[LOGO]
SECURITY AND LOAN AGREEMENT
(ACCOUNTS RECEIVABLE)
This Agreement is entered into between SILICON LABORATORIES INC., a DELAWARE
CORPORATION (herein called "Borrower") and IMPERIAL BANK (herein called "Bank").
1. Bank hereby commits, subject to all the terms and conditions of this
Agreement and prior to the termination of its commitment as hereinafter
provided, to make loans to Borrower from time to time in such amounts as
may be determined by Bank up to, but not exceeding in the aggregate
unpaid principal balance, the following Borrowing Base:
80% of Eligible Accounts
and in no event more than $ 3,000,000.00
2. The amount of each loan made by Bank to Borrower hereunder shall be
debited to the loan ledger account of Borrower maintained by Bank (herein
called "Loan Account") and Bank shall credit the Loan Account with all
loan repayments made by Borrower. Borrower promises to pay Bank (a) the
unpaid balance of Borrower's Loan Account earlier of event of default or
maturity date and (b) on or before the tenth day of each month, interest
on the average daily unpaid balance of the Loan Account during the
immediately preceding month at the rate of ZERO percent (0%) per annum in
excess of the rate of interest which Bank has announced as its prime
lending rate ("Prime Rate") which shall vary concurrently with any change
in such Prime Rate. Interest shall be computed at the above rate on the
basis of the actual number of days during which the principal balance of
the loan account is outstanding divided by 360, which shall for interest
computation purposes be considered one year. Bank at its option may demand
payment of any or all of the amount due under the Loan Account including
accrued but unpaid interest at any time. Such notice may be given verbally
or in writing and should be effective upon receipt by Borrower. The amount
of interest payable each first of the month by Borrower shall not be less
than a minimum monthly charge of $250.00. Bank is hereby authorized to
charge Borrower's deposit account(s) with Bank for all sums due Bank under
this Agreement.
3. Requests for loans hereunder shall be in writing duly executed by
Borrower in a form satisfactory to Bank and shall contain a
certification setting forth the matters referred to in Section 1, which
shall disclose that Borrower is entitled to the amount of loan being
requested.
4. As used in this Agreement, the following terms shall have the following
meanings:
A. "Accounts" means any right to payment for goods sold or leased, or
to be sold or to be leased, or for services rendered or to be
rendered no matter how evidenced, including accounts receivable,
contract rights, chattel paper, instruments, purchase orders,
notes, drafts, acceptances, and other forms of obligations and
receivables.
B. "Collateral" means any and all personal property of Borrower which
is assigned or hereafter is assigned to Bank as security or in which
Bank now has or hereafter acquires a security interest.
C. "Eligible Accounts" means all of Borrower's Accounts excluding,
however, (1) all Accounts under which payment is not received within
90 days from any invoice date, (2) all Accounts against which the
account debtor or any other person obligated to make payment thereon
asserts any defense, offset, counterclaim or other right to avoid or
reduce the liability represented by the Account in excess of 2.5% of
the total Account and (3) any Accounts if the account debtor or any
other person liable in connection therewith is insolvent, subject to
bankruptcy or receivership proceedings or has made an assignment for
the benefit of creditors or whose credit standing is unacceptable to
Bank and Bank has so notified Borrower.
5. Borrower hereby assigns to Bank all Borrower's present and future
Accounts, including all proceeds due thereunder, all guaranties and
security therefor, and hereby grants to Bank a continuing security
interest in all moneys in the Collateral Account referred to in Section 6
hereof, as security for any and all obligations of Borrower to Bank,
whether now owing or hereafter incurred and whether direct, indirect,
absolute or contingent. So long as Borrower is indebted to Bank or Bank
is committed to extend credit to Borrower, Borrower will execute and
deliver to Bank such assignments, including Bank's standard forms of
Specific or General Assignment covering individual Accounts, notices,
financing statements, and other documents and papers as Bank may require
in order to affirm, effectuate or further assure the assignment to Bank
of the Collateral or to give any third party, including the account
debtors obligated on the Accounts, notice of Bank's interest in the
Collateral.
6. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10, Borrower will collect in accordance with Borrower's
customary practices all Borrower's Accounts, provided that no legal
action shall be maintained thereon or in connection therewith without
Bank's prior written consent. Any collection of Accounts by Borrower,
whether in the form of cash, checks, notes, or other instruments for the
payment of money (properly endorsed or assigned where required to enable
Bank to collect same), shall be in trust for Bank, and (A) and upon event
of default Borrower shall keep all such collections separate and apart
from all other funds and property so as to be capable of identification
as the property of Bank and deliver said collections daily to Bank in the
identical form received. The proceeds of such collections when received by
Bank may be applied by Bank directly to the payment of Borrower's Loan
Account or any other obligation secured hereby. Any credit given by Bank
upon receipt of said proceeds shall be conditional credit subject to
collection. Returned items at Bank's option may be charged to Borrower's
general account. All collections of the Accounts shall be set forth on an
itemized schedule, showing the name of the account debtor, the amount of
each payment and such other information as Bank may request.
7. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10, Borrower may continue its present policies with respect to
returned merchandise and adjustments. However, Borrower shall immediately
notify Bank of all cases greater of $50,000 or 20% per account, involving
returns, repossessions, and loss or damage of or to merchandise
represented by the Accounts and of any credits, adjustments or disputes
arising in connection with the goods or services represented by the
Accounts and, in any of such events, if borrower is out of compliance with
borrowing base Borrower will immediately pay to Bank from its own funds
(and not from the proceeds of Accounts or Inventory) for application to
Borrower's Loan Account or any other obligation secured hereby the amount
of any credit for such returned or repossessed merchandise and adjustments
made to any of the Accounts.
8. Borrower represents and warrants to Bank: (i) If Borrower is a corporation,
that Borrower is duly incorporated and existing in the State of its
incorporation and the execution, delivery and performance hereof are within
Borrower's corporate powers, have been duly authorized and are not in
conflict with law or the terms of any charter, by-law or other
incorporation papers, or of any material indenture, agreement or
undertaking to which Borrower is a party or by which Borrower is found or
affected; (ii) Borrower is, or at the time the collateral becomes subject
to Bank's security interest will be, the true and lawful owner of and has,
or at the time the Collateral becomes subject to Bank's security interest
will have, good and clear title to the Collateral, subject only to Bank's
rights therein; (iii) Each Account is, or at the time the Account comes
into existence will be, a true and correct statement of a bona fide
indebtedness incurred by the debtor named therein in the amount of the
Account for either merchandise sold or delivered (or being held subject to
Borrower's delivery instructions) to, or services rendered, performed and
accepted by, the account debtor; (iv) That there are or will be no
defenses, counterclaims, or setoffs which may be asserted against the
Accounts; and (v) any and all financial information, including information
relating to the Collateral, submitted by Borrower to Bank, whether
previously or in the future, is or will be materially correct.
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9. Borrower will: (i) Furnish Bank from time to time such financial statements
and information as Bank may reasonably request and inform Bank immediately
upon the occurrence of a material adverse change therein; (ii) Furnish Bank
periodically, in such form and detail and at such times as Bank may
require, statements showing aging and reconciliation of the Accounts and
collections thereon; (iii) Permit representatives of Bank to inspect the
Borrower's books and records relating to the Collateral and make extracts
therefrom at any reasonable time and to arrange for verification of the
Accounts, under reasonable procedures, acceptable to Bank, directly with
the account debtors or otherwise at Borrower's expense; (iv) Promptly
notify Bank of any attachment or other legal process levied against any of
the Collateral and any information received by Borrower relative to the
Collateral, including the Accounts, the account debtors or other persons
obligated in connection therewith, which may in the reasonable judgement of
bank affect the value of the Collateral or the rights and remedies of Bank
in respect thereto; (v) Reimburse Bank upon demand for any and all legal
costs, including reasonable attorneys' fees, and other expense incurred in
collecting any sums payable by Borrower under Borrower's Loan Account or
any other obligation secured hereby, enforcing any term or provision of
this Security Agreement or otherwise or in the checking, handling and
collection of the Collateral and the preparation and enforcement of any
agreement relating thereto; (vi) Notify Bank of each location and of each
office of Borrower at which records of Borrower relating to the Accounts
are kept; (vii) Provide, maintain and deliver to Bank policies insuring
the Collateral against loss or damage by such risks and in such amounts,
forms and companies as Bank may require and with loss payable solely to
Bank, and, in the event Bank takes possession of the Collateral, the
insurance policy or policies and any unearned or returned premium thereon
shall at the option of Bank become the sole property of Bank, such policies
and the proceeds of any other insurance covering or in any way relating to
the Collateral, whether now in existence or hereafter obtained, being
hereby assigned to Bank; (viii) In the event the unpaid balance of
Borrower's Loan Account shall exceed the maximum amount of outstanding
loans to which Borrower is entitled under Section 1 hereof, Borrower shall
immediately pay to Bank.
10. After the occurrence and continuation of an Event of Default, Bank may
collect the Accounts and may give notice of assignment to any and all
account debtors, and Borrower does hereby make, constitute and appoint Bank
its irrevocable, true and lawful attorney with power to receive, open and
dispose of all mail addressed to Borrower, to endorse the name of Borrower
upon any checks or other evidences of payment that may come into the
possession of Bank upon the Accounts to endorse the name of the undersigned
upon any document or instrument relating to the Collateral; in its name or
otherwise, to demand, xxx for, collect and give acquittances for any and
all moneys due or to become due upon the Accounts; to compromise, prosecute
or defend any action, claim or proceeding with respect thereto; and to do
any and all things necessary and proper to carry out the purpose herein
contemplated.
