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LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
SILICON STORAGE TECHNOLOGY, INC.
AND
FOOTHILL CAPITAL CORPORATION
DATED AS OF SEPTEMBER 22, 1998
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TABLE OF CONTENTS
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PAGE(S)
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1. DEFINITIONS AND CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms. . . . . . . . . . . . . . . . . . . . . . . . . 13
1.3 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.4 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
1.5 Schedules and Exhibits. . . . . . . . . . . . . . . . . . . . . . 14
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . 14
2.1 Revolving Advances. . . . . . . . . . . . . . . . . . . . . . . . 14
2.2 Intentionally Omitted.. . . . . . . . . . . . . . . . . . . . . . 15
2.3 Intentionally Omitted.. . . . . . . . . . . . . . . . . . . . . . 15
2.4 Capital Expenditure Line. . . . . . . . . . . . . . . . . . . . . 15
2.5 Overadvances. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.6 Interest, Rates, Payments, and Calculations.. . . . . . . . . . . 16
2.7 Collection of Accounts. . . . . . . . . . . . . . . . . . . . . . 17
2.8 Crediting Payments; Application of Collections. . . . . . . . . . 17
2.9 Designated Account. . . . . . . . . . . . . . . . . . . . . . . . 18
2.10 Maintenance of Loan Account; Statements of Obligations. . . . . . 18
2.11 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.12 Eurodollar Rate Loans.. . . . . . . . . . . . . . . . . . . . . . 19
2.13 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.14 Requirements of Law.. . . . . . . . . . . . . . . . . . . . . . . 21
2.15 Indemnity.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3. CONDITIONS; TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . 23
3.1 Conditions Precedent to the Initial Advance and the Initial
Capital Expenditure Loan. . . . . . . . . . . . . . . . . . . . . 23
3.2 Conditions Precedent to all Advances and all Capital
Expenditure Loans.. . . . . . . . . . . . . . . . . . . . . . . . 25
3.3 Conditions Subsequent . . . . . . . . . . . . . . . . . . . . . . 25
3.4 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.5 Effect of Termination.. . . . . . . . . . . . . . . . . . . . . . 26
3.6 Early Termination by Borrower.. . . . . . . . . . . . . . . . . . 26
3.7 Termination Upon Event of Default.. . . . . . . . . . . . . . . . 26
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . 26
4.1 Grant of Security Interest. . . . . . . . . . . . . . . . . . . . 26
4.2 Negotiable Collateral.. . . . . . . . . . . . . . . . . . . . . . 27
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.4 Delivery of Additional Documentation Required.. . . . . . . . . . 27
1
4.5 Power of Attorney.. . . . . . . . . . . . . . . . . . . . . . . . 27
4.6 Right to Inspect. . . . . . . . . . . . . . . . . . . . . . . . . 28
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . 28
5.1 No Encumbrances.. . . . . . . . . . . . . . . . . . . . . . . . . 28
5.2 Eligible Accounts.. . . . . . . . . . . . . . . . . . . . . . . . 28
5.3 Intentionally Omitted.. . . . . . . . . . . . . . . . . . . . . . 28
5.4 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.5 Location of Inventory and Equipment.. . . . . . . . . . . . . . . 28
5.6 Inventory Records.. . . . . . . . . . . . . . . . . . . . . . . . 29
5.7 Location of Chief Executive Office; FEIN. . . . . . . . . . . . . 29
5.8 Due Organization and Qualification; Subsidiaries. . . . . . . . . 29
5.9 Due Authorization; No Conflict. . . . . . . . . . . . . . . . . . 29
5.10 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.11 No Material Adverse Change. . . . . . . . . . . . . . . . . . . . 30
5.12 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.13 Employee Benefits.. . . . . . . . . . . . . . . . . . . . . . . . 31
5.14 Environmental Condition.. . . . . . . . . . . . . . . . . . . . . 31
6. AFFIRMATIVE COVENANTS.. . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1 Accounting System.. . . . . . . . . . . . . . . . . . . . . . . . 31
6.2 Collateral Reporting. . . . . . . . . . . . . . . . . . . . . . . 31
6.3 Financial Statements, Reports, Certificates.. . . . . . . . . . . 32
6.4 Tax Returns.. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.5 Information About Account Debtors.. . . . . . . . . . . . . . . . 33
6.6 Returns.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.7 Title to Equipment. . . . . . . . . . . . . . . . . . . . . . . . 33
6.8 Maintenance of Equipment. . . . . . . . . . . . . . . . . . . . . 33
6.9 Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.10 Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.11 No Setoffs or Counterclaims.. . . . . . . . . . . . . . . . . . . 35
6.12 Location of Inventory and Equipment.. . . . . . . . . . . . . . . 35
6.13 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . 35
6.14 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . 35
6.15 Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.16 Year 2000 Compliance. . . . . . . . . . . . . . . . . . . . . . . 35
