Exhibit 10.13
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated as of April
22, 2003 between SILICON VALLEY BANK, a California chartered bank, with its
principal place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000
and with a loan production office located at One Newton Executive Park, Suite
200, 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, doing business under
the name "Silicon Valley East" ("Bank") and OPEN SOLUTIONS INC., a Delaware
corporation ("Borrower"), provides the terms on which Bank shall lend to
Borrower and Borrower shall repay Bank. The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document. Capitalized terms in this Agreement
shall have the meanings set forth in Section 13.
2 LOAN AND TERMS OF PAYMENT
2.1 PROMISE TO PAY. Borrower hereby unconditionally promises to pay Bank
the unpaid principal amount of all Credit Extensions and interest on
the unpaid principal amount of the Credit Extensions as and when due in
accordance with this Agreement.
2.1.1 REVOLVING ADVANCES.
(a) Availability. Bank shall make Advances not exceeding
(i) the lesser of (A) the Revolving Line or (B) the Borrowing Base minus (ii)
the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit), minus (iii) the FX Reserve, and minus (iv) the
aggregate outstanding Advances hereunder (including any Cash Management
Services). Amounts borrowed under this Section may be repaid and reborrowed
during the term of this Agreement.
(b) Borrowing Procedure. To obtain an Advance, Borrower
must notify Bank by facsimile or telephone by 3:00 p.m. Eastern time on the
Business Day the Advance is to be made. If such notification is by telephone,
Borrower must promptly confirm the notification by delivering to Bank a
completed Payment/Advance Form in the form attached as EXHIBIT B. Bank shall
credit Advances to Borrower's deposit account. Bank may make Advances under this
Agreement based on instructions from a Responsible Officer or his or her
designee or without instructions if the Advances are necessary to meet
Obligations which have become due. Bank may rely on any telephone notice given
by a person whom Bank believes is a Responsible Officer or designee. Borrower
shall indemnify Bank for any loss Bank suffers due to such reliance.
(c) Termination; Repayment. The Revolving Line terminates
on the Revolving Maturity Date, when the principal amount of all Advances and
the unpaid interest thereon, shall be immediately due and payable. The Borrower
may pay without penalty all or a portion of the Revolving Line before the
Revolving Maturity Date. Borrower may terminate this Agreement upon repayment of
all Obligations to the Bank hereunder.
2.1.2 LETTERS OF CREDIT.
(a) Bank shall issue or have issued Letters of Credit for
Borrower's account not exceeding (i) the lesser of the Revolving Line or the
Borrowing Base minus (ii) the outstanding principal balance of any Advances
(including any Cash Management Services), minus (iii) the amount of all Letters
of Credit (including drawn but unreimbursed Letters of Credit), plus an amount
equal to any Letter of Credit Reserves. The face amount of outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve) may not exceed Two Million Dollars ($ 2,000,000.00). Each Letter
of Credit shall have an expiry date no later than 180 days after the Revolving
Maturity Date provided Borrower's Letter of Credit reimbursement obligation
shall be secured by cash on terms acceptable to Bank on and after (i) the
Revolving Maturity Date if the term of this Agreement is not extended by Bank,
or (ii) the occurrence of an Event of Default hereunder. All Letters of Credit
shall be, in form and substance, acceptable to Bank in its sole discretion and
shall be subject to the terms and conditions of Bank's form of standard
Application and Letter of Credit Agreement. Borrower agrees to execute any
further documentation in connection with the Letters of Credit as Bank may
reasonably request.
(b) The obligation of Borrower to immediately reimburse
Bank for drawings made under Letters of Credit shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend, protect, and hold Bank harmless from any loss,
cost, expense or liability, including, without limitation, reasonable attorneys'
fees, arising out of or in connection with any Letters of Credit.
(c) Borrower may request that Bank issue a Letter of
Credit payable in a currency other than United States Dollars. If a demand for
payment is made under any such Letter of Credit, Bank shall treat such demand as
an Advance to Borrower of the equivalent of the amount thereof (plus cable
charges) in United States currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other currency for cable transfer
to the country of which it is the currency.
(d) Upon the issuance of any letter of credit payable in
a currency other than United States Dollars, Bank shall create a reserve (the
"Letter of Credit Reserve") under the Revolving Line for letters of credit
against fluctuations in currency exchange rates, in an amount equal to ten
percent (10%) of the face amount of such letter of credit. The amount of such
reserve may be amended by Bank from time to time to account for fluctuations in
the exchange rate. The availability of funds under the Revolving Line shall be
reduced by the amount of such reserve for so long as such letter of credit
remains outstanding.
2.1.3 FOREIGN EXCHANGE SUBLIMIT. If there is availability under the
Revolving Line and the Borrowing Base, then Borrower may enter in foreign
exchange forward contracts with the Bank under which Borrower commits to
purchase from or sell to Bank a set amount of foreign currency more than one
business day after the contract date (the "FX Forward Contract"). Bank shall
subtract 10% of each outstanding FX Forward Contract from the foreign exchange
sublimit which is a maximum of Two Million Dollars ($2,000,000.00) (the "FX
Reserve")]. The total FX Forward Contracts at any one time may not exceed 10
times the amount of the FX Reserve. Bank may terminate the FX Forward Contracts
if an Event of Default occurs.
2.1.4 CASH MANAGEMENT SERVICES SUBLIMIT. Borrower may use up to Two
Million Dollars ($2,000,000.00) for the Bank's cash management services, which
may include merchant services, direct deposit of payroll, business credit card,
and check cashing services identified in the various cash management services
agreements related to such cash management services (the "Cash Management
Services"). Such aggregate amounts utilized under the Cash Management Services
Sublimit shall at all times reduce the amount otherwise available for Credit
Extensions under the Revolving Line. Any amounts Bank pays on behalf of Borrower
or any amounts that are not paid by Borrower for any Cash Management Services
will be treated as Advances under the Revolving Line and will accrue interest at
the interest rate applicable to Advances.
2.1.5 EQUIPMENT ADVANCES.
(a) Availability. Through October 22, 2003 (the
"Equipment Availability End Date"), Bank shall make advances ("Equipment
Advance" and, collectively, "Equipment Advances") not exceeding the Equipment
Line. The Equipment Advances may only be used to finance Eligible Equipment
purchased on or after 90 days before the date of each Equipment Advance and no
Equipment Advances may exceed 100 % of the equipment invoice excluding taxes,
shipping, warranty charges, freight discounts and installation expense relating
to such Equipment, unless such costs constitute Other Equipment. Each Equipment
Advance must be for a minimum of Two Hundred Thousand Dollars ($200,000.00).
Subject to the foregoing conditions, the initial Equipment Advance hereunder may
include invoices dated on or after January 1, 2002 (the "Initial Advance")
provided such Initial Advance is requested within ten (10) days after the
Closing Date. After repayment, Equipment Advances may not be reborrowed.
