EXHIBIT 10.14
Streamline Facility Agreement
October 30, 1998
Terayon Communication Systems, Inc.
0000 Xxxxxx Xxxx Xxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Gentlemen:
Reference is made to the Loan and Security between you ("Borrower") and us
("Silicon") dated August 10, 1998 (as amended, the "Loan Agreement"). (This
letter agreement, the Loan Agreement, and all other written documents and
agreements between us are referred to herein collectively as the "Loan
Documents". Capitalized terms used but not defined in this agreement, shall
have the meanings set forth in the Loan Agreement.)
This will confirm our agreement that the following provisions shall apply,
effective on the date hereof:
1. Monthly Borrowing Base. Within 20 days after the end of each month,
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if at the end of such month the outstanding Obligations exceed $3,000,000,
Borrower shall deliver to Silicon a Borrowing Base Certificate signed by the
Chief Executive Officer, President, Chief Financial Officer or Controller of
Borrower in substantially the form of Exhibit A hereto.
2. Daily Delivery of Proceeds of Receivables Not Required. Borrower
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shall not be required to deliver the proceeds of Receivables to Silicon upon
receipt as provided in Section 4.4 of the Loan Agreement; provided that if any
Event of Default has occurred and is continuing, without limiting its other
rights and remedies, Silicon shall have the right to require that all proceeds
of all Receivables be delivered to Silicon upon receipt and in the form
received.
3. Changes to Reporting Requirements.
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(a) Daily delivery to Silicon of transaction reports, schedules and
assignments of Receivables, and schedules of collections, and delivery to
Silicon of copies of credit memos within two days after the date issued, as
called for by Section 4.3 of the Loan Agreement, will not be required.
(b) The first sentence of Section 4.6, which requires that Borrower
promptly notify Silicon of all disputes or claims relating to Receivables, is
replaced by the following: "Borrower shall promptly notify Silicon of all
returns and recoveries and of all disputes and claims, where the return,
recovery, dispute or claim involves more than $50,000".
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(c) The following reporting requirements shall supersede and replace
those reporting requirements set forth in Section 6 of the Schedule to the Loan
Agreement. Borrower shall provide Silicon with the following, in such form as
Silicon shall specify:
(i) Monthly Receivable agings, aged by invoice date, within
twenty days after the end of each month if at the end of
such month the outstanding Obligations exceed $3,000,000.
(ii) Monthly accounts payable agings, aged by invoice date, and
outstanding or held check registers, if any, within twenty
days after the end of each month if at the end of such
month the outstanding Obligations exceed $3,000,000.
(iii) Quarterly Compliance Certificates, within fifty days after
the end of each fiscal quarter, in such form as Silicon
shall reasonably specify, signed by the Chief Financial
Officer of Borrower, certifying that as of the end of such
fiscal quarter Borrower was in full compliance with all of
the terms and conditions of this Agreement, and setting
forth calculations showing compliance with the financial
covenants set forth in this Agreement and such other
information as Silicon shall reasonably request,
including, without limitation, a statement that at the end
of such fiscal quarter there were no held checks.
(iv) Copies of all reports on Form 10-Q filed with the
Securities and Exchange Commission, within fifty (50) days
after the end of each fiscal quarter.
(v) Copies of all reports on Form 10-K filed with the
Securities and Exchange Commission, within ninety-five
(95) days after the end of each fiscal year.
4. Letters of Credit. Section 1.5 of the Loan Agreement is amended to
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read as follows:
"1.5 LETTERS OF CREDIT. At the request of Borrower, Silicon may, in
its sole discretion, issue or arrange for the issuance of letters of credit
for the account of Borrower, in each case in form and substance
satisfactory to Silicon in its sole discretion (collectively, "Letters of
Credit"). The aggregate face amount of all outstanding Letters of Credit
from time to time shall not exceed the amount shown on the Schedule (the
"Letter of Credit Sublimit"), and shall be reserved against Loans which
would otherwise be available hereunder. Borrower shall pay all bank
charges (including charges of Silicon) for the issuance of Letters of
Credit, together with such additional fee as Silicon's letter of credit
department shall charge in connection with the issuance of the Letters of
Credit. Any
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payment by Silicon under or in connection with a Letter of Credit shall
constitute a Loan hereunder on the date such payment is made. Each Letter
of Credit shall have an expiry date no later than thirty days prior to the
Maturity Date. Borrower hereby agrees to indemnify, save, and hold Silicon
harmless from any loss, cost, expense, or liability, including payments
made by Silicon, expenses, and reasonable attorneys' fees incurred by
Silicon arising out of or in connection with any Letters of Credit.