7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.1 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.2 Liens.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.3 Restrictions on Fundamental Changes.. . . . . . . . . . . . . . . 36
7.4 Disposal of Assets. . . . . . . . . . . . . . . . . . . . . . . . 36
7.5 Change Name.. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.6 Guarantee.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2
7.7 Nature of Business. . . . . . . . . . . . . . . . . . . . . . . . 37
7.8 Prepayments and Amendments. . . . . . . . . . . . . . . . . . . . 37
7.9 Change of Control.. . . . . . . . . . . . . . . . . . . . . . . . 37
7.10 Consignments. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.11 Distributions.. . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.12 Accounting Methods. . . . . . . . . . . . . . . . . . . . . . . . 38
7.13 Investments.. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.14 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . 38
7.15 Suspension. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.16 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.17 Use of Proceeds.. . . . . . . . . . . . . . . . . . . . . . . . . 38
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees. . . . . . . . . . . . . . . . . . . . . . 38
7.19 Intentionally Omitted.. . . . . . . . . . . . . . . . . . . . . . 39
7.20 Financial Covenant. . . . . . . . . . . . . . . . . . . . . . . . 39
7.21 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . 39
8. EVENTS OF DEFAULT.. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9. FOOTHILL'S RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . 41
9.1 Rights and Remedies.. . . . . . . . . . . . . . . . . . . . . . . 41
9.2 Remedies Cumulative.. . . . . . . . . . . . . . . . . . . . . . . 43
10. TAXES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11. WAIVERS; INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 43
11.1 Demand; Protest; etc. . . . . . . . . . . . . . . . . . . . . . . 43
11.2 Foothill's Liability for Collateral.. . . . . . . . . . . . . . . 44
11.3 Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . . 44
12. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. . . . . . . . . . . . . . . 45
14. DESTRUCTION OF BORROWER'S DOCUMENTS . . . . . . . . . . . . . . . . . . 46
15. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15.1 Effectiveness.. . . . . . . . . . . . . . . . . . . . . . . . . . 46
15.2 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . 46
15.3 Section Headings. . . . . . . . . . . . . . . . . . . . . . . . . 47
15.4 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . 47
15.5 Severability of Provisions. . . . . . . . . . . . . . . . . . . . 47
15.6 Amendments in Writing.. . . . . . . . . . . . . . . . . . . . . . 47
15.7 Counterparts; Telefacsimile Execution.. . . . . . . . . . . . . . 47
3
15.8 Revival and Reinstatement of Obligations. . . . . . . . . . . . . 47
15.9 Integration.. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4
LOAN AND SECURITY AGREEMENT
1
THIS LOAN AND SECURITY AGREEMENT (THIS "AGREEMENT"), is entered into as
of September 22, 1998, between FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), with a place of business located at 00000 Xxxxx
Xxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000 and SILICON
STORAGE TECHNOLOGY, INC., a California corporation ("Borrower"), with its
chief executive office located at 0000 Xxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxx
00000.
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:
"ACCOUNT DEBTOR" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account.
"ACCOUNTS" means all currently 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 or the rendition of
services by Borrower, irrespective of whether earned by performance, and any
and all credit insurance, guaranties, or security therefor.
"ADJUSTED EURODOLLAR RATE" means, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next whole multiple of 1/16 of 1% per annum)
determined by dividing (a) the Eurodollar Rate for such Interest Period by
(b) a percentage equal to (i) 100% minus (ii) the Reserve Percentage. The
Adjusted Eurodollar Rate shall be adjusted on and as of the effective day of
any change in the Reserve Percentage.
"ADVANCES" has the meaning set forth in SECTION 2.1(a).
"AFFILIATE" means, as applied to any Person, any other
Person who directly or indirectly controls, is controlled by, is under common
control with or is a director or officer of such Person. For purposes of
this definition, "control" means the possession, directly or indirectly, of
the power to vote 20% or more of the securities having ordinary voting power
for the election of directors or the direct or indirect power to direct the
management and policies of a Person.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"AUTHORIZED PERSON" means any officer or other employee of
Borrower.
"BANKRUPTCY CODE" means the United States Bankruptcy Code
(11 U.S.C. Section 101 ET SEQ.), as amended, and any successor statute.