(b) Interest Rate. Interest accrues from the date of each
Equipment Advance at a per annum rate equal to the greater of: (i) the aggregate
of the Bank's Prime Rate, and one percent (1.0%) and (ii) five and
three-quarters of one percent (5.75%) and is payable monthly.
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(c) Repayment. For each Equipment Advance, Borrower shall
make monthly payments of: (a) equal principal payments calculated by the Bank
based upon: (1) the amount of the Equipment Advance, and (2) an amortization
schedule equal to thirty (30) months plus (b) interest on the outstanding
principal amount of each Equipment Advance at the rate in Section 2.1.5(b)
(individually, the "Scheduled Payment", and collectively, "Scheduled Payments"),
on the first Business Day of the month following the month in which the Funding
Date occurs with respect to such Equipment Advance and continuing thereafter on
the first Business Day of each successive calendar month (each a "Payment
Date"). All unpaid principal and accrued interest is due and payable in full on
the last Payment Date with respect to such Equipment Advance. Payments received
after 3:00 p.m. Eastern time are considered received at the opening of business
on the next Business Day. The Borrower may pay without penalty all or a portion
of the Equipment Line owed earlier than it is due.
(d) To obtain an Equipment Advance, Borrower must notify
Bank (the notice is irrevocable) by facsimile no later than 3:00 p.m. Eastern
time one (1) Business Day before the day on which the Equipment Advance is to be
made. The notice in the form of EXHIBIT B (Payment/Advance Form) must be signed
by a Responsible Officer or designee and include a copy of the invoice for the
Equipment being financed.
2.1.6 UNDISBURSED CREDIT EXTENSIONS. The Bank's obligation to lend
the undisbursed portion of the Obligations shall terminate if, in Bank's sole
discretion, there has been a material adverse change in the general affairs,
management, results of operation, condition (financial or otherwise) or the
prospect of repayment of the Obligations, or there has been any material adverse
deviation by Borrower from the most recent business plan of Borrower presented
to and accepted by Bank prior to the execution of this Agreement.
2.2 OVERADVANCES. If Borrower's Obligations under Section 2.1.1, 2.1.2,
2.1.3, and 2.1.4 exceed the lesser of either (i) the Revolving Line or
(ii) the Borrowing Base, Borrower must immediately pay in cash to Bank
the excess.
2.3 INTEREST RATE; PAYMENTS.
(a) Interest Rate. The principal amounts outstanding
under the Revolving Line shall accrue interest at a per annum rate equal to the
greater of: (i) the aggregate of the Bank's Prime Rate, and one-half of one
percent (.50%) and (ii) five and one-quarter of one percent (5.25%). After an
Event of Default, Obligations shall bear interest at three percent (3.0%) above
the rate effective immediately before the Event of Default. The applicable
interest rate hereunder shall increase or decrease when the Prime Rate changes.
Interest is computed on the basis of a 360 day year for the actual number of
days elapsed.
(b) Payments. Interest is payable on the Payment Date of
each month. Payments received after 3:00 p.m. Eastern time are considered
received at the opening of business on the next Business Day. When a payment is
due on a day that is not a Business Day, the payment is due the next Business
Day and additional fees or interest, as applicable, shall continue to accrue.
(c) Debit of Accounts. Bank may debit any of Borrower's
deposit accounts including Account Number _______________ for current principal
and interest payments then due for such month or any amounts Borrower owes Bank.
Bank shall promptly notify Borrower when it debits Borrower's accounts. These
debits are not a set-off but automatic payments.
2.4 FEES. Borrower shall pay to Bank:
(a) Equipment Line Facility Fee. A fully earned,
non-refundable facility fee, in an amount equal to one quarter of one percent
(0.25%) of the total Equipment Advances advanced by Bank as of the Equipment
Availability End Date, as determined by the Bank ; and
(b) Unused Revolving Line Facility Fee. In addition to
the foregoing, as compensation for the Bank's maintenance of sufficient funds
available for such purpose, the Bank shall have earned a Unused Revolving Line
Facility Fee (so referred to herein), which fee shall be paid quarterly, in
arrears, on a calendar year basis, in an amount equal to one quarter of one
percent (0.25%) of the average unused portion of the Revolving
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Line, as determined by the Bank. The Borrower shall not be entitled to any
credit, rebate or repayment of any Facility Fee previously earned by the Bank
pursuant to this Section notwithstanding any termination of the within
Agreement, or suspension or termination of the Bank's obligation to make loans
and advances hereunder;
(c) Bank Expenses. All Bank Expenses (including
reasonable attorneys' fees and expenses incurred through and after the Closing
Date) when due. The Borrower has paid a good faith deposit in the amount of Ten
Thousand Dollars ($10,000.00) which shall be used toward the Bank's Expenses in
connection with the negotiation and documentation of this Agreement and the Loan
Documents.
3 CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The Bank's obligation
to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance
satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with
respect to articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of this Agreement;
(c) Negative Pledge Agreement covering Intellectual
Property;
(d) landlord's waiver;
(e) a legal opinion of Borrower's counsel, in form and
substance acceptable to Bank;
(f) financing statements (Forms UCC-1);
(g) Account Control Agreement/ Investment Account Control
Agreement
(h) insurance certificate;
(i) payment of the fees and Bank Expenses then due
specified in Section 2.4 hereof;
(j) Certificate of Foreign Qualification- Connecticut;
(k) Certificate of Good Standing/Legal Existence-
Delaware; 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. Bank's obligations to
make each Credit Extension, including the initial Credit Extension, is
subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 shall
be materially true on the date of the Payment/Advance Form and on the effective
date of each Credit Extension and no Event of Default shall have occurred and be
continuing, or result from the Credit Extension. Each Credit Extension is
Borrower's representation and warranty on that date that the representations and
warranties in Section 5 remain true (except for representations and warranties
applicable to a specific date).
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4 CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants Bank, to secure the
payment and performance in full of all of the Obligations and the
performance of each of Borrower's duties under the Loan Documents, a
continuing security interest in, and pledges and assigns to the Bank,
the Collateral, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds and products thereof. The
security interest granted in this Section 4.1 shall terminate
immediately upon satisfaction in full of all Obligations and written
termination of this Agreement by the Bank. At such time the Bank agrees
to execute any and all documents necessary to release its security
interest in the Collateral created hereunder. Borrower warrants and
represents that the security interest granted herein shall be a first
priority security interest in the Collateral. Bank may place a "hold"
on any deposit account pledged as Collateral.
Except as noted on the Perfection Certificate, Borrower is not a party to, nor
is bound by, any license or other material agreement with respect to which the
Borrower is the licensee that prohibits or otherwise restricts Borrower from
granting a security interest in Borrower's interest in such material license or
agreement or any other property. Without prior consent from Bank, Borrower shall
not enter into, or become bound by, any such license or agreement which is
reasonably likely to have a material impact on Borrower's business or financial
condition. Borrower shall take such steps as Bank reasonably requests to obtain
the consent of, or waiver by, any person whose consent or waiver is necessary
for all such material licenses or contract rights to be deemed "Collateral" and
for Bank to have a security interest in it that might otherwise be restricted or
prohibited by law or by the terms of any such license or agreement, whether now
existing or entered into in the future.