Borrower agrees to be bound by the regulations and interpretations of the
issuer of any Letters of Credit guarantied by Silicon and opened for
Borrower's account or by Silicon's interpretations of any Letter of Credit
issued by Silicon for Borrower's account, and Borrower understands and
agrees that Silicon shall not be liable for any error, negligence, or
mistake, whether of omission or commission, in following Borrower's
instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto. Borrower understands
that Letters of Credit may require Silicon to indemnify the issuing bank
for certain costs or liabilities arising out of claims by Borrower against
such issuing bank. Borrower hereby agrees to indemnify and hold Silicon
harmless with respect to any loss, cost, expense, or liability incurred by
Silicon under any Letter of Credit as a result of Silicon's indemnification
of any such issuing bank. The provisions of this Loan Agreement, as it
pertains to Letters of Credit, and any other present or future documents or
agreements between Borrower and Silicon relating to Letters of Credit are
cumulative."
5. Credit Limit. The Credit Limit (Section 1 of the Schedule to the Loan
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Agreement) is hereby amended to read as follows:
"1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of:
(a) $10,000,000 at any one time outstanding (the "Maximum
Credit Limit") or,
(b) the sum of:
(i) 80% of Borrower's Eligible Receivables other than
Receivables backed by a letter of credit satisfactory
to Silicon, plus
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(ii) 100% of Borrower's Eligible Receivables backed by a
letter of credit satisfactory to Silicon,
provided that subsection (b) above shall not apply unless
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the outstanding Obligations exceed $3,000,000.
LETTER OF CREDIT SUBLIMIT
(Section 1.5): $2,000,000.
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FOREIGN EXCHANGE
CONTRACT SUBLIMIT Up to $2,000,000 of the Credit Limit (the "Contract
Limit") may be utilized for spot and future foreign
exchange contracts (the "Exchange Contracts"). The
Credit Limit available at any time shall be reduced by
the following amounts (the "Foreign Exchange Reserve")
on each day (the "Determination Date"): (i) on all
outstanding Exchange Contracts on which delivery is to
be effected or settlement allowed more than two
business days from the Determination Date, 10% of the
gross amount of the Exchange Contracts; plus (ii) on
all outstanding Exchange Contracts on which delivery
is to be effected or settlement allowed within two
business days after the Determination Date, 100% of
the gross amount of the Exchange Contracts. In lieu of
the Foreign Exchange Reserve for 100% of the gross
amount of any Exchange Contract, Borrower may request
that Silicon debit Borrower's bank account with
Silicon for such amount, provided Borrower has
immediately available funds in such amount in its bank
account.
Silicon may, in its discretion, terminate the Exchange
Contracts at any time (a) that an Event of Default
occurs or (b) that there is not sufficient
availability under the Credit Limit and Borrower does
not have available funds in its bank account to
satisfy the Foreign Exchange Reserve. If either
Silicon or Borrower terminates the Exchange Contracts,
and without limitation of the FX Indemnity Provisions
(as defined below), Borrower agrees to reimburse
Silicon for any and all fees, costs and expenses
relating thereto or arising in connection therewith.
Borrower shall not permit the total gross amount of
all Exchange Contracts on which delivery is to be
effected and settlement allowed in any two business
day period to be more than $1,000,000 (the "Settlement
Limit"), nor shall Borrower permit the total gross
amount of all Exchange Contracts to which Borrower is
a party, outstanding at any one time, to exceed the
Contract Limit.
Notwithstanding the above, however, the amount which
may be settled in any two (2) business day period may,
in Silicon's sole discretion, be increased above the
Settlement Limit up to, but in no event to exceed, the
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amount of the Contract Limit (the "Discretionary
Settlement Amount") under either of the following
circumstances (the "Discretionary Settlement
Circumstances"):
(i) if there is sufficient availability under the
Credit Limit in the amount of the Foreign Exchange
Reserve as of each Determination Date, and Silicon
in advance shall reserve the full amount of the
Foreign Exchange Reserve against the Credit Limit;
or
(ii) if there is insufficient availability under
the Credit Limit as to settlements within any two
(2) business day period, and if Silicon is able
to: (A) verify good funds overseas prior to
crediting Borrower's deposit account with Silicon
(in the case of Borrower's sale of foreign
currency); or (B) debit Borrower's deposit account
with Silicon prior to delivering foreign currency
overseas (in the case of Borrower's purchase of
foreign currency);
provided that it is expressly understood that
Silicon's willingness to adopt the Discretionary
Settlement Amount is a matter of Silicon's sole
discretion and the existence of any Discretionary
Settlement Circumstances in no way means or implies
that Silicon shall be obligated to permit Borrower to
exceed the Settlement Limit in any two business day
period.
