EXHIBIT 10.15
This LOAN AND SECURITY AGREEMENT is entered into as of August 25, 1999, by and
between VENTURE BANKING GROUP, a division of Cupertino National Bank ("Bank")
and VIDEONICS, INC. ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank desires
to extend credit to Borrower. This Agreement sets forth the terms on which Bank
will advance credit to Borrower, and Borrower 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 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
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 Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means a cash advance or cash advances
under the Revolving Facility.
"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 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; reasonable Collateral audit fees; and Bank's reasonable attorneys'
fees and expenses incurred in amending, enforcing or defending the Loan
Documents (including fees and expenses of appeal), incurred before, during and
after an Insolvency Proceeding, whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning 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" means an amount equal to seventy-five percent
(80%) of Eligible Accounts, as determined by Bank with reference to the most
recent Borrowing Base Certificate delivered by Borrower.
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"Business Day" means any day that is not a Saturday, Sunday,
or other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A
attached hereto.
"Committed Revolving 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 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.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Credit Extension" means each Advance or any other extension
of credit by Bank for the benefit of Borrower hereunder.
"Current Assets" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"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 Borrower 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 year from the date of determination thereof unless
such Indebtedness is renewable or extendible at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination.
"Daily Balance" means the amount of the Obligations owed at
the end of a given day.
"Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
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 as a
consequence of any Collateral audits done pursuant to Section 6.3 in Bank's
reasonable judgment and upon
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notification thereof to Borrower 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 ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor,
thirty percent (30%) of whose Accounts the account debtor has failed to pay
within ninety (90) days of invoice date;
(c) Accounts with respect to which the account debtor
is an officer, employee, or agent of Borrower;
(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 of Borrower;
(f) Accounts with respect to which the account debtor
does not have its principal place of business in the United States, with the
exception of those Accounts which are backed by either letters of credit or
foreign credit insurance;
(g) Accounts with respect to which the account debtor
is the United States or any department, agency, or instrumentality of the United
States;
(h) Accounts with respect to which Borrower is liable
to the account debtor for goods sold or services rendered by the account debtor
to Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(i) Accounts with respect to an account debtor,
including Subsidiaries and Affiliates, whose total obligations to Borrower
exceed twenty percent (20%) of all Accounts, 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 Borrower has any interest.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"Event of Default" has the meaning assigned in Article 8.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
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"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, (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.
"Intellectual Property Collateral" means all of Borrower's
right, title and interest in and to the following:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all
intellectual property rights in computer software and computer software products
now or hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available
to Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past,
present and future infringement of any of the rights included above, with the
right, but not the obligation, to xxx for and collect such damages for said use
or infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the
Copyrights, Patents or Trademarks, and all license fees and royalties arising
from such use to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of
the Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing,
including without limitation all payments under insurance or any indemnity or
warranty payable in respect of any of the foregoing.
"Inventory" means all 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 at any time hereafter owned by or in the
custody or possession, actual or constructive, of 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, and Borrower's Books relating
to any of the foregoing.
"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, and
the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
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"Loan Documents" means, collectively, this Agreement, any note
or notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on
(i) the business operations or condition (financial or otherwise) of Borrower
and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay
the Obligations or otherwise perform its obligations under the Loan Documents.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by 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 Borrower to others that Bank may have obtained by
assignment or otherwise.
"Patents" means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Bank pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of 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;
(c) Indebtedness secured by a lien described in
clause (c) of the defined term "Permitted Liens," provided such Indebtedness
does not exceed the lesser of the cost or fair market value of the equipment
financed with such Indebtedness; and
(d) Subordinated Debt.
"Permitted Investment" means:
(a) Investments existing on the Closing Date
disclosed in the Schedule; and
(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 rating of at least A-2 or P-2 from either
Standard & Poor's Corporation or Xxxxx'x Investors Service, (iii) certificates
of deposit maturing no more than one (1) year from the date of investment
therein issued by Bank and (iv) Bank's money market accounts.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and
disclosed in the Schedule or arising under this Agreement or the other Loan
Documents;
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(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, 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 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; and
(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.
"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.
"Prime Rate" means the variable rate of interest, per annum,
most recently published in the Western Edition of The Wall Street Journal, as
the "prime rate," whether or not such rate is the lowest rate available from
Bank.
"Quick Assets" means, at any date as of which the amount
thereof shall be determined, the unrestricted cash and cash-equivalents,
accounts receivable and investments with maturities not to exceed 90 days, of
Borrower determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive
Officer, the Chief Operating Officer, the Chief Financial Officer and the
Controller of Borrower.
"Revolving Facility" means the facility under which Borrower
may request Bank to issue Advances, as specified in Section 2.1.1 hereof.
"Revolving Maturity Date" means August 25, 2001.
"Schedule" means the schedule of exceptions attached hereto,
if any.