Borrower agrees that any disposition of the Collateral in violation of this
Agreement, by either the Borrower or any other Person, shall be deemed to
violate the rights of the Bank under the Code. If the Agreement is terminated,
Bank's lien and security interest in the Collateral shall continue until
Borrower fully satisfies its Obligations. If Borrower shall at any time, acquire
a commercial tort claim, Borrower shall promptly notify Bank in a writing signed
by Borrower of the brief details thereof and grant to Bank in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
Bank.
4.2 AUTHORIZATION TO FILE FINANCING STATEMENTS. Borrower hereby
authorizes Bank to file financing statements, without notice to Borrower, with
all appropriate jurisdictions in order to perfect or protect Bank's interest or
rights hereunder.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION. Borrower is duly existing and in
good standing in its state of formation and qualified and licensed to
do business in, and in good standing in, any state in which the conduct
of its business or its ownership of property requires that it be
qualified except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change. In connection with this
Agreement, the Borrower delivered to the Bank a certificate signed by
the Borrower and entitled "Perfection Certificate". The Borrower
represents and warrants to the Bank that: (a) the Borrower's exact
legal name is that indicated on the Perfection Certificate and on the
signature page hereof; and (b) the Borrower is an organization of the
type, and is organized in the jurisdiction, set forth in the Perfection
Certificate; and (c) the Perfection Certificate accurately sets forth
the Borrower's organizational identification number or accurately
states that the Borrower has none; and (d) the Perfection Certificate
accurately sets forth the Borrower's place of business, or, if more
than one, its chief executive off-ice as well as the Borrower's mailing
address if different, and (e) all other information set forth on the
Perfection Certificate pertaining to the Borrower is accurate and
complete. If the Borrower does not now have an organizational
identification number, but later obtains one, Borrower shall forthwith
notify the Bank of such organizational identification number.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's organizational documents,
nor constitute an event of default under any material agreement
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by which Borrower is bound. Borrower is not in default under any agreement to
which or by which it is bound in which the default could reasonably be expected
to cause a Material Adverse Change.
5.2 COLLATERAL. Borrower has good title to the Collateral, free of Liens
except Permitted Liens. Borrower has no deposit account, other than the
deposit accounts with Bank and deposit accounts described in the
Perfection Certificate delivered to the Bank in connection herewith.
The Accounts are bona fide, existing obligations, and the service or
property has been performed or delivered to the account debtor or its
agent for immediate shipment to and unconditional acceptance by the
account debtor. The Collateral is not in the possession of any third
party bailee (such as a warehouse). Except as hereafter disclosed to
the Bank in writing by Borrower, none of the components of the
Collateral shall be maintained at locations other than as provided in
the Perfection Certificate. In the event that Borrower, after the date
hereof, intends to store or otherwise deliver any portion of the
Collateral to a bailee, then Borrower will first receive the written
consent of Bank and such bailee must acknowledge in writing that the
bailee is holding such Collateral for the benefit of Bank. Borrower has
no knowledge of any actual or imminent Insolvency Proceeding of any
account debtor whose accounts are an Eligible Account in any Borrowing
Base Certificate. All Inventory is in all material respects of good and
marketable quality, free from material defects.
5.3 LITIGATION. Except as shown in the Perfection Certificate, there are no
actions or proceedings pending or, to the knowledge of Borrower's
Responsible Officers or legal counsel, threatened by or against
Borrower in which an adverse decision could reasonably be expected to
cause a Material Adverse Change.
5.4 NO MATERIAL DEVIATION IN FINANCIAL STATEMENTS. All consolidated
financial statements for Borrower delivered to Bank fairly present in
all material respects Borrower's consolidated financial condition and
Borrower's consolidated results of operations. There has not been any
material deterioration in Borrower's consolidated financial condition
since the date of the most recent financial statements submitted to
Bank.
5.5 SOLVENCY. The fair salable value of Borrower's assets (including
goodwill minus disposition costs) exceeds the fair value of its
liabilities; the Borrower is not left with unreasonably small capital
after the transactions in this Agreement; and Borrower is able to pay
its debts (including trade debts) as they mature.
5.6 REGULATORY COMPLIANCE. Borrower is not an "investment company" or a
company "controlled" by an "investment company" under the Investment
Company Act. Borrower is not engaged as one of its important activities
in extending credit for margin stock (under Regulations T and U of the
Federal Reserve Board of Governors). Borrower has complied in all
material respects with the Federal Fair Labor Standards Act. Borrower
has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None
of Borrower's properties or assets has been used by Borrower, in
disposing, producing, storing, treating, or transporting any hazardous
substance other than legally. Borrower has timely filed all required
tax returns and paid when due, or made adequate provision to pay, all
material taxes, except those being contested in good faith with
adequate reserves under GAAP. Borrower has obtained all consents,
approvals and authorizations of, made all declarations or filings with,
and given all notices to, all government authorities that are necessary
to continue its business as currently conducted except where the
failure to make such declarations, notices or filings would not
reasonably be expected to cause a Material Adverse Change.
5.7 PERMITTED INVESTMENTS. Borrower does not own any stock, partnership
interest or other equity securities except for Permitted Investments.
5.8 FULL DISCLOSURE. No written representation, warranty or other statement
of Borrower in any certificate or written statement given to Bank taken
together with all such written certificates and written statements
given to Bank) contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements
contained in the certificates or statements not misleading (it being
recognized by Bank that the projections and forecasts provided by
Borrower in good faith and based upon reasonable assumptions are not
viewed as facts and that actual results during the period or periods
covered by such projections and forecasts may differ from the projected
or forecasted results).
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6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 GOVERNMENT COMPLIANCE. Borrower shall maintain its legal existence and
good standing in its jurisdiction of formation and maintain
qualification in each jurisdiction in which the failure to so qualify
would reasonably be expected to have a material adverse effect on
Borrower's business or operations. Borrower shall comply with all laws,
ordinances and regulations to which it is subject, noncompliance with
which could have a material adverse effect on Borrower's business or
operations or would reasonably be expected to cause a Material Adverse
Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower shall deliver to Bank: (i) as soon as
available, but no later than thirty (30) days after the last day of each month,
a company prepared consolidated balance sheet and income statement covering
Borrower's consolidated operations during the period certified by a Responsible
Officer and in a form acceptable to Bank; (ii) as soon as available, but no
later than one hundred and twenty (120) days after the last day of Borrower's
fiscal year, audited consolidated financial statements prepared under GAAP,
consistently applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm reasonably
acceptable to Bank; (iii) in the event that the Borrower's stock becomes
publicly held, within five (5) days of filing, copies of all statements, reports
and notices made available to Borrower's security holders or to any holders of
Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission; (iv) a prompt report of any legal actions
pending or overtly threatened against Borrower that could result in damages or
costs to Borrower of Two Hundred Fifty Thousand Dollars ($250,000.00) or more;
and (vi)other financial information reasonably requested by Bank.
