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EXHIBIT 10.15
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is entered into as of April 5, 1999,
by and among SILICON VALLEY BANK, a California-chartered bank ("Bank") with its
principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000
and doing business in Virginia as "Silicon Valley East, Inc.," with a loan
production office located at 00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx,
Xxxxxxxx 00000 and VISUAL NETWORKS, INC., a Delaware corporation ("Company"),
VISUAL NETWORKS OPERATIONS, INC., a Delaware corporation ("Visual Operations"),
VISUAL NETWORKS INVESTMENTS, INC., a California corporation ("Visual
Investments"), VISUAL NETWORKS TECHNOLOGIES, INC., a California corporation
("Visual Technologies"), VISUAL NETWORKS PROTECTION, INC., a Vermont corporation
("Visual Protection") and VISUAL NETWORKS OF TEXAS, LP, a Texas limited
partnership ("Visual Texas", together with Visual Operations, Visual
Investments, Visual Technologies, Visual Protection and the Company being called
collectively, the "Borrowers" and each a "Borrower").
RECITALS
Borrowers wish to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrowers. This Agreement sets forth the terms on
which Bank will advance credit to Borrowers, and Borrowers will repay the
amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following
terms shall have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to any
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by any Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by any Borrower and each Borrower's Books
relating to any of the foregoing.
"Advance" or "Advances" means a loan advance under the
Committed Revolving Line.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under
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common control with such Person, and each of such Person's senior executive
officers, directors and partners.
"Bank Expenses" means all reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents, whether or not suit is
brought.
"Borrower's Books" means all of a Borrower's books and records
including, without limitation: ledgers; records concerning such Borrower's
assets or liabilities, the Collateral, business operations or financial
condition; and all computer programs, or tape files, and the equipment,
containing such information.
"Borrowing Base" shall mean an amount equal to eighty five
percent (85%) of Eligible Accounts.
"Business Day" means any day that is not a Saturday, Sunday,
or other day on which banks in the State of California or the State of Maryland
are authorized or required to close.
"Closing Date" means the date of this Agreement.
"Code" means the Uniform Commercial Code, as the same may,
from time to time be in effect in the State of Maryland.
"Collateral" means any and all Equipment now or hereafter
purchased with the proceeds of any Equipment Advance now or hereafter made under
the Committed Equipment Line, wherever located together with 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.
"Committed Revolving Line" means a credit extension of up to
Seven Million Dollars ($7,000,000).
"Committed Equipment Line means a credit extension of up to
One Million Dollars ($1,000,000).
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that
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Person; and (iii) all obligations arising under any interest rate, currency or
commodity swap agreement, interest rate cap agreement, interest rate collar
agreement, or other agreement or arrangement designated to protect a Person
against fluctuation in interest rates, currency exchange rates or commodity
prices; provided, however, that the term "Contingent Obligation" shall not
include endorsements for collection or deposit in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith; provided, however, that such amount
shall not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.
"Credit Extension" means each Advance, Equipment Advance,
Letter of Credit or any other extension of credit by Bank for the benefit of any
Borrower hereunder.
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of the Company and its Subsidiaries, as at
such date, plus, to the extent not already included therein, all outstanding
Credit Extensions made under this Agreement, including all Indebtedness that is
payable upon demand or within one (1) year from the date of determination
thereof unless such Indebtedness is renewable or extendable at the option of the
Company or any Subsidiary to a date more than one (1) year from the date of
determination, but excluding Subordinated Debt.
"Daily Balance" means the amount outstanding on the Committed
Revolving Line owed at the end of a given day.
"Default" means an event which, with the giving of notice or
lapse of time, or both, could or would constitute an Event of Default under this
Agreement.
"Eligible Accounts" means those Accounts that arise in the
ordinary course of each Borrower's business that comply with all of the
Borrowers' representations and warranties to Bank set forth in Section 5.4;
provided, that standards of eligibility may be fixed and revised from time to
time by Bank in Bank's reasonable judgment and upon prior notification thereof
to, and consultation with, the Company in accordance with the provisions hereof.
Unless otherwise agreed to by Bank, Eligible Accounts shall not include the
following:
(a) Accounts that the account debtor has failed
to pay within sixty (60) days of invoice due date;
(b) Accounts with respect to an account debtor,
fifty percent (50%) of whose Accounts the account debtor has failed to pay
within sixty (60) days of invoice due date;
(c) Accounts with respect to which the account
debtor is an officer, employee, or agent of any Borrower;
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(d) Accounts with respect to which goods are
placed on consignment, guaranteed sale, sale or return, sale on approval, xxxx
and hold, or other terms by reason of which the payment by the account debtor
may be conditional;
(e) Accounts with respect to which the account
debtor is an Affiliate (other than by virtue of being directly or indirectly
under common ownership or control with any Borrower) of any Borrower;
(f) Accounts with respect to which the account
debtor does not have its principal place of business in the United States and
Accounts arising from products shipped to or services provided to branches or
offices located in the United States of any account debtor that does not have
its principal place of business in the United States;
(g) Accounts with respect to which the account
debtor is a federal, state, or local governmental entity or any department,
agency, or instrumentality thereof;
(h) Accounts with respect to which any Borrower
is liable to the account debtor for goods sold or services rendered by the
account debtor to any Borrower, but only to the extent of any amounts owing to
the account debtor against amounts owed to the any Borrower;
(i) Accounts with respect to an account debtor,
including Subsidiaries and Affiliates, whose total obligations to the Borrowers
exceed twenty-five percent (25%) of all Accounts, except with respect to
Sprint/United Management Company, AT&T Corp. and MCI Worldcom, Inc., as to which
the percentage shall be forty percent (40%), to the extent such obligations
exceed the aforementioned percentage, except as approved in writing by Bank;
(j) Accounts with respect to which the account
debtor disputes liability or makes any claim with respect thereto as to which
Bank believes, in its sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(k) Accounts the collection of which Bank
reasonably determines to be doubtful.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which any Borrower has any interest.
"Equipment Advance" has the meaning set forth in Section 2.3.
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"Equipment Availability End Date" means the Equipment
Availability End Date One or the Equipment Availability End Date Two, as the
case may be.
"Equipment Term Note" means the two (2) equipment term notes
now or hereafter delivered by the Borrower to the Bank in connection with the
Committed Equipment Line in substantially the form of Exhibit __ and "Equipment
Term Notes means collectively, the equipment term notes which may now or
hereafter be delivered by the Borrower to Bank in connection with the Committed
Equipment Line, together with all renewals, amendments, modifications and
substitutions therefore.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated thereunder.
"GAAP" means generally accepted accounting principles as in
effect in the United States from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money
or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments (excluding stock which in accordance with GAAP should be
classified as "preferred stock" of the Company), (c) all capital lease
obligations and (d) all Contingent Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which
any Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of any Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above.
"Investment" means any beneficial ownership of (including
stock, partnership interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated thereunder.
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"Letter of Credit" means a letter of credit or similar
undertaking issued by Bank pursuant to Section 2.2.
"Letter of Credit Reserve" has the meaning set forth in
Section 2.2(e).
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, the
Notes, the Negative Pledge, any note or notes executed by any Borrower, and any
other present or future agreement and/or security agreement entered into between
any Borrower and/or for the benefit of Bank in connection with this Agreement,
all as amended, extended or restated from time to time.
"Material Adverse Effect" means a material adverse effect (i)
on the value of the Borrowers' Equipment, Accounts and Inventory (taken as a
whole) or the perfection or priority of Bank's security interest on the
Collateral (taken as a whole), including, but not limited to, the creation of
any liens, other than Permitted Liens on any Borrowers' Accounts, Inventory or
Equipment, (ii) on the ability of any Borrower to repay the Obligations or
otherwise perform its obligations under the Loan Documents, (iii) resulting from
any circumstance or event of whatever nature (including any adverse
determination in any litigation) which does, or could reasonably be expected to
cause an Event of Default.
"Maturity Date" means the latest date on which Equipment
Advances will be due and payable in full on the Equipment Term Notes.
"Negative Pledge" means that certain Negative Pledge Agreement
of even date herewith from the Borrowers in favor of the Bank covering the
Borrowers' Accounts and Inventory, as such agreement may be amended, modified or
restated from time to time.
"Negotiable Collateral" means all of Borrowers' present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper and Borrowers'
Books and Records relating to any of the foregoing.
"Note" means the Revolving Promissory Note or an Equipment
Term Note, and "Notes" means the Revolving Promissory Note and the Equipment
Term Notes.
"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by any Borrower pursuant to this
Agreement or any other agreement, whether absolute or contingent, due or to
become due, now existing or hereafter arising, including any interest that
accrues after the commencement of an Insolvency Proceeding and including any
debt, liability, or obligation owing from any Borrower to others that Bank may
have obtained by assignment or otherwise.
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"Payment Date" means the fifth calendar day of each month
commencing on the first such date after the Closing Date and ending on the
Maturity Date.
