LOAN AND SECURITY AGREEMENT
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This LOAN AND SECURITY
AGREEMENT (this “Agreement”) dated as of October 5, 2007, between SILICON VALLEY BANK, a
California chartered bank, with its principal place of business at 0000 Xxxxxx
Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 (“Bank”) and GigOptix, LLC, an Idaho
limited liability company, with offices at 0000 Xxxx Xxxx #00, Xxxx Xxxx, XX
00000 (“Borrower”), provides the terms on which Bank shall lend to Borrower and
Borrower shall repay Bank. The parties agree as follows:
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. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meanings provided by the Code, to the
extent such terms are defined therein.
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(a)
Borrower shall direct each Account Debtor (and each depository
institution where proceeds of Accounts are on deposit) to remit payments with
respect to the Accounts to a lockbox account established with Bank or to wire
transfer payments to a cash collateral account that Bank controls (collectively,
the “Lockbox”). It will be considered an immediate Event of Default
if the Lockbox is not set-up and operational within forty-five (45) days from
the date of such direction by Bank.
(b)
Until such Lockbox is established, the proceeds of the
Accounts shall be paid by the Account Debtors to an address consented to by
Bank. Upon receipt by Borrower of such proceeds, the Borrower shall
immediately transfer and deliver the same to Bank, along with a detailed cash
receipts journal. Provided no Event of Default exists or an event
that with notice or lapse of time will be an Event of Default, within three (3)
days of receipt of such amounts by Bank, Bank will turn over to Borrower the
proceeds of the Accounts other than Collections with respect to Financed
Receivables and the amount of Collections in excess of the amounts for which
Bank has made an Advance to Borrower, less any amounts due to Bank, such as the
Finance Charge, the Facility Fee, payments due to Bank, other fees and expenses,
or otherwise; provided, however, Bank may hold such excess amount with respect
to Financed Receivables as a reserve until the end of the applicable
Reconciliation Period if Bank, in its discretion, determines that other Financed
Receivable(s) may no longer qualify as an Eligible Account at any time prior to
the end of the subject Reconciliation Period. This Section does not
impose any affirmative duty on Bank to perform any act other than as
specifically set forth herein. All Accounts and the proceeds thereof
are Collateral and if an Event of Default occurs, Bank may apply the proceeds of
such Accounts to the Obligations.
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(a) a
certificate of the Secretary of Borrower
with respect to articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of this Agreement;
(b) a
Perfection Certificate by Borrower;
(c) the
IP Agreement;
(d) the
Subordination Agreement signed by Stellar Technologies, LLC;
(e) a
confirmation of consent signed by Stellar Technologies, LLC;
(f) the
original Warrant;
(g) the
other Loan Documents to which Borrower is a party;
(f) evidence
satisfactory to Bank that the insurance policies required by Section 6.4 hereof
are in full force and effect, together with appropriate evidence showing lender
loss payable and/or additional insured clauses or endorsements in favor of
Bank;
(f) payment
of the fees and Bank Expenses then due and payable;
(g) Certificate
of Good Standing/Legal Existence (California and Idaho); and
(h) such
other documents, and completion of such other matters, as Bank may reasonably
deem necessary or appropriate.
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(a) receipt
of the Invoice Transmittal;
(b) Bank
shall have (at its option) conducted the confirmations and verifications as
described in Section 2.1.1 (d); and
(c) each
of the representations and warranties in Section 5 shall be true on the date of
the Invoice Transmittal and on the effective date of each Advance and no Event
of Default shall have occurred and be continuing, or result from the
Advance. Each Advance is Borrower’s representation and warranty on
that date that the representations and warranties in Section 5 remain
true.
If the
Agreement is terminated, Bank’s lien and security interest in the Collateral
shall continue until Borrower fully satisfies its Obligations. If
Borrower shall at any time, acquire a commercial tort claim, Borrower shall
promptly notify Bank in a writing signed by Borrower of the brief details
thereof and grant to 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 Bank.
