MASTER
LOAN AND SECURITY AGREEMENT
(SHORT FORM)
CONTENTS
1 ACCOUNTING AND OTHER TERMS ............................................ 1
2 LOAN AND TERMS OF PAYMENT ............................................. 1
2.1 Credit Extensions ................................................ 1
2.1.1 Revolving Advances ......................................... 1
2.1.2 Equipment Advances ......................................... 2
2.2 Overadvances ..................................................... 2
2.3 Interest Rate; Payments .......................................... 2
2.4 Fees ............................................................. 3
3 CONDITIONS OF LOANS ................................................... 3
3.1 Conditions Precedent to Initial Credit Extension ................. 3
3.2 Conditions Precedent to all Credit Extensions .................... 3
4 CREATION OF SECURITY INTEREST ......................................... 3
4.1 Grant of Security Interest ....................................... 3
5 REPRESENTATIONS AND WARRANTIES ........................................ 3
5.1 Due Organization and Authorization ............................... 4
5.2 Collateral ....................................................... 5
5.3 Litigation ....................................................... 5
5.4 No Material Adverse Change in Financial Statements ............... 5
5.5 Solvency ......................................................... 5
5.6 Regulatory Compliance ............................................ 5
5.7 Subsidiaries ..................................................... 5
5.8 Full Disclosure .................................................. 0
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0 XXXXXXXXXXX XXXXXXXXX ................................................. 6
6.1 Government Compliance ............................................ 6
6.2 Financial Statements, Reports, Ceritificates ..................... 6
6.3 Inventory; Returns ............................................... 7
6.4 Taxes ............................................................ 7
6.5 Insurance ........................................................ 7
6.6 Primary Accounts ................................................. 7
6.7 Financial Covenants .............................................. 7
6.9 Further Assurances ............................................... 7
7 NEGATIVE COVENANTS .................................................... 7
7.1 Dispositions ..................................................... 8
7.2 Changes in Business, Ownership, Management or Business Locations.. 8
7.3 Mergers or Acquisitions .......................................... 8
7.4 Indebtedness ..................................................... 8
7.5 Encumbrance ...................................................... 8
7.6 Investments; Distributions ....................................... 8
7.7 Transactions with Affiliates ..................................... 8
7.8 Subordinated Debt ................................................ 8
7.9 Compliance ....................................................... 9
8 EVENTS OF DEFAULT ..................................................... 9
8.1 Payment Default .................................................. 10
8.2 Covenant Default ................................................. 10
8.3 Material Adverse Change .......................................... 10
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8.4 Attachment ....................................................... 10
8.5 Insolvency ....................................................... 10
8.6 Other Agreements ................................................. 10
8.7 Judgments ........................................................ 10
8.8 Misrepresentations ............................................... 11
9 BANK'S RIGHTS AND REMEDIES ............................................ 11
9.1 Rights and Remedies .............................................. 11
9.2 Power of Attorney ................................................ 12
9.3 Accounts Collection .............................................. 12
9.4 Bank Expenses .................................................... 12
9.5 Bank's Liability for Collateral .................................. 12
9.6 Remedies Cumulative .............................................. 12
9.7 Demand Waiver .................................................... 13
10 NOTICES ............................................................... 13
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER ............................ 13
12 GENERAL PROVISIONS .................................................... 14
12.1 Successors and Assigns ........................................... 14
12.2 Indemnification .................................................. 14
12.3 Time of Essence .................................................. 14
12.4 Severability of Provision ........................................ 14
12.5 Amendments in Writing, Integration ............................... 14
12.6 Counterparts ..................................................... 14
12.7 Survival ......................................................... 14
12.8 Confidentiality .................................................. 15
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12.9 Attorney's Fees, Costs and Expenses .............................. 15
13 DEFINITIONS ........................................................... 15
13.1 Definitions ...................................................... 15
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This LOAN AND SECURITY AGREEMENT (this "Agreement") dated September 24,
1998, between SILICON VALLEY BANK ("Bank") a California-chartered bank ("Bank")
with its principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000
and with a loan production office located at 000 000xx Xxx. X.X., Xxxxx 000,
Xxxxxxxx, XX 00000 and XXXXXX.XXX, INC. ("Borrower") 00000 XX 0xx Xxxxxx, Xxxxx
000, Xxxxxxxx, XX 00000, provides the terms on which Bank will lend to Borrower
and Borrower will repay Bank. The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement will be construed following
GAAP Calculations and determinations must be made following GAAP. The term
"financial statements" includes the notes and schedules. The terms "including"
and "includes" always mean "including (or includes) without limitation" in this
or any Loan Document. Capitalized terms in this Agreement shall have the
meanings set forth in Section 13. This Agreement shall be construed to impart
upon Bank a duty to act reasonably at all times.