"Subordinated Debt" means any debt incurred by Borrower that
is subordinated to the debt owing by Borrower to Bank on terms reasonably
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i)
any general partnership interest or (ii) more than 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, at the time as of which any determination is
being made, is owned by Borrower, either directly or through an Affiliate.
"Tangible Net Worth" means at any date as of which the amount
thereof shall be determined, the sum of the capital stock and additional paid-in
capital plus retained earnings (or minus accumulated deficit) of Borrower and
its Subsidiaries minus intangible assets, plus Subordinated Debt, on a
consolidated basis determined in accordance with GAAP.
"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 Borrower,
including in any event all Indebtedness.
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"Trademarks" means any trademark and servicemark rights,
whether registered or not, applications to register and registrations of the
same and like protections, and the entire goodwill of the business of Borrower
connected with and symbolized by such trademarks.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
2.1 Credit Extensions.
Borrower promises to pay to the order of Bank, in
lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower hereunder. Borrower
shall also pay interest on the unpaid principal amount of such Credit Extensions
at rates in accordance with the terms hereof.
2.1.1 Revolving Facility.
(a) Subject to and upon the terms and conditions of
this Agreement, Borrower may request Advances in an aggregate outstanding amount
not to exceed the lesser of (i) the Borrowing Base or (ii) the Committed
Revolving Line. Subject to the terms and conditions of this Agreement, amounts
borrowed pursuant to this Section 2.1.1 may be repaid and reborrowed at any time
prior to the Revolving Maturity Date, at which time all Advances under this
Section 2.1.1 shall be immediately due and payable. Borrower may prepay any
Advances without penalty or premium.
(b) Whenever Borrower desires an Advance, Borrower
will notify Bank by facsimile transmission or telephone no later than 3:00 p.m.
Pacific 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. 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 Borrower 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 2.1.1 to
Borrower's deposit account.
(c) Interest hereunder shall be due and payable on
the twenty-fifth (25th) calendar day of each month during the term hereof. Bank
shall, at its option, charge such interest, all Bank Expenses, and all Periodic
Payments against any of Borrower's deposit accounts or against the Committed
Revolving Line, in which case those amounts shall thereafter accrue interest at
the rate then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations and shall thereafter accrue
interest at the rate then applicable hereunder.
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2.2 Overadvances. If at any time the aggregate amount of the Advances
exceeds the lesser of (i) the Borrowing Base or (ii) the Committed Revolving
Line, Borrower shall immediately pay to Bank, in cash, the amount of such
excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rates.
(i) Advances. Except as set forth in Section
2.3(b), the Advances shall bear interest, on the outstanding daily balance
thereof, at a rate equal to one and one-half percent (1.50%) above the Prime
Rate.
(b) Default Rate. All Obligations shall bear
interest, from and after the occurrence and during the continuance 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) Computation. In the event the Prime Rate is
changed from time to time hereafter, the applicable rate of interest hereunder
shall be increased or decreased effective as of 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.
2.4 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 Borrower 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 on account 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 12:00 noon California 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.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. On the Closing Date, a Facility Fee
equal to Three Thousand Seven Hundred Fifty Dollars ($3,750), which shall be
nonrefundable;
(b) Financial Examination and Appraisal Fees. Bank's
customary fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents; and
(c) Bank Expenses. On the Closing Date, all Bank
Expenses incurred through the Closing Date, including reasonable attorneys' fees
and expenses and, after the Closing Date, all Bank Expenses, including
reasonable attorneys' fees and expenses, as and when they become due.
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2.6 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 Borrower 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 increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
the Obligations, Bank shall notify Borrower thereof. Borrower agrees 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.
2.7 Term. 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 Revolving 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. Notwithstanding termination, Bank's Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding.
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) an intellectual property security agreement;
(c) no later than September 15, 1999, a warrant to
purchase stock;
(d) a subordination agreement in form and substance
acceptable to Bank for the One Million Dollars ($1,000,000) which represent the
director loan;
(e) such documents required to effect the transfer of
ownership and proceeds of Borrower's existing lockbox from Xxxxx Fargo Bank to
Bank.
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(f) a certificate of the Secretary of Borrower with
respect to incumbency and resolutions authorizing the execution and delivery of
this Agreement;
(g) a promissory note evidencing Borrower's
indebtedness to Bank under this Agreement in substantially the form of Exhibit
E;
(h) financing statement (Form UCC-1);
(i) insurance certificate;
(j) payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof;
(k) an accounts receivable audit, the results of
which shall be satisfactory to Bank; and
(l) 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 exist after giving effect to
such Credit Extension (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). The making of each Credit
Extension shall be deemed to be a representation and warranty by Borrower 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. Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
4.2 Delivery of Additional Documentation Required. Borrower shall from
time to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral 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 Borrower's usual business hours, to
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inspect Borrower's Books and to make copies thereof and to check, test, and
appraise the Collateral in order to verify Borrower's financial condition or the
amount, condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary 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.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible title to
the Collateral, free and clear of Liens, except for Permitted Liens.