"Permitted Indebtedness" means:
(a) Indebtedness of any Borrower in favor of
Bank arising under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date
and disclosed in the Schedule 7.4;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in
the ordinary course of business;
(e) Indebtedness secured by Permitted Liens;
(f) Warranty and product support obligations and
related insurance liabilities payable to Affiliates, which arise in the ordinary
course and conduct of any Borrower's business;
(g) Indebtedness in respect of taxes permitted
under Section 6.5; and
(h) Other Indebtedness not exceeding Three
Hundred Thousand Dollars ($300,000) in the aggregate outstanding at any time.
"Permitted Investment" means:
(a) Investments existing on the Closing Date
disclosed in Schedule 7.7;
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or Xxxxx'x Investors Service, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank;
(c) Investments pursuant to or arising under
currency agreements or interest rate agreements entered into in the ordinary
course of business;
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(d) Loans or advances to officers and employees
approved by the Company's Board of Directors in an aggregate amount not in
excess of Fifty Thousand Dollars ($50,000) outstanding at any time;
(e) Investments in eligible securities set forth
in Schedule B attached hereto;
(f) Investments pursuant to any investment
guidelines now or hereafter approved by the Company's board of directors; and
(g) Intercompany loans or advances to any
Borrower that is now or hereafter a party to this Agreement.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and
disclosed in Schedule 7.5 or arising under this Agreement or the other Loan
Documents;
(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and as to which adequate reserves are
maintained on any Borrower's Books in accordance with GAAP, provided the same
have no priority over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired
or held by any Borrower or any of its Subsidiaries to secure the purchase price
of such Equipment or indebtedness incurred solely for the purpose of financing
the acquisition of such Equipment, or (ii) existing on such equipment at the
time of its acquisition, provided that the Lien is confined solely to the
property so acquired and improvements thereon, and the proceeds of such
equipment;
(d) Liens incurred in connection with the
extension, renewal or refinancing of the indebtedness secured by Liens of the
type described in clauses (a) through (c) above, provided that any extension,
renewal or replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase; and
(e) Liens on Equipment leased by any Borrower or
any Subsidiary pursuant to an operating lease in the ordinary course of business
(including proceeds thereof and accessions thereto) incurred solely for the
purpose of financing the lease of such Equipment (including Liens pursuant to
leases permitted pursuant to Section 7.1 and Liens arising from UCC financing
statements regarding leases permitted by this Agreement).
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"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Prepayment Fee" means a fee on any portion of the Obligations
accruing interest under the Fixed Rate Option (the "Fixed Obligations") that is
repaid before the payment due date. The Prepayment Fee is calculated as follows:
First, Bank determines a "Current Market Rate" based on what the Bank would
receive if it loaned the amount on the prepayment date in a wholesale funding
market matching maturity, principal amount and principal and interest payment
dates (such aggregate payments received being deemed the "Current Market Rate
Amount"). Bank, in its discretion, may select a Treasury Security with a
maturity comparable to the maturity of the Fixed Obligations being prepaid as
the Current Market Rate. Second, Bank will take the prepayment amount and
calculate the present value of each principal and interest payment which,
without prepayment, the Bank would have received during term of the Fixed
Obligations using the applicable interest rate set forth in this Agreement. The
sum of the present value calculations is the "Xxxx to Market Amount". Third, the
Bank will subtract the Xxxx to Market Amount from the Current Market Rate
Amount. Any amount greater than zero is the Prepayment Fee.
"Prime Rate" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Quick Assets" means, as of any applicable date, the
consolidated cash, cash equivalents, accounts receivable and investments with
maturities of fewer than one hundred eighty (180) days of Company determined in
accordance with GAAP.
"Responsible Officer" means each of the Chief Executive
Officer, the President, the Treasurer, the Chief Financial Officer, the Vice
President of Finance, the Director of Treasury Operations and the Controller of
the Company.
"Revolving Maturity Date" means April 5, 2000.
"Revolving Promissory Note" means that certain Revolving
Promissory Note of even date herewith in substantially the form of Exhibit ____
hereto in the maximum principal amount of Seven Million Dollars ($7,000,000)
from the Borrowers in favor of Bank, together with all renewals, amendments,
modifications and substitutions therefore.
"Solvent" with respect to any Person, means that (i) the fair
value of all of such Person's properties and assets exceed the total amount of
its Indebtedness; (ii) it is able to pay its debts as they mature; (iii) it does
not have unreasonably small capital for the business in which it is engaged or
for any business or transaction in which it is about to engage; and (iv) it is
not "insolvent" as such term is defined in Section 101(31) of Title 11 of the
United States Code, 11. U.S.C. Section 101, et seq.
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"Subordinated Debt" means any debt incurred by any Borrower
that is subordinated to the debt owing by Borrowers to Bank on terms acceptable
to Bank (and identified as being such by Borrowers and Bank).
"Subsidiary" means any corporation or partnership in which (i)
any general partnership interest or (ii) more than fifty percent (50%) of the
stock of which by the terms thereof ordinary voting power to elect the Board of
Directors, managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by any Borrower, either directly or
through an Affiliate.
"Tangible Net Worth" means at any date as of which the amount
thereof shall be determined, the consolidated total assets of the Company,
minus, without duplication, (i) the sum of any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) all reserves not already
deducted from assets, and (ii) Total Liabilities.
"Total Liabilities" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of the
Company, including in any event all Indebtedness, but specifically excluding
Subordinated Debt.
"Treasury Rate" means fixed a rate equal to the rate of United
States Treasury Securities adjusted to a constant maturity of thirty six (36)
months as quoted by Bank and reported in The Wall Street Journal for that same
date; provided, however, that if the Treasury Rate shall cease to be so
published, Bank may select in its sole and absolute discretion a successor
source for the Treasury Rate.
1.2 Accounting and Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP and all
calculations and determinations made hereunder shall be made in accordance with
GAAP. When used herein, the term "financial statements" shall include the notes
and schedules thereto. The terms "including"/ "includes" shall always be read as
meaning "including (or includes) without limitation", when used herein or in any
other Loan Document.
2. LOANS AND TERMS OF PAYMENT
2.1 Credit Extensions under the Committed Revolving Line.
(a) Subject to and upon the terms and conditions
of this Agreement, Bank agrees to make Advances to Borrowers in an aggregate
outstanding amount not to exceed (i) the Committed Revolving Line or the
Borrowing Base, whichever is less, minus (ii) the face amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit)
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as determined by Bank with reference to the most recent Borrowing Base
Certificate delivered by the Company. Subject to the terms and conditions of
this Agreement, amounts borrowed pursuant to this Section 2.1 may be repaid and
reborrowed at any time during the term of this Agreement.
(b) Whenever any Borrower desires an Advance,
the Company will notify Bank by facsimile transmission or telephone no later
than 3:00 p.m. Washington, D.C. time, on the Business Day that the Advance is to
be made. Each such notification shall be promptly confirmed by a Payment/Advance
Form in substantially the form of Exhibit B hereto (the "Payment Advance Form")
sent to Bank by confirmed facsimile transmission. Bank is authorized to make
Advances under this Agreement, based upon instructions received from a
Responsible Officer or a designee of a Responsible Officer, or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank shall be entitled to
rely on any telephonic notice given by a person who Bank reasonably believes to
be a Responsible Officer or a designee thereof, and Borrowers shall indemnify
and hold Bank harmless for any damages or loss suffered by Bank as a result of
such reliance. Bank will credit the amount of Advances made under this Section
2.1 to Company's deposit account.
(c) Unless terminated pursuant to sub-section
2.1(d) of this Agreement, the Committed Revolving Line shall terminate on the
Revolving Maturity Date, at which time all Advances under this Section 2.1 and
other Credit Extensions due under the Committed Revolving Line (except as
otherwise expressly specified herein) shall be immediately due and payable.
(d) The Company may at such times as no Credit
Extensions are outstanding under the Committed Revolving Line, terminate the
Committed Revolving Line upon not less than ten (10) days prior written notice
to Bank.