Borrower
represents and warrants as follows:
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The
execution, delivery and performance by Borrower of the Loan Documents to which
it is a party have been duly authorized, and do not (i) conflict with any of
Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law,
(iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any its Subsidiaries or any of their property or assets may be
bound or affected, (iv) require any action by, filing with or Governmental
Approval from any Governmental Authority (except such Governmental Approvals
which have already been obtained and are in full force and effect) or
(v) constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to
which it is a party or by which it is bound in which the default could have a
material adverse effect on Borrower’s business.
The
Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate. None of
the components of the Collateral shall be maintained at locations other than as
provided in the Perfection Certificate or as Borrower has given Bank notice
pursuant to Section 7.2. In the event that Borrower, after the date
hereof, intends to store or otherwise deliver any portion of the Collateral to a
bailee, then Borrower will first receive the written consent of Bank and such
bailee must execute and deliver a bailee agreement in form and substance
satisfactory to Bank in its sole discretion.
Borrower
is the sole owner of its 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 to the best of
Borrower’s knowledge, no claim has been made that any part of the intellectual
property violates the rights of any third party except to the extent such claim
could not reasonably be expected to have a material adverse effect on Borrower’s
business. Except as noted on the Perfection Certificate, Borrower is
not a party to, nor is bound by, any material license or other agreement with
respect to which Borrower is licensee that prohibits or otherwise restricts
Borrower from granting a security interest in Borrower’s interest in such
license or agreement or any other property. Borrower shall provide
written notice to Bank within 30 days of entering or becoming bound by any such
license or agreement which is reasonably likely to have a material impact on
Borrower’s business or financial condition (other than over-the-counter software
that is commercially available to the public). Borrower shall take
such steps as Bank requests to obtain the consent of, or wavier by, any person
whose consent or waiver is necessary for all 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 (such consent or authorization may include a licensor’s agreement
to a contingent assignment of the license to Bank if Bank determines that is
necessary in its good faith judgment), whether now existing or entered into in
the future.
Without
prior consent from Bank, Borrower shall not enter into, or become bound by, any
such license or agreement which is reasonably likely to have a material impact
on Borrower’s business or financial condition. Borrower shall take
such steps as Bank requests to obtain the consent of, or waiver by, any person
whose consent or waiver is necessary for all 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.
(a) Each
Financed Receivable is an Eligible Account;
(b) Borrower
has the right to sell, transfer, assign and encumber such Financed
Receivable;
(c) The
correct amount is on the Invoice Transmittal and is not disputed;
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(d) Payment
is not contingent on any obligation or contract and Borrower has fulfilled all
its obligations as of the Invoice Transmittal date;
(e) Each
Financed Receivable is based on an actual sale and delivery of goods and/or
services rendered, is due to Borrower, is not past due or in default, has not
been previously sold, assigned, transferred, or pledged and is free of any
liens, security interests and encumbrances other than Permitted
Liens;
(f) There
are no defenses, offsets, counterclaims or agreements for which the Account
Debtor may claim any deduction or discount;
(g) Borrower
reasonably believes no Account Debtor is insolvent or subject to any Insolvency
Proceedings;
(h) Borrower
has not filed or had filed against it Insolvency Proceedings and does not
anticipate any filing;
(i) Bank
has the right to endorse and/ or require Borrower to endorse all payments
received on Financed Receivables and all proceeds of Collateral;
and
(j) No
representation, warranty or other statement of Borrower in any certificate or
written statement given to Bank contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statement contained in
the certificates or statement not misleading.
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No
certificate, authorization, permit, consent, approval, order, license, exemption
from, or filing or registration or qualification with, any Governmental
Authority or any Requirement of Law is or will be required to authorize, or is
otherwise required in connection with Borrower’s performance of its obligations
under the Loan Documents and the creation of the Liens described in and granted
by Borrower pursuant to the Loan Documents.