2 LOAN AND TERMS OF PAYMENT
2.1 Credit Extensions. Borrower will pay Bank the unpaid principal amount of all
Credit Extensions and interest on the unpaid principal amount of the Credit
Extensions.
2.1.1 Revolving Advances.
(a) Bank will make Advances not exceeding (i) the lesser of (A) the
Committed Revolving Line or (B) the Borrowing Base minus (ii) the outstanding
principal balance of the Committed Revolving Line. Amounts borrowed under this
Section may be repaid and reborrowed during the term of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 3:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to that reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.
2.1.2 Equipment Advances.
(a) Through December 31, 1998 (the "Equipment Availability End Date"),
Bank will make advances ("Equipment Advance" and, collectively, "Equipment
Advances") not exceeding the Committed Equipment Line. The Equipment Advances
may only be used to purchase Equipment and may not exceed 100% of the equipment
invoice for the eligible Equipment purchased, excluding taxes, shipping,
warranty charges, freight discounts and installation expense.
(b) Interest accrues from the date of each Equipment Advance at the rate
in Section 2.3(a) and is payable monthly until the Equipment Availability End
Date occurs. Equipment Advances outstanding on the Equipment Availability End
Date are payable in 36 equal monthly installments of principal, plus accrued
interest, beginning on the last of each month following the Equipment
Availability End Date and ending on January 31, 2002 (the "Equipment Maturity
Date"). Equipment Advances when repaid may not be reborrowed.
(c) To obtain an Equipment Advance, Borrower must notify Bank (the notice
is irrevocable) by facsimile no later than 3:00 p.m. Pacific time 1 Business Day
before the day on which the Equipment Advance is to be made. The notice in the
form of Exhibit B (Payment/Advance Form) must be signed by a Responsible Officer
or designee and include a copy of the invoice for the Equipment being financed.
2.2 Overadvances. If Borrower's Obligations under Section 2.1.1 exceed the
lesser of either (i) the Committed Revolving Line or (ii) the Borrowing Base,
Borrower must immediately pay in cash to Bank the excess. If Borrower's
Obligations under Section 2.1.2 exceed the lesser of either (i) the Committed
Equipment Line or (ii) 100% of the equipment invoice for the eligible Equipment
purchased, excluding taxes, shipping, warranty charges, freight discounts and
installation expense, Borrower must immediately pay in cash to Bank the excess.
2.3 Interest Rate; Payments.
(a) Interest Rate. Advances accrue interest on the outstanding principal
balance at a per annum rate 1.0 percentage points above the Prime Rate.
Equipment Advances accrue interest on the outstanding principal balance at a per
annum rate 2.0 percentage points above the Prime Rate. After an Event of
Default, Obligations accrue interest at 5 percent above the rate effective
immediately before the Event of Default. The interest rate increases or
decreases when the Prime Rate changes. Interest is computed on a 360 day year
for the actual number of days elapsed.