2.2 Letters of Credit.
(a) Subject to the terms and conditions of this
Agreement, Bank agrees to issue or cause to be issued Letters of Credit for the
account of a Borrower in an aggregate outstanding face amount not to exceed (i)
the lesser of the Committed Revolving Line or the Borrowing Base, whichever is
less, minus (ii) the then outstanding principal balance of the Advances;
provided that the face amount of outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit and any Letter of Credit Reserve) shall not
in any case exceed One Million Five Hundred Thousand Dollars ($1,500,000). Each
Letter of Credit shall have an expiry date no later than ninety (90) days after
the Revolving Maturity Date, provided that Borrowers' Letter of Credit
reimbursement obligation shall be secured by cash on terms acceptable to Bank at
any time after the Revolving Maturity Date if the term of this Agreement is not
extended by Bank. All Letters of Credit shall be, in form and substance,
acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions of Bank's form of application and letter of credit agreement which
shall be executed and delivered to Bank not less
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than two (2) Business Days prior to the date on which a Letter of Credit is
requested to be opened. In the event of any conflict between the provisions of
this Agreement and the provisions of any form of application and letter of
credit agreement, the provisions of this Agreement shall prevail and control
unless otherwise expressly provided in the such application and letter of credit
agreement. The application and letter of credit agreement shall specify, among
other things: (i) the name and address of the beneficiary of the Letter of
Credit, (ii) the amount of the Letter of Credit, (iii) whether the Letter of
Credit is to be revocable or irrevocable, (iv) the Business Day on which the
Letter of Credit is to be opened and the date on which the Letter of Credit is
to expire, (v) the terms of payment of any draft or drafts which may be drawn
under the Letter of Credit and (vi) any other terms or provisions Borrowers
desire to be contained in the Letter of Credit.
(b) The joint and several obligations of
Borrowers to immediately reimburse Bank for drawings made under Letters of
Credit shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement and such Letters of
Credit, under all circumstances whatsoever, it being understood that to the
extent Advances can be made under the Committed Revolving Line, the Bank will
make such Advances to pay any such drawings. Borrowers shall indemnify, defend,
protect, and hold Bank harmless from any loss, cost, expense or liability,
including, without limitation, reasonable attorneys' fees, arising out of or in
connection with any Letters of Credit.
(c) Prior to or simultaneously with the opening
of each Letter of Credit, Borrowers shall pay to Bank a letter of credit fee in
such amount as Bank customarily charges in connection with the opening,
negotiation, processing and administration of a letter of credit on the date
such Letter of Credit is opened.
(d) A Borrower may request that Bank issue a
Letter of Credit payable in a currency other than United States Dollars. If a
demand for payment is made under any such Letter of Credit, Bank shall treat
such demand as an Advance to Borrowers of the equivalent of the amount thereof
(plus cable charges) in United States currency at the then prevailing rate of
exchange in San Francisco, California, for sales of that other currency for
cable transfer to the country of which it is the currency.
(e) Upon the issuance of any letter of credit
payable in a currency other than United States Dollars, Bank shall create a
reserve under the Committed Revolving Line for letters of credit against
fluctuations in currency exchange rates, in an amount equal to twenty percent
(20%) of the face amount of such letter of credit (the "Letter of Credit
Reserve"). The amount of such reserve may be amended by Bank from time to time
to account for fluctuations in the exchange rate. The availability of funds
under the Committed Revolving Line shall be reduced by the amount of such
reserve for so long as such letter of credit remains outstanding.
2.3 Equipment Advances.
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(a) Subject to and upon the terms and conditions
of this Agreement, at any time from the date hereof through October 31, 1999
(the "Equipment Availability End Date One"), Borrowers may from time to time
request advances (each together with the advances described in subsection (b)
below, an "Equipment Advance" and collectively, the "Equipment Advances") to
Borrowers in an aggregate outstanding amount not to exceed the Committed
Equipment Line. Amounts borrowed pursuant to this Section 2.3(a) may not be
readvanced.
All Equipment Advances made prior to the Equipment
Availability End Date One shall be evidenced by an Equipment Term Note
("Equipment Term Note No. 1") to be executed and delivered by the Borrowers to
Bank on the Closing Date. All Equipment Advances made prior to the Equipment
Availability End Date One shall be repaid in accordance with the terms of
Equipment Term Note No. 1.
(b) At any time from November 1, 1999 through
April 5, 2000 (the "Equipment Availability End Date Two"), Borrowers may from
time to time request advances from Bank in an aggregate amount not to exceed the
Committed Equipment Line. Amounts borrowed pursuant to this Section 2.3(b) may
not be readvanced.
All Equipment Advances made after the Equipment
Availability End Date One, but prior to the Equipment Availability End Date Two
shall be evidenced by an Equipment Term Note ("Equipment Term Note No. 2") to be
executed and delivered by Borrowers to Bank on the Closing Date. All Equipment
Advances made after the Equipment Availability End Date One, but prior to the
Equipment Availability End Date Two shall be repaid in accordance with the terms
of Equipment Term Note No. 2.
(c) To evidence the Equipment Advance or
Equipment Advances, Borrowers shall deliver to Bank, at the time of each
Equipment Advance request, an invoice for the equipment to be purchased,
together with any items requested pursuant to Section 4.2 hereof. Equipment
which may be purchased under the Committed Equipment Line may include new and/or
used equipment, computer equipment, office equipment, lab, test equipment and
furnishings. The Equipment Advances under Equipment Term Note No. 1 shall be
used only to purchase or refinance Equipment purchased on or after January 1,
1999 and Equipment Advances under Equipment Term Note No. 2 shall be used only
to purchase or refinance Equipment purchased after September 30, 1999. Equipment
Advances shall not exceed one hundred percent (100%) of the invoice amount of
such equipment (as such invoices may be verified from time to time by Bank),
excluding taxes, shipping, warranty charges, freight discounts and installation
expense. Transferable software licenses, leasehold improvements or other soft
costs, including sales tax, freight, and install expenses, may, however,
constitute up to twenty five percent (25%) of the Committed Equipment Line. At
no time shall Bank make any Equipment Advances if after giving effect to such
request the aggregate amount then outstanding would exceed the Committed
Equipment Line.
(d) Except as otherwise set forth herein,
interest under each Equipment Term Note shall accrue from the date of each
Equipment Advance until repayment in full at the
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Prime Rate. In addition, the Company shall have the one time option on each
Equipment Term Note, to fix the rate of interest rate applicable on each
Equipment Term Note, to a fixed rate equal to the then applicable Treasury Rate,
plus three hundred basis points (the "Fixed Rate Option"). In the event the
Company desires to convert the interest rate under either Equipment Term Note to
the Fixed Rate Option, the Company shall give Bank written notice of its
intention to do so (an "Interest Rate Notice"), not less than five (5) Business
Days prior to the then applicable Equipment Availability End Date. Once given,
an Interest Rate Notice is not revocable.
(e) Interest under each Equipment Note shall be
payable monthly for each month through the month in which the applicable
Equipment Availability End Date falls. Any Equipment Advances that are
outstanding on such Equipment Availability End Date will be payable in thirty
six (36) equal monthly installments of principal, plus all accrued interest,
beginning on the Payment Date of each month following the Equipment Availability
End Date and ending on the Maturity Date. Equipment Advances, once repaid, may
not be reborrowed. Any amounts accruing interest at the Fixed Rate Option which
are prepaid shall be accompanied by a Prepayment Fee, payable on the date of
prepayment (the "Prepayment Date").
(f) When any Borrower desires to obtain an
Equipment Advance, Company shall notify Bank (which notice shall be irrevocable)
by facsimile transmission to be received no later than 3:00 p.m. Washington,
D.C. time one (1) Business Day before the day on which the Equipment Advance is
to be made. Such notice shall be substantially in the form of Exhibit B. The
notice shall be signed by a Responsible Officer or its designee and include a
copy of the invoice for the Equipment to be financed.
2.4 Overadvances. If, at any time or for any reason, the
outstanding amounts of Credit Extensions under the Committed Revolving Line
exceeds the lesser of (i) the Committed Revolving Line or (ii) the Borrowing
Base, Borrowers shall immediately pay to Bank, in cash, the amount of such
excess.
2.5 Interest Rates, Payments, and Calculations.
(a) Interest Rate. All Advances shall bear
interest, on the average Daily Balance at the rate set forth in the Revolving
Note.
(b) Default Rate. All Obligations shall bear
interest, from and after the occurrence of an Event of Default, at a rate equal
to five (5) percentage points above the interest rate applicable immediately
prior to the occurrence of the Event of Default.
(c) Payments. Interest under the Notes shall be
due and payable on the Payment Date of each month during the term thereof.
Borrowers hereby authorizes Bank to debit and Bank hereby agrees to debit,
Account Number 3300020208 maintained at Bank without notice for payments of
principal and interest due on the Obligations, but with prior notice for any
other amounts owing by any Borrower to Bank, provided, however that after the
occurrence of
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any Event of Default, Borrowers authorize Bank to debit any accounts of any
Borrower maintained with Bank. Bank will notify the Company of all debits which
Bank makes against any Borrower's accounts. Any such debits against any
Borrower's accounts in no way shall be deemed a set-off. Any interest not paid
when due shall be compounded by becoming a part of the Obligations, and such
interest shall thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is
changed from time to time hereafter, the applicable rate of interest under the
Notes shall be increased or decreased effective as of 12:01 a.m. on the day the
Prime Rate is changed, by an amount equal to such change in the Prime Rate. All
interest chargeable under the Loan Documents shall be computed on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed.
2.6 Crediting Payments. Prior to the occurrence of an
Event of Default, Bank shall credit a wire transfer of funds, check or other
item of payment to such deposit account or Obligation as the Company specifies.