"BENEFIT PLAN" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or
any ERISA Affiliate has been an "employer" (as defined in Section 3(5) of
ERISA) within the past six years.
"BORROWER" has the meaning set forth in the preamble to this
Agreement.
"BORROWER'S BOOKS" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing
Borrower's properties or assets (including the Collateral) or liabilities;
all information relating to Borrower's business operations or financial
condition; and all computer programs, disk or tape files, printouts, runs, or
other computer prepared information.
"BORROWING BASE" has the meaning set forth in SECTION 2.1(a).
"BUSINESS DAY" means any day that is not a Saturday, Sunday,
or other day on which national banks are authorized or required to close.
"CAPITAL EXPENDITURE LINE COMMITMENT" has the meaning set
forth in SECTION 2.4.
"CAPITAL EXPENDITURE LOAN" has the meaning set forth in
SECTION 2.4.
"CHANGE OF CONTROL" shall be deemed to have occurred at such
time as a "person" or "group" (within the meaning of SECTIONS 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934),
directly or indirectly, of more than 20% of the total voting power of all
classes of stock then outstanding of Borrower entitled to vote in the
election of directors.
"CLOSING DATE" means the date on which the conditions in
SECTION 3.1 are satisfied and the Closing Fee is paid.
"CODE" means the California Uniform Commercial Code.
"COLLATERAL" means each of the following:
(a) the Accounts,
(b) Borrower's Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Investment Property,
(g) the Negotiable Collateral,
(h) any money, or other assets of Borrower that now or
hereafter come into the possession, custody, or control of Foothill, and
(i) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the Collateral, and any and all Accounts, Borrower's Books,
Equipment, General Intangibles, Inventory, Negotiable Collateral, Real
Property, money, deposit accounts, or other tangible or intangible property
resulting from the sale, exchange, collection, or other disposition of any of
the foregoing, or any portion thereof or interest therein, and the proceeds
thereof.
"COLLATERAL ACCESS AGREEMENT" means a landlord waiver,
mortgagee waiver, bailee letter, or acknowledgement agreement of any
warehouseman, processor, lessor, consignee, or other Person in possession of,
having a Lien upon, or having rights or interests in the Equipment or
Inventory, in each case, in form and substance satisfactory to Foothill.
"COLLECTIONS" means all cash, checks, notes, instruments,
and other items of payment (including, insurance proceeds, proceeds of cash
sales, rental proceeds, and tax refunds).
"CONTROL AGREEMENT" means that certain Control Agreement
among Borrower, Foothill and Xxxxxxx Xxxxx or another Person mutually
acceptable to Borrower and Foothill.
"COMPLIANCE CERTIFICATE" means a certificate substantially
in the form of EXHIBIT C-1 and delivered by the chief financial officer of
Borrower to Foothill.
"DAILY BALANCE" means, with respect to each day during the
term of this Agreement, the amount of an Obligation owed at the end of such
day.
"DEEMS ITSELF INSECURE" means that the Person deems itself
insecure in accordance with the provisions of Section 1208 of the Code.
"DEFAULT" means an event, condition, or default that, with
the giving of
notice, the passage of time, or both, would be an Event of Default.
"DESIGNATED ACCOUNT" means account number 1260003522 of
Borrower maintained with Borrower's Designated Account Bank, or such other
deposit account of Borrower (located within the United States) which has been
designated, in writing and from time to time, by Borrower to Foothill.
"DESIGNATED ACCOUNT BANK" means Union Bank of California,
whose office is located at Sunnyvale, California, and whose ABA number is
000000000, or such other banks as may be agreed to by Foothill and Borrower
from time to time.
"DILUTION" means, in each case based upon the experience of
the immediately prior three months, the result of dividing the Dollar amount
of (a) bad debt write-downs, discounts, advertising, returns, promotions,
credits, or other dilutive items with respect to the Accounts, by (b)
Borrower's Collections (excluding extraordinary items) plus the Dollar amount
of clause (a).
"DILUTION RESERVE" means, as of any date of determination,
an amount sufficient to reduce Foothill's advance rate against Eligible
Accounts by one percentage point for each percentage point by which Dilution
is in excess of 7.00%.
"DOLLARS OR $" means United States dollars.
"EARLY TERMINATION PREMIUM" has the meaning set forth in
SECTION 3.6.