Borrower
shall do all of the following:
(a) 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 Borrower’s consolidated operations during the month,
certified by a Responsible Officer and in a form acceptable to Bank; (ii) as
soon as available, but no later than one hundred eighty (180) days after the last day
of Borrower’s fiscal year, commencing with the fiscal year ending December 31,
2007, consolidated financial statements prepared under GAAP, consistently
applied, audited by an independent certified public accounting firm reasonably
acceptable to Bank; (iii) in the event that Borrower’s stock becomes publicly
held, within five (5) days of filing, copies of all statements, reports and
notices made available to Borrower’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 Borrower or any Subsidiary that could result in
damages or costs to Borrower or any Subsidiary of One Hundred Thousand Dollars
($100,000.00) or more; (v) prompt notice of any material change in the
composition of any copyright, patent, mask work, trademark, or other
intellectual property Collateral, or the registration of any copyright,
including any subsequent ownership right of Borrower in or to any copyright,
patent or trademark not shown in the IP Agreement, or knowledge of an event that
materially adversely affects the value of the intellectual property Collateral;
and (vi)budgets, sales projections, operating plans or other financial
information reasonably requested by Bank.
(b) Within
thirty (30) days after the last day of each month, deliver to Bank with the
monthly financial statements a Compliance Certificate signed by a Responsible
Officer in the form of Exhibit
B.
(c) Allow
Bank to audit Borrower’s Collateral, including, but not limited to, Borrower’s
Accounts at Borrower’s expense, upon reasonable notice to Borrower; provided,
however, prior to the occurrence of an Event of Default, Borrower shall be
obligated to pay for not more than one (1) audit per year. After the occurrence
of an Event of Default, Bank may audit Borrower’s Collateral, including, but not
limited to, Borrower’s Accounts at Borrower’s expense and at Bank’s sole and
exclusive discretion and without notification and authorization from
Borrower.
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(d) Upon
Bank’s request, provide a written report respecting any Financed Receivable, if
payment of any Financed Receivable does not occur by its due date and include
the reasons for the delay.
(e) Provide
Bank with, as soon as available, but no later than thirty (30) days following
each Reconciliation Period, an aged listing of accounts receivable (domestic
accounts) and accounts payable by invoice date, in form acceptable to
Bank.
(f) Provide
Bank with, as soon as available, but no later than thirty (30) days following
each Reconciliation Period, a Deferred Revenue report, in form acceptable to
Bank.
(a) To
permit Bank to monitor Borrower’s financial performance and condition,
Borrower and all of Borrower’s United States Subsidiaries shall
maintain their primary operating deposit accounts and securities accounts with
Bank and Bank’s affiliates. Any Guarantor shall maintain all depository,
operating and securities accounts with Bank.
(b) Borrower
shall maintain all of its bank deposit accounts with Bank. Borrower
shall further identify to Bank, in writing, any securities account or other
account holding cash, securities or similar instruments opened in the United
States by Borrower or its Subsidiaries with any institution other than
Bank. In addition, for each such account, Borrower or its Subsidiary
shall, at Bank’s request and option, pursuant to an agreement in form and
substance acceptable to Bank, cause the depository bank or securities
intermediary to agree that such account is the collateral of Bank pursuant to
the terms hereunder. The provisions of the previous sentence shall
not apply to deposit or securities accounts exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the benefit
of Borrower’s employees.
(a) On
or before the Liquidity Date, Borrower shall have accepted and signed a term
sheet for a new round of equity financing of at least $5,000,000. As
used herein, the term “Liquidity Date” is the first date when the available
credit remaining under the credit facility evidenced by the promissory note
dated July 1, 2007, made by Borrower to the order of Stellar Technologies LLC in
the principal sum of $7,000,000, is less than or equal to
$1,000,000.
(b) On
or before August 31, 2008, Borrower shall have closed, and received the proceeds
of, a new round of equity financing of at least $5,000,000, provided that the
failure to do so shall not be an Event of Default so long as no Advances are
outstanding and there are no Financed Receivables. Borrower may not
draw any Advances after August 31, 2008 until it has closed the new round of
equity financing and received the proceeds thereof.