11. Until Borrower's Loan Account and all other obligations secured hereby
shall have been repaid in full, Borrower shall not sell, dispose of or
grant a security interest in any of the Collateral other than to Bank, or
execute any financing statements covering the Collateral in favor of any
secured party or person other than Bank.
12. Should: (i) Default which is not cured by Borrower within fifteen (15) days
of receipt of notice thereof be made in the payment of any obligation, or
breach be made in any warranty, statement, promise, term or condition,
contained herein or hereby secured; (ii) Any material statement or
representation made for the purpose of obtaining credit hereunder prove
false; (iii) (iv) Borrower become insolvent or make an assignment for the
benefit of creditors; or (v) Any proceeding be commenced by or against
Borrower and if against Borrower, is not cured within 60 days of action
under any bankruptcy, reorganization, arrangement, readjustment of debt or
moratorium law or statute; then in any such event, Bank may, at its option
and without demand first made and without additional notice to Borrower, do
any one or more of the following: (a) Terminate its obligation to make
loans to Borrower as provided in Section 1 hereof; (b) Declare all sums
secured hereby immediately due and payable; (c) Immediately take possession
of the Collateral wherever it may be found, using all necessary force so to
do, or require Borrower to assemble the Collateral and make it available to
Bank at a place designated by Bank which is reasonably convenient to
Borrower and Bank, and Borrower waives all claims for damages due to or
arising from or connected with any such taking; (d) Proceed in the
foreclosure of Bank's security interest and sale of the Collateral in any
manner permitted by law, or provided for herein; (e) Sell, lease or
otherwise dispose of the Collateral at public or private sale, with or
without having the Collateral at the place of sale, and upon terms and in
such manner as Bank may determine, and Bank may purchase same at any such
sale; (f) Retain the Collateral in full satisfaction of the obligations
secured thereby; (g) Exercise any remedies of a secured party under the
Uniform Commercial Code. Prior to any such disposition, Bank may, at as
option, cause any of the Collateral to be repaired or reconditioned in such
manner and to such extent as Bank may deem advisable, and any sums expended
therefor by Bank shall be repaid by Borrower and secured hereby. Bank shall
have the right to enforce one or more remedies hereunder successively or
concurrently, and any such action shall not estop or prevent Bank from
pursuing any further remedy which it may have hereunder or by law. If a
sufficient sum is not realized from any such disposition of Collateral to
pay all obligations secured by this Security Agreement, Borrower hereby
promises and agrees to pay Bank any deficiency.
13. If any writ of attachment, garnishment, execution or other legal process be
issued against any property of Borrower, or if any assessment for taxes
against Borrower, other than real property, is made by the Federal or State
government or any department thereof, the obligation of Bank to make loans
to Borrower as provided in Section 1 hereof shall immediately terminate and
the unpaid balance of the Loan Account, all other obligations secured
hereby and all other sums due hereunder shall immediately become due and
payable without demand, presentment or notice.
14. Borrower authorizes Bank to destroy all invoices, delivery receipts,
reports and other types of documents and records submitted to Bank in
connection with the transactions contemplated herein at any time subsequent
to four months from the time such items are delivered to Bank.
15. Nothing herein shall in any way limit the effect of the conditions set
forth in any other security or other agreement executed by Borrower, but
each and every condition hereof shall be in addition thereto.
16. Should default be made in the payment of principal or interest which is not
cured by Borrower within fifteen (15) days of receipt of notice thereof, or
in the performance or observance, which is not cured by Borrower within
fifteen (15) days of receipt of notice thereof, of any item, covenant or
condition of this Agreement, any deed of trust, security agreement or other
agreement (including amendments or extensions thereof) securing or
pertaining to this Agreement, at the option of the holder hereof and
without notice or demand, the entire balance of principal and accrued
interest then remaining unpaid shall (a) become immediately due and
payable, and (b) thereafter bear interest, until paid in full, at the
increased rate of 5% per year in excess of the rate provided for above, as
it may vary from time to time.
17. If any installment payment, interest payment, principal payment or
principal balance payment due hereunder is delinquent twenty (20) or more
days, Borrower agrees to pay Bank a late charge in the amount of 5% of the
payment so due and unpaid, in addition to the payment; but nothing in this
paragraph is to be construed as any obligation on the part of the Bank to
accept payment of any payment past due or less than the total unpaid
principal balance after maturity.
All payments shall be applied first to any late charges owing, then to
interest and the remainder, if any, to principal.