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.
Borrower has not received 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.
5.6 Intellectual Property Collateral. Borrower is the sole owner of the
Intellectual Property Collateral, except for non-exclusive licenses granted by
Borrower to its customers in the ordinary course of business. Each of the
Patents is valid and enforceable, and no part of the Intellectual Property
Collateral has been judged invalid or unenforceable, in whole or in part, and no
claim has been made that any part of the Intellectual Property Collateral
violates the rights of any third party.
5.7 Name; Location of Chief Executive Office. Except as disclosed in
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof. 5.8 Litigation.
5.8 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect or a material adverse effect on Borrower's interest or
Bank's security interest in the Collateral.
5.9 No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower and any Subsidiary that
are delivered by Borrower to Bank fairly
11
present in all material respects Borrower's consolidated financial condition as
of the date thereof and Borrower's consolidated results of operations for the
period then ended. There has not been a material adverse change in the
consolidated financial condition of Borrower since the date of the most recent
of such financial statements submitted to Bank.
5.10 Solvency, Payment of Debts. Borrower is solvent and able to pay
its debts (including trade debts) as they mature.
5.11 Regulatory Compliance. Borrower and each Subsidiary have met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations T and U of the Board of Governors of the Federal Reserve
System). Borrower has complied with all the provisions of the Federal Fair Labor
Standards Act. Borrower has not violated any statutes, laws, ordinances or rules
applicable to it, violation of which could have a Material Adverse Effect.
5.12 Environmental Condition. None of Borrower's or any Subsidiary's
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of 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 Borrower's knowledge, none of 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 Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency concerning any action or
omission by Borrower or any Subsidiary resulting in the releasing, or otherwise
disposing of hazardous waste or hazardous substances into the environment.
5.13 Taxes. Borrower and each Subsidiary have filed or caused to be
filed all tax returns required to be filed, and have paid, or have made adequate
provision for the payment of, all taxes reflected therein.
5.14 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
5.15 Government Consents. Borrower and each Subsidiary have 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 Borrower's business as currently conducted.
5.16 Year 2000. Borrower and its Subsidiaries have reviewed the areas
within their operations and business which could be adversely affected by, and
have developed or are
12
developing a program to address on a timely basis, the Year 2000 Problem and
have made related appropriate inquiry of material suppliers and vendors, and
based on such review and program, the Year 2000 Problem will not have a Material
Adverse Effect upon its financial condition, operations or business as now
conducted. "Year 2000 Problem" means the possibility that any computer
applications or equipment used by Borrower may be unable to recognize and
properly perform date sensitive functions involving certain dates prior to and
any dates on or after December 31, 1999.
5.17 Full Disclosure. No representation, warranty or other statement
made by 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.
6. AFFIRMATIVE COVENANTS
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, Borrower shall do all of the following:
6.1 Good Standing. 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. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. 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. 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. Borrower shall deliver
to Bank: (a) as soon as available, but in any event within twenty (20) days
after the end of each calendar month, a company prepared consolidated balance
sheet and income statement covering Borrower's consolidated operations during
such period, in a form acceptable to Bank and certified by a Responsible
Officer; (b) as soon as available, but in any event within ninety (90) days
after the end of Borrower's fiscal year, audited consolidated financial
statements of Borrower 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)
if applicable, copies of all statements, reports and notices sent or made
available generally by Borrower to its security holders or to any holders of
Subordinated Debt and all reports on Forms 10-K and 10-Q filed with the
Securities and Exchange Commission; (d) promptly upon receipt of notice thereof,
a 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 Fifty Thousand Dollars ($50,000) or more; (e) such budgets, sales
projections, operating plans or other financial information as Bank may
reasonably request from time to time generally prepared by Borrower in the
ordinary course of business; and (f) within twenty-five (25) days of the last
day of each fiscal quarter, a report signed by Borrower, in form reasonably
acceptable to Bank, listing any
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applications or registrations that Borrower has made or filed in respect of any
Patents, Copyrights or Trademarks and the status of any outstanding applications
or registrations, as well as any material change in Borrower's intellectual
property, including but not limited to any subsequent ownership right of
Borrower in or to any Trademark, Patent or Copyright not specified in Exhibits
A, B, and C of the Intellectual Property Security Agreement delivered to Bank by
Borrower in connection with this Agreement.
Within twenty (20) days after the last day of each month, Borrower shall deliver
to Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings of
accounts receivable and accounts payable.
Borrower shall deliver to Bank with the monthly and quarterly financial
statements 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 Borrower's Accounts
and appraise Collateral at Borrower's expense, provided that such audits will be
conducted no more often than every six (6) months unless an Event of Default has
occurred and is continuing.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects. Returns and allowances, if
any, as between Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist at
the time of the execution and delivery of this Agreement. Borrower 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 Fifty
Thousand Dollars ($50,000).