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(c) Beginning
March 31, 2008 and at all times thereafter, measured on the last day of each
month or as needed at Bank’s discretion, Borrower shall have on deposit with
Bank or Bank’s affiliates unrestricted cash or cash equivalents in an amount not
less than the sum of the net losses incurred by Borrower in the preceding two
months; provided that this financial covenant set forth in this Section 6.6(c)
shall terminate at such time as Borrower closes and receives the proceeds of a
new round of equity financing of at least $5,000,000.
6.7
Further
Assurances. Borrower 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.
Borrower
shall not do any of the following without Bank’s prior written
consent.
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Any one
of the following shall constitute an event of default (an “Event of Default”)
under this Agreement:
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(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 Borrower’s benefit under this Agreement
or under any other agreement between Borrower and Bank;
(c) Settle
or adjust disputes and claims directly with Account Debtors for amounts, on
terms and in any order that Bank considers advisable and notify any Person owing
Borrower money of Bank’s security interest in such funds and verify the amount
of such account. Borrower shall collect all payments in trust for
Bank and, if requested by Bank, immediately deliver the payments to Bank in the
form received from the Account Debtor, with proper endorsements for
deposit;
(d) Make
any payments and do any acts it considers necessary or reasonable to protect its
security interest in the Collateral. Borrower 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. Borrower grants 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 (i) any balances and deposits of Borrower it holds, or (ii)
any amount held by Bank owing to or for the credit or the account of
Borrower;
(f) Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell the Collateral. Bank is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, patents, copyrights, mask works, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any 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, Borrower’s
rights under all licenses and all franchise agreements inure to Bank’s
benefit;
(g) Place
a “hold” on any account maintained with Bank and/or deliver a notice of
exclusive control, any entitlement order, or other directions or instructions
pursuant to any control agreement or similar agreements providing control of any
Collateral; and
(h) Exercise
all rights and remedies and dispose of the Collateral according to the
Code.
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Notices
or demands by either party under or about this Agreement must be in writing and
personally delivered or sent by an overnight delivery service, by certified mail
postage prepaid return receipt requested, or by fax to the addresses listed at
the beginning of this Agreement. A party may change notice address by
written notice to the other party.
California
law governs the Loan Documents without regard to principles of conflicts of
law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Santa Xxxxx County, California; provided,
however, that nothing in this Agreement shall be deemed to operate to preclude
Bank from bringing suit or taking other legal action in any other jurisdiction
to realize on the Collateral or any other security for the Obligations, or to
enforce a judgment or other court order in favor of Bank. Borrower
expressly submits and consents in advance to such jurisdiction in any action or
suit commenced in any such court, and Borrower hereby waives any objection that
it may have based upon lack of personal jurisdiction, improper venue, or forum
non conveniens and hereby consents to the granting of such legal or equitable
relief as is deemed appropriate by such court. Borrower hereby waives
personal service of the summons, complaints, and other process issued in such
action or suit and agrees that service of such summons, complaints, and other
process may be made by registered or certified mail addressed to Borrower at the
address set forth in Section 10 of this Agreement and that service so made shall
be deemed completed upon the earlier to occur of Borrower’s actual receipt
thereof or three (3) days after deposit in the U.S. mails, proper postage
prepaid.
TO THE EXTENT PERMITTED BY APPLICABLE
LAW, BORROWER AND BANK EACH WAIVES ITS 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.