(b) Payments. Interest is payable on the last day of each month. Bank may
debit any of Borrower's deposit accounts including Account Number 3300051842 for
principal and interest payments or any amounts Borrower owes Bank. Bank will
notify Borrower when it debits Borrower's accounts. These debits are not a
set-off. Payments received after 12:00
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noon Pacific time are considered received at the opening of business on the next
Business Day. When a payment is due on a day that is not a Business Day, the
payment is due the next Business Day and additional fees or interest accrue.
2.4 Fees. Borrower will pay to Bank:
(a) Facility Fee. A fully earned, non-refundable facility fee of $7,500
due on the Closing Date; and
(b) Bank Expenses. All Bank Expenses (including reasonable attorneys' fees
and expenses) incurred through and after the Closing Date when due.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension.
Bank's obligation to make the initial Credit Extension is subject to the
condition precedent that it receive the agreements, documents and fees it
requires.
3.2 Conditions Precedent to all Credit Extensions. Bank's obligations to make
each Credit Extension, including the initial Credit Extension, is subject to the
following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension and no Event of Default may have occurred and be continuing, or
result from the Credit Extension. Each Credit Extension is Borrower's
representation and warranty on that date that the representations and warranties
in Section 5 remain true.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower grants Bank a continuing security
interest in all presently existing and later acquired Collateral to secure all
Obligations and performance of each of Borrower's duties under the Loan
Documents and any other documents or agreements between Bank and Borrower to
document Obligations arising with respect to existing extensions of credit.
Except for Permitted Liens, any security interest will be a first priority
security interest in the Collateral. Bank may place a "hold" on any deposit
account pledged as Collateral. If the Agreement is terminated, Bank's lien and
security interest in the Collateral will continue until Borrower fully satisfies
its Obligations.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
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5.1 Due Organization and Authorization. Borrower and each Subsidiary is duly
existing and in good standing in its state of formation and qualified and
licensed to do business in, and in good standing in, any state in which the
conduct of its business or its ownership of property requires that it be
qualified.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formations documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it is
bound in which the default could cause a Material Adverse Change.
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5.2 Collateral. Borrower has good title to the Collateral, free of Liens except
Permitted Liens. The Eligible Accounts are bona fide, existing obligations, and
the service or property has been performed or delivered to the account debtor or
its agent for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has no notice of any actual or imminent Insolvency Proceeding
of any account debtor whose accounts are an Eligible Account in any Borrowing
Base Certificate. All Inventory is in all material respects of good and
marketable quality, free from material defects.
5.3 Litigation. Except as shown in the Schedule, there are no actions or
proceedings pending or, to Borrower's knowledge, threatened by or against
Borrower or any Subsidiary in which an adverse decision could cause a Material
Adverse Change.
5.4 No Material Adverse Change in Financial Statements. All consolidated
financial statements for Borrower and any Subsidiary delivered to Bank fairly
present in all material respects Borrower's consolidated financial condition and
Borrowers consolidated results of operations. There has not been any material
deterioration in Borrower's consolidated financial condition since the date of
the most recent financial statements submitted to Bank.
5.5 Solvency. The fair salable value of Borrower's assets (including goodwill
minus disposition costs) exceeds the fair value of its liabilities; the Borrower
is not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.
5.6 Regulatory Compliance. Borrower is not an "investment company" or a company
"controlled" by an "investment company" under the Investment Company Act.
Borrower is not engaged as one of its important activities in extending credit
for margin stock (under Regulations G, T and U of the Federal Reserve Board of
Governors). Borrower has complied with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could cause a Material Adverse Change. None of Borrower's or any Subsidiary's
properties or assets has been used by Borrower or any Subsidiary or, to the best
of Borrower's knowledge, by previous Persons, in disposing, producing, storing,
treating, or transporting any hazardous substance other than legally. Borrower
and each Subsidiary has timely filed all required tax returns or made adequate
provision to pay, all taxes. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all government authorities that are necessary to
continue its business as currently conducted.