After the occurrence of an Event of Default, the receipt by Bank of any wire
transfer of funds, check, or other item of payment shall be immediately applied
to conditionally reduce Obligations, but shall not be considered a payment in
respect of the Obligations unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is honored
when presented for payment. Notwithstanding anything to the contrary contained
herein, any wire transfer or payment received by Bank after 10:00 a.m.
Washington, D.C. time shall be deemed to have been received by Bank as of the
opening of business on the immediately following Business Day. Whenever any
payment to Bank under the Loan Documents would otherwise be due (except by
reason of acceleration) on a date that is not a Business Day, such payment shall
instead be due on the next Business Day, and additional fees or interest, as the
case may be, shall accrue and be payable for the period of such extension.
2.7 Fees. Borrowers shall pay to Bank the following:
(a) Facility Fee. A Facility Fee for the
Committed Revolving Line equal to Seventeen Thousand Five Hundred Dollars
($17,500) and for the Committed Equipment Line equal to Two Thousand Five
Hundred Dollars ($2,500), which fees shall be due on the Closing Date and once
paid shall be fully earned and non-refundable;
(b) Financial Examination and Appraisal Fees.
Bank's customary fees and out-of-pocket expenses for Bank's audits of each
Borrower's Accounts, and for each appraisal of Collateral and financial analysis
and examination of each Borrower performed from time to time by Bank or its
agents, provided that prior to the occurrence of an Event of Default, the
Borrowers shall only be obligated to pay the expenses associated with one (1)
such appraisal or examination, during any twelve (12) month period. Bank will
keep the results of any such appraisal or examination confidential in accordance
with the provisions of Section 12.8 hereof;
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(c) Bank Expenses. Upon demand from Bank,
including, without limitation, upon the date hereof, all Bank Expenses incurred
through the date hereof, including reasonable attorneys' fees and expenses and,
after the date hereof, all Bank Expenses, including reasonable attorneys' fees
and expenses, as and when they become due.
2.8 Additional Costs. In case any law, regulation, treaty
or official directive or the interpretation or application thereof by any court
or any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to
payments of principal or interest or any other amounts payable hereunder by
Borrowers or otherwise with respect to the transactions contemplated hereby
(except for taxes on the overall net income of Bank imposed by the United States
of America or any political subdivision thereof);
(b) imposes, modifies or deems applicable any
deposit insurance, reserve, special deposit or similar requirement against
assets held by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with
respect to its performance under this Agreement; and
the result of any of the foregoing is to materially increase the cost to Bank,
materially reduce the income receivable by Bank or impose any expense upon Bank
with respect to any loans, Bank shall notify Borrowers thereof. Borrowers agree
to pay to Bank the amount of such increase in cost, reduction in income or
additional expense as and when such cost, reduction or expense is incurred or
determined, upon presentation by Bank of a statement of the amount and setting
forth Bank's calculation thereof, all in reasonable detail, which statement
shall be deemed true and correct absent manifest error.
2.9 Term. Except as otherwise set forth herein, this
Agreement shall become effective on the Closing Date and, subject to Section
12.7, shall continue in full force and effect for a term ending on the Maturity
Date. Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default.
2.10 Company as Agent.
(a) For administrative convenience, each Person
included in the term "Borrower" hereby irrevocably appoints the Company as the
Borrower's attorney-in-fact, with power of substitution (with the prior written
consent of Bank in the exercise of its sole and absolute discretion), in the
name of the Company or in the name of the Borrower or otherwise to take any and
all actions with respect to this Agreement, the other Loan Documents, the
Obligations and/or the Collateral (including, without limitation, the proceeds
thereof) as the
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Company may so elect from time to time, including, without limitation, actions
to (i) request Credit Extensions, apply for and direct the benefits of Letters
of Credits, and direct Bank to disburse or credit the proceeds of any Advance or
Equipment Advance directly to an account of the Company, any one or more of such
Persons or otherwise, which direction shall evidence the making of such Advance
or Equipment Advance and shall constitute the acknowledgment by each such Person
of the receipt of the proceeds of such Advance or Equipment Advance or the
benefit of such Letter of Credit, (ii) enter into, execute, deliver, amend,
modify, restate, substitute, extend and/or renew this Agreement, any other Loan
Documents, security agreements, mortgages, deposit account agreements,
instruments, certificates, waivers, letter of credit applications, releases,
documents and agreements from time to time, and (iii) endorse any check or other
item of payment in the name of such Person or in the name of the Company. The
foregoing appointment is coupled with an interest, cannot be revoked without the
prior written consent of Bank, and may be exercised from time to time through
the Company's duly authorized officer, officers or other Person or Persons
designated by the Company to act from time to time on behalf of the Company.
(b) Each Person included in the term "Borrower"
hereby irrevocably authorizes Bank to make Loans to any one or more of such
Persons, and hereby irrevocably authorizes Bank to issue or cause to be issued
Letters of Credit for the account of any or all of such Persons, pursuant to the
provisions of this Agreement upon the written, oral or telephone request any one
or more of the Persons who is from time to time a Responsible Officer of a
Borrower under the provisions of the most recent certificate of corporate
resolutions and/or incumbency of the Person included in the term "Borrower" on
file with Bank and also upon the written, oral or telephone request of any one
of the Persons who is from time to time a Responsible Officer of the Company
under the provisions of the most recent certificate of corporate resolutions
and/or incumbency for the Company on file with Bank.
(c) Bank assumes no responsibility or liability
for any errors, mistakes, and/or discrepancies in the oral, telephonic, written
or other transmissions of any instructions, orders, requests and confirmations
between Bank and any one or more of the Persons included in the term "Borrower"
or Borrower in connection with the Credit Extensions, any Loan, any Letter of
Credit or any other transaction in connection with the provisions of this
Agreement.
2.11 Inter-Company Debt, Contribution. Without implying
any limitation on the joint and several nature of the Obligations, Bank agrees
that, notwithstanding any other provision of this Agreement, the Persons
included in the term "Borrower" may create inter-company indebtedness between or
among the Persons included in the term "Borrower" with respect to the allocation
of the benefits and proceeds of the advances and Loans under this Agreement. The
Persons included in the term "Borrower" agree among themselves, and Bank
consents to that agreement, that each such Person shall have rights of
contribution from all of the such Persons to the extent such Person incurs
Obligations in excess of the proceeds of the Loans received by, or allocated to
purposes for the direct benefit of, such Person. All such indebtedness and
rights shall be, and are hereby agreed by the Persons included in the term
"Borrower" to be,
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subordinate in priority and payment to the indefeasible repayment in full in
cash of the Obligations, and, after the occurrence and during the continuance of
any Event of Default, unless Bank agrees in writing otherwise, shall not be
exercised or repaid in whole or in part until all of the Obligations have been
indefeasibly paid in full in cash. Each Person included in the term "Borrower"
agrees that all of such inter-company indebtedness and rights of contribution
are part of the Collateral and secure the Obligations. Each Person included in
the term "Borrower" hereby waives all rights of counter claim, recoupment and
offset between or among themselves arising on account of that indebtedness and
otherwise. No Person included in the term "Borrower" shall evidence the
inter-company indebtedness or rights of contribution by note or other
instrument, and shall not secure such indebtedness or rights of contribution
with any Lien or security.
2.12 Borrowers are Integrated Group.
(a) Each Person included in the term "Borrower"
hereby represents and warrants to Bank that each of them will derive benefits,
directly and indirectly, from each Letter of Credit and from each Credit
Extension, both in their separate capacity and as a member of the integrated
group to which each such Person belongs and because the successful operation of
the integrated group is dependent upon the continued successful performance of
the functions of the integrated group as a whole, because (i) the terms of the
consolidated financing provided under this Agreement are more favorable than
would otherwise would be obtainable by such Persons individually, and (ii) the
additional administrative and other costs and reduced flexibility associated
with individual financing arrangements which would otherwise be required if
obtainable would substantially reduce the value to such Persons of the
financing.