18. Reference Provision.
A. Other than (i) non-judicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property;
or (ii) the appointment of a receiver, or the exercise of other
provisional remedies (any and all of which may be initiated pursuant
to applicable law), each controversy, dispute or claim between the
parties arising out of or relating to this document ("Agreement"),
which controversy, dispute or claim is not settled in writing within
thirty (30) days after the "Claim Date" (defined as the date on which
a party subject to the Agreement gives written notice to all other
parties that a controversy, dispute or claim exists), will be settled
by a reference proceeding in California in accordance with the
provisions of Section 638 et seq. of the California Code of Civil
Procedure, or their successor section ("CCP"), which shall constitute
the exclusive remedy for the settlement of any controversy, dispute or
claim concerning this Agreement, including whether such controversy,
dispute or claim is subject to the reference proceeding and except as
set forth above, the parties waive their rights to initiate any legal
proceedings against each other in any court or jurisdiction other than
the Superior Court in the County where the Real Property, if any, is
located or Los Angeles County if none (the "Court"). The referee shall
be a retired Judge of the Court selected by mutual agreement of the
parties, and if they cannot so agree within forty-five (45) days after
the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his representative). The referee
shall be appointed to sit as a temporary judge, with all of the powers
of a temporary judge, as authorized by law, and upon selection should
take and subscribe to the oath of office as provided for in Rule 244
of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP Section
170.6. The referee shall (a) be requested to set the matter for
hearing within sixty (60) days after the Claim Date and (b) try any
and all issues of law or fact and report a statement of decision upon
them, if possible, within ninety (90) days of the Claim Date. Any
decision rendered by the referee will be final, binding and conclusive
and judgment shall be entered pursuant to CCP Section 644 in any court
in the State of California having jurisdiction. Any party may apply
for a reference proceeding at any time after thirty (30) days
following notice to any other party of the nature of the controversy,
dispute or claim, by filing a petition for a hearing and/or trial.
All discovery permitted by this Agreement shall be completed no later
than fifteen (15) days before the first hearing date established by
the referee. The referee may extend such period in the event of a
party's refusal to provide requested discovery for any reason
whatsoever, including, without limitation, legal objections raised to
such discovery or unavailability of a witness due to absence or
illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be
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taken by either party upon seven (7) days written notice, and request
for production or inspection of documents shall be responded to within
ten (10) days after service. All disputes relating to discovery which
cannot be resolved by the parties shall be submitted to the referee
whose decision shall be final and binding upon the parties. Pending
appointment of the referee as provided herein, the Superior Court is
empowered to issue temporary and/or provisional remedies, as
appropriate.
B. Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted
including the time and place of all hearings, the order of
presentation of evidence, and all other questions that arise with
respect to the course of the reference proceeding. All proceedings and
hearings conducted before the referee, except for trial, shall be
conducted without a court reporter, except that when any party so
requests, a court reporter will be used at any hearing conducted
before the referee. The party making such a request shall have the
obligation to arrange for and pay for the court reporter. The costs of
the court reporter at the trial shall be borne equally by the parties.
C. The referee shall be required to determine all issues in accordance
with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in
the State of California will be applicable to the reference
proceeding. The referee shall be empowered to enter equitable as well
as legal relief, to provide all temporary and/or provisional remedies
and to enter equitable orders that will be binding upon the parties.
The referee shall issue a single judgment at the close of the
reference proceeding which shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto
expressly reserve the right to contest or appeal from the final
judgment or any appealable order or appealable judgment entered by the
referee. The parties hereto expressly reserve the right to findings of
fact, conclusions of law, a written statement of decision, and the
right to move for a new trial or a different judgment, which new
trial, if granted, is also to be a reference proceeding under this
provision.
D. In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is
enacted), any dispute between the parties that would otherwise be
determined by the reference procedure herein described will be
resolved and determined by arbitration. The arbitration will be
conducted by a retired judge of the Court, in accordance with the
California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to
discovery as set forth hereinabove shall apply to any such arbitration
proceeding.
19. Additional Provisions: SUBJECT TO THE PROVISIONS OF THE CREDIT TERMS AND
CONDITIONS AGREEMENT DATED JUNE 25, 1999, AND ALL AMENDMENTS THERETO AND
REPLACEMENTS THEREFOR.
/ / If checked, the Addendum or Exhibit "A" attached (and all amendments
thereto and replacements therefor) is incorporated herein by this
reference.