6.5 Taxes. Borrower 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 Borrower 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 request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
6.6 Insurance.
(a) Borrower, at its 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
Borrower's business is conducted on the date hereof. Borrower shall also
maintain insurance relating to Borrower's ownership and use of the Collateral in
amounts and of a type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such
form, with such companies, and in such amounts as 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
14
loss payee thereof 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. Upon
Bank's request, Borrower 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, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 Year 2000 Compliance. Borrower shall perform all acts reasonably
necessary to ensure that (a) Borrower and any business in which Borrower holds a
substantial interest, and (b) all customers, suppliers and vendors that are
material to Borrower's business, become Year 2000 Compliant in a timely manner.
Such acts shall include, without limitation, performing a comprehensive review
and assessment of all Borrower's systems and adopting a detailed plan, with
itemized budget, for the remediation, monitoring and testing of such systems. As
used in this paragraph, "Year 2000 Compliant" shall mean, in regard to any
entity, that all software, hardware, firmware, equipment, goods or systems
utilized by or material to the business operations or financial condition of
such entity, will properly perform date sensitive functions before, during and
after the year 2000. Borrower shall immediately upon request, provide to Bank
such certifications or other evidence of Borrower's compliance with the terms of
this paragraph as Bank may from time to time require.
6.8 Principal Depository. Borrower shall maintain its principal
depository and operating accounts with Bank.
6.9 Current Ratio. Borrower shall maintain, as of the last day of each
calendar month, a ratio of Current Assets to Current Liabilities of at least
1.75 to 1.00.
6.10 Tangible Net Worth. Borrower shall maintain, as of the last day of
each calendar month, a Tangible Net Worth of not less than Two Million Five
Hundred Thousand Dollars ($2,500,000) plus fifty percent (50%) of Borrower's
quarterly net profits after tax.
6.11 Profitability. Borrower shall show a profit of at least One Dollar
($1.00) for each fiscal quarter, commencing with the quarter ending March 31,
2000.
6.12 Registration of Intellectual Property Rights.
(a) Borrower shall register or cause to be registered
on an expedited basis (to the extent not already registered) with the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable: (i) those intellectual property rights listed on Exhibits A, B and C
to the Intellectual Property Security Agreement delivered to Bank by Borrower in
connection with this Agreement, within thirty (30) days of the date of this
Agreement, (ii) all registerable intellectual property rights Borrower has
developed as of the date of this Agreement but heretofore failed to register,
within thirty (30) days of the date of this Agreement, and (iii) those
additional intellectual property rights developed or acquired by Borrower from
time to time in connection with any product, prior to the sale or licensing of
such product to any third party, and prior to Borrower's use of such product
(including without limitation major revisions or additions to the intellectual
property rights listed on such Exhibits A, B and C). Borrower shall give Bank
notice of all such applications or registrations.
15
(b) Borrower shall execute and deliver such
additional instruments and documents from time to time as Bank shall reasonably
request to perfect Bank's security interest in the Intellectual Property
Collateral.
(c) Borrower shall (i) protect, defend and maintain
the validity and enforceability of the Trademarks, Patents and Copyrights, (ii)
use its best efforts to detect infringements of the Trademarks, Patents and
Copyrights and promptly advise Bank in writing of material infringements
detected and (iii) not allow any material Trademarks, Patents or Copyrights to
be abandoned, forfeited or dedicated to the public without the written consent
of Bank, which shall not be unreasonably withheld.
(d) Bank may audit Borrower's Intellectual Property
Collateral to confirm compliance with this Section 6.13, provided such audit may
not occur more often than once per year, unless an Event of Default has occurred
and is continuing. Bank shall have the right, but not the obligation, to take,
at Borrower's sole expense, any actions that Borrower is required under this
Section 6.13 to take but which Borrower fails to take, after fifteen (15) days'
notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.13.
6.13 Further Assurances. At any time and from time to time Borrower
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.
Borrower covenants and agrees that, so long as any credit
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 Credit
Extensions, Borrower will not do any of the following:
7.1 Dispositions. 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 (including Intellectual Property)
without Bank's prior written consent, which shall not be unreasonably withheld,
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 Borrower or its Subsidiaries; or (iii) Transfers of surplus,
worn-out or obsolete Equipment.
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 Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a material change in Borrower's ownership.
Borrower will not, without thirty (30) days prior written notification to Bank,
relocate its chief executive office.
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, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
16
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
with respect to any of its property (including Intellectual Property
Collateral), 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.
7.6 Distributions. Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock, except that Borrower may make distributions to its Parent in an aggregate
amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in the
aggregate in any given year.