(b) Each Person included in the term "Borrower"
hereby represents and warrants that with respect to such Person all of the
representations and warranties contained in the Loan Documents are true and
correct with respect to such Person on and as of the date hereof as if made on
and as of such date, both before and after giving effect to this Agreement, and
that no Event of Default or Default has occurred and is continuing or exists or
would occur or exist after giving effect to this Agreement.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. The
obligation of Bank to make the initial Credit Extension is subject to the
condition precedent that Bank shall have received, in form and substance
satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of each
Borrower with respect to articles, bylaws, incumbency and resolutions
authorizing the execution and delivery of this Agreement;
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(c) the Notes;
(d) the Negative Pledge;
(e) an opinion of Borrowers' counsel;
(f) insurance certificate;
(g) payment of the fees and Bank Expenses then
due specified in Section 2.7 hereof; and
(h) such other documents, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The
obligation of Bank to make each Credit Extension, including the initial Credit
Extension, is further subject to the following conditions:
(a) timely receipt by Bank of the
Payment/Advance Form as provided in Section 2.1; and
(b) the representations and warranties contained
in Section 5 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Credit
Extension as though made at and as of each such date, and no Event of Default
shall have occurred and be continuing, or would result from such Credit
Extension. The making of each Credit Extension shall be deemed to be a
representation and warranty by Borrowers on the date of such Credit Extension as
to the accuracy of the facts referred to in this Section 3.2 (b).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Each Borrower grants and
pledges to Bank a continuing security interest in the Collateral in order to
secure prompt payment of any and all Obligations (other than any Credit
Extension including accrued interest under the Committed Revolving Line) and in
order to secure prompt performance by Borrowers of each of their covenants and
duties under the Loan Documents. Such security interest shall remain in effect
for as long as any and all Obligations (other than any Credit Extension
including accrued interest under the Committed Revolving Line) are outstanding
and such security interest constitutes a valid, first priority security interest
in the Collateral, and will constitute a valid, first priority security interest
in all such Collateral acquired after the date hereof.
4.2 Delivery of Additional Documentation Required. Each
Borrower shall from time to time execute and deliver to Bank, at the request of
Bank, all financing statements and other documents that Bank may reasonably
request in form satisfactory to Bank and pay
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such fees and taxes as required in connection therewith, to perfect and continue
perfected Bank's security interests in the Equipment and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during each Borrower's usual business hours, to inspect each
Borrower's Books and to make copies thereof and to check, test, and appraise the
Equipment in order to verify each Borrower's financial condition or the amount,
condition of, or any other matter relating to, the Equipment, provided that Bank
will use reasonable efforts so as not to interfere with such Borrower's business
operations.
5. REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants with respect to such Borrower as
follows:
5.1 Due Organization and Qualification. Such Borrower and
each Subsidiary of such Borrower is a corporation duly existing and in good
standing under the laws of its state of incorporation and qualified and licensed
to do business in, and is in good standing in, any state in which the conduct of
its business or its ownership of property requires that it be so qualified,
except where a failure to be so qualified could not have a Material Adverse
Effect.
5.2 Due Authorization; No Conflict. The execution,
delivery, and performance of the Loan Documents are within each Borrower's
powers, have been duly authorized, and are not in conflict with nor constitute a
breach of any provision contained in any Borrower's Articles/Certificate of
Incorporation, Bylaws, or Partnership Agreement, as the case may be, nor will
they constitute an event of default under any material agreement to which any
Borrower is a party or by which any Borrower is bound. No Borrower is in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrowers have good and
indefeasible title to the Collateral, free and clear of Liens, other than those
in favor of the Bank.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts
are bona fide existing obligations. The property giving rise to such Eligible
Accounts has been delivered to the account debtor or to the account debtor's
agent for immediate shipment to and unconditional acceptance by the account
debtor. No Borrower has received any notice of actual or imminent Insolvency
Proceeding of any account debtor that is included in any Borrowing Base
Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all
material respects of good and marketable quality, free from all material
defects.
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5.6 Name; Location of Chief Executive Office. Except as
disclosed in Schedule 5.6, no Borrower has done business under any name other
than that specified on the signature page hereof. The chief executive office of
each Borrower is located at the address indicated in Section 10 hereof.
5.7 Litigation. Except as set forth in Schedule 5.7,
there are no actions or proceedings pending, by or against any Borrower or any
Subsidiary before any court or administrative agency in which an adverse
decision could have a Material Adverse Effect. Borrowers do not have knowledge
of any such pending or threatened actions or proceedings.
5.8 No Material Adverse Change in Financial Statements.
All consolidated financial statements related to the Company, any Borrower and
any Subsidiary that have been delivered by the Company to Bank fairly present in
all material respects the Company's consolidated financial condition as of the
date thereof and the Company's consolidated results of operations for the period
then ended. There has not been a material adverse change in the consolidated
financial condition of Borrowers since the date of the most recent of such
financial statements submitted to Bank on or about the Closing Date.
5.9 Solvency. The Borrowers are Solvent.
5.10 Regulatory Compliance. Each Borrower and each
Subsidiary has met the minimum funding requirements of ERISA with respect to any
employee benefit plans subject to ERISA. No event has occurred resulting from
any Borrower's failure to comply with ERISA that is reasonably likely to result
in any Borrower's incurring any liability that could have a Material Adverse
Effect. No Borrower is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940.
Borrowers are not engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations G, T and U of the Board of
Governors of the Federal Reserve System). To the best of each Borrower's
knowledge it has complied with all the provisions of the Federal Fair Labor
Standards Act. To the best of each Borrower's knowledge, it has not violated any
statutes, laws, ordinances or rules applicable to it, violation of which could
have a Material Adverse Effect.
5.11 Environmental Condition. None of any Borrower's or
any Subsidiary's properties or assets has ever been used by any Borrower or any
Subsidiary or, to the best of any Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of any Borrower's knowledge, none of any
Borrower's properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by any Borrower or any Subsidiary; and neither any Borrower nor
any Subsidiary has received a summons, citation, notice, or directive from the
Environmental
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Protection Agency or any other federal, state or other governmental agency
concerning any action or omission by any Borrower or any Subsidiary resulting in
the release, or other disposition of hazardous waste or hazardous substances
into the environment.
5.12 Taxes. Each Borrower and each Subsidiary has filed or
caused to be filed all tax returns required to be filed or has applied for and
received extensions of the deadline for filing, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein, except those
being contested in good faith and by appropriate proceedings.
5.13 Subsidiaries. Borrowers do not own any stock,
partnership interest or other equity securities of any Person, except for
Permitted Investments.
5.14 Government Consents. To the best of its knowledge,
each Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all governmental authorities that are necessary for the continued operation
of each Borrower's business as currently conducted.
5.15 Full Disclosure. No representation, warranty or other
statement made by any Borrower in any certificate or written statement furnished
to Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading in any material respect.
6. AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that, until payment in full
of all outstanding Obligations, and for so long as Bank may have any commitment
to make a Credit Extension hereunder, each Borrower shall do all of the
following:
6.1 Good Standing. Each Borrower shall maintain its and
each of its Subsidiaries' corporate existence and good standing in its
jurisdiction of incorporation and maintain qualification in each jurisdiction in
which the failure to so qualify could have a Material Adverse Effect. Each
Borrower shall maintain, and shall cause each of its Subsidiaries to maintain,
to the extent consistent with prudent management of Borrower's business, in
force all licenses, approvals and agreements, the loss of which could have a
Material Adverse Effect.
6.2 Government Compliance. Each Borrower shall meet, and
shall cause each Subsidiary to meet, the minimum funding requirements of ERISA
with respect to any employee benefit plans subject to ERISA. Each Borrower shall
comply, and shall cause each Subsidiary to comply, with all statutes, laws,
ordinances and government rules and regulations to which it is subject,
noncompliance with which could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral.
6.3 Financial Statements, Reports, Certificates. Company
shall deliver to Bank: (a) as soon as available, but in any event within forty
five (45) days after the end of each
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of the first three (3) fiscal quarters, a company prepared consolidated balance
sheet and income statement covering Company's consolidated operations during
such period, in a form and certified by an officer of the Company (without any
personal liability therefore other than liability based on fraud or criminal
misconduct) reasonably acceptable to Bank; (b) as soon as available, but in any
event within ninety (90) days after the end of Company's fiscal year, audited
consolidated financial statements of Company prepared in accordance with GAAP,
consistently applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (c) promptly upon receipt of notice thereof, a report of any
legal actions pending or threatened against any Borrower or any Subsidiary that
could result in damages or costs to any Borrower or any Subsidiary of One
Hundred Thousand Dollars ($100,000) or more; and (e) such budgets, sales
projections, operating plans or other financial information as Bank may
reasonably request from time to time.
For any calendar month that Credit Extensions have been made
or are outstanding under the Committed Revolving Line, Company shall deliver to
Bank, within thirty (30) days after the last day of each such month, a Borrowing
Base Certificate signed by a Responsible Officer in substantially the form of
Exhibit C hereto, together with aged listings of accounts receivable.
The Company shall deliver to Bank with the quarterly financial
statements described in Section 6.3(a) above, a Compliance Certificate signed by
a Responsible Officer in substantially the form of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit
Borrowers' Accounts at Borrowers' expense, provided that such audits will be
conducted no more often than every twelve (12) months unless an Event of Default
has occurred and is continuing. In addition, within one hundred twenty (120)
days of the Closing Date, Bank may, at the Borrower's expense, audit Borrowers'
Accounts.
6.4 Inventory; Returns. Borrowers shall keep all
Inventory in good and marketable condition, free from all material defects.