"ELIGIBLE ACCOUNTS" means those Accounts (net of unapplied
cash and Borrower's general ledger reserve for price protection) created by
Borrower in the ordinary course of business that arise out of Borrower's sale
of goods or rendition of services, that strictly comply with each and all of
the representations and warranties respecting Accounts made by Borrower to
Foothill in the Loan Documents, and that are and at all times continue to be
acceptable to Foothill in all respects; PROVIDED, HOWEVER, that standards of
eligibility may be fixed and revised from time to time in good faith by
Foothill in Foothill's reasonable credit judgment. Eligible Accounts shall
not include the following:
(a) Accounts that the Account Debtor has failed to pay:
(i) within 120 days of invoice date or 60 days of due date or, (ii) in the
case of Silicon Technology Co., Ltd. (or other Persons as may be agreed to by
Foothill and Borrower from time to time), within 135 days of invoice date or
60 days of due date;
(b) Accounts owed by an Account Debtor or its Affiliates
where 50% or more of all Accounts owed by that Account Debtor (or its
Affiliates) are deemed ineligible under clause (a) above;
(c) Accounts with respect to which the Account Debtor is
an
employee, Affiliate, or agent of Borrower, but excluding Silicon Technology
Co., Ltd. so long as Borrower owns less than 20% of the outstanding capital
stock of such company;
(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 that are not payable in Dollars or with
respect to which the Account Debtor is the government of any foreign country
or sovereign state, or of any state, province, municipality, or other
political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof;
(f) Accounts with respect to which the Account Debtor is
either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which
Borrower has complied, to the satisfaction of Foothill, with the Assignment
of Claims Act, 31 U.S.C. Section 3727), or (ii) any State of the United
States (exclusive, however, of Accounts owed by any State that does not have
a statutory counterpart to the Assignment of Claims Act);
(g) Accounts with respect to which the Account Debtor is a
creditor of Borrower, has or has asserted a right of setoff, has disputed its
liability, or has made any claim with respect to the Account, to the extent
of the amount owed by Borrower to such Account Debtor;
(h) Accounts with respect to an Account Debtor whose total
obligations owing to Borrower exceed 10% of all Eligible Accounts (or (i) 25%
of all Eligible Accounts in the case of Acer Inc., (ii) the LESSER of (a)
$5,000,000 or (b) 25% of all Eligible Accounts in the case of Silicon
Technology Co., Ltd., (iii) 20% of all Eligible Accounts in the case of
Samsung Electronics Co., Ltd. and (iv) 15% of all Eligible Accounts in the
case of each of Actron Technology Co. Ltd. (provided that Foothill is given
satisfactory financial information for this Account Debtor) and Datel
Electronics Ltd.), to the extent of the obligations owing by such Account
Debtor in excess of such percentage;
(i) Accounts with respect to which the Account Debtor is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(j) Accounts the collection of which Foothill, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(k) Accounts with respect to which the goods giving rise
to such Account have not been shipped and billed to the Account Debtor, the
services giving rise to such Account have not been performed and accepted by
the Account Debtor, or the Account otherwise does not represent a final sale;
(l) Accounts with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, or West Virginia (or any
other state that requires a creditor to file a Business Activity Report or
similar document in order to bring suit or otherwise enforce its remedies
against such Account Debtor in the courts or through any judicial process of
such state), unless Borrower has qualified to do business in New Jersey,
Minnesota, West Virginia, or such other states, or has filed a Notice of
Business Activities Report with the applicable division of taxation, the
department of revenue, or with such other state offices, as appropriate, for
the then-current year, or is exempt from such filing requirement;
(m) Accounts that represent progress payments or other
advance xxxxxxxx that are due prior to the completion of performance by
Borrower of the subject contract for goods or services;
(n) Accounts consisting of license or royalty fees,
deferred distributor revenue or other non-trade Accounts;
(o) Accounts resulting from Yen price sharing with Sanyo
Electric Co., Ltd.; and
(p) In the event that 15%, or more, of Borrower's Accounts
(other than those set forth in paragraphs (m), (n) and (o), above) are more
than 60 days past due, then Accounts that are not payable in Dollars or with
respect to which the Account Debtor: (i) does not maintain its chief
executive office in the United States, or (ii) is not organized under the
laws of the United States or any State thereof shall not be Eligible
Accounts, unless (y) the Account is supported by an irrevocable letter of
credit satisfactory to Foothill (as to form, substance, and issuer or
domestic confirming bank) that has been delivered to Foothill and is directly
drawable by Foothill, or (z) the Account is covered by credit insurance in
form and amount, and by an insurer, satisfactory to Foothill.
"EQUIPMENT" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts,
goods (other than consumer goods, farm products, or Inventory), wherever
located, including, (a) any assets acquired by Borrower with the proceeds of
a Capital Expenditure Loan, (b) any interest of Borrower in any of the
foregoing, and (c) all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, 29 U.S.C. Sections 1000 et seq., amendments thereto, successor
statutes, and regulations or guidance promulgated thereunder.
