costs
approved by the Bank, including sales tax, freight and installation expenses.
Unless otherwise agreed to by Bank, not more than twenty five percent (25%) of
the Committed Equipment Line shall be used to finance Other Equipment.
"Payment Date" means the first calendar day of each month commencing on
the first such day after the Closing Date and ending on the Equipment Maturity
Date.
"Permitted Indebtedness" is:
(a) Borrowers' indebtedness to Bank under this Agreement or
the Loan Documents;
(b) Indebtedness existing on the Closing Date incurred in
the ordinary course of business;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business;
(e) Indebtedness secured by Permitted Liens;
(f) Indebtedness shown on the Schedule;
(g) Any Borrower intercompany indebtedness; and
(h) Extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (g)
above, provided that the principal amount thereof is not increased or
the terms thereof are not modified to impose more burdensome terms upon
Borrowers or their Subsidiaries, as the case may be.
-16-
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"Permitted Investments" are:
(a) Investments shown on the Schedule and existing on the
Closing Date;
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States or its agency or any
state maturing within 1 year from its acquisition, (ii) commercial paper
maturing no more than 1 year after its creation and having the highest
rating from either Standard & Poor's Corporation or Xxxxx'x Investors
Service, Inc., (iii) Bank's certificates of deposit issued maturing no
more than 1 year after issue, (iv) investments made pursuant to a
written investment policy acceptable to Bank in writing, and (v) any
other investments administered through the Bank.
"Permitted Liens" are:
(a) Liens existing on the Closing Date incurred in the
ordinary course of business or arising under this Agreement or other
Loan Documents;
(b) Liens for taxes, fees, assessments or other government
charges or levies, either not delinquent or being contested in good
faith and for which Borrowers maintain adequate reserves on its Books,
if they have no priority over any of Bank's security interests;
(c) Purchase money Liens of up to Three Million Dollars
($3,000,000.00) in the aggregate (i) on Equipment acquired or held by
Borrower incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;
(d) Leases or subleases and non-exclusive licenses or
sublicenses granted in the ordinary course of Borrowers' business, if
the leases, subleases, licenses and sublicenses do not prohibit granting
Bank a security interest;
(e) Liens shown on the Schedule; and
(f) Liens incurred in the extension, renewal or refinancing
of the indebtedness secured by Liens described in (a) through (e), but
any extension, renewal or replacement Lien must be limited to the
property encumbered by the existing Lien and the principal amount of the
indebtedness may not increase.
"Person" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
"Prime Rate" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.
"Quick Assets" is, on any date, the Borrowers' consolidated,
unrestricted cash, cash equivalents, net billed accounts receivable determined
according to GAAP.
"Responsible Officer" is each of the Chief Executive Officer; President;
Chief Financial Officer; Vice President, Finance; Director, Treasury Operations;
and Controller of Agent, or of a Borrower (if appropriate).
"Subordinated Debt" is debt incurred by Borrowers subordinated to
Borrowers' debt to Bank (pursuant to a subordination agreement entered into
between the Bank, the Borrowers and the subordinated creditor).
"Subsidiary" is for any Person, joint venture, or any other business
entity of which more than 50% of the voting stock or other equity interests is
owned or controlled, directly or indirectly, by the Person or one or more
Affiliates of the Person.
-17-
18
"Total Liabilities" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrowers' consolidated balance sheet, including
all Indebtedness.
"Trademarks" are trademark and service xxxx rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.
-18-
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first above written.
AGENT:
VISUAL NETWORKS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Xxxxx X. Xxxxxxxx
Title: Chief Financial Officer
-----------------------
BORROWERS:
VISUAL NETWORKS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Xxxxx X. Xxxxxxxx
Title: Chief Financial Officer
-----------------------
VISUAL NETWORKS OPERATIONS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Xxxxx X. Xxxxxxxx
Title: Treasurer
------------------
VISUAL NETWORKS INVESTMENTS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Xxxxx X. Xxxxxxxx
Title: Treasurer
------------------
VISUAL NETWORKS TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Xxxxx X. Xxxxxxxx
Title: Treasurer
------------------
VISUAL NETWORKS OF TEXAS, L.P.,
by Visual Networks Texas Operations, Inc., its
General Partner
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Xxxxx X. Xxxxxxxx
Title: Treasurer
------------------
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VISUAL NETWORKS INSURANCE, INC.