5.7 Subsidiaries. Borrower does not own any stock, partnership interest or other
equity securities except for Permitted Investments.
5.8 Full Disclosure. No representation, warranty or other statement of Borrower
in any certificate or written statement given to Bank contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading.
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6 AFFIRMATIVE COVENANTS
Borrower will do all of the following:
6.1 Government Compliance. Borrower will maintain its 'and all 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 on Borrower's business or operations.
Borrower will comply, and have each Subsidiary comply, with all laws, ordinances
and regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower's business or operations or cause a Material
Adverse Change.
6.2 Financial Statements, Reports, Certificates. (a) Borrower will deliver to
Bank: (i) as soon as available, but no later than 30 days after the last day of
each month, a company prepared consolidated balance sheet and income statement
covering Borrower's consolidated operations during the period, in a form
acceptable to Bank and certified by a Responsible Officer; (ii) as soon as
available, but no later than 90 days after the end of Borrower's fiscal year,
audited consolidated financial statements prepared under GAAP, consistently
applied, together with an opinion on the financial statements from an
independent certified public accounting firm acceptable to Bank; (iii) within 5
days of filing, copies of all statements, reports and notices made available to
Borrower's security holders or to any holders of Subordinated Debt and all
reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission; (iv) a prompt report of any legal actions pending or threatened
against Borrower or any Subsidiary that could result in damages or costs to
Borrower or any Subsidiary of $100,000 or more; (v) and budgets, sales
projections, operating plans or other financial information Bank requests.
(b) Within 20 days after the last day of each month, Borrower will deliver
to Bank a Borrowing Base Certificate signed by a Responsible Officer in the form
of Exhibit C, with aged listings of accounts receivable and accounts payable.
(c) Within 30 days after the last day of each month, Borrower will deliver
to Bank with the monthly financial statements a Compliance Certificate signed by
a Responsible Officer in the form of Exhibit D.
(d) Bank has the right to audit Borrower's Accounts at Borrower's expense,
but the audits will be conducted no more often than once every 6 months unless
an Event of Default has occurred and is continuing.
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6.3 Inventory; Returns. Borrower will keep all Inventory in good and marketable
condition, free from material defects. Returns and allowances between Borrower
and its account debtors will follow Borrower's customary practices as they exist
at the Closing Date. Borrower must promptly notify Bank of all returns,
recoveries, disputes and claims that involve more than $50,000.
6.4 Taxes. Borrower will make, and cause each Subsidiary to make, timely payment
of all material federal, state, and local taxes or assessments and will deliver
to Bank, on demand, appropriate certificates attesting to the payment.
6.5 Insurance. Borrower will keep its business and the Collateral insured for
risks and in amounts, as Bank requests. Insurance policies will be in a form,
with companies, and in amounts that are satisfactory to Bank. All property
policies will have a lender's loss payable endorsement showing Bank as an
additional loss payee and all liability policies will show the Bank as an
additional insured and provide that the insurer must give Bank at least 20 days
notice before canceling its policy. At Bank's request, Borrower will deliver
certified copies of policies and evidence of all premium payments. Proceeds
payable under any policy will, at Bank's option, be payable to Bank on account
of the Obligations.
6.6 Primary Accounts. Borrower will maintain its primary depository and
operating accounts with Bank.
6.7 Financial Covenants. Borrower will maintain as of the last day of each month
from and after the earlier of (i) January 31, 1999 or (ii) the close of
Borrower's Series E equity round:
(a) Quick Ratio. A ratio of Quick Assets to Current Liabilities of at
least 1.50 to 1.0.
(b) Tangible Net Worth. A Tangible Net Worth of at least $1,000,000.00.
(c) Liquidity Coverage. A ratio of (i) unrestricted cash (and equivalents)
plus (x) the Committed Revolving Line or the Borrowing Base, whichever is less,
minus (y) the outstanding principal balance of the Committed Revolving Line over
(ii) the outstanding principal balance of the Committed Equipment Line of at
least 1.5 to 1.0.