Executed this 25TH day of JUNE, 1999
SILICON LABORATORIES INC., A DELAWARE CORPORATION
-------------------------------------------------
(Name of Borrower)
Chief
IMPERIAL BANK BY: /s/ Xxxx X. XxXxxxxx Financial Officer
--------------------------------------------
(Authorized Signature and Title)
SVP & VP-
BY: /s/ Xxxxx Xxxxxxxxx, Manager BY: /s/ Xxxxxxx X. Xxxxx Engineering
----------------------------- --------------------------------------------
Title (Authorized Signature and Title)
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IMPERIAL BANK
Member FDIC
000 Xxxxxxx Xxxxxxx
Xxx Xxxx, XX 00000
Subject: Credit Terms and Conditions ("Agreement")
June 25, 1999
Gentlemen:
Borrower: Silicon Laboratories Inc.
To induce Imperial Bank (herein sometimes referred to as "you" and sometimes
as "Bank") to make loans to the undersigned (herein called "Borrower"), and
in consideration of any loan or loans you, in your sole discretion, may make
to Borrower, Borrower warrants and agrees as follows:
A. Borrower represents and warrants that:
1. EXISTENCE AND RIGHTS.
Borrower is a Delaware corporation.
Borrower is duly organized and existing and in good standing under the laws
of the State of Delaware and is authorized and in good standing to do
business in the State of Texas. Borrower has powers and adequate authority,
rights and franchises to own its property and to carry on its business as now
conducted, and is duly qualified and in good standing in each State in which
the character of the properties owned by it therein or the conduct of its
business makes such qualification necessary, and Borrower has the power and
adequate authority to make and carry out this Agreement. Borrower has no
investment in any other business entity, except as previously disclosed to
Bank.
2. AGREEMENT AUTHORIZED. The execution, delivery and performance of this
Agreement are duly authorized and do not require the consent or approval of
any governmental body or other regulatory authority; are not in contravention
of or in conflict with any law or regulation or any term or provision of
Borrower's articles of incorporation, by-laws, or Articles of Association, as
the case may be, and this Agreement is the valid, binding and legally
enforceable obligation of Borrower in accordance with its terms.
3. NO CONFLICT. The execution, delivery and performance of this
Agreement are not in contravention of or in conflict with any agreement,
indenture or undertaking to which Borrower is a party or by which it or any
of its property may be bound or affected, and do not cause any lien, charge
or other encumbrance to be created or imposed upon any such property by
reason thereof.
4. LITIGATION. There is no litigation or other proceeding pending or
threatened against or affecting Borrower, received in writing or known by
Borrower, and Borrower is not in default with respect to any order, writ,
injunction, decree or demand of any court or other governmental or regulatory
authority, except as previously disclosed in writing to bank.
5. FINANCIAL CONDITION. The balance sheet of Borrower as of May 1,
1999, and the related profit and loss statement for the 4 months ended on
that date, a copy of which has heretofore been delivered to you by Borrower,
and all other statements and data submitted in writing by Borrower to you in
connection with this request for credit are true and correct, and said
balance sheet and profit and loss statement truly present the financial
condition of Borrower as of the date thereof and the results of the
operations of Borrower for the period covered thereby, and have been prepared
in accordance with generally accepted accounting principles on a basis
consistently maintained, except for the two million dollar equipment
financing transaction with Finova Capital Corporation previously disclosed to
bank and subordinated in form and substance respective of a specific lien
satisfactory to Bank. Since such date there have been no materially adverse
changes in the financial condition or business of Borrower. Borrower has no
knowledge of any material liabilities, contingent or otherwise, at such date
not reflected in said balance sheet, and Borrower has not entered into any
special commitments or substantial contracts which are not reflected in said
balance sheet, other than in the ordinary and normal course of its business,
which may have a materially adverse effect upon its financial condition,
operations or business as now conducted.
6. TITLE TO ASSETS. Except for transactions with COMDISCO, Third Coast
Capital and Finova Capital Corporation, leasehold improvement affixed to
landlord owned real estate and software in the form of software licenses
rather than ownership of source code, borrower has good title to its assets,
and the same are not subject to any liens or encumbrances other than those
permitted by Section C.3 hereof.
7. TAX STATUS. Borrower has no known liability for any delinquent
state, local or federal taxes, and if Borrower has contracted with any
government agency, Borrower has no liability for renegotiation of profits.
8. TRADEMARKS, PATENTS. To the best of it's knowledge, Borrower, as of
the date hereof, possesses all necessary trademarks, trade names, copyrights,
patents, patent rights, and licenses to conduct its business as now operated,
without any known material conflict with the valid trademarks, trade names,
copyrights, patents and license rights of others. Notwithstanding the
foregoing, there is no pending intellectual property litigation against the
Company. The Company has no reason to believe it has infringed on any
intellectual property rights. The semiconductor industry is characterized by
vigorous protection and pursuit of intellectual property rights or positions,
which have resulted in significant and often protracted, expensive
litigation. The Company or its foundries may from time to time in the future
receive notice of claims that the Company has infringed patents or other
intellectual property rights owned by others. The Company may seek licenses
under such patents or other intellectual property rights. However, these can
be no assurance that licenses will be offered or that the terms of any
offered licenses will be acceptable to the Company.