"ERISA AFFILIATE" means (a) any corporation subject to ERISA
whose
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees
of Borrower under IRC Section 414(c), (c) solely for purposes of Section 302
of ERISA and Section 412 of the IRC, any organization subject to ERISA that
is a member of an affiliated service group of which Borrower is a member
under IRC Section 414(m), or (d) solely for purposes of Section 302 of ERISA
and Section 412 of the IRC, any party subject to ERISA that is a party to an
arrangement with Borrower and whose employees are aggregated with the
employees of Borrower under IRC Section 414(o).
"EURODOLLAR RATE" means, with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum (rounded upwards, if
necessary, to the next whole multiple of 1/16 of 1% per annum) at which
United States dollar deposits are offered to Norwest Bank Minnesota, National
Association (or its Affiliates) by major banks in the London interbank market
(or other Eurodollar Rate market selected by Foothill) on or about 11:00 a.m.
(California time) two Business Days prior to the commencement of such
Interest Period in amounts comparable to the amount of the Eurodollar Rate
Loans requested by and available to Borrower in accordance with this
Agreement and for a period of three months from the date of such offer.
"EURODOLLAR RATE LOANS" means any Advance (or any portion
thereof) made or outstanding hereunder during any period when interest on
such Advance (or portion thereof) is payable based on the Adjusted Eurodollar
Rate.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
"FEIN" means Federal Employer Identification Number.
"FOOTHILL" has the meaning set forth in the preamble to this
Agreement.
"FOOTHILL ACCOUNT" has the meaning set forth in SECTION 2.7.
"FOOTHILL EXPENSES" means all: costs or expenses (including
taxes, and insurance premiums) required to be paid by Borrower under any of
the Loan Documents that are paid or incurred by Foothill; fees or charges
paid or incurred by Foothill in connection with Foothill's transactions with
Borrower, including, fees or charges for photocopying, notarization, couriers
and messengers, telecommunication, public record searches (including tax
lien, litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, costs and expenses incurred by Foothill in
the disbursement of funds to Borrower (by wire transfer or otherwise);
charges paid or incurred by Foothill resulting from the dishonor of checks;
costs and expenses paid or incurred by Foothill to correct any default or
enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or
any portion thereof, irrespective of whether a sale is consummated; costs and
expenses paid or incurred by Foothill in examining Borrower's Books; costs
and expenses of third party claims or any other suit paid or incurred by
Foothill in enforcing or defending the Loan Documents or in connection with
the transactions contemplated by the Loan Documents or Foothill's
relationship with Borrower or any guarantor; and Foothill's reasonable
attorneys fees and expenses incurred in advising, structuring, drafting,
reviewing, amending, terminating, enforcing, defending, or concerning the
Loan Documents (including reasonable attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning Borrower or any guarantor of the Obligations), irrespective of
whether suit is brought.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all of Borrower's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due
or recoverable from pension funds, route lists, rights to payment and other
rights under any royalty or licensing agreements, infringement claims,
computer programs, information contained on computer disks or tapes,
literature, reports, catalogs, deposit accounts, insurance premium rebates,
tax refunds, and tax refund claims), other than goods, Accounts, and
Negotiable Collateral.
"GOVERNING DOCUMENTS" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"HAZARDOUS MATERIALS" means (a) substances that are defined
or listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define,
list, or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive
toxicity, or "EP toxicity", (b) oil, petroleum, or petroleum derived
substances, natural gas, natural gas liquids, synthetic gas, drilling fluids,
produced waters, and other wastes associated with the exploration,
development, or production of crude oil, natural gas, or geothermal
resources, (c) any flammable substances or explosives or any radioactive
materials, and (d) asbestos in any form or electrical equipment that contains
any oil or dielectric fluid containing levels of polychlorinated biphenyls in
excess of 50 parts per million.
"INDEBTEDNESS" means: (a) all obligations of Borrower for
borrowed
money, (b) all obligations of Borrower evidenced by bonds, debentures, notes,
or other similar instruments and all reimbursement or other obligations of
Borrower in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations of Borrower under
capital leases, (d) all obligations or liabilities of others secured by a
Lien on any property or asset of Borrower, irrespective of whether such
obligation or liability is assumed, and (e) any obligation of Borrower
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to Borrower) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other Person.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any
other bankruptcy or insolvency law, assignments for the benefit of creditors,
formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.