Returns and allowances, if any, as between Borrowers and its account debtors
shall be on the same basis and in accordance with the usual customary practices
of Borrowers, as they exist at the time of the execution and delivery of this
Agreement. Borrowers shall promptly notify Bank of all returns and recoveries
and of all disputes and claims, where the return, recovery, dispute or claim
involves more than Two Hundred Thousand Dollars ($200,000).
6.5 Taxes. Borrowers shall make, and shall cause each
Subsidiary to make, due and timely payment or deposit of all material federal,
state, and local taxes, assessments, or contributions required of it by law, and
will execute and deliver to Bank, on demand, appropriate certificates attesting
to the payment or deposit thereof; and Borrowers will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon
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request, furnish Bank with proof satisfactory to Bank indicating that Borrowers
or a Subsidiary has made such payments or deposits; provided that Borrowers or a
Subsidiary need not make any payment if the amount or validity of such payment
is (i) contested in good faith by appropriate proceedings, and (ii) is reserved
against (to the extent required by GAAP) by Borrowers.
6.6 Insurance.
(a) Borrowers, at their expense, shall keep the
Collateral insured against loss or damage by fire, theft, explosion, sprinklers,
and all other hazards and risks, and in such amounts, as ordinarily insured
against by other owners in similar businesses conducted in the locations where
Borrowers' business are conducted on the date hereof. Borrowers shall also
maintain insurance relating to each Borrower's ownership and use of the
Collateral in amounts and of a type that are customary to businesses similar to
each Borrower's.
(b) All such policies of insurance shall be in
such form, with such companies, and in such amounts as are reasonably
satisfactory to Bank. All such policies of property insurance shall contain a
lender's loss payable endorsement, in a form satisfactory to Bank, showing Bank
as an additional loss payee thereof as its interests may appear and all
liability insurance policies shall show the Bank as an additional insured, and
shall specify that the insurer must give at least twenty (20) days notice to
Bank before canceling its policy for any reason. At Bank's request, Borrowers
shall deliver to Bank certified copies of such policies of insurance and
evidence of the payments of all premiums therefor. All proceeds payable under
any such policy shall for any Collateral or any collateral hereafter delivered
to Bank pursuant to Section 9.1 hereof, at the option of Bank, be payable to
Bank to be applied on account of the Obligations.
6.7 Principal Depository. Each Borrower shall maintain
its principal disbursing accounts with Bank.
6.8 Quick Ratio. Company shall maintain on a consolidated
basis, as of the last day of each fiscal quarter, a ratio of Quick Assets to
Current Liabilities, less deferred revenues of at least 1.0 to 1.0.
6.9 Tangible Net Worth. Company shall maintain on a
consolidated basis, as of the last day of each fiscal quarter, a minimum
Tangible Net Worth of not less than $40,000,000 as of the fiscal quarter ending
December 31, 1998. Thereafter, the minimum Tangible Net Worth of the Company
shall "step up" on a quarterly basis, as follows:
The Company shall maintain a minimum Tangible Net Worth equal to the sum of: (i)
eighty percent (80%) of net income for the fiscal quarter then ending, plus (ii)
the minimum Tangible Net Worth required under this Section for the immediately
preceding quarter. For example, for the fiscal quarter ending March 31, 1999,
the Company must have a minimum Tangible Net Worth equal to eight percent (80%)
of net income for the fiscal quarter ending March 31, 1999,
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25
plus $40,000,000, the Tangible Net Worth required for the prior fiscal quarter
(December 31, 1998).
6.10 Profitability. Company shall not report on a
consolidated basis more than one loss for any fiscal quarter in any fiscal year
and such loss may not exceed Eight Million Dollars ($8,000,000). In addition,
the Company will be profitable as of each fiscal year end. Profitability will be
adjusted for increases of capitalized development costs, if any.
6.11 Further Assurances. At any time and from time to time
Borrowers shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.
7. NEGATIVE COVENANTS
Each Borrower covenants and agrees that, so long as any Credit
Extension hereunder shall be available and until payment in full of the
outstanding Obligations or for so long as Bank may have any commitment to make
any Advances, Borrowers will not do any of the following:
7.1 Dispositions. At any time prior to the termination of
the Committed Revolving Line pursuant to Section 2.1, convey, sell, lease,
transfer or otherwise dispose of (collectively, a "Transfer"), or permit any of
its Subsidiaries to Transfer, all or any part of its business or property, other
than: (i) Transfers of Inventory in the ordinary course of business; (ii)
Transfers of non-exclusive licenses and similar arrangements for the use of the
property of any Borrower or its Subsidiaries; (iii) Transfers of worn-out or
obsolete Equipment made in the ordinary course of business; or (iv) other
Transfers not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in the
aggregate.
7.2 Change in Business. Engage in any business, or permit
any of its Subsidiaries to engage in any business, other than the businesses
currently engaged in by any Borrower and any business substantially similar or
related thereto (or incidental thereto), or suffer a material change in any
Borrower's ownership, management or directors (other than changes due to death
or legal incapacity). Borrower will not, without thirty (30) days prior written
notification to Bank, relocate its chief executive office and will promptly
notify Bank if it receives notice that the lease for its current location will
not be renewed or will be terminated.
7.3 Mergers or Acquisitions. Merge or consolidate, or
permit any of its Subsidiaries to merge or consolidate, with or into any other
business organization, and no Borrower will acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, unless, (i) Company will be the surviving entity,
(ii) no Event of Default has occurred and is continuing, (iii) no Material
Adverse Effect will be caused by such an occurrence, and (iv) Company and such
other business organization deliver to Bank such instruments, agreements and
such other documents as Bank may request.
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26
7.4 Indebtedness. At any time prior to the termination of
the Committed Revolving Line pursuant to Section 2.1, create, incur, assume or
be or remain liable with respect to any Indebtedness, or permit any Subsidiary
so to do, other than Permitted Indebtedness, and at all other times, create,
incur, assume or be or remain liable with respect to any Indebtedness, or permit
any Subsidiary so to do, other than Permitted Indebtedness and other
Indebtedness.
7.5 Encumbrances. At any time prior to the termination of
the Committed Revolving Line pursuant to Section 2.1, create, incur, assume or
suffer to exist any Lien with respect to any of its property, or assign or
otherwise convey any right to receive income, including the sale of any
Accounts, or permit any of its Subsidiaries so to do, except for Permitted
Liens, provided, however, at no time may the Borrowers create, incur, assume or
suffer to exist any Lien with respect to the Collateral, other than Liens in
favor of the Bank.
7.6 Distributions. At any time prior to the termination
of the Committed Revolving Line pursuant to Section 2.1, pay any dividends or
make any other distribution or payment on account of or in redemption,
retirement or purchase of any capital stock in excess of Fifty Thousand Dollars
($50,000) in the aggregate, provided that at such time no Event of Default has
occurred and is continuing or would exist after giving effect to such payment
and no Material Adverse Effect will be caused by such an occurrence.
7.7 Investments. At any time prior to the termination of
the Committed Revolving Line pursuant to Section 2.1, directly or indirectly
acquire or own, or make any Investment in or to any Person, or permit any of its
Subsidiaries so to do, other than Permitted Investments.
7.8 Transactions with Affiliates. At any time prior to
the termination of the Committed Revolving Line pursuant to Section 2.1,
directly or indirectly enter into or permit to exist any material transaction
with any Affiliate of any Borrower except for transactions that are in the
ordinary course of such Borrower's business, upon fair and reasonable terms that
are no less favorable to such Borrower than would be obtained in an arm's length
transaction with a nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Compliance. Become an "investment company" or a
company controlled by an "investment company," within the meaning of the
Investment Company Act of 1940, or become principally engaged in, or undertake
as one of its important activities, the business of extending credit for the
purpose of purchasing or carrying margin stock, or use the proceeds of any
Advance for such purpose; fail to meet the minimum funding requirements of
ERISA; permit a Reportable Event or Prohibited Transaction, as defined in ERISA,
to occur. Fail to comply with the Federal Fair Labor Standards Act or violate
any other law or regulation, which
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27
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral; or permit any
of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by any Borrowers under this Agreement:
8.1 Payment Default. If Borrowers fails to pay, within
three (3) days after their due date, any of the Obligations.