(b) Within thirty (30) days after the last day of each
month in which Advances were outstanding under the Revolving Line, or Credit
Extensions other than Advances are issued or outstanding in excess of Five
Hundred Thousand Dollars ($500,000.00), Borrower shall deliver to Bank a
Borrowing Base Certificate signed by a Responsible Officer in the form of
EXHIBIT C, with aged listings of accounts receivable (by invoice date).
(c) Borrower shall also deliver to Bank with the monthly
and annual financial statements a Compliance Certificate signed by a Responsible
Officer in the form of EXHIBIT D.
(d) Allow Bank to audit Borrower's Collateral at
Borrower's expense. Such audits shall be conducted no more often than once every
twelve (12) months unless an Event of Default has occurred and is continuing.
Notwithstanding the foregoing, the initial audit shall occur before any Advances
are made.
6.3 INVENTORY; RETURNS. Borrower shall keep all Inventory in good and
marketable condition, free from material defects. Returns and
allowances between Borrower and its account debtors shall follow
Borrower's customary practices as they exist at the Closing Date.
Borrower must promptly notify Bank of all returns, recoveries, disputes
and claims that involve more than Two Hundred and Fifty Thousand
Dollars ($250,000.00).
6.4 TAXES. Borrower shall make, and cause each Subsidiary to make, timely
payment of all material federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting in good
faith, with adequate reserves maintained in accordance with GA AP) and
will deliver to Bank, on dem and, appropriate certificates attesting to
such payments.
6.5 INSURANCE. Borrower shall keep its business and the Collateral insured
for risks and in amounts, and as Bank may reasonably request. Insurance
policies shall be in a form, with companies, and in amounts that are
satisfactory to Bank. All property policies shall have a lender's loss
payable endorsement showing Bank as an additional loss payee and all
liability policies shall show the Bank as an additional insured and all
policies shall provide that the insurer must give Bank at least twenty
(20) days notice before canceling
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its policy. At Bank's request, Borrower shall deliver certified copies
of policies and evidence of all premium payments. Proceeds payable
under any policy shall, at Bank's option, be payable to Bank on account
of the Obligations. Notwithstanding the foregoing, so long as no Event
of Default has occurred and is continuing, Borrower shall have the
option of applying the proceeds of any casualty policy up to
$150,000.00, in the aggregate, toward the replacement or repair of
destroyed or damaged property; provided that (i) any such replaced or
repaired property (a) shall be of equal or like value as the replaced
or repaired Collateral and (b) shall be deemed Collateral in which Bank
has been granted a first priority security interest and (ii) after the
occurrence and during the continuation of an Event of Default all
proceeds payable under such casualty policy shall, at the option of the
Bank, be payable to Bank on account of the Obligations. If Borrower
fails to obtain insurance as required under Section 6.5 or to pay any
amount or furnish any required proof of payment to third persons and
the Bank, Bank may make all or part of such payment or obtain such
insurance policies required in Section 6.5, and take any action under
the policies Bank deems prudent.
6.6 ACCOUNTS.
(a) In order to permit the Bank to monitor the Borrower's
financial performance and condition, Borrower shall maintain its primary
depository, operating, and securities account with Bank and a portion of the
Borrower's cash or securities in excess of that amount used for Borrower's
operations shall be maintained or administered through the Bank. Accounts
maintained at Bank by the Borrower shall not, at anytime, fall below an amount
of One Million Five Hundred Thousand Dollars ($1,500,000.00).
(b) Borrower shall identify to Bank, in writing, any bank
or securities account opened by Borrower with any institution other than Bank.
In addition, for each such account that the Borrower at anytime opens or
maintains, Borrower shall, at the Bank's request and option, pursuant to an
agreement inform and substance acceptable to the Bank, cause the depositary bank
or securities intermediary to agree that such account is the collateral of the
Bank pursuant to the terms hereunder. The provisions of the previous sentence
shall not apply to deposit accounts exclusively used for payroll, payroll taxes
and other employee wage and benefit payments to or for the benefit of the
Borrower's employees.
6.7 FINANCIAL COVENANTS.
Borrower shall maintain at all times, to be tested as of the last day
of each quarter, unless otherwise noted:
(a) MINIMUM NET PROFIT. (i) Quarterly Net Losses not to
exceed One Million Dollars ($1,000,000.00) for the Borrower's quarters
ending December 31, 2002 and March 31, 2003; and (ii) Quarterly Net
Profits of at least (A) One Dollar ($1.00) for the Borrower's fiscal
quarter ending June 30, 2003; and (B) Five Hundred Thousand Dollars for
the Borrower's quarter ending September 30, 2003 and for each quarter
thereafter.
6.8 FURTHER ASSURANCES. Borrower shall execute any further instruments and
take further action as Bank reasonably requests to perfect or continue
Bank's security interest in the Collateral or to effect the purposes of
this Agreement.
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without the Bank's prior
written consent which shall not be unreasonably withheld.
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of
(collectively a "Transfer"), all or any part of its business or
property, except for Transfers (i) of Inventory in the ordinary course
of business; (ii) of nonexclusive licenses and similar arrangements for
the use of the property of Borrower in the ordinary course of business;
(iii) of worn-out or obsolete Equipment; or (iv) transfers of property
in the ordinary course of business with a fair market value of less
than One Hundred Thousand Dollars ($100,000.00), in the aggregate.
8
7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in any business other than the businesses currently engaged in
by Borrower or reasonably related thereto, or have a material change in
its control or ownership (other than by the sale of Borrower's equity
securities in a public offering or to venture capital investors so long
as Borrower identifies to Bank the venture capital investors prior to
the closing of the investment), or management. Borrower shall not,
without at least five (5) days prior written notice to Bank: (i)
relocate its chief executive office, or add any new offices or business
locations, including warehouses (unless such new offices or business
locations contain less than Ten Thousand Dollars ($10,000.00) in
Borrower's assets or property, excluding offices or business locations
acquired as set forth in Section 7.3 hereof), or (iii) change its
organizational structure or type, or (iv) change its legal name, or (v)
change any organizational number (if any) assigned by its jurisdiction
of organization.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, with or into any other
business organization, or acquire, all or substantially all of the
capital stock or property of another Person unless: (i) there is no
Event of Default hereunder, and (ii) that such merger, consolidation or
acquisition will not result, on a prospective basis, in the breach of
any of the covenants, terms and conditions hereunder, and (iii) that
such merger, consolidation or acquisition is in the same or similar
line of business as the Borrower, and (iv) that the maximum cash outlay
by Borrower shall be Four Million Dollars ($4,000,000.00) per merger,
consolidation or acquisition or not greater than Six Million Dollars ($
6,000,000.00) in the aggregate, during any fiscal year, and (v) the
Borrower is the surviving legal entity, and (vi) that the Net Current
Assets of any company which the Borrower proposes to acquire shall be
greater than One Hundred Thousand Dollars ($100,000.00). A Subsidiary
may merge or consolidate into another Subsidiary or into Borrower.