"INTANGIBLE ASSETS" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be
treated as intangibles under GAAP.
"INTELLECTUAL PROPERTY SECURITY AGREEMENT" means that
certain Intellectual Property Security Agreement, of even date herewith,
between Borrower and Foothill.
"INTEREST PERIOD" means, for any Eurodollar Rate Loan, the
period commencing on the Business Day such Eurodollar Rate Loan is disbursed
or continued, or on the Business Day on which a Reference Rate Loan is
converted to such Eurodollar Rate Loan, and ending on the date that is one,
two or three months thereafter, as selected by Borrower and notified to
Foothill as provided in SECTION 2.12(a) and (b).
"INVENTORY" means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and
future raw materials, work in process, finished goods, and packing and
shipping materials, wherever located.
"INVESTMENT PROPERTY" has the meaning set forth in Section
9115 of the Code.
"IRC" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
"LIEN" means any interest in property securing an obligation
owed to, or a claim by, any Person other than the owner of the property,
whether such interest shall be based on the common law, statute, or contract,
whether such interest shall be recorded or perfected, and whether such
interest shall be contingent upon the occurrence of some future event or
events or the existence of some future circumstance or circumstances,
including the
lien or security interest arising from a mortgage, deed of trust,
encumbrance, pledge, hypothecation, assignment, deposit arrangement, security
agreement, adverse claim or charge, conditional sale or trust receipt, or
from a lease, consignment, or bailment for security purposes and also
including reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases, and other title exceptions and
encumbrances affecting Real Property.
"LOAN ACCOUNT" has the meaning set forth in SECTION 2.10.
"LOAN DOCUMENTS" means this Agreement, the Disbursement
Letter, the Lockbox Agreements, the Intellectual Property Security Agreement,
the Control Agreement, any note or notes executed by Borrower and payable to
Foothill, and any other agreement entered into, now or in the future, in
connection with this Agreement.
"LOCKBOX ACCOUNT" shall mean a depositary account
established pursuant to one of the Lockbox Agreements.
"LOCKBOX AGREEMENTS" means those certain Lockbox Operating
Procedural Agreements and those certain Depository Account Agreements, in
form and substance satisfactory to Borrower and Foothill, each of which is
among Borrower, Foothill, and one of the Lockbox Banks.
"LOCKBOX BANKS" means Union Bank of California or such other
banks as may be agreed to by Foothill and Borrower from time to time.
"LOCKBOXES" has the meaning set forth in SECTION 2.7.
"MATERIAL ADVERSE CHANGE" means (a) a material adverse
change in the business, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrower, (b) the
material impairment of Borrower's ability to perform its obligations under
the Loan Documents to which it is a party or of Foothill to enforce the
Obligations or realize upon the Collateral, (c) a material adverse effect on
the value of the Collateral or the amount that Foothill would be likely to
receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral, or (d) a material
impairment of the priority of Foothill's Liens with respect to the Collateral.
"MATURITY DATE" has the meaning set forth in SECTION 3.4.
"MAXIMUM AMOUNT" means, as of any date of determination, the
sum of (a) the Maximum Revolving Amount and (b) the outstanding Capital
Expenditure Loans.
"MAXIMUM REVOLVING AMOUNT" means $25,000,000 minus the
amount of the outstanding Capital Expenditure Loans.
"NEGOTIABLE COLLATERAL" means all of Borrower's present and
future letters of credit, notes, drafts, instruments, Investment Property,
securities (including the shares of stock of Subsidiaries of Borrower),
documents, personal property leases (wherein Borrower is the lessor), and
chattel paper.
"OBLIGATIONS" means all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the
Bankruptcy Code, would have accrued), premiums (including Early Termination
Premiums), liabilities (including all amounts charged to Borrower's Loan
Account pursuant hereto), obligations, fees, charges, costs, or Foothill
Expenses (including any fees or expenses that, but for the provisions of the
Bankruptcy Code, would have accrued), lease payments, guaranties, covenants,
and duties owing by Borrower to Foothill of any kind and description (whether
pursuant to or evidenced by the Loan Documents or pursuant to any other
agreement between Foothill and Borrower, and irrespective of whether for the
payment of money), whether direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising, and including any debt,
liability, or obligation owing from Borrower to others that Foothill may have
obtained by assignment or otherwise, and further including all interest not
paid when due and all Foothill Expenses that Borrower is required to pay or
reimburse by the Loan Documents, by law, or otherwise.
"OVERADVANCE" has the meaning set forth in SECTION 2.5.