9. REGULATION U. The proceeds of this loan shall not be used to
purchase or carry margin stock (as defined with Regulation U of the Board of
Governors of the Federal Reserve system).
10. YEAR 2000 COMPLIANCE. Borrower has reviewed the areas within their
operations and business which could be adversely affected by, and have
developed or are developing a program to address on a timely basis, the Year
2000 Problem and have made related appropriate inquiry of material suppliers
and vendors, and based on such review and program, the Year 2000 Problem will
not have a material adverse effect upon its financial condition, operations
or business as now conducted. "Year 2000 Problem" means the risk that any
computer applications used by Borrower may be unable to recognize and
properly perform date-sensitive functions involving certain dates prior to
and any dates one or after December 31, 1999.
B. Borrower agrees that so long as it is indebted to you, it will, unless
you shall otherwise consent in writing:
1. RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
2. INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against
fire and other hazards with responsible insurance carriers to the extent
usually maintained by similar businesses.
3. TAXES AND OTHER LIABILITIES. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and all
its other liabilities at any time existing, except to the extent and so long
as:
(a) The same are being contested in good faith and by appropriate proceedings
in such manners as not to cause any materially adverse effect upon its
financial condition or the loss of any right of redemption from any sale
thereunder, and
(b) it shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting practice) deemed by it adequate
with respect thereto.
4. RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit your representatives to have access to,
and to examine its properties, books and records at all reasonable times; and
furnish you:
(a) As soon as available, and in any event within 25 days after the close
of each month of each fiscal year of Borrower, commencing with the month next
ending, a balance sheet, profit and loss statement and reconciliation of
Borrower's capital accounts as of the close of such period and covering
operations for the portion of Borrower's fiscal year ending on the last day
of such period, all in reasonable detail and stating in comparative form the
figures for the corresponding date and period in the previous fiscal year,
prepared in accordance with generally accepted accounting principles on a
basis consistently maintained by Borrower and certified by an appropriate
officer of Borrower, subject, however, to year-end audit adjustments;
(b) As soon as available, and in any event within 90 days after the close of
each fiscal year of Borrower, a report of audit of Company as of the close
of and for such fiscal year, all in reasonable detail and stating in
comparative form the figures as of the close of and for the previous fiscal
year, with the unqualified opinion of accountants satisfactory to you.
(c) Within 25 days after the close of each month of each fiscal year of
Borrower, a certificate by chief financial officer or partner of Borrower,
stating that Borrower has performed and observed each and every covenant
contained in this Letter of Inducement to be performed by it and that no
event has occurred and no condition then exists which constitutes an event of
default hereunder or would constitute such an event of default upon the lapse
of time or upon the giving of notice and the lapse of time specified herein,
or, if any such event has occurred or any such condition exists, specifying
the nature thereof;
(d) Promptly after the receipt thereof by Borrower, copies of any detailed
audit reports submitted to Borrower by independent accountants in connection
with each annual or interim audit of the accounts of Borrower made by such
accountants;
(e) Promptly after the same are available, copies of all such proxy
statements, financial statements and reports as Borrower shall send to its
stockholders, if any, and copies of all reports which Borrower may file with
the Securities and Exchange Commission or any governmental authority at any
time substituted therefor; and
(f) Such other information relating to the affairs of Borrower as you
reasonably may request from time to time.
(g) Notice of Default. Promptly notify the Bank in writing of the occurrence
of any event of default hereunder or any event which upon notice and lapse of
time would be an event of default.
5. INTELLECTUAL PROPERTY. Borrower shall (i) protect, defend and
maintain the validity and enforceability of the Trademarks, Patents and
Copyrights, (ii) use its best efforts to detect infringements of the
Trademarks, Patents and Copyrights and promptly advise Bank in writing of
material infringements detected.
6. YEAR 2000 COMPLIANCE. Borrower shall perform all acts reasonably
necessary to ensure that Borrower and any business in which Borrower holds a
substantial interest become Year 2000 Compliant in a timely manner. Such acts
shall include, without limitation, performing a comprehensive review and
assessment of all Borrower's systems and adopting a detailed plan, with
itemized budget, for the remediation, monitoring and testing of such systems.
Borrower shall also take reasonably necessary steps to ensure that it will
not be materially adversely affected as a result of any customer, supplier or
vendor's failure to become Year 2000 compliant. As used in this paragraph,
"Year 2000 Compliant" shall mean, in regard to any entity, that all software,
hardware, firmware, equipment, goods or systems utilized by or material to
the business operations or financial condition of such entity, will properly
perform date sensitive functions before, during and after the year 2000.