7.4 INDEBTEDNESS. Create, incur, assume, or be liable for any Indebtedness,
other than Permitted Indebtedness.
7.5 ENCUMBRANCE. Create, incur, or allow any Lien on any of its property,
or assign or convey any right to receive income, including the sale of
any Accounts, except for Permitted Liens, or permit any Collateral not
to be subject to the first priority security interest granted herein.
The Collateral may also be subject to Permitted Liens.
7.6 DISTRIBUTIONS; INVESTMENTS. (i) Directly or indirectly acquire or own
any Person, or make any Investment in any Person, other than Permitted
Investments or except as provided in Section 7.3 herein; or (ii) pay
any dividends or make any distribution or payment or redeem, retire or
purchase any capital stock.
7.7 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter 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 non-affiliated Person.
7.8 SUBORDINATED DEBT. Make or permit any payment on any Subordinated Debt,
except under the terms of the Subordinated Debt, or amend any provision
in any document relating to the Subordinated Debt, without Bank's prior
written consent.
7.9 COMPLIANCE. Become an "investment company" or a company controlled by
an "investment company", under the Investment Company Act of 1940 or
undertake as one of its important activities extending credit to
purchase or carry margin stock, or use the proceeds of any Credit
Extension for that purpose; fail to meet the minimum funding
requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a
material adverse effect on Borrower's business or operations or would
reasonably be expected to cause a Material Adverse Change.
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
9
8.1 PAYMENT DEFAULT. Borrower fails to pay any of the Obligations within
three (3) Business Days after their due date. During the additional
period the failure to cure the default is not an Event of Default (but
no Credit Extension shall be made during the cure period);
8.2 COVENANT DEFAULT. Borrower fails or neglects to perform any obligation
in Section 6 or violates any covenant in Section 7 or fails or neglects
to perform, keep, or observe any other material term, provision,
condition, covenant or agreement contained in this Agreement, any Loan
Documents, or in any present or future agreement between Borrower and
Bank and as to any default under such other material term, provision,
condition, covenant or agreement that can be cured, has failed to cure
the default within ten (10) days after the occurrence 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 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 cure the default shall not be deemed an Event of
Default (but no Credit Extensions shall be made during such cure
period). Grace periods provided under this section shall not apply,
among other things, to financial covenants or any other covenants that
are required to be satisfied, completed or tested by a date certain.
8.3 MATERIAL ADVERSE CHANGE. A Material Adverse Change occurs;
8.4 ATTACHMENT. (i) Any material portion of Borrower's assets is attached,
seized, levied on, or comes into possession of a trustee or receiver
and the attachment, seizure or levy is not removed in ten (10) days;
(ii) the service of process upon the Borrower seeking to attach, by
trustee or similar process, any funds of the Borrower on deposit with
the Bank; (iii) Borrower is enjoined, restrained, or prevented by court
order from conducting a material part of its business; (iv) a judgment
or other claim in excess of Two Hundred and Fifty Thousand Dollars
($250,000.00), in the aggregate, becomes a Lien on a material portion
of Borrower's assets; or (v) a notice of lien, levy, or assessment is
filed against any of Borrower's assets by any government agency and not
paid within ten (10) days after Borrower receives notice. These are not
Events of Default if stayed or if a bond is posted pending contest by
Borrower (but no Credit Extensions shall be made during the cure
period);
8.5 INSOLVENCY. (i) Borrower becomes insolvent; (ii) Borrower begins an
Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun
against Borrower and not dismissed or stayed within thirty (30) days
(but no Credit Extensions shall be made before any Insolvency
Proceeding is dismissed);
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 the
acceleration of the maturity of any Indebtedness in an amount in excess
of Two Hundred Thousand Dollars ($200,000) or that could result in a
Material Adverse Change;
8.7 JUDGMENTS. If an uninsured judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least Two
Hundred Thousand Dollars ($200,000) shall be rendered against Borrower
and shall remain unsatisfied and unstayed for a period of twenty (20)
days (provided that no Credit Extensions will be made prior to the
satisfaction or stay of such judgment);
8.8 MISREPRESENTATIONS. If Borrower or any Person which the Bank reasonably
believes is acting for Borrower makes any material misrepresentation or
material misstatement now or later in any warranty or representation in
this Agreement or in any writing delivered to Bank or to induce Bank to
enter this Agreement or any Loan Document.
9 BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. When an Event of Default occurs and continues Bank
may, without notice or demand, do any or all of the following:
10
(a) Declare all Obligations immediately due and payable
(but if an Event of Default described in Section 8.5 occurs all
Obligations are immediately due and payable without any action by
Bank);
(b) Stop advancing money or extending credit for
Borrower's benefit under this Agreement or under any other agreement
between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with
account debtors for amounts, on terms and in any order that Bank
considers advisable and notify any Person owing Borrower money of
Bank's security interest in such funds and verify the amount of such
account. Borrower shall collect all payments in trust for Bank and, if
requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor, with proper endorsements for deposit;
(d) Make any payments and do any acts it considers
necessary or reasonable to protect its security interest in the
Collateral. Borrower shall assemble the Collateral if Bank requests and
make it available as Bank designates. Bank may enter premises where the
Collateral is located, take and maintain possession of any part of the
Collateral, and pay, purchase, contest, or compromise any Lien which
appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Bank a license to enter and occupy
any of its premises, without charge, to exercise any of Bank's rights
or remedies;
(e) Apply to the Obligations any (i) balances and
deposits of Borrower it holds, or (ii) any amount held by Bank owing to
or for the credit or the account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell the Collateral.
Bank is hereby granted a non-exclusive, royalty-free license or other
right to use, without charge, Borrower's labels, patents, copyrights,
mask works, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection
with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's
benefit; and
(g) Dispose of the Collateral according to the Code.
9.2 POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, to be effective upon the occurrence and during
the continuance of an Event of Default, to: (i) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign
Borrower's name on any invoice or xxxx of lading for any Account or
drafts against account debtors; (iii) settle and adjust disputes and
claims about the Accounts directly with account debtors, for amounts
and on terms Bank determines reasonable; (iv) make, settle, and adjust
all claims under Borrower's insurance policies; and (v) transfer the
Collateral into the name of Bank or a third party as the Code permits.
Borrower hereby appoints Bank as its lawful attorney-in-fact to sign
Borrower's name on any documents necessary to perfect or continue the
perfection of any security interest regardless of whether an Event of
Default has occurred until all Obligations have been satisfied in full
and Bank is under no further obligation to make Credit Extensions
hereunder. Bank's foregoing appointment as Borrower's attorney in fact,
and all of Bank's rights and powers, coupled with an interest, are
irrevocable until all Obligations have been fully repaid and performed
and Bank's obligation to provide Credit Extensions terminates.