"PARTICIPANT" means any Person to which Foothill has sold a
participation interest in its rights under the Loan Documents.
"PAY-OFF LETTER" means a letter, in form and substance
reasonably satisfactory to Foothill, from Existing Lender respecting the
amount necessary to repay in full all of the obligations of Borrower owing to
Existing Lender and obtain a termination or release of all of the Liens
existing in favor of Existing Lender in and to the properties or assets of
Borrower.
"PERMITTED LIENS" means (a) Liens held by Foothill, (b)
Liens for unpaid taxes that either (i) are not yet due and payable or (ii)
are the subject of Permitted Protests, (c) Liens set forth on SCHEDULE P-1,
(d) the interests of lessors under operating leases and purchase money
security interests and Liens of lessors under capital leases to the extent
that the acquisition or lease of the underlying asset is permitted under
SECTION 7.21 and so long as the Lien only attaches to the asset purchased or
acquired and only secures the purchase price of the asset, (e) Liens arising
by operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of
business of Borrower and not in connection with the borrowing of money, and
which Liens either (i) are for sums not yet due and payable, or (ii) are the
subject of Permitted Protests, (f) Liens arising from deposits made in
connection with obtaining worker's compensation or other unemployment
insurance, (g) Liens or deposits to secure performance of bids, tenders, or
leases (to the extent permitted under this Agreement), incurred in the
ordinary course of
business of Borrower and not in connection with the borrowing of money, (h)
Liens arising by reason of security for surety or appeal bonds in the
ordinary course of business of Borrower, and (i) Liens of or resulting from
any judgment or award that would not cause a Material Adverse Change and as
to which the time for the appeal or petition for rehearing of which has not
yet expired, or in respect of which Borrower is in good faith prosecuting an
appeal or proceeding for a review, and in respect of which a stay of
execution pending such appeal or proceeding for review has been secured.
"PERMITTED PROTEST" means the right of Borrower to protest
any Lien (other than any such Lien that secures the Obligations), tax (other
than payroll taxes or taxes that are the subject of a United States federal
tax lien), or rental payment, provided that (a) a reserve with respect to
such obligation is established on the books of Borrower in an amount that is
reasonably satisfactory to Foothill, (b) any such protest is instituted and
diligently prosecuted by Borrower in good faith, and (c) Foothill is
satisfied that, while any such protest is pending, there will be no
impairment of the enforceability, validity, or priority of any of the Liens
of Foothill in and to the Collateral.
"PERSON" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships,
limited liability partnerships, joint ventures, trusts, land trusts, business
trusts, or other organizations, irrespective of whether they are legal
entities, and governments and agencies and political subdivisions thereof.
"REAL PROPERTY" means any estates or interests in real
property now owned or hereafter acquired by Borrower.
"REFERENCE RATE" means the variable rate of interest, per
annum, most recently announced by Norwest Bank Minnesota, National
Association, or any successor thereto, as its "base rate," irrespective of
whether such announced rate is the best rate available from such financial
institution.
"REFERENCE RATE LOAN" means any Advance (or portion thereof)
made or outstanding hereunder during any period when interest on such Advance
(or portion thereof) is payable based on the Reference Rate.
"REQUIREMENT OF LAW" means, as to any Person: (a) (i) all
statutes and regulations and (ii) court orders and injunctions, arbitrators'
decisions, and/or similar rulings, in each instance by any Governmental
Authority or arbitrator applicable to or binding upon such Person or any of
such Person's property or to which such Person or any of such Person's
property is subject; and (b) that Person's organizational documents, by-laws
and/or other instruments which deal with corporate or similar governance, as
applicable.
"RESERVE PERCENTAGE" for any Interest Period means, as of
the date of determination thereof, the maximum percentage (rounded upward, if
necessary to the nearest 1/100th of 1%), as determined by Foothill (or its
Affiliates) in accordance with its (or their)
usual procedures (which determination shall be conclusive in the absence of
manifest error), that is in effect on such date as prescribed by the Board of
Governors of the Federal Reserve System for determining the reserve
requirements (including supplemental, marginal, and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as
"eurocurrency liabilities") having a term equal to such Interest Period by
Foothill or its Affiliates.
"SOLVENT" means, with respect to any Person on a particular
date, that on such date (a) at fair valuations, all of the properties and
assets of such Person are greater than the sum of the debts, including
contingent liabilities, of such Person, (b) such Person is able to realize
upon its properties and assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the normal
course of business, (c) such Person does not intend to, and does not believe
that it will, incur debts beyond such Person's ability to pay as such debts
mature, and (d) such Person is not engaged in business or a transaction, and
is not about to engage in business or a transaction, for which such Person's
properties and assets would constitute unreasonably small capital after
giving due consideration to the prevailing practices in the industry in which
such Person is engaged. In computing the amount of contingent liabilities at
any time, it is intended that such liabilities will be computed at the amount
that, in light of all the facts and circumstances existing at such time,
represents the amount that reasonably can be expected to become an actual or
matured liability.