6.9 Further Assurances. Borrower will execute any further instruments and take
further action as Bank requests to perfect or continue Bank's security interest
in the Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
Borrower will not do any of the following:
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7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively "Transfer"), or permit any of its Subsidiaries to Transfer, all or
any part of its business or property, other than a Transfer: (i) of Inventory in
the ordinary course of business: (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; or (iii) of worn-out or obsolete Equipment.
7.2 Changes in Business, Ownership, Management or Business Locations.
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or have a change in
(i) its ownership of 50% of more or (ii) senior management (defined for this
purpose as Borrower's chief executive officer, chief operating officer and chief
financial officer); provided, however, that the hiring of a chief executive
officer and a chief financial officer by Borrower for openings existing as of
the Closing Date will not be considered a "change of senior management" for
purposes of this covenant although this provision will apply to subsequent
openings in those positions. Borrower will not, without at least 30 days prior
written notice to Bank, relocate its principal executive office or add any new
offices or business locations.
7.3 Mergers or Acquisitions. (i) Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person; or (ii) merge or consolidate a
Subsidiary into another Subsidiary or into Borrower.
7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or
permit any Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance. Create, incur, or allow any Lien on any of its property, or
assign or convey any right to receive income, including the sale of any
Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Bank's first priority security interest in the Collateral
to change.
7.6 Investments; Distributions. (i) Directly or indirectly acquire or own any
Person, or make any Investment in any Person, other than Permitted Investments,
or permit any of its Subsidiaries to do so; or (ii) pay any dividends or make
any distribution or payment or redeem, retire or purchase any capital stock.
7.7 Transactions with Affiliates. Directly or indirectly enter or permit any
material transaction with any Affiliate, except transactions that are in the
ordinary course of Borrower's business, on terms less favorable to Borrower than
would be obtained in an arm's length transaction with a non-affiliated Person.
7.8 Subordinated Debt. Make or permit any payment on any Subordinated Debt,
except under the terms of the Subordinated Debt, or amend any provision in any
document relating to the Subordinated Debt, without Bank's prior written
consent.
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7.9 Compliance. Become an "investment company" or a company controlled by an
"investment company," under the Investment Company Act of 1940 or undertake as
one of its important activities extending credit to purchase or carry margin
stock, or use the proceeds of any Advance for that purpose; fail to meet the
minimum funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could have a material adverse effect on Borrower's business or operations or
cause a Material Adverse Change, or permit any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
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8.1 Payment Default. Borrower fails to pay any of the Obligations;
8.2 Covenant Default. Borrower does not perform any obligation in Section 6 or
violates any covenant in Article 7 or does not perform or observe any other
material term, condition or covenant in this Agreement, any Loan Documents, or
in any agreement between Borrower and Bank and as to any default under a term,
condition or covenant that can be cured, has not cured the default within 10
days after it occurs, or if the default cannot be cured within 10 days or cannot
be cured after Borrower's attempts in the 10 day period, and the default may be
cured within a reasonable time, then Borrower has an additional time, (of not
more than 30 days) to attempt to cure the default; or Borrower does not perform
any obligation under any other documents or agreements between Bank and Borrower
to document Obligations arising with respect to existing extensions of credit in
accordance with the terms of such document or agreement. During the additional
period the failure to cure the default is not an Event of Default (but no Credit
Extensions will be made during the cure period);
8.3 Material Adverse Change. (i) There occurs a material impairment in the
perfection or priority of Bank's security interest in the Collateral or in the
value of such Collateral which is not covered by adequate insurance; or (ii)
Bank determines, based upon information available to it and in its reasonable
judgment, that there is a reasonable likelihood that Borrower will fail to
comply with one or more of the financial covenants in Section 6 during the next
succeeding financial reporting period;
8.4 Attachment. (i) Any material portion of Borrower's assets is attached,
seized, levied on, or comes into possession of a trustee or receiver and the