8.2 Covenant Default.
(a) If Borrowers fail to perform any obligation or
meet any requirement under Sections 6.7, 6.8, 6.9 or 6.10 or violates any of the
covenants contained in Article 7 of this Agreement, or
(b) If any Borrower fails or neglects to perform,
keep, or observe any other material term, provision, condition, covenant, or
agreement contained in this Agreement, in any of the Loan Documents, or in any
other present or future agreement between any Borrower and Bank and as to any
default under such other term, provision, condition, covenant or agreement that
can be cured, has failed to cure such default within ten (10) days after any
Borrower receives notice thereof or any officer becomes aware thereof; provided,
however, that if the default cannot by its nature be cured within the ten (10)
day period or cannot after diligent attempts by such Borrower be cured within
such ten (10) day period, and such default is likely to be cured within a
reasonable time, then Borrowers shall have an additional reasonable period
(which shall not in any case exceed thirty (30) days) to attempt to cure such
default, and within such reasonable time period the failure to have cured such
default shall not be deemed an Event of Default (provided that no such Advances
will be required to be made during such cure period);
8.3 Material Adverse Change. If there (i) occurs a
material impairment of the perfection or priority of Bank's security interest in
the Collateral or the value of such Collateral which is not covered by adequate
insurance, or (ii) Bank determines, based upon reliable information available to
it and in the exercise of its reasonable judgment, that there is a reasonable
likelihood that Borrowers will fail to comply with one or more of the financial
covenants set forth in Sections 6.8, 6.9 or 6.10 during the next succeeding
quarterly reporting period for which financial reports have not yet been
received by Bank;
8.4 Attachment. If any material portion of any Borrower's
assets are attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any trustee, receiver or person
acting in a similar capacity and such attachment, seizure, writ or distress
warrant or levy has not been removed, discharged, bonded over or rescinded
within ten (10) days, or if any Borrower is enjoined, restrained, or in any way
prevented by court order from
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continuing to conduct all or any material part of its business affairs, or if a
judgment or other claim in excess of One Hundred Fifty Thousand Dollars
($150,000) in the aggregate becomes a lien or encumbrance upon any material
portion of any Borrower's assets, or if a notice of lien, levy, or assessment
for an amount in excess of One Hundred Fifty Thousand Dollars ($150,000) is
filed of record with respect to any of any Borrower's assets by the United
States Government, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, and the same is not paid
within ten (10) days after any Borrower receives notice thereof, provided that
none of the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith contest
by any Borrower (provided that no Advances will be required to be made during
such cure period);
8.5 Insolvency. If any Borrower is no longer Solvent, or
if an Insolvency Proceeding is commenced by any Borrower, or if an Insolvency
Proceeding is commenced against any Borrower and is not dismissed or stayed
within 30 days (provided that no Advances will be made prior to the dismissal of
such Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any
agreement for borrowed money to which any Borrower is a party with a third party
or parties resulting in a right by such third party or parties, whether or not
exercised, to accelerate the maturity of any Indebtedness in an amount in excess
of Three Hundred Thousand Dollars ($300,000) or that could have a Material
Adverse Effect;
8.7 Subordinated Debt. If any Borrower makes any payment
on account of Subordinated Debt, except to the extent such payment is allowed
under any subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment
of money in an amount, individually or in the aggregate, of at least One Hundred
Fifty Thousand Dollars ($150,000) shall be rendered against any Borrower and
shall remain unsatisfied and unstayed for a period of ten (10) days (provided
that no Advances will be made prior to the satisfaction or stay of such
judgment); or
8.9 Misrepresentations. If any material misrepresentation
or material misstatement exists now or hereafter in any warranty or
representation set forth herein or in any certificate or writing delivered to
Bank by any Responsible Officer pursuant to this Agreement or to induce Bank to
enter into this Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Within five (5) days of the
occurrence of an Event of Default and if at such time any Credit Extensions are
outstanding under the Committed
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Revolving Line, the Borrowers shall, to secure such Credit Extensions under the
Committed Revolving Line, deliver to Bank (at their own expense) signed security
agreements in form and substance satisfactory to Bank in all material respects,
granting to Bank a first lien priority security interest in each Borrower's
Accounts and Inventory, together with UCC financing statements and other
documents that Bank may request to grant and perfect Bank's security interest in
such Accounts and Inventory. In the event any of the Borrower's fails to deliver
such items within five (5) days of said Event of Default, each Borrower hereby
irrevocably appoints Bank (and any of Bank's designed officers or employees) as
each Borrower's true and lawful attorney to sign each Borrower's name on such
security agreement, financing statements or any other documents or instruments
necessary to carry out the provisions of this Section. The appointment of Bank
as each Borrower's attorney in fact, and each and every one of Bank's rights and
powers, being coupled with an interest, is irrevocable until all of the
Committed Revolving Line has been repaid and terminated and Bank's obligation to
provide Advances thereunder is terminated. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrowers:
(a) Declare all Obligations, whether evidenced
by this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default
described in Section 8.5 all Obligations shall become immediately due and
payable without any action by Bank);
(b) Cease advancing money or extending credit to
or for the benefit of Borrowers under this Agreement or under any other
agreement between Borrowers and Bank;
(c) Demand that Borrowers (i) deposit cash with
Bank in an amount equal to the amount of any Letters of Credit remaining
undrawn, as collateral security for the repayment of any future drawings under
such Letters of Credit, and Borrowers shall forthwith deposit and pay such
amounts, and (ii) pay in advance all Letters of Credit fees scheduled to be paid
or payable over the remaining term of the Letters of Credit;
(d) Without notice to or demand upon any
Borrower, make such payments and do such acts as Bank considers necessary or
reasonable to protect its security interest in the Collateral. Borrowers agree
to assemble the Collateral if Bank so requires, and to make the Collateral
available to Bank as Bank may designate. Each Borrower authorizes Bank to enter
the premises where the Collateral is located, to take and maintain possession of
the Collateral, or any part of it, and to pay, purchase, contest, or compromise
any encumbrance, charge, or lien which in Bank's determination appears to be
prior or superior to its security interest and to pay all expenses incurred in
connection therewith. With respect to any of any Borrower's owned premises, each
Borrower hereby grants Bank a license to enter into possession of such premises
and to occupy the same, without charge, for up to one hundred twenty (120) days
in order to exercise any of Bank's rights or remedies provided herein, at law,
in equity, or otherwise;
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(e) Without notice to any Borrower set off and
apply to the Obligations any and all (i) balances and deposits of any Borrower
held by Bank, or (ii) indebtedness at any time owing to or for the credit or the
account of any Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Bank is hereby granted a license or other
right, solely pursuant to the provisions of this Section 9.1, to use, without
charge, any Borrower's labels, patents, copyrights, mask works, rights of use of
any name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral
and, in connection with Bank's exercise of its rights under this Section 9.1,
each Borrower's rights under all licenses and all franchise agreements shall
inure to Bank's benefit;
(g) Sell the Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including each Borrower's
premises) as Bank determines is commercially reasonable, (but in any event after
ten (10) days prior notice to Company of the date and time of any such sale);
(h) Bank may credit bid and purchase at any
public sale; and
(i) Any deficiency that exists after disposition
of the Collateral as provided above will be paid immediately by Borrowers.
9.2 Power of Attorney. In addition to the rights set
forth in Section 9.1 hereof, effective only upon the occurrence and during the
continuance of an Event of Default, each Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as such Borrower's
true and lawful attorney to: (a) endorse each Borrower's name on any checks or
other forms of payment or security that may come into Bank's possession; and (b)
make, settle, and adjust all claims under and decisions with respect to each
Borrower's policies of insurance with respect to any Collateral. The appointment
of Bank as each Borrower's attorney in fact, and each and every one of Bank's
rights and powers, being coupled with an interest, is irrevocable until all of
the Obligations have been fully repaid and performed and Bank's obligation to
provide advances hereunder is terminated.
9.3 [Omitted].
9.4 Bank Expenses. If Borrowers fail to pay any amounts
or furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement after notice from Bank, then Bank may
do any or all of the following: (a) make payment of the same or any part
thereof; (b) set up such reserves under the Committed Revolving Line as Bank
deems necessary to protect Bank from the exposure created by such failure; or
(c) obtain and maintain insurance policies of the type discussed in Section 6.6
of this Agreement, and take any action with respect to such policies as Bank
deems prudent. Any amounts so paid
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or deposited by Bank shall constitute Bank Expenses, shall be immediately due
and payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank
complies with reasonable banking practices, Bank shall not in any way or manner
be liable or responsible for: (a) the safekeeping of the Collateral; (b) any
loss or damage thereto occurring or arising in any manner or fashion from any
cause; (c) any diminution in the value thereof; or (d) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other person whomsoever.
All risk of loss, damage or destruction of the Collateral shall be borne by
Borrowers.
9.6 Remedies Cumulative. Bank's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Bank shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by Bank
of one right or remedy shall be deemed an election, and no waiver by Bank of any
Event of Default on any Borrower's part shall be deemed a continuing waiver. No
delay by Bank shall constitute a waiver, election, or acquiescence by it. No
waiver by Bank shall be effective unless made in a written document signed on
behalf of Bank and then shall be effective only in the specific instance and for
the specific purpose for which it was given.