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WITHOUT
INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE
RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is
not enforceable, the parties hereto agree that any and all disputes or
controversies of any nature between them arising at any time shall be decided by
a reference to a private judge, mutually selected by the parties (or, if they
cannot agree, by the Presiding Judge of the Santa Xxxxx County, California
Superior Court) appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Santa Xxxxx County, California; and the parties hereby submit to the
jurisdiction of such court. The reference proceedings shall be
conducted pursuant to and in accordance with the provisions of California Code
of Civil Procedure §§ 638 through 645.1, inclusive. The private judge
shall have the power, among others, to grant provisional relief, including
without limitation, entering temporary restraining orders, issuing preliminary
and permanent injunctions and appointing receivers. All such
proceedings shall be closed to the public and confidential and all records
relating thereto shall be permanently sealed. If during the course of
any dispute, a party desires to seek provisional relief, but a judge has not
been appointed at that point pursuant to the judicial reference procedures, then
such party may apply to the Santa Xxxxx County, California Superior Court for
such relief. The proceeding before the private judge shall be
conducted in the same manner as it would be before a court under the rules of
evidence applicable to judicial proceedings. The parties shall be
entitled to discovery which shall be conducted in the same manner as it would be
before a court under the rules of discovery applicable to judicial
proceedings. The private judge shall oversee discovery and may
enforce all discovery rules and order applicable to judicial proceedings in the
same manner as a trial court judge. The parties agree that the
selected or appointed private judge shall have the power to decide all issues in
the action or proceeding, whether of fact or of law, and shall report a
statement of decision thereon pursuant to the California Code of Civil Procedure
§ 644(a). Nothing in this paragraph shall limit the right of any
party at any time to exercise self-help remedies, foreclose against collateral,
or obtain provisional remedies. The private judge shall also
determine all issues relating to the applicability, interpretation, and
enforceability of this paragraph.
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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: (a) to Bank’s
Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any
interest in the Advances (provided, however, Bank shall use commercially
reasonable efforts to obtain such prospective transferee’s or purchaser’s
agreement to the terms of this provision); (c) as required by law, regulation,
subpoena, or other order, (d) to Bank’s regulators or as otherwise in connection
with Bank’s examination or audit; and (e) as Bank considers appropriate in
exercising remedies under this Agreement. Confidential information
does not include information that either: (i) 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 (ii) is disclosed to Bank by a third party, if Bank
does not know that the third party is prohibited from disclosing the
information.
“Account” is any “account” as
defined in the Code with such additions to such term as may hereafter be made,
and includes, without limitation, all accounts receivable and other sums owing
to Borrower.
“Account Debtor” is as defined
in the Code and shall include, without limitation, any person liable on any
Financed Receivable, such as, a guarantor of the Financed Receivable and any
issuer of a letter of credit or banker’s acceptance.
“Adjusted Quick Ratio” is the
ratio of (i) cash and cash equivalents on deposit or held by Bank and Bank’s
Affiliates plus net billed Eligible Accounts, to (ii) to Current
Liabilities.
“Adjustments” are all
discounts, allowances, returns, disputes, counterclaims, offsets, defenses,
rights of recoupment, rights of return, warranty claims, or short payments,
asserted by or on behalf of any Account Debtor for any Financed
Receivable.
“Advance” is defined in
Section 2.1.1.
“Advance Rate” is eighty
percent (80%), net of any Deferred Revenue and other offsets related to each
specific Account Debtor, or such other percentage as Bank establishes under
Section 2.1.1.
“Affiliate” 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.
“Applicable Rate” is a per
annum rate equal to the Prime Rate plus one and 25/100 percent
(1.25%).
“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).
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“Borrower’s Books” are all
Borrower’s books and records including ledgers, records regarding Borrower’s
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 Bank is closed.
“Closing Date” is the date of
this Agreement.
“Code” is the Uniform
Commercial Code as adopted in California, as amended and as may be amended and
in effect from time to time.
“Collateral” is any and all
properties, rights and assets of Borrower granted by Borrower to Bank or arising
under the Code, now, or in the future, in which Borrower obtains an interest, or
the power to transfer rights, as described on Exhibit A.
“Collateral Handling Fee” is
defined in Section 2.2.4.
“Collections” are all funds
received by Bank from or on behalf of an Account Debtor for Financed
Receivables.
“Compliance Certificate” is a
certificate by Borrower in the form attached as Exhibit
B.
“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.
“Current Liabilities” is all
obligations and liabilities of Borrower to Bank, plus, without duplication, the
aggregate amount of Borrower’s Total Liabilities which mature within one (1)
year.
“Deferred Revenue” is all
amounts received or invoiced, as appropriate, in advance of performance under
contracts and not yet recognized as revenue.
“Early Termination Fee” is
defined in Section 2.1.1.