attachment, seizure or levy is not removed in 10 days; (ii) Borrower is
enjoined, restrained, or prevented by court order from conducting a material
part of its business; (iii) a judgment or other claim becomes a Lien on a
material portion of Borrower's assets; or (iv) a notice of lien, levy, or
assessment is filed against any of Borrower's assets by any government agency
and not paid within 10 days after Borrower receives notice. These are not Events
of Default if stayed or if a bond is posted pending contest by Borrower (but no
Credit Extensions will be made during the cure period);
8.5 Insolvency. (i) Borrower becomes insolvent; (ii) Borrower begins an
Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against
Borrower and not dismissed or stayed within 30 days (but no Credit Extensions
will be made before any Insolvency Proceeding is dismissed);
8.6 Other Agreements. There is a default in any agreement between Borrower and a
third party that gives the third party the right to accelerate any indebtedness
exceeding $100,000 or that could cause a Material Adverse Change;
8.7 Judgments. A money judgment(s) in the aggregate of at least $50,000 is
rendered against Borrower and is unsatisfied and unstayed for 10 days (but no
Credit Extensions will be made before the judgment is stayed or satisfied);
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8.8 Misrepresentations. If Borrower or any Person acting for Borrower makes any
material misrepresentation or material misstatement now or later in any warranty
or representation in this Agreement or in any communication delivered to Bank or
to induce Bank to enter this Agreement or any Loan Document.
9 BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. When an Event of Default occurs and continues Bank may,
without notice or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an Event
of Default described in Section 8.5 occurs all Obligations are immediately due
and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit under
this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors for
amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or reasonable
to protect its security interest in the Collateral. Borrower will assemble the
Collateral if Bank requests and make it available as Bank designates. Bank may
enter premises where the Collateral is located, take and maintain possession of
any part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to exercise any of Bank's rights or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower it
holds, or (ii) any amount held by Bank owing to or for the credit or the account
of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and ad franchise agreements inure to Bank's benefit;
and
(g) Dispose of the Collateral according to the Code.
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9.2 Power of Attorney. When an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign Borrower's name
on any invoice or xxxx of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under Borrower's insurance
policies; (iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as the Code
permits. Bank may exercise the power of attorney to sign Borrower's name on any
documents necessary to perfect or continue the perfection of any security
interest regardless of whether an Event of Default has occurred. Bank's
appointment as Borrower's attorney in fact, and all of Bank's rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and Bank's obligation to provide Credit Extensions
terminates.
9.3 Accounts Collection. When an Event of Default occurs and continues, Bank may
notify any Person owing Borrower money of Bank's security interest in the funds
and verify the amount of the Account. Borrower must collect all payments in
trust for Bank and, if requested by Bank, immediately deliver the payments to
Bank in the form received from the account debtor, with proper endorsements for
deposit.
9.4 Bank Expenses. If Borrower fails to pay any amount or furnish any required
proof of payment to third persons Bank may make all or part of the payment or
obtain insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank's waiver of any Event of Default.
9.5 Bank's Liability for Collateral. If Bank complies with reasonable banking
practices it is not liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the
value of the Collateral; or (d) any act or default of any carrier, warehouseman,
bailee, or other person. Borrower bears all risk of loss, damage or destruction
of the Collateral.
9.6 Remedies Cumulative. Bank's rights and remedies under this Agreement, the
Loan Documents, and all other agreements are cumulative. Bank has all rights and
remedies provided under the Code, by law, or in equity. Bank's exercise of one
right or remedy is not an election, and Bank's waiver of any Event of Default is
not a continuing waiver. Bank's delay is not a waiver, election, or
acquiescence. No waiver is effective unless signed by Bank and then is only
effective for the specific instance and purpose for which it was given.
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9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice
of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guaranties held by Bank on which Borrower is
liable.