Borrower shall, immediately upon request, provide to Bank such certifications
or other evidence of Borrower's compliance with the terms of this paragraph
as Bank may from time to time require.
C. Borrower agrees that so long as it is indebted to you, it will not,
without your written consent:
1. TYPE OF BUSINESS; MANAGEMENT. Make any substantial change in the
character of its business; or make any change in its executive management
2. OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys other than loans from you except obligations
now existing as shown in financial statement dated May 1, 1999, excluding
those being refinanced by your bank; or sell or transfer, either with or
without recourse, any accounts or notes receivable or any moneys due to
become due and except for transactions with COMDISCO. Third Coast Capital and
Finova Capital Corporation, including follow-on equipment schedules to
existing permitted financing lines.
3. LIENS AND ENCUMBRANCES. Except for transactions with COMDISCO, Third
Coast Capital and Finova Capital Corporation, including follow-on equipment
schedules to existing permitted financing lines, create, incur, or assume any
mortgage, pledge encumbrance, lien or charge of any kind (including the
charge upon property at any time purchased or acquired under conditional sale
or other title retention agreement) upon any asset (including Borrower's
intellectual property to a financial institution), now owned or hereafter
acquired by it, other than liens for taxes not delinquent, materialmen and
mechanics liens, provided they are discharged within sixty days, and liens in
your favor. Purchase money security interests are allowed.
4. LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or
advances to any person or other entity other than in the ordinary and normal
course of its business as now conducted or make any investment in securities
other than United States Government Treasuries or Agencies, Imperial Bank
sponsored paper, or the Monarch Money Market Funds; or guarantee or otherwise
become liable upon the obligation of any person or other entity, except by
endorsement of negotiable instruments for deposit or collection in the
ordinary and normal course of its business.
5. ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION. Purchase
or otherwise acquire all or substantially all of the assets or business of
any person or other entity; or liquidate, dissolve, merge or consolidate, or
commence any proceedings therefor; or sell any assets except in the ordinary
and normal course of its business as now conducted; or sell, lease, assign,
or transfer any substantial part of its business or fixed assets, or any
property or other assets necessary for the continuance of its business as now
conducted including without limitation the selling of any property or other
asset accompanied by the leasing back of the same.
6. DIVIDENDS, STOCK PAYMENTS. If a corporation, declare or pay any
dividend (other than dividends payable in common stock of Borrower) or make
any other distribution on any of its capital stock now outstanding or
hereafter issued or purchase (other than the routine repurchase of common
stock shares issued to employees under the 1997 Stock Option/Stock Issuance
Plan and any successor plans), redeem or retire any of such stock.
D. The occurrence of any one of the following events of default shall, at
your option, terminate your commitment to lend and make all sums of principal
and interest then remaining unpaid on all Borrower's indebtedness to you
immediately due and payable, all without demand, presentment or notice, all
of which are hereby expressly waived;
1. FAILURE TO PAY. Failure to pay any installment of principal or of
interest on any indebtedness of Borrower to you, provided such failure is not
cured by Borrower within fifteen (15) days of receipt of notice thereof.
2. BREACH OF COVENANT. Failure of Borrower to perform any other term
or condition of this Agreement binding upon Borrower. Provided such failure
is not cured by Borrower within fifteen (15) days of receipt of notice
thereof.
3. BREACH OF WARRANTY. Any of Borrower's representations or warranties
made herein or any statement or certificate at any time given in writing
pursuant hereto or in connection herewith shall be false or misleading in any
material respect.
4. INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent;
or admit its inability to pay its debts as they mature; or make an assignment
for the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
5. JUDGMENTS, ATTACHMENTS. Any money judgment, writ or warrant of
attachment, or similar process in excess of two hundred fifty thousand dollars
($250,000), shall be entered or filed against Borrower or any of its assets
and shall remain unvacated unbonded or unstayed for a period of 10 days or in
any event later than five days prior to the date of any proposed sale
thereunder
6. BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against Borrower and,
if instituted against it, shall be consented to.
E. Miscellaneous Provisions.
1. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of your Bank or any holder of Notes issued hereunder, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under this agreement or any note
issued in connection with a loan that your Bank may make hereunder, are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
2. LEASE OF PERSONAL PROPERTY. Notwithstanding anything contained
herein or in any security agreement or any other document executed by
Borrower in favor of Bank ("Loan Documents"), the Borrower is hereby
permitted to rent and or lease personal property and to execute such
documents as necessary to effect such transactions, including the granting of
a purchase money security interest if the property being rented or leased.
Any such rental or lease will not be a violation of any of the Loan Documents.
3. APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the state of California, to the
jurisdiction of whose courts the parties hereby agree to submit.
4. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED, THE BANK AND THE BORROWER EACH HEREBY WAIVES AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE SUBJECT MATTER HEREOF OR THEREOF
OR ANY OBLIGATION OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO
THE DEALINGS OF THE BANK OR THE BORROWER IN CONNECTION WITH ANY OF THE ABOVE,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN
CONTRACT OR TORT OR OTHERWISE.
5. JUDICIAL REFERENCE (a) Other than (i) non-judicial foreclosure and
all matters in connection therewith regarding security interests in real or
personal property; or (ii) the appointment of a receiver, or the exercise of
other provisional remedies (any and all of which may be initiated pursuant to
applicable law), each controversy, dispute or claim between the parties
arising out of or relating to this document ("Agreement"), which controversy,
dispute or claim is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to the Agreement
gives written notice to all other parties that a controversy, dispute or
claim exists), will be settled by a reference proceeding in California in
accordance with the provisions of Section 638 ET SEQ. of the California Code
of Civil Procedure, or their successor section ("CCP"), which shall
constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Agreement, including whether such
controversy, dispute or claim is subject to the reference proceeding and
except as set forth above, the parties waive their rights to initiate any
legal proceedings against each other in any court or jurisdiction other than
the Superior Court in the County where the Real Property, if any, is located
or Los Angeles County if none (the "Court"). The referee shall be a retired
Judge of the Court selected by mutual agreement of the parties, and if they
cannot so agree within forty-five (45) days after the Claim Date, the referee
shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP Section 170.6.
The referee shall (a) be requested to set the matter for hearing within sixty
(60) days after the Claim Date and (b) try any and all issues of law or fact
and report a statement of decision upon them, if possible, within ninety (90)
days of the Claim Date. Any decision rendered by the referee will be final,
binding and conclusive and judgment shall be entered pursuant to CCP Section
644 in any court in the State of California having jurisdiction. Any party
may apply for a reference proceeding at any time after thirty (30) days
following notice to any other party of the nature of the controversy, dispute
or claim, by filing a petition for a hearing and/or trial. All discovery
permitted by this Agreement shall be completed no later than fifteen (15)
days before the first hearing date established by the referee. The referee
may extend such period in the event of a party's refusal to provide requested
discovery for any reason whatsoever, including, without limitation, legal
objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days
written notice, and request for production or inspection of documents shall
be responded to within ten (10) days after service. All disputes relating to
discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding upon the parties. Pending
appointment of the referee as provided herein, the Superior Court is
empowered to issue temporary and/or provisional remedies, as appropriate.
(b) Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence,
and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the
referee, except for trial, shall be conducted without a court reporter,
except that when any party so requests, a court reporter will be used at any
hearing conducted before the referee. The party making such a request shall
have the obligation to arrange for and pay for the court reporter. The costs
of the court reporter at the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the
State of California will be applicable to the reference proceeding. The
referee shall be empowered to enter equitable as well as legal relief, to
provide all temporary and/or provisional remedies and to enter equitable
orders that will be binding upon the parties. The referee shall issue a
single judgment at the close of the reference proceeding which shall dispose
of all of the claims of the parties that are the subject of the reference.
The parties hereto expressly reserve the right to contest or appeal from the
final judgment or any appealable order or appealable judgment entered by the
referee. The parties hereto expressly reserve the right to findings of fact,
conclusions of law, a written statement of decision, and the right to move
for a new trial or a different judgment, which new trial, if granted, is also
to be a reference proceeding under this provision.
(d) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted),
any dispute between the parties that would otherwise be determined by the
reference procedure herein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the
Court, in accordance with the California Arbitration Act, Section 1280
through Section 1294.2 of the CCP as amended from time to time. The
limitations with respect to discovery as set forth hereinabove shall apply to
any such arbitration proceeding.
6. RIDER TO STANDBY LETTER OF CREDIT AND SECURITY AGREEMENT. Borrower
hereby agrees that the Rider to Standby Letter of Credit and Security
Agreement dated September 4, 1998 remain in full force and effect and the
reference therein to Credit Agreement shall mean this Agreement as may be
amended or replaced.
The Commitment Letter dated April 19, 1999, attached hereto and all
amendments and replacements thereto, is incorporated herein by this reference
for additional terms. In the event of a conflict between this Agreement and
the Letter, the terms in the Letter shall take precedence.
SILICON LABORATORIES INC.
By /s/ XXXX X. XXXXXXXX
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Authorized Signature
Name: XXXX X. XXXXXXXX
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Title: CHIEF FINANCIAL OFFICER
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By /s/ XXXXXXX X. XXXXX
------------------------
Authorized Signature
Name: XXXXXXX X. XXXXX
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Title: VP ENGINEERING
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