“Eligible Accounts” are billed
Accounts in the ordinary course of Borrower’s business that meet all Borrower’s
representations and warranties in Section 5.3, have been, at the option of Bank,
confirmed in accordance with Section 2.1.1(d), and are due and owing from
Account Debtors deemed creditworthy by Bank in its sole
discretion. Without limiting the fact that the determination of
which Accounts are eligible hereunder is a matter of Bank discretion in each
instance, Eligible Accounts shall not include the following Accounts (which
listing may be amended or changed in Bank’s discretion with notice to
Borrower):
(a) Accounts
that the Account Debtor has not paid within ninety (90) days of invoice
date;
(b) Accounts
for which the Account Debtor does not have its principal place of business in
the United States, unless agreed to by Bank in writing, in its sole discretion,
on a case-by-case basis;
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(c) Accounts
for which the Account Debtor is a federal, state or local government entity or
any department, agency, or instrumentality thereof except for Accounts of the
United States if the payee has assigned its payment rights to Bank and the
assignment has been acknowledged under the Assignment of Claims Act of 1940 (31
U.S.C. 3727);
(d) Accounts
for which Borrower owes the Account Debtor, but only up to the amount owed
(sometimes called “contra” accounts, accounts payable, customer deposits or
credit accounts);
(e) Accounts
subject to offset, including offset based on Deferred Revenue;
(f)
Contract receivables or invoices based on milestone xxxxxxxx
under a contract or agreement;
(g) Accounts
for demonstration or promotional equipment, or in which goods are consigned,
sales guaranteed, sale or return, sale on approval, xxxx and hold, or other
terms if the Account Debtor’s payment may be conditional;
(h) Accounts
for which the Account Debtor is Borrower’s Affiliate, officer, employee, or
agent;
(i)
Accounts in which the Account Debtor disputes liability or makes any claim
and Bank believes there may be a basis for dispute (but only up to the disputed
or claimed amount), or if the Account Debtor is subject to an Insolvency
Proceeding, or becomes insolvent, or goes out of business; and
(j) Accounts
for which Bank reasonably determines collection to be doubtful or any Accounts
which are unacceptable to Bank for any reason.
“ERISA” is the Employment
Retirement Income Security Act of 1974, and its regulations.
“Events of Default” are set
forth in Article 8.
“Facility Amount” is Two
Million Five Hundred Thousand Dollars ($2,500,000).
“Facility Fee” is defined in
Section 2.2.2.
“Finance Charges” is defined
in Section 2.2.3.
“Financed Receivables” are all
those Eligible Accounts, including their proceeds which Bank finances and makes
an Advance, as set forth in Section 2.1.1. A Financed Receivable
stops being a Financed Receivable (but remains Collateral) when the Advance made
for the Financed Receivable has been fully paid.
“Financed Receivable Balance”
is the total outstanding gross face amount, at any time, of any Financed
Receivable.
“GAAP” is generally accepted
accounting principles.
“Good Faith Deposit” is defined
in Section 2.2.8.
“Governmental Authority” is any
nation or government, any state or other political subdivision thereof, any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative functions of or pertaining to government, any securities exchange
and any self-regulatory organization.
“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.
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“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.
“Investment” is any beneficial
ownership of (including stock, partnership interest or other securities) any
Person, or any loan, advance or capital contribution to any Person.
“Invoice Transmittal” shows
Eligible Accounts which Bank may finance and, for each such Account, includes
the Account Debtor’s, name, address, invoice amount, invoice date and invoice
number.
“IP Agreement” is that certain
Intellectual Property Security Agreement executed and delivered by Borrower to
Bank.
“Lockbox” is defined in
Section 2.2.7.
“Lien” is a mortgage, lien,
deed of trust, charge, pledge, security interest or other
encumbrance.
“Liquidity Date” is defined in
Section 6.6(a).
“Loan Documents” are,
collectively, this Agreement, any note, or notes or guaranties executed by
Borrower, and any other present or future agreement between Borrower and Bank
(or for the benefit of Bank) in connection with this Agreement, all as amended,
extended or restated.