7.7 Investments. 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. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to 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 Inventory and Equipment. Store the Inventory or the Equipment with
a bailee, warehouseman, or similar party unless Bank has received a pledge of
the warehouse receipt covering such Inventory; provided, however, that Borrower
may deposit software code in escrow for customers in the ordinary course of
business. Except for Inventory sold in the ordinary course of business and
except for such other locations as Bank may approve in writing, Borrower shall
keep the Inventory and Equipment only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" or be 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 Credit Extension 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 law or
regulation, which 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.
7.12 Intellectual Property Agreements. Borrower shall not permit the
inclusion in any material contract to which it becomes a party of any provisions
that could or might in any way prevent the creation of a security interest in
Borrower's rights and interests in any property included within the definition
of the Intellectual Property Collateral acquired under such contracts.
8. EVENTS OF DEFAULT
17
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay, when due, any of the
Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation under
Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or 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 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 Borrower receives notice thereof or
any officer of Borrower 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 Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
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 Credit Extensions will be required to be made
during such cure period);
8.3 Material Adverse Change. If there occurs a material adverse change
in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in the
Collateral;
8.4 Attachment. If any material portion of Borrower's assets is
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 or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of 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 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 Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within ten (10) days (provided
that no Credit Extensions will be made prior to the dismissal of such Insolvency
Proceeding);
8.6 Other Agreements. If there is a default in any agreement to which
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 Fifty Thousand Dollars ($50,000) or
that could have a Material Adverse Effect;
18
8.7 Subordinated Debt. If 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 Fifty Thousand Dollars
($50,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of ten (10) days (provided that no Credit Extensions 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 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. 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 Borrower:
(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 Borrower 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, upon terms and in whatever order that Bank
reasonably considers advisable;
(d) Make such payments and do such acts as Bank
considers necessary or reasonable to protect its security interest in the
Collateral. Borrower agrees to assemble the Collateral if Bank so requires, and
to make the Collateral available to Bank as Bank may designate. 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
Borrower's owned premises, Borrower hereby grants Bank a license to enter into
possession of such premises and to occupy the same, without charge, in order to
exercise any of Bank's rights or remedies provided herein, at law, in equity, or
otherwise;
(e) Set off and apply to the Obligations any and all
(i) balances and deposits of Borrower held by Bank, or (ii) indebtedness at any
time owing to or for the credit or the account of 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,
19
Borrower's labels, patents, copyrights, 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, 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 Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
(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 Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or xxxx of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions with respect to Borrower's policies of insurance; (f) settle
and adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable; (g)
to modify, in its sole discretion, any intellectual property security agreement
entered into between Borrower and Bank without first obtaining Borrower's
approval of or signature to such modification by amending Exhibits A, B, and C,
thereof, as appropriate, to include reference to any right, title or interest in
any Copyrights, Patents or Trademarks acquired by Borrower after the execution
hereof or to delete any reference to any right, title or interest in any
Copyrights, Patents or Trademarks in which Borrower no longer has or claims to
have any right, title or interest; (h) to file, in its sole discretion, one or
more financing or continuation statements and amendments thereto, relative to
any of the Collateral without the signature of Borrower where permitted by law;
and (i) to transfer the Intellectual Property Collateral into the name of Bank
or a third party to the extent permitted under the California Uniform Commercial
Code; provided Bank may exercise such power of attorney to sign the name of
Borrower on any of the documents described in Section 4.2 regardless of whether
an Event of Default has occurred. The appointment of Bank as 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 Accounts Collection. At any time during the term of this Agreement,
Bank may notify any Person owing funds to Borrower of Bank's security interest
in such funds and verify the amount of such Account. Borrower shall collect all
amounts owing to Borrower for Bank, receive in trust all payments as Bank's
trustee, and immediately deliver such payments to Bank in their original form as
received from the account debtor, with proper endorsements for deposit.
20
9.4 Bank Expenses. If Borrower fails 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, then Bank may do any or all of the following after
reasonable notice to Borrower: (a) make payment of the same or any part thereof;
(b) set up such reserves under the Revolving Facility 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 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 Borrower.
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 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. 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 Borrower 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, certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
21
If to Borrower: Videonics, Inc.
0000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxxx
FAX: (000) 000-0000
If to Bank: Venture Banking Group,
a division of Cupertino National Bank
Three Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
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 California, without regard to
principles of conflicts of law. Each of Borrower and Bank hereby submits to the
exclusive jurisdiction of the state and Federal courts located in the County of
Santa Xxxxx, State of California. BORROWER 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.
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 Borrower 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 Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify 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 this Agreement; 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 Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
22
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. 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 Borrower 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 brought against Bank have run.
12.8 Confidentiality. In handling any confidential information Bank and
all employees and agents of Bank, including but not limited to accountants,
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 Borrower, (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 Borrower and have delivered a copy to
Borrower, (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
determine in connection with the enforcement 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.
23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
VIDEONICS, INC.