9.3 ACCOUNTS NOTIFICATION/COLLECTION. In the event that an Event of Default
occurs and is continuing, Bank may notify any Person owing Borrower
money of Bank's security interest in the funds and verify and/or
collect the amount of the Account. After the occurrence of an Event of
Default, any amounts received by Borrower shall be held in trust by
Borrower for Bank, and, if requested by Bank, Borrower shall promptly
deliver such receipts to Bank in the form received from the account
debtor, with proper endorsements for deposit.
11
9.4 BANK EXPENSES. Any amounts paid by Bank as provided herein are Bank
Expenses and are immediately due and payable, and shall bear interest
at the then applicable rate and be secured by the Collateral. No
payments by Bank shall be deemed an agreement to make similar payments
in the future or Bank's waiver of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL. So long as the Bank complies with
reasonable banking practices regarding the safekeeping of collateral,
the Bank shall not be liable or responsible for: (a) the safekeeping of
the Collateral; (b) any loss or damage to the Collateral; (c) any
diminution in the value of the Collateral; or (d) any act or default of
any carrier, warehouseman, bailee, or other person. Borrower bears all
risk of loss, damage or destruction of the Collateral.
9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under this Agreement,
the Loan Documents, and all other agreements are cumulative. Bank has
all rights and remedies provided under the Code, by law, or in equity.
Bank's exercise of one right or remedy is not an election, and Bank's
waiver of any Event of Default is not a continuing waiver. Bank's delay
is not a waiver, election, or acquiescence. No waiver hereunder shall
be effective unless signed by Bank and then is only effective for the
specific instance and purpose for which it was given.
9.7 DEMAND WAIVER. Borrower waives demand, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of
accounts, documents, instruments, chattel paper, and guarantees held by
Bank on which Borrower is liable.
10 NOTICES
All notices or demands by any party to this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile at the addresses listed below. Either Bank or
Borrower may change its notice address by giving the other written notice.
If to Borrower: Open Solutions Inc.
000 Xxxxxxx Xxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxxxx 00000
Attn: Vice President and Chief Financial Officer
FAX: _____________________________________
If to Bank: Silicon Valley Bank
One Xxxxxx Executive Park, Suite 200
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxx Xxxxxxxxx
Fax: (000) 000-0000
with a copy to: Xxxxxx & Xxxxxxxxxx LLP
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esquire
FAX: (000) 000-0000
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Massachusetts law governs the Loan Documents without regard to
principles of conflicts of law. Borrower and Bank each submit to the
non-exclusive jurisdiction of the State and Federal courts in Massachusetts;
provided, however, that if for any reason Bank cannot avail itself of such
courts in the Commonwealth of Massachusetts,
12
Borrower accepts jurisdiction of the courts and venue in Santa Xxxxx County,
California. NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE RIGHT TO
BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE
IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK'S RIGHTS
AGAINST THE BORROWER OR ITS PROPERTY.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. This Agreement binds and is for the benefit of
the successors and permitted assigns of each party. Borrower may not
assign this Agreement or any rights or Obligations under it without
Bank's prior written consent which may be granted or withheld in Bank's
discretion. Bank has the right, without the consent of or notice to
Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank's obligations, rights and
benefits under this Agreement, the Loan Documents or any related
agreement.
12.2 INDEMNIFICATION. Borrower hereby indemnifies, defends and holds
harmless, the Bank and its officers, employees and agents against: (a)
all obligations, demands, claims, and liabilities asserted by any other
party in connection with the transactions contemplated by the Loan
Documents; and (b) all losses or Bank Expenses incurred, or paid by
Bank from, following, or consequential to transactions between Bank and
Borrower (including reasonable attorneys' fees and expenses), except
for losses caused by Bank's gross negligence or willful misconduct.
12.3 RIGHT OF SET-OFF. Borrower hereby grant to Bank, a lien, security
interest and right of setoff as security for all Obligations to Bank,
whether now existing or hereafter arising upon and against all
deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Bank or any entity under
the control of the Bank or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default,
without demand or notice, Bank may set off the same or any part thereof
and apply the same to any liability or obligation of Borrower even
though unmatured and regardless of the adequacy of any other collateral
securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL
WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF
WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.4 TIME OF ESSENCE. Time is of the essence for the performance of all
Obligations in this Agreement.
12.5 SEVERABILITY OF PROVISION. Each provision of this Agreement is
severable from every other provision in determining the enforceability
of any provision.
12.6 AMENDMENTS IN WRITING; INTEGRATION. All amendments to this Agreement
must be in writing signed by both Bank and Borrower. This Agreement and
the Loan Documents represent the entire agreement about this subject
matter, and supersede prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and
negotiations between the parties about the subject matter of this
Agreement and the Loan Documents merge into this Agreement and the Loan
Documents.
13
12.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, are an original, and all taken
together, constitute one Agreement.
12.8 SURVIVAL. All covenants, representations and warranties made in this
Agreement continue in full force while any Obligations remain
outstanding. The obligation of Borrower in Section 12.2 to indemnify
Bank shall survive until the statute of limitations with respect to
such claim or cause of action shall have run. Upon repayment of all
Obligations and the termination of Bank's commitment to lend hereunder,
Bank shall promptly deliver to Borrower all appropriate termination
statements and releases to evidence the termination of this Agreement
and the security interest granted herein.
12.9 CONFIDENTIALITY. In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own
proprietary information, but disclosure of information may be made: (i)
to Bank's subsidiaries or affiliates in connection with their business
with Borrower; (ii) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Bank shall use
commercially reasonable efforts in obtaining such prospective
transferee's or purchaser's agreement to the terms of this provision);
(iii) as required bylaw, regulation, subpoena, or other order, (iv) as
required in connection with Bank's examination or audit; and (v) as
Bank considers appropriate in exercising remedies under this Agreement.
Confidential information does not include information that either: (a)
is in the public domain or in Bank's possession when disclosed to Bank,
or becomes part of the public domain after disclosure to Bank; or (b)
is disclosed to Bank by a third party, if Bank does not know that the
third party is prohibited from disclosing the information.
13 DEFINITIONS
13.1 DEFINITIONS. In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Revolving Line.
"AFFILIATE" a Person that owns or controls directly or indirectly the
Person, any Person that controls or is controlled by or is under common control
with the Person, and each of that Person's senior executive officers, directors,
partners and, for any Person that is a limited liability company, that Person's
managers and members.
"BANK EXPENSES" are all reasonable audit fees and expenses and
reasonable costs or expenses (including reasonable attorneys' fees and expenses)
for preparing, negotiating, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.
"BORROWING BASE" is eighty percent (80.0%) of Eligible Accounts, as
determined by Bank from Borrower's most recent Borrowing Base Certificate;
provided, however, that Bank may lower the percentage of the Borrowing Base
after performing an audit of Borrower's Collateral.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.
"CASH MANAGEMENT SERVICES" are defined in Section 2.1.4.
14
"CLOSING DATE" is the date of this Agreement.
"CODE" is the Uniform Commercial Code as adopted in Massachusetts, as
amended and as may be amended and in effect from time to time.