10 NOTICES
All notices or demands by any party to this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile at the addresses below:
Borrower XxxxxX.xxx, Inc.
00000 XX 0xx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attn: F. Xxxxxx Xxxxxxxxxxx, President
FAX: (000) 000-0000
Bank: Silicon Valley Bank
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
FAX: (000) 000-0000
A Party may change its notice address by giving the other Party written
notice.
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Washington law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in King County, Washington.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
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12 GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement binds and is for the benefit of the
successors and permitted assigns of each party. Borrower may not assign this
Agreement or any rights or Obligations under it without Bank's prior written
consent which may be granted or withheld in Bank's discretion. Bank has the
right, without the consent of or notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits under this Agreement, the Loan Documents
or any related agreement.
12.2 Indemnification. Borrower will indemnify, defend and hold harmless Bank and
its officers, employees and agents against: (a) all obligations, demands,
claims, and liabilities asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (b) all losses or Bank
Expenses incurred, or paid by Bank from, following, or consequential to
transactions between Bank Line and Borrower (including 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 in this Agreement.
12.4 Severability of Provision. Each provision of this Agreement is severable
from every other provision in determining the enforceability of any provision.
12.5 Amendments in Writing, Integration. All amendments to this Agreement must
be in writing. This Agreement and the Loan Documents represent the entire
agreement about this subject matter, and supersedes prior or contemporaneous
negotiations or agreements. All prior or contemporaneous agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents.
12.6 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, are an original, and all taken together, are one Agreement.
12.7 Survival. All covenants, representations and warranties made in this
Agreement continue in full force while any Obligations remain outstanding. The
obligations of Borrower in Section 12.2 to indemnify Bank will survive until all
statutes of limitations for actions that may be brought against Bank have run.
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12.8 Confidentiality. In handling any confidential information, Bank will
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (i) to Bank's
subsidiaries or affiliates in connection with their business with Borrower; (ii)
to prospective transferees or purchasers of any interest in the Loans; (iii) as
required by law, regulation, subpoena, or other order, (iv) as required in
connection with Bank's examination or audit; and (v) as Bank considers
appropriate exercising remedies under this Agreement. Confidential information
does not include information that either: (a) is in the public domain or in
Bank's possession when disclosed to Bank, or becomes part of the public domain
after disclosure to Bank; or (b) is disclosed to Bank by a third party, if Bank
does not know that the third party is prohibited from disclosing the
information.
12.9 Attorneys' Fees, Costs and Expenses. In any action or proceeding between
Borrower and Bank arising out of the Loan Documents, the prevailing party will
be entitled to recover its reasonable attorneys' fees and other costs and
expenses incurred, in addition to any other relief to which it may be entitled.
13 DEFINITIONS
13.1 Definitions. In this Agreement:
"Accounts" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" is a loan advance (or advances) under the
Committed Revolving Line.
"Affiliate" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"Bank Expenses" are all audit fees and expenses and reasonable costs or
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"Borrower's Books" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.
"Borrowing Base" is 75% of Eligible Accounts, as determined by Bank from
Borrower's most recent Borrowing Base Certificate.
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"Business Day" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
"Closing Date" is the date of this Agreement.
"Code" is the Washington Uniform Commercial Code.
"Collateral" is the property described on Exhibit A.
"Committed Revolving Line" is a Credit Extension of up to $300,000.00.
"Committed Equipment Line" is a Credit Extension of up to $450,000.00;
provided, however that notwithstanding anything else contained in this
Agreement, Borrower may borrow not more than $200,000.00 of the Committed
Equipment Line until such time as Bank has received evidence, satisfactory in
Bank's sole discretion, that a term sheet has been agreed upon with one or more
investors to complete an issuance of additional equity securities of Borrower of
at least $2,100,000.00.
"Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"Copyrights" are all copyright rights, applications or registrations and
like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"Credit Extension" is each Advance, Equipment Advance, Letter of Credit,
Term Loan, Exchange Contract or any other extension of credit by Bank for
Borrower's benefit.