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Xxxxx X. Xxxxxxxx
Title: Treasurer
------------------
INVERSE NETWORK TECHNOLOGY
By: /s/ Xxxxx X. Xxxxxxxx
---------------------
Xxxxx X. Xxxxxxxx
Title: President
------------------
AVESTA TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx
Title: President
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BANK:
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
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Title: SVP
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SILICON VALLEY BANK
By /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
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Title: SVP
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(Signed in Santa Xxxxx County, California)
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21
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest
in and to the following:
All goods, equipment, inventory, contract rights, trademarks,
servicemarks, trade styles, trade names, patents, patent applications, leases,
license agreements, franchise agreements, general intangibles, accounts,
documents, instruments, chattel paper, cash, deposit accounts, fixtures, letters
of credit, investment property, and financial assets, whether now owned or
hereafter acquired, wherever located; and
Any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work, whether
published or unpublished, now owned or later acquired; any patents, trademarks,
service marks and applications therefor; any trade secret rights, including any
rights to unpatented inventions, know-how, operating manuals, license rights and
agreements and confidential information, now owned or hereafter acquired; or any
claims for damages by way of any past, present and future infringement of any of
the foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
-21-
22
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., E.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
--------------------------
FAX#:[ ] TIME:
--------------------------
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FROM: VISUAL NETWORKS, INC., AS AGENT
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CLIENT NAME (BORROWER)
REQUESTED BY:
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AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
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PHONE NUMBER:
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FROM ACCOUNT # TO ACCOUNT #
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REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $
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PRINCIPAL PAYMENT (ONLY) $
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INTEREST PAYMENT (ONLY) $
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PRINCIPAL AND INTEREST (PAYMENT) $
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OTHER INSTRUCTIONS:
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All Borrower's representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone request for and Advance confirmed by this Borrowing Certificate; but
those representations and warranties expressly referring to another date shall
be true, correct and complete in all material respects as of that date.
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BANK USE ONLY
TELEPHONE REQUEST:
-----------------
The following person is authorized to request the loan payment transfer/loan advance on the
advance designated account and is known to me.
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Authorized Requester Phone #
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---------------------------------
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EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: VISUAL NETWORKS, INC., AS AGENT
The undersigned Responsible Officer of VISUAL NETWORKS, INC. certifies
that under the terms and conditions of the Loan and Security Agreement between
Agent (for the benefit of certain "Borrowers" named therein) and Bank (the
"Agreement"), (i) Borrowers are in complete compliance for the period ending
_______________ with all required covenants except as noted below and (ii) all
representations and warranties in the Agreement are true and correct in all
material respects on this date. Attached are the required documents supporting
the certification. The Officer certifies that these are prepared in accordance
with Generally Accepted Accounting Principles (GAAP) consistently applied from
one period to the next except as explained in an accompanying letter or
footnotes. The Officer acknowledges that no borrowings may be requested at any
time or date of determination that Borrowers are not in compliance with any of
the terms of the Agreement, and that compliance is determined not just at the
date this certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements with CC Monthly within 30 days Yes No
Annual (CPA Audited) with XX XXX within 90 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio (monthly) .90:1.0 through 6/30/01 _____:1.0 Yes No
1.0:1.0 thereafter _____:1.0 Yes No
Maximum Net Loss/Profit (quarterly): ($* ) ($_________) Yes No
*(i) ($19,500,000.00) for the quarter ending 12/31/00;
*(ii) ($7,250,000.00) for the quarter ending 3/31/01;
*(iii) ($3,500,000.00) for the quarter ending 6/30/01;
*(iv) ($1,250,000.00) for the quarter ending 9/30/01;
*(v) $1,000,000.00 for the quarter ending 12/31/01;
*(vi) a quarterly net profit of $1.00 thereafter.
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COMMENTS REGARDING EXCEPTIONS: See Attached, if any. BANK USE ONLY
Sincerely, Received by:
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AUTHORIZED SIGNER
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SIGNATURE Date:
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TITLE Verified:
--------------------------
----------------------------- AUTHORIZED SIGNER
DATE
Date:
------------------------------
Compliance Status: Yes No
3
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24
SCHEDULE 5.2
COLLATERAL
1. SMARTS Claim. On October 31, 1997, a lawsuit was filed against Avesta
Technologies, Inc. ("Avesta") and Xxxxx Xxxxx (a founder and, at the time, an
employee of Avesta) by Systems Management ARTS Incorporated ("SMARTS") in the
United States District Court for the Southern District of New York, alleging
unfair competition, unjust enrichment and that Avesta and Xx. Xxxxx infringed
two patents held by SMARTS. The complaint also alleges interference with
contractual relations against Avesta, as well as a claim of breach of contract
against Xx. Xxxxx. Avesta answered the complaint, denying all allegations, and
also asserted counterclaims against SMARTS for patent misuse, unfair
competition, interference with business and patent invalidity.
2. eWatcher Challenge. AverStar, Inc. ("AverStar") sent a letter dated
August 24, 1999 advising Avesta of AverStar's belief that it has superior rights
to the eWatcher xxxx. AverStar has filed a competing trademark application for
the xxxx in the U.S. Patent and Trademark Office.
25
SCHEDULE 5.3
LITIGATION
1. SMARTS Litigation. On October 31, 1997, a lawsuit was filed against
Avesta Technologies, Inc. ("Avesta") and Xxxxx Xxxxx (a founder and, at the
time, an employee of Avesta) by Systems Management ARTS Incorporated ("SMARTS")
in the United States District Court for the Southern District of New York,
alleging unfair competition, unjust enrichment and that Avesta and Xx. Xxxxx
infringed two patents held by SMARTS. The complaint also alleges interference
with contractual relations against Avesta, as well as a claim of breach of
contract against Xx. Xxxxx. Avesta answered the complaint, denying all
allegations, and also asserted counterclaims against SMARTS for patent misuse,
unfair competition, interference with business and patent invalidity.