"COLLATERAL" is any and all properties, rights and assets of the
Borrower granted by the Borrower to Bank or arising under the Code, now, or in
the future, in which the Borrower obtains an interest, or the power to transfer
rights, the property described on EXHIBIT A.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"CREDIT EXTENSION" is each Advance, Equipment Advance, Letter of
Credit, Exchange Contract, or any other extension of credit by Bank for
Borrower's benefit.
"CURRENT ASSETS" are the Borrower's consolidated, unrestricted cash,
cash equivalents, net billed accounts receivable, and marketable securities with
maturities of fewer than 12 months determined according to GAAP
"CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year, which shall include, without
limitation, all long-term obligations and liabilities of Borrower for borrowed
money and excluding Deferred Revenue.
"DEFERRED REVENUE" is all amounts received in advance of performance
under contracts and not yetrecognized as revenue.
"ELIGIBLE ACCOUNTS" are billed Accounts in the ordinary course of
Borrower's business that meet all Borrower's representations and warranties in
Section 5.2; but Bank may change eligibility standards by giving Borrower prior
written notice. Unless Bank agrees otherwise in writing, Eligible Accounts shall
not include:
(a) Accounts that the account debtor has not paid within
ninety (90) days of invoice date;
(b) Accounts for an account debtor, fifty percent (50%)
or more of whose Accounts have not been paid within ninety (90) days of
invoice date;
(c) Credit balances over ninety (90) days from invoice
date;
(d) Accounts for an account debtor, including Affiliates,
whose total obligations to Borrower exceed twenty-five (25%) of all
Accounts, for the amounts that exceed that percentage, unless Bank
approves in writing;
(e) Accounts for which the account debtor does not have
its principal place of business in the United States;
(f) Accounts for which the account debtor is a federal,
state or local government entity or any department, agency, or
instrumentality thereof (except for Accounts of the United States if
the payee
15
has assigned its payment rights to Bank and the assignment has been
acknowledged under the Assignment of Claims Act of 1940 (31 U.S.C.
3727);
(g) Accounts for which Borrower owes the account debtor,
but only up to the amount owed (sometimes called "contra" accounts,
accounts payable, customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment,
or in which goods are consigned, sales guaranteed, sale or return, sale
on approval, xxxx and hold, or other terms if account debtor's payment
may be conditional;
(i) Accounts for which the account debtor is Borrower's
Affiliate, officer, employee, or agent;
(j) Accounts in which the account debtor disputes
liability or makes any claim and Bank believes there may be a basis for
dispute (but only up to the disputed or claimed amount), or if the
Account Debtor is subject to an Insolvency Proceeding, or becomes
insolvent, or goes out of business;
(k) Accounts for which Bank reasonably determines after
inquiry and consultation with Borrower collection to be doubtful.
"ELIGIBLE EQUIPMENT" is (a) general purpose computer equipment, office
equipment, test and laboratory equipment, furnishings, subject to the
limitations set forth herein, and (b) Other Equipment that complies with all of
Borrower's representations and warranties to Bank and which is acceptable to
Bank in all respects.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"EQUIPMENT ADVANCE" is defined in Section 2.1.5.
"EQUIPMENT AVAILABILITY END DATE" is defined in Section 2.1.5.
"EQUIPMENT LINE" is an Equipment Advance or Equipment Advances of up to
Two Million Dollars ($ 2,000,000.00).
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"FINANCED EQUIPMENT" is all present and future Eligible Equipment in
which Borrower has any interest, the purchase of which is financed by an
Equipment Advance.
"FX FORWARD CONTRACT" is defined in Section 2.1.3.
"FX RESERVE" is defined in Section 2.1.3.
"GAAP" is generally accepted accounting principles.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INITIAL ADVANCE" is defined in Section 2.1.5(a).
"INSOLVENCY PROCEEDING" is any proceeding by or against any Person
under the United States Bankruptcy Code, or any other bankruptcy or insolvency
law, including assignments for the benefit of creditors, compositions,
extensions generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
16
"INTELLECTUAL PROPERTY" any copyright rights, copyright applications,
copyright registrations and like protections in each work of authorship and
derivative work, whether published or unpublished, now owned or later acquired;
any patents, trademarks, service marks and applications therefor; any trade
secret rights, including any rights to unpatented inventions, know-how and
operating manuels, now owned or hereafter acquired.
"INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"LETTER OF CREDIT" means a letter of credit or similar undertaking
issued by Bank pursuant to Section 2.1.2.
"LETTER OF CREDIT RESERVE" has the meaning set forth in Section
2.1.2(d).
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN AMOUNT" in respect of each Equipment Advance is the original
principal amount of such Equipment Advance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes
or guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
"MATERIAL ADVERSE CHANGE" is: (i) A material impairment in the
perfection or priority of Bank's security interest in the Collateral or in the
value of such Collateral; (ii) a material adverse change in the business,
operations, or condition (financial or otherwise) of the Borrower; or (iii) a
material impairment of the prospect of repayment of any portion of the
Obligations; or (iv) Bank determines, based upon information available to it and
in its reasonable judgment, that there is a substantial likelihood that Borrower
shall fail to comply with one or more of the financial covenants in Section 6
during the next succeeding financial reporting period.
"MATURITY DATE" is the Revolving Maturity Date with respect to the
Revolving Line.
"NET CURRENT ASSETS" shall be Current Assets less Current Liabilities.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later pursuant to this Agreement, including
letters of credit, cash management services, and foreign exchange contracts, if
any, and including interest accruing after Insolvency Proceedings begin and
debts, liabilities, or obligations of Borrower assigned to Bank.
"ORIGINAL STATED COST" is (i), the original cost to the Borrower of the
item of new Eligible Equipment net of any and all freight, installation, tax, or
(ii) the fair market value assigned to such item of used Eligible Equipment by
mutual agreement of Borrower and Bank at the time of making of the Equipment
Advance.
"OTHER EQUIPMENT" is computer software and other similar property and
soft costs approved by the Bank including sales tax, freight and installation
expenses. Unless otherwise agreed to by Bank, not more than 35% of the proceeds
of the Equipment Line shall be used to finance Other Equipment.
"PAYMENT DATE" is the first calendar day of each month.
"PERMITTED INDEBTEDNESS" is:
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(a) Borrower's indebtedness to Bank under this Agreement
or the Loan Documents;
(b) Indebtedness existing on the Closing Date and shown
on the Perfection Certificate;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the
ordinary course of business; and
(e) Indebtedness secured by Permitted Liens;
(f) Extensions, refinancings, modifications, amendments
and restatements of any items of Permitted Indebtedness (a) through (e)
above, provided that the principal amount thereof is not increased or
the terms thereof are not modified to impose more burdensome terms upon
Borrower or its Subsidiary, as the case may be; and
(g) Unsecured indebtedness expressly subordinated to the
Bank pursuant to documentation reasonably acceptable to the Bank.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Perfection Certificate and
existing on the Closing Date;
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States or its agency or any
state maturing within 1 year from its acquisition, (ii) commercial
paper maturing no more than 1 year after its creation and having the
highest rating from either Standard & Poor's Corporation or Xxxxx'x
Investors Service, Inc., (iii) Bank's certificates of deposit issued
maturing no more than 1 year after issue, (iv) any other investments
administered through the Bank; and
(c) Investments by Borrower in Subsidiaries, up to a
maximum amount of Seven Hundred Fifty Thousand Dollars ($750,000.00),in
the aggregate.