In the case of Borrower's purchase of foreign
currency, Borrower shall instruct Silicon in advance
upon settlement either to treat the settlement amount
as an advance under the Credit Limit, or to debit
Borrower's account for the amount settled.
Borrower shall execute all standard form applications
and agreements of Silicon in connection with the
Exchange Contracts, and without limiting any of the
terms of such applications and agreements, Borrower
shall pay all standard fees and charges of Silicon in
connection with the Exchange Contracts.
Without limiting any of the other terms of this Loan
Agreement or any such standard form applications and
agreements of Silicon, Borrower agrees to indemnify
Silicon and hold it harmless, from and against any and
all
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claims, debts, liabilities, demands, obligations,
actions, costs and expenses (including, without
limitation, attorneys' fees of counsel of Silicon's
choice), of every nature and description, which it may
sustain or incur, based upon, arising out of, or in
any way relating to any of the Exchange Contracts or
any transactions relating thereto or contemplated
thereby (collectively referred to as the "FX Indemnity
Provisions").
The Exchange Contracts shall have maturity dates no
later than the Maturity Date."
6. Interest Rate. The definition of the interest rate charged upon all
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monetary Obligations, as set forth in Section 2 of the Schedule to the Loan
Agreement, is hereby amended to read as follows:
"A rate equal to the "Prime Rate" in effect from time to time.
Interest shall be calculated on the basis of a 360-day year for the actual
number of days elapsed. "Prime Rate" means the rate announced from time to
time by Silicon as its "prime rate;" it is a base rate upon which other
rates charged by Silicon are based, and it is not necessarily the best rate
available at Silicon. The interest rate applicable to the Obligations shall
change on each date there is a change in the Prime Rate."
7. Change in Maturity Date. The Maturity Date is hereby amended to be
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364 days from the date of this letter agreement.
8. Financial Covenants. Borrower shall comply with all of the following
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covenants. Compliance shall be determined as of the end of each fiscal quarter.
(a) Tangible Net Worth. During the six-month period beginning with
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the date of this letter agreement, Borrower shall maintain a Tangible Net Worth
of not less than $25,000,000. Beginning six months from the date of this letter
agreement, and continuing thereafter, Borrower shall maintain a Tangible Net
Worth of not less than $20,000,000. The foregoing supersedes and replaces the
Minimum Tangible Net Worth covenant set forth in Section 5 of the Schedule to
the Loan Agreement.
(b) Quick Ratio. Borrower shall maintain a ratio of quick assets of
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current liabilities of at least 2.0 to 1.0. The term "quick assets" means, as
of any applicable date, Borrower's consolidated cash, cash equivalents, accounts
receivable and investments with maturities of fewer than 90 days, determined in
accordance with generally accepted accounting principles.
(c) Debt-Net Worth Ratio. Borrower shall maintain a ratio of total
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liabilities to tangible net worth of not more than 1.0 to 1.0.
This letter agreement, the Loan Agreement, and the other Loan Documents set
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forth in full all of the representations and agreements of the parties with
respect to the subject matter hereof and supersede all prior discussions, oral
representations, oral agreements and oral understandings between the parties
with respect to the subject hereof. Except as herein expressly amended, all of
the terms and provisions of the Loan Agreement, and all other Loan Documents
shall continue in full force and effect and the same are hereby ratified and
confirmed.
If the foregoing correctly sets forth our agreement, please sign the
enclosed copy of this Agreement and return it to us.
Sincerely yours,
Silicon Valley Bank
By /s/ Xxxxxxx X. Xxxxx
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Title VP
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Accepted and agreed:
Borrower:
TERAYON COMMUNICATION SYSTEMS,
INC.
By /s/ Xxx X. Xxxxx
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President or Vice President
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EXHIBIT A
BORROWING BASE CERTIFICATE
Borrower: Terayon Communication Systems, Inc. Bank: Silicon Valley Bank
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 90 days due $_______________ _
5. Balance of 50% over 90 day 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 (_____% OF #14) $_______________ _
INVENTORY
16. Inventory Value as of _________ _ $_______________ _
17. LOAN VALUE OF INVENTORY (_____% OF #16) $_______________ _
BALANCES
18. Maximum Loan Amount $_______________ _
19. Total Funds Available [Lessor of #18 or (#15 plus #17)] $_______________ _
20. Present balance owing on Line of Credit $_______________ _
21. Outstanding under Sublimits ( ) $_______________ _
22. RESERVE POSITION (#19 minus #20 and #21) $_______________ _
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:
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BANK USE ONLY
Received By:______________
Date:______________
Reviewed By:______________
Complaints Status: Yes/No
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Terayon Communication Systems, Inc.
By: /s/ Xxx X. Xxxxx
______________________________
Authorized Signer