By: /s/ Xxxx Xxxxxxxx
------------------------------------
Title: V.P. Finance and CFO
---------------------------------
VENTURE BANKING GROUP,
a division of Cupertino National Bank
By: /s/ Xxxxx Xxxxxxxx
------------------------------------
Title: Commercial Loan Officer
---------------------------------
24
EXHIBIT A
The Collateral shall consist of all right, title and interest of Borrower in and
to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's 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, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, leases, license agreements,
franchise agreements, blueprints, drawings, purchase orders, customer lists,
route lists, claims, literature, reports, catalogs, income tax refunds, payments
of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by 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 Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, securities
accounts, security entitlements, financial assets, investment property, letters
of credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and
(g) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.
25
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., PACIFIC TIME
TO: VENTURE BANKING GROUP DATE:___________________________________
FAX #: (000) 000-0000 TIME:___________________________________
--------------------------------------------------------------------------------
FROM: Videonics, Inc.
----------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY: _______________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE: _______________________________________________________
PHONE NUMBER: _______________________________________________________________
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 Borrower 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
Payment / Advance Form; 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 Phone #
------------------------------------ -----------------------------------
Authorized Requester Phone #
---------------------------------------------
Authorized Signature (Bank)
--------------------------------------------------------------------------------
26
EXHIBIT C
BORROWING BASE CERTIFICATE
--------------------------------------------------------------------------------
Borrower: Videonics, Inc.
Lender: Venture Banking Group, a division of Cupertino National Bank
Commitment Amount: $1,000,000
--------------------------------------------------------------------------------
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 90 days due $___________
5. Balance of 30% over 90 day accounts $___________
6. Concentration Limits
7. Foreign Accounts not backed by letters of credit or
foreign credit insurance $___________
8. Governmental Accounts $___________
9. Contra Accounts $___________
10. 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 (80% of #14) $___________
BALANCES
16. Maximum Loan Amount $1,000,000
17. Total Funds Available [Lesser of #16 or #15] $___________
18. Present balance owing on Line of Credit $___________
19. RESERVE POSITION (#17 minus #18) $___________
27
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 Venture Banking Group, a division
of Cupertino National Bank.
VIDEONICS, INC.
By:__________________________________________
Authorized Signer
28
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: VENTURE BANKING GROUP
FROM: VIDEONICS, INC.
The undersigned authorized officer of Videonics, Inc. hereby certifies that in
accordance with the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the "Agreement"), (i) Borrower is in complete
compliance for the period ending _________________ with all required covenants
except as noted below and (ii) all representations and warranties of Borrower
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.
Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies
------------------ -------- --------
Monthly financial statements Monthly within 20 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R and A/P Agings, Borrowing Base Cert. Monthly within 20 days Yes No
A/R Audit Initial and Semi-annual Yes No
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
On a monthly basis for Borrower:
Current Ratio 1.75:1.00 _____:1.0 Yes No
Minimum TNW* $________ $________ Yes No
Profitability (quarterly) ** $1.00 $________ Yes No
* $2,500,000 plus 50% of quarterly NPAT.
** Commencing with quarter ending March 31, 2000.
Comments Regarding Exceptions: See Attached
----------------------------------------
Sincerely, BANK USE ONLY
___________________________________ Received By:_________________________
SIGNATURE AUTHORIZED SIGNER
___________________________________ Date:________________________________
TITLE
Verified:____________________________
___________________________________ AUTHORIZED SIGNER
DATE
Date:________________________________
Compliance Status: Yes No
----------------------------------------
29
EXHIBIT E
REVOLVING PROMISSORY NOTE
$1,000,000 Palo Alto, California
August 25, 1999
VIDEONICS, INC. ("Borrower"), for value received, hereby promises to pay to the
order of VENTURE BANKING GROUP, a division of Cupertino National Bank ("Bank"),
in lawful money of the United States of America, pursuant to that certain Loan
and Security Agreement dated as of the date hereof, by and between Borrower and
Bank (the "Loan Agreement"), (i) the principal amount of One Million Dollars
($1,000,000), or, if lesser, (ii) the aggregate principal amount of all Advances
(the "Revolving Advances") outstanding as of the maturity date hereof.
This Note is the Note referred to in the Loan Agreement. All terms defined in
the Loan Agreement shall have the same definitions when used herein, unless
otherwise defined herein.
Borrower further promises to pay interest on each Revolving Advance hereunder in
like funds on the principal amount hereof from time to time outstanding from the
date hereof until paid in full, at a rate or rates per annum and payable on the
dates determined pursuant to the Loan Agreement.
Payment on this Note shall be applied in the manner set forth in the Loan
Agreement. The Loan Agreement contains provisions for acceleration of the
maturity of Revolving Advances hereunder upon the occurrence of certain stated
events and also provides for optional and mandatory prepayments of principal
hereof prior to any stated maturity upon the terms and conditions therein
specified.