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the
Perfection Certificate or arising under this Agreement or other Loan
Documents;
(b) Liens for taxes, fees, assessments or other
government charges or levies, either not delinquent or being contested
in good faith and for which Borrower maintains adequate reserves on its
Books, if they have no priority over any of Bank's security interests;
(c) Purchase money Liens in an amount not to exceed One
Hundred Thousand Dollars ($100,000.00) in the aggregate during any
fiscal year: (i) on Equipment acquired or held by Borrower incurred for
financing the acquisition of the Equipment, or (ii) existing on
equipment when acquired, if the Lien is confined to the property and
improvements and the proceeds of the equipment;
(d) Leases or subleases and non-exclusive licenses or
sublicenses granted in the ordinary course of Borrower's business, if
the leases, subleases, licenses and sublicenses permit granting Bank a
security interest;
(e) Liens incurred in the extension, renewal or
refinancing of the indebtedness secured by Liens described in (a)
through (d), but any extension, renewal or replacement Lien must be
limited to the property encumbered by the existing Lien and the
principal amount of the indebtedness may not increase.
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"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate. Except as otherwise provided elsewhere herein, any
Credit Extension made hereunder based on the Bank's Prime Rate shall increase or
decrease with the changes in the Bank's Prime Rate.
"RESPONSIBLE OFFICER" is each of the ChiefExecutive Officer, President,
Chief Financial Officer and Controller of Borrower.
"REVOLVING LINE" is an Advance or Advances of up to Two Million Dollars
($ 2,000,000.00).
"REVOLVING MATURITY DATE" is April 21, 2004.
"SCHEDULED PAYMENT" is defined in Section 2.1.5(c).
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (pursuant to a subordination agreement entered into
between the Bank, the Borrower and the subordinated creditor), on terms
acceptable to Bank.
"SUBSIDIARY" is any Person, corporation, partnership, limited liability
company, joint venture, or any other business entity of which more than 50% of
the voting stock or other equity interests is owned or controlled, directly or
indirectly, by the Person or one or more Affiliates of the Person.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first above written.
BORROWER:
OPEN SOLUTIONS INC.
By /s/ Xxxx X. Xxxxxxxx
--------------------------------------------------
Name: Xxxx X. Xxxxxxxx
-----------------------------------------------
Title: V.P. & C. F. O.
----------------------------------------------
BANK:
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By /s/ Xxxxxx Xxxx
---------------------------------------------------
Name: Xxxxxx Xxxx
------------------------------------------------
Title: SVP
-----------------------------------------------
SILICON VALLEY BANK
By /s/ Xxxxxxxx X. Xxxxxxxx
---------------------------------------------------
Name: Xxxxxxxx X. Xxxxxxxx
------------------------------------------------
Title: Asst. Vice Pres.
-----------------------------------------------
(Signed in Santa Xxxxx County, California)
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NEGATIVE PLEDGE AGREEMENT
This Negative Pledge Agreement is made as of April 22, 2003, by and
between OPEN SOLUTIONS INC. ("Borrower") and SILICON VALLEY BANK, a
California-chartered bank, with its principal place of business at 0000 Xxxxxx
Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and with a loan production office located
at One Newton Executive Park, Suite 200, 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, doing business under the name "Silicon Valley East"
("Bank").
In connection with, among other documents, the Loan and Security Agreement (the
"Loan Documents") being concurrently executed herewith between Borrower and
Bank, Borrower agrees as follows:
1. Except for the granting of non-exclusive licenses or
sublicenses by Borrower in the ordinary course of business,
Borrower has not, and shall not, sell, transfer, assign,
mortgage, pledge, lease, grant a security interest in, or
encumber any of Borrower's Intellectual Property (as defined
below).
2. Borrower has not, and shall not, enter into a negative pledge
agreement, or similar agreement, affecting the rights of the
Intellectual Property with any other party.
3. It shall be an event of default under the Loan Documents
between Borrower and Bank if there is a breach of any term of
this Negative Pledge Agreement.
4. As used herein,
a. "Intellectual Property" means:
(i) Any and all Copyrights;
(ii) 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;
(iii) Any and all design rights which may be
available to Borrower now or hereafter
existing, created, acquired or held;
(iv) All Mask Works or similar rights available
for the protection of semiconductor chips;
(v) All Patents;
(vi) Any Trademarks;
(vii) Any and all claims for damages by way of
past, present and future infringements 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;
(viii) All licenses or other rights to use any of
the Copyrights, Patents, Trademarks, or Mask
Works and all license fees and royalties
arising from such use to the extent
permitted by such license or rights; and
(ix) All amendments, extensions, renewals and
extensions of any of the Copyrights,
Trademarks, Patents, or Mask Works; and
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(x) 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.
b. "Copyrights" means any and all copyright rights,
copyright applications, copyright registrations and
like protections in each work of 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.
c. "Mask Works" means all mask work or similar rights
available for the protection of semiconductor chips,
now owned or hereafter acquired;
d. "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.
e. "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.
5. Capitalized terms used but not otherwise defined herein shall
have the same meaning as in the Loan Documents.
6. The laws of the Commonwealth of Massachusetts shall apply to
this Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY
ACTION, SUIT, OR PROCEEDING OF ANY KIND, AGAINST IT WHICH
ARISES OUT OF OR BY REASON OF THIS AGREEMENT; PROVIDED,
HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF
THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER
ACCEPTS JURISDICTION OF THE COURTS AND VENUE IN SANTA XXXXX
COUNTY, CALIFORNIA. NOTWITHSTANDING THE FOREGOING, THE BANK
SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST
THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE IN
ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE
BANK'S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.
7. This Agreement shall become effective only when it shall have
been executed by Borrower and Bank (provided, however, in no
event shall this Agreement become effective until signed by an
officer of Bank in California).
EXECUTED as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first written above.
BORROWER:
OPEN SOLUTIONS INC.
By /s/ Xxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxxxx
---------------------------------------
Title: V.P. & C. F. O.
--------------------------------------
2
BANK:
SILICON VALLEY BANK, D/B/A SILICON VALLEY
EAST
By /s/ Xxxxxx Xxxx
------------------------------------------
Name: Xxxxxx Xxxx
---------------------------------------
Title: SVP
--------------------------------------
SILICON VALLEY BANK
By /s/ Xxxxxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxxxxx X. Xxxxxxxx
---------------------------------------
Title: Asst. Vice Pres.
--------------------------------------
(Signed in Santa Clara, California)
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