"Current Liabilities" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year.
"Eligible Accounts" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5.2;
but Bank may change
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eligibility standards by giving Borrower notice. Unless Bank agrees otherwise in
writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has not paid within 90 days of
invoice date;
(b) Accounts for an account debtor, 50% or more of whose Accounts have not
been paid within 90 days of invoice date;
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, for the amounts that exceed
that percentage, unless Bank approves in writing;
(e) Accounts for which the account debtor does not have its principal
place of business in the United States;
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality;
(g) Accounts for which Borrower owes the account debtor, but only up to
the amount owed (sometimes called "contra" accounts, accounts payable, customer
deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which goods
are consigned, sales guaranteed, sale or return, sale on approval, xxxx and
hold, or other terms if account debtor's payment may be conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes any
claim and Bank believes there may be a basis for dispute (but only up to the
disputed or claimed amount), or if the Account Debtor is subject to an
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
"Equipment" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"Equipment Advance" is defined in Section 2.1.2.
"Equipment Availability End Date" is defined in Section 2.1.2.
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"Equipment Loan Maturity Date" is defined in Section 2.1.2.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"GAAP" is generally accepted accounting principles.
"Indebtedness" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"Insolvency Proceeding" is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with as creditors, or proceedings seeking reorganization, arrangement,
or other relief.
"Inventory" is present and future inventory in which 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 later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"Investment" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Documents" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
"Material Adverse Change" is defined in Section 8.3.
"Mask Works" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"Obligations" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit and
Exchange Contracts and
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including interest accruing after Insolvency Proceedings begin and debts,
liabilities, or obligations of Borrower assigned to Bank.
"Patents" are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.
"Permitted Indebtedness" is:
(a) Borrower's indebtedness to Bank under this Agreement or the Loan
Documents;
(b) Indebtedness existing on the Closing Date and shown on the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investments" are:
(a) Investments shown on the Schedule and existing on the Closing Date;
and
(b) (i) marketable direct obligations issued or unconditionally guaranteed
by the United States or its agency or any State maturing within 1 year from its
acquisition, (ii) commercial paper maturing no more than 1 year after its
creation and having the highest rating from either Standard & Poor's Corporation
or Xxxxx'x Investors Service, Inc., and (iii) Bank's certificates of deposit
issued maturing no more than 1 year after issue.
"Permitted Liens" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower or
its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;
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(d) Leases or subleases and licenses or sublicenses granted in the
ordinary course of Borrower's business and any interest or title of a lessor,
licenser or under any lease or license, if the leases, subleases, licenses and
sublicenses permit granting Bank a security interest;
(e) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
"Person" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
"Prime Rate" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.
"Quick Assets" is, on any date, the Borrower's consolidated, unrestricted
cash, cash equivalents, net billed accounts receivable and investments with
maturities of less than 12 months determined according to GAAP.
"Responsible Officer" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" is the earlier of (i) the Closing Date plus 364
days or (ii) September 18, 1999.
"Schedule" is any attached schedule of exceptions.
"Subordinated Debt" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (and identified as subordinated by Borrower and Bank).
"Subsidiary" is for any Person, joint venture, or any other business
entity of which more than 50% of the voting stock or other equity interests is
owned or controlled, directly or indirectly, by the Person or one or more
Affiliates of the Person.
"Tangible Net Worth" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) 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) reserves not already
deducted from assets, and (ii) Total Liabilities plus Subordinated Debt.
"Total Liabilities" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrowers consolidated balance sheet, including all
Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.
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"Trademarks" are trademark and service xxxx rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
BORROWER:
XXXXXX.XXX, INC.
By: /s/ F. Xxxxxx Xxxxxxxxxxx
-------------------------
Title: President
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SILICON VALLEY BANK
By: /s/ [Illegible]
-----------------------
Title: Vice President
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