All Revolving Advances made by Bank to Borrower pursuant to the Loan Agreement
shall be recorded by Bank on the books and records of Bank. The failure of Bank
to record any Revolving Advance or any prepayment or payment made on account of
the principal balance hereof shall not limit or otherwise affect the obligation
of Borrower under this Note and under the Loan Agreement to pay the principal,
interest and other amounts due and payable under the Revolving Advances.
Any principal or interest payments on this Note not paid when due, whether at
stated maturity, by acceleration or otherwise, shall bear interest at the
Default Rate. Upon the occurrence of a default hereunder or an Event of Default
under the Loan Agreement, all unpaid principal, accrued interest and other
amounts owing hereunder shall, at the option of Bank, be immediately collectible
by or on behalf of Bank pursuant to the Loan Agreement and applicable law.
Except as otherwise provided in the Loan Agreement, Borrower waives presentment
and demand for payment, notice of dishonor, protest and notice of protest of
this Note, and shall pay all costs of collection when incurred, including
reasonable attorneys' fees, costs and expenses. The right to plead any and all
statutes of limitations as a defense to any demand hereunder is hereby waived to
the full extent permitted by law.
The amount of this Note is secured by the Collateral identified and described as
security therefor in the Loan Agreement. This Note shall be governed by, and
construed and enforced in accordance with, the laws of the State of California,
excluding conflict of laws principles that would cause the application of the
laws of any other jurisdiction. The provisions of this Note shall inure to the
benefit of and be binding upon any successor to Borrower and shall extend to any
holder hereof.
VIDEONICS, INC.
By: ____________________________________
Title: _________________________________
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: VIDEONICS, INC.
================================================================================
LOAN TYPE. This is a variable rate, line of credit of a principal amount up to
$1,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: to support growth in
trading assets.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line
--------------
Amount paid to Borrower directly: $__________
Undisbursed Funds $__________
Principal $__________
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Charges Paid in Cash:
$3,750 Loan Fee
$ Accounts Receivables Audit
$ UCC Search Fees
$ UCC Filing Fees
$ Patent Filing Fees
$ Trademark Filing Fees
$ Copyright Filing Fees
$ Outside Counsel Fees and Expenses (Estimate)
Total Charges Paid in Cash $__________
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered __________ the amount of any loan payment. If the
funds in the account are insufficient to cover any payment, Bank shall not be
obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF AUGUST 25, 1999.
VIDEONICS, INC.
/s/ Xxxx Xxxxxxxx
-------------------
Authorized Officer
================================================================================
AGREEMENT TO PROVIDE INSURANCE
Grantor: Videonics, Inc. Bank: Venture Banking Group
================================================================================
INSURANCE REQUIREMENTS. The undersigned ("Grantor") understands that insurance
coverage is required in connection with the extending of a loan or the providing
of other financial accommodations to Grantor by Bank. These requirements are set
forth in the Loan Documents. The following minimum insurance coverages must be
provided on the following described collateral (the "Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation
that coverage will not be cancelled or
diminished without a minimum of twenty (20)
days' prior written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Bank. Grantor understands
that credit may not be denied solely because insurance was not purchased through
Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or before
closing, evidence of the required insurance as provided above, with an effective
date of the Closing Date, or earlier. Grantor acknowledges and agrees that if
Grantor fails to provide any required insurance or fails to continue such
insurance in force, Bank may do so at Grantor's expense as provided in the
Amended and Restated Loan and Security Agreement. The cost of such insurance, at
the option of Bank, shall be payable on demand or shall be added to the
indebtedness as provided in the security document. GRANTOR ACKNOWLEDGES THAT IF
BANK SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED
PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE
LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN
ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor
authorizes Bank to provide to any person (including any insurance agent or
company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO PROVIDE
INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AUGUST 25, 1999.
Videonics, Inc.
X /s/ Xxxx Xxxxxxxx
------------------
Authorized Officer
================================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: _________________________ PHONE: _________________________
AGENT'S NAME:_________________________________________________________________
INSURANCE COMPANY: ___________________________________________________________
POLICY NUMBER: _______________________________________________________________
EFFECTIVE DATES: _____________________________________________________________
COMMENTS: ____________________________________________________________________
================================================================================
CORPORATE RESOLUTIONS TO BORROW
================================================================================
Borrower: VIDEONICS, INC.
================================================================================
I, the undersigned Secretary or Assistant Secretary of Videonics, Inc. (the
"Corporation"), HEREBY CERTIFY that the Corporation is organized and existing
under and by virtue of the laws of the State of Calfornia.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true and
complete copies of the Articles of Incorporation and Bylaws of the Corporation,
each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation, duly
called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.