9.7 Demand; Protest. Each Borrower waives demand,
protest, notice of protest, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees at any time held by Bank on which Borrowers may in any way
be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrowers or to Bank, as the case may be, at
its addresses set forth below:
If to Borrowers: Visual Networks, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxxx, Chief Financial Officer
FAX: (000) 000-0000
If to Bank: Silicon Valley Bank
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11600 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxxxx, Vice President
FAX: (000) 000-0000
With a Copy to; Silicon Valley Bank
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Loan Services
Fax: (000) 000-0000
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Maryland, without regard to
principles of conflicts of law. EACH BORROWER ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION
OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF MARYLAND
IN ANY ACTION, SUIT, OR PROCEEDING OF ANY KIND, AGAINST IT WHICH ARISES OUT OF
OR BY REASON OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK
CANNOT AVAIL ITSELF OF THE COURTS OF MARYLAND, EACH BORROWER ACCEPTS
JURISDICTION OF THE COURTS AND VENUE IN SANTA XXXXX COUNTY, CALIFORNIA.
BORROWERS AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
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12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of each
of the parties; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by Borrowers without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrowers to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder, provided that in the case of
a sale or transfer of all or a portion of the Obligations evidenced by this
Agreement and the other Loan Documents, Bank will furnish Borrower with prior
written notice of the name and address of the intended transferee.
12.2 Indemnification. Borrowers shall, indemnify, defend,
and hold harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrowers whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the
performance of all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement
cannot be amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.
12.7 Survival. Except as otherwise specifically provided
herein, all covenants, representations and warranties made in this Agreement
shall continue in full force and effect so long as any Obligations remain
outstanding. The obligations of Borrowers to indemnify Bank with respect to the
expenses, damages, losses, costs and liabilities described in Section 12.2 shall
survive until all applicable statute of limitations periods with respect to
actions that may be
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brought against Bank have run provided that so long as the obligations set forth
in the first sentence of this Section 12.7 have been satisfied, and Bank has no
commitment to make any Credit Extensions or to make any other loans to
Borrowers, Bank shall release all security interests granted hereunder and
redeliver all Collateral held by it in accordance with applicable law.
12.8 Confidentiality. In handling any confidential
information Bank shall exercise the same degree of care that it exercises with
respect to its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrowers, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrowers and
have delivered a copy to the Company, (iii) as required by law, regulations,
rule or order, subpoena, judicial order or similar order, (iv) as may be
required in connection with the examination, audit or similar investigation of
Bank, and (v) as Bank may deem appropriate in connection with the exercise of
any remedies hereunder. Confidential information hereunder shall not include
information that either: (a) is in the public domain or in the knowledge or
possession of Bank when disclosed to Bank, or becomes part of the public domain
after disclosure to Bank through no fault of Bank; or (b) is disclosed to Bank
by a third party, provided Bank does not have actual knowledge that such third
party is prohibited from disclosing such information.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
WITNESS/ATTEST: VISUAL NETWORKS, INC.
/s/ XXXXXXX X. XXXXX By: /s/ XXXXX X. XXXXXXXX
----------------------- -----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Chief Financial Officer
WITNESS/ATTEST: VISUAL NETWORKS OPERATIONS, INC.
/s/ XXXXXXX X. XXXXX By: /s/ XXXXX X. XXXXXXXX
----------------------- -----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Treasurer
WITNESS/ATTEST: VISUAL NETWORKS TECHNOLOGIES, INC.
/s/ XXXXXXX X. XXXXX By: /s/ XXXXX X. XXXXXXXX
----------------------- -----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Treasurer
WITNESS/ATTEST: VISUAL NETWORKS INVESTMENTS, INC.
/s/ XXXXXXX X. XXXXX By: /s/ XXXXX X. XXXXXXXX
----------------------- -----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Treasurer
WITNESS/ATTEST: VISUAL NETWORKS PROTECTION, INC.
/s/ XXXXXXX X. XXXXX By: /s/ XXXXX X. XXXXXXXX
----------------------- -----------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Treasurer
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WITNESS/ATTEST: VISUAL NETWORKS OF TEXAS, L.P.
By: Visual Networks of Texas Operations, Inc.,
its general partner
/s/ XXXXXXX X. XXXXX By: /s/ XXXXX X. XXXXXXXX
-------------------------- ---------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Treasurer
SILICON VALLEY EAST, INC.
By: /s/ XXXXX XXXXXXXXX
--------------------------------------------
Xxxxx Xxxxxxxxx
Vice President
SILICON VALLEY BANK
By: /s/ XXX XXXXX
--------------------------------------------
Name: Xxx Xxxxx
Title: Vice President
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EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., E.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
----------------
FAX#: (408) TIME:
---------- ----------------
FROM:
---------------------------------------------------------------------------
BORROWER'S NAME
FROM:
---------------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
--------------------------------------------------------------------------------
AUTHORIZED SIGNATURE
PHONE:
--------------------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT#
------------------------------ ------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $
PRINCIPAL PAYMENT (ONLY) $
INTEREST PAYMENT (ONLY) $
PRINCIPAL AND INTEREST (PAYMENT) $
OTHER INSTRUCTIONS:
All representations and warranties of Borrowers stated in the Loan and
Security Agreement are true, correct and complete in all material respects as of
the date of the telephone request for and Advance confirmed by this Advance
Request; provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such date.
BANK USE ONLY:
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
------------------------------------
Authorized Requester
-----------------------------------
Authorized Signature (Bank)
Phone #
----------------------------
-38-
38
EXHIBIT C
BORROWING BASE CERTIFICATE
BORROWER: Visual Networks, Inc. Bank: Silicon Valley Bank
Commitment Amount: $7,000,000
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of $
-------- ----------
2. Additions (please explain on reverse) $
----------
3. TOTAL ACCOUNTS RECEIVABLE $
----------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 60 days over due $
----------
5. Balance of 50% over 60 day over due accounts $
----------
6. Concentration Limits $
----------
7. Foreign Accounts $
----------
8. Governmental Accounts $
----------
9. Contra Accounts $
----------
10. Promotion or Demo Accounts $
----------
11. Intercompany/Employee Accounts $
----------
12. Other (please explain on reverse) $
----------
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
----------
14. Eligible Accounts (#3 minus #13) $
----------
15. LOAN VALUE OF ACCOUNTS (75% of #14) $
----------
BALANCES
16. Maximum Loan Amount $7,000,000
----------
17. Total Funds Available [Lesser of #16 or #15] $
----------
18. Present balance owing on Line of Credit $
----------
19. Outstanding under Sublimits ( LC's) $
----------
20. RESERVE POSITION (#17 minus #18 and #19) $
----------
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS:
====================================
BANK USE ONLY
RECEIVED BY:
--------------------
DATE:
----------------
REVIEWED BY:
--------------------
COMPLIANCE STATUS: YES / NO
====================================
---------------------------
By:
------------------------
Authorized Signer
-39-
39
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: Visual Networks, Inc.
The undersigned authorized officer of Visual Networks, Inc. certifies
that in accordance with the terms and conditions of the Loan and Security
Agreement any Borrower and Bank (the "Agreement"), (i) Borrowers are in complete
compliance for the period ending _______ with all required covenants except as
noted below and (ii) all representations and warranties of Borrowers stated in
the Agreement are true and correct in all material respects as of the date
hereof. Attached herewith are the required documents supporting the above
certification. The Officer further certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that no
borrowings may be requested by the Borrowers at any time or date of
determination that Borrowers are not in compliance with any of the terms of the
Agreement, and that such compliance is determined not just at the date this
certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies
------------------ -------- --------
Quarterly financial statements Quarterly within 45 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R Agings Monthly within 30 days Yes No
(if Outstandings under LOC)
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Minimum Quick Ratio 1.0:1.0 :1.0 Yes No
-----
Minimum Tangible Net Worth
12/31/98 $40,000,000 $ Yes No
---------
3/31/99* $ $ Yes No
----------- ---------
6/30/99* $ $ Yes No
----------- ---------
9/30/99* $ $ Yes No
----------- ---------
12/31/99* $ $ Yes No
----------- ---------
3/31/00* $ $ Yes No
----------- ---------
*(Steps Up Quarterly by 80% Net Income)*
Profitability: Quarterly Max. 1 loss not
to exceed 8mm $ Yes No
---------
Annually $1 $ Yes No
---------
====================================
BANK USE ONLY
RECEIVED BY:
--------------------
DATE:
----------------
REVIEWED BY:
--------------------
COMPLIANCE STATUS: YES / NO
====================================
-40-
40
Comments Regarding Exceptions:
Sincerely,
Date:
------------------------ ------------
SIGNATURE
------------------------
TITLE
-41-
41
SCHEDULE 7.5
PERMITTED ENCUMBRANCES
EXISTING WAREHOUSE LIENS, OR WAREHOUSE LIENS THAT MAY BE CREATED IN THE FUTURE,
THAT ARE JUNIOR AND SUBORDINATE TO ANY LIENS CREATED IN FAVOR OF BANK.
NOTWITHSTANDING THE FOREGOING, SUCH LIENS MAY PERMIT A STORAGE FACILITY TO SELL
ASSETS TO THE EXTENT NECESSARY TO SATISFY OUTSTANDING OVERDUE STORAGE CHARGES.
-42-