2. Shareholders Litigation. In July 2000, several purported class action
complaints were filed against Visual Networks, Inc. ("Visual") and Xxxxx X.
Xxxxxxxx, Chairman and CEO of Visual, in the United States District Court for
the District of Maryland. The complaints allege that between February 7, 2000
and August 23, 2000, the defendants made false and misleading statements and
omissions that had the effect of inflating the market price of Visual's common
stock in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of
1934. The complaints do not specify the amount of damages sought.
3. Sexual Discrimination. In January 2001, a claim was filed in the Reading
(United Kingdom) Employment Tribunal by a former employee alleging that she was
dismissed as the result of sexual discrimination and seeking monetary
compensation. The amount is not identified. The Company believes that the claim
has no merit and intends to strongly defend itself against this claim.
26
SCHEDULE 7.4
PERMITTED INDEBTEDNESS
The Standby Letter of Credit issued by Silicon Valley Bank on December 12, 2000
in the amount of $5,000,000 for the benefit of Celestica Corporation.
27
SCHEDULE 7.5
PERMITTED LIENS
Existing warehouse liens, or warehouse liens that may be created in the future,
that are junior and subordinate to any liens created in favor of Silicon Valley
Bank. Notwithstanding the foregoing, such liens may permit a storage facility to
sell assets to the extent necessary to satisfy outstanding overdue storage fees.
28
SCHEDULE 7.6
PERMITTED INVESTMENTS
1. Investments in the following marketable securities pursuant to Visual's
Investment Objectives and Guidelines dated March 1998:
U. S. Treasury Bills, Notes, Bonds and Strips: Issued and guaranteed by
the U.S. Government.
Federal Agencies: Government National Mortgage Association (GNMA),
Tennessee Valley Authority (TVA), and World Bank.
Government Sponsored Enterprises: Federal National Mortgage Association
(FNMA), Federal Home Loan Mortgage Corporation (FHLMC), and Student Loan
Marketing Association (SLMA).
Money Markets: Taxable and/or tax-exempt issues rated A1/P1 or better as
defined by Standard & Poor's and/or Xxxxx'x.
Mortgage Backed Securities: Participation certificates and pass-through
certificates of Government National Mortgage Association (GNMA), Federal
Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage
Association (FNMA).
Repurchase Agreements: Backed by U.S. Treasury obligations pledged as
collateral and delivered to a third party custodian for safekeeping. The
value of underlying repurchase collateral must be equal to or exceed
102% of the principal and interest amount of the investment at
initiation. Repurchase Agreements should be limited to maturities of
less than one week.
Tax Advantage Debt Instruments: Issued by state governmental entities
rated AAA by Standard & Poor's. No more than 5% of the Portfolio shall
be invested in the securities of any issuer.
Commingled (pooled) Funds: Short-term money market investment funds
consisting of the Eligible Securities described above and managed by (1)
a sponsor with a family of funds with assets in excess of $10 billion,
or (2) a federal or state chartered bank with assets of at least $100
billion and total stockholders equity of at least $10 billion.
2 Investments in /advances to Visual's joint venture, End-to-End Germany,
a private start-up company that will offer products and complete solutions for
monitoring and managing networks. HypoVereinsbank, the second largest German
commercial bank, owns 60% of the joint venture and Visual owns 30%. The
remaining 10% is reserved for management.
29
3. Investments in Xxxxxxx Sachs Financial Square Trust Money Market Fund
(portfolio account 026263525.)
4. An investment in Quadrian Holdings, Inc. preferred stock received by
Avesta Technologies, Inc. in 1998 in exchange for a license of certain
technology rights.
5. Investments made as of the Closing Date in any of the following
Affiliates:
- VISUAL NETWORKS OPERATIONS, INC. (Delaware)
- VISUAL NETWORKS OF TEXAS, L. P. (Texas)
- VISUAL NETWORKS PROTECTION, INC. (Vermont)
- VISUAL NETWORKS INSURANCE, INC. (Vermont)
- VISUAL NETWORKS INTERNATIONAL OPERATIONS, INC. (Delaware)
- VISUAL NETWORKS, LTD. (Bermuda)
- VISUAL NETWORKS TECHNOLOGIES, INC. (California)
- VISUAL NETWORKS INVESTMENTS, INC. (California)
- VISUAL NETWORKS TEXAS OPERATIONS, INC. (Delaware)
- NET2NET, LLC (Delaware)
- INVERSE NETWORK TECHNOLOGY (California)
- AVESTA TECHNOLOGIES, INC. (Delaware)
- AVESTA TECHNOLOGIES CANADA, INC. (Ontario, Canada)
- AVESTA TECHNOLOGIES PTE. LTD. (Singapore)