"STOCK PLEDGE AGREEMENT" means that certain Security
Agreement - Stock Pledge, of even date herewith, between Borrower and
Foothill relating to the shares of capital stock of Silicon Technology Co.,
Ltd. owned by Borrower.
"SUBSIDIARY" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors
(or appoint other comparable managers) of such corporation, partnership,
limited liability company, or other entity.
"TANGIBLE NET WORTH" means, as of any date of determination,
the difference of (a) Borrower's total stockholder's equity, MINUS (b) the
sum of: (i) all Intangible Assets of Borrower, (ii) all of Borrower's
prepaid expenses, and (iii) all amounts due to Borrower from Affiliates.
"VOIDABLE TRANSFER" has the meaning set forth in SECTION
15.8.
"YEAR 2000 COMPLIANT" means, with regard to any Person, that
all software in goods produced or sold by, or utilized by and material to the
business operations or financial condition of, such entity are able to
interpret and manipulate data on and involving all calendar dates correctly
and without causing any abnormal ending scenario, including in relation to
dates in and after the year 2000.
1.2 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein,
the term "financial statements" shall include the notes and schedules
thereto. Whenever the term "Borrower" is used in respect of a financial
covenant or a related definition, it shall be understood to mean Borrower on
a consolidated basis unless the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references
to the singular include the plural, the term "including" is not limiting, and
the term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. An Event of
Default shall "continue" or be "continuing" until such Event of Default has
been waived in writing by Foothill. Section, subsection, clause, schedule,
and exhibit references are to this Agreement unless otherwise specified. Any
reference in this Agreement or in the Loan Documents to this Agreement or any
of the Loan Documents shall include all alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, and
supplements, thereto and thereof, as applicable.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to make advances ("Advances") to Borrower in an amount
outstanding not to exceed at any one time the lesser of (i) the Maximum
Revolving Amount or (ii) the Borrowing Base. For purposes of this Agreement,
"Borrowing Base", as of any date of determination, shall mean the result of:
(x) THE LESSER OF (i) 80% of the value of Eligible
Accounts, LESS the amount, if any, of the Dilution Reserve, or
(ii) an amount equal to Borrower's Collections with respect to
Accounts for the immediately preceding 90 day period, MINUS
(y) the aggregate amount of reserves, if any,
established by Foothill under SECTIONS 2.1(b), 6.15, and 10.
(b) Anything to the contrary in SECTION 2.1(a) above
notwithstanding, Foothill may create reserves against the Borrowing Base or
reduce its advance rates based upon Eligible Accounts without declaring an
Event of Default if it determines that there has occurred a Material Adverse
Change.
(c) Amounts borrowed pursuant to this SECTION 2.1 may be
repaid and, subject to the terms and conditions of this Agreement, reborrowed
at any time during the term of this Agreement.
2.2 INTENTIONALLY OMITTED.
2.3 INTENTIONALLY OMITTED.
2.4 CAPITAL EXPENDITURE LINE. Subject to the terms and
conditions of this Agreement, Foothill agrees to make a series of term loans
to Borrower (each, a "Capital Expenditure Loan") in an aggregate amount at
any one time outstanding not to exceed $6,000,000 (the "Capital Expenditure
Line Commitment"). Each Capital Expenditure Loan shall be repayable in 36
equal monthly installments of principal, such installments to be payable on
the first day of each month commencing with the first day of the first month
following the date on which the Capital Expenditure Loan is made and
continuing on the first day of each succeeding month until and including the
date on which the unpaid balance of the Capital Expenditure Loan is paid in
full. The outstanding principal balance and all accrued and unpaid interest
under each Capital Expenditure Loan shall be due and payable upon the
termination of this Agreement, whether by its terms, by prepayment, by
acceleration, or otherwise.
Each Capital Expenditure Loan shall be made by Foothill at
such times and in such amounts as Borrower may request in writing, shall be
advanced directly to the applicable vendor or Borrower, as the case may be,
and once borrowed may be prepaid in whole or in part without penalty or
premium at any time during the term of this Agreement upon 30 days prior
written notice by Borrower to Foothill, all such prepaid amounts to be
applied to the installments due on all of