“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; (ii) a material
adverse change in the business, operations, or condition (financial or
otherwise) of Borrower; or (iii) a material impairment of
the prospect of repayment of any portion of the Obligations.
“Maturity Date” is 364 days
from the date of this Agreement.
“Obligations” are all advances,
liabilities, obligations, covenants and duties owing, arising, due or payable by
Borrower to Bank now or later under this Agreement or any other document,
instrument or agreement, account (including those acquired by assignment)
primary or secondary, such as all Advances, Finance Charges, Facility Fee,
Collateral Handling Fee, interest, fees, expenses, professional fees and
attorneys’ fees, or other amounts now or hereafter owing by Borrower to
Bank.
“Perfection Certificate” is a
certain representations and warranties letter agreement previously executed and
delivered by Borrower to Bank in connection with this Agreement.
“Permitted Indebtedness”
is:
(a) Borrower’s
indebtedness to Bank under this Agreement or the Loan Documents;
(b) Subordinated
Debt;
(c) Indebtedness
to trade creditors incurred in the ordinary course of business; and
(d) Indebtedness
secured by Permitted Liens.
“Permitted Investments” are:
(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) any other
investments administered through Bank.
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“Permitted Liens”
are:
(a) Liens
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 Borrower maintains
adequate reserves on its Books, if they have no priority over any of Bank’s
security interests;
(c) Purchase
money Liens securing no more than $50,000 in the aggregate amount
outstanding (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 Borrower’s business, if the leases,
subleases, licenses and sublicenses permit granting Bank a security
interest;
(e) Liens
incurred in the extension, renewal or refinancing of the indebtedness secured by
Liens described in (a) through (d), 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.
“Reconciliation Day” is the
last calendar day of each month.
“Reconciliation Period” is each
calendar month.
“Registered Organization” is
any “registered organization” as defined in the Code with such additions to such
term as may hereafter be made.
“Requirement of Law” is as to
any Person, the organizational or governing documents of such Person, and any
law (statutory or common), treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
“Responsible Officer” is each of the Chief
Executive Officer, President, Chief Financial Officer and Controller of
Borrower.
“Subordinated Debt” is debt
incurred by Borrower subordinated to Borrower’s debt to Bank (pursuant to a
subordination agreement entered into between Bank, Borrower and the subordinated
creditor), on terms acceptable to Bank.
“Subsidiary” is any Person,
corporation, partnership, limited liability company, 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.
“Total Liabilities” is on any day,
obligations that should, under GAAP, be classified as liabilities on Borrower’s
consolidated balance sheet, including all Indebtedness, and current portion of
Subordinated Debt permitted by Bank to be paid by Borrower, but excluding all
other Subordinated Debt.
“Warrant” is that certain
Warrant to Purchase Membership Units dated October __, 2007 executed by Borrower
in favor of Bank, substantially in the form attached hereto as Exhibit
C.
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BORROWER:
|
: | ||||
By |
/s/
Xxx Xxxx
|
||||
Name: Xxx Xxxx | |||||
Title: Chief Executive Officer | |||||
SILICON VALLEY BANK | |||||
By | /s/ Xxxx Tu | ||||
Name: Xxxx Tu | |||||
Title: DTL |
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The
Collateral consists of all of Borrower’s right, title and interest in and to the
following:
All
goods, equipment, inventory, contract rights or rights to payment of money,
leases, license agreements, franchise agreements, general intangibles (including
payment intangibles) accounts (including health-care receivables), documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), commercial tort claims,
securities, and all other investment property, supporting obligations, 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; trade styles, trade names, 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;
All of
its copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work, whether published or
unpublished, any patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions, and
continuations-in-part of the same, trademarks, service marks and, to the extent
permitted under applicable law, any applications therefor, whether registered or
not, and the goodwill of the business of Borrower connected with and symbolized
thereby, know-how, operating manuals, trade secret rights, rights to unpatented
inventions, and any claims for damage by way of any past, present, or future
infringement of any of the foregoing; and
All of
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.
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