BE IT RESOLVED, that any one (1) of the following named officers, employees, or
agents of this Corporation, whose actual signatures are shown below:
Name POSITIONS ACTUAL SIGNATURES
------------------- --------------------- ----------------------------
------------------- --------------------- ----------------------------
------------------- --------------------- ----------------------------
------------------- --------------------- ----------------------------
------------------- --------------------- ----------------------------
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
Borrow Money. To borrow from time to time from Venture Banking Group, a division
of Cupertino National Bank ("Bank"), on such terms as may be agreed upon between
the officers, employees, or agents and Bank, such sum or sums of money as in
their judgment should be borrowed, without limitation, including such sums as
are specified in that certain Loan and Security Agreement dated as of August 25,
1999 (as amended or modified from time to time the "Loan Agreement").
Execute Notes. To execute and deliver to Bank the promissory note or notes of
the Corporation, on Bank's forms, at such rates of interest and on such terms as
may be agreed upon, evidencing the sums of money so borrowed or any indebtedness
of the Corporation to Bank (the "Notes"), and also to execute and deliver to
Bank one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion of
the Notes.
Execute Loan Documents. To execute and deliver to Bank the Loan Agreement and
any other agreement entered into between Borrower and Bank in connection with
the Loan Agreement, all as amended or extended from time to time (collectively,
with the Loan Agreement and the Notes, the "Loan Documents"), and also to
execute and deliver to Bank one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for the Loan Documents, or any
portion thereof.
1
Grant Security. To grant a security interest to Bank in the Collateral described
in the Loan Documents, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Documents.
Negotiate Items. To draw, endorse, and discount with Bank all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the account of the Corporation with Bank, or to cause such other disposition
of the proceeds derived therefrom as they may deem advisable.
Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are duly
elected, appointed, or employed by or for the Corporation, as the case may be,
and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on August 25, 1999 and attest
that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X /s/ Xxxx Xxxxxxxx
-----------------
2
REVOLVING PROMISSORY NOTE
$1,000,000 Palo Alto, California
Date: August 25, 1999
VIDEONICS, INC. ("Borrower"), for value received, hereby promises to pay to the
order of VENTURE BANKING GROUP, a division of Cupertino National Bank ("Bank"),
in lawful money of the United States of America, pursuant to that certain Loan
and Security Agreement dated as of the date hereof, by and between Borrower and
Bank (the "Loan Agreement"), (i) the principal amount of Seven Hundred Fifty
Thousand Dollars ($1,000,000), or, if lesser, (ii) the aggregate principal
amount of all Advances (the "Revolving Advances") outstanding as of the maturity
date hereof.
This Note is the Note referred to in the Loan Agreement. All terms defined in
the Loan Agreement shall have the same definitions when used herein, unless
otherwise defined herein.
Borrower further promises to pay interest on each Revolving Advance hereunder in
like funds on the principal amount hereof from time to time outstanding from the
date hereof until paid in full, at a rate or rates per annum and payable on the
dates determined pursuant to the Loan Agreement.
Payment on this Note shall be applied in the manner set forth in the Loan
Agreement. The Loan Agreement contains provisions for acceleration of the
maturity of Revolving Advances hereunder upon the occurrence of certain stated
events and also provides for optional and mandatory prepayments of principal
hereof prior to any stated maturity upon the terms and conditions therein
specified.
All Revolving Advances made by Bank to Borrower pursuant to the Loan Agreement
shall be recorded by Bank on the books and records of Bank. The failure of Bank
to record any Revolving Advance or any prepayment or payment made on account of
the principal balance hereof shall not limit or otherwise affect the obligation
of Borrower under this Note and under the Loan Agreement to pay the principal,
interest and other amounts due and payable under the Revolving Advances.
Any principal or interest payments on this Note not paid when due, whether at
stated maturity, by acceleration or otherwise, shall bear interest at the
Default Rate. Upon the occurrence of a default hereunder or an Event of Default
under the Loan Agreement, all unpaid principal, accrued interest and other
amounts owing hereunder shall, at the option of Bank, be immediately collectible
by or on behalf of Bank pursuant to the Loan Agreement and applicable law.
Except as otherwise provided in the Loan Agreement, Borrower waives presentment
and demand for payment, notice of dishonor, protest and notice of protest of
this Note, and shall pay all costs of collection when incurred, including
reasonable attorneys' fees, costs and expenses. The right to plead any and all
statutes of limitations as a defense to any demand hereunder is hereby waived to
the full extent permitted by law.
The amount of this Note is secured by the Collateral identified and described as
security therefor in the Loan Agreement. This Note shall be governed by, and
construed and enforced in accordance with, the laws of the State of California,
excluding conflict of laws principles that would cause the application of the
laws of any other jurisdiction. The provisions of this Note shall inure to the
benefit of and be binding upon any successor to Borrower and shall extend to any
holder hereof.
VIDEONICS, INC.
By: /s/ Xxxx Xxxxxxxx
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Title: V.P. Finance and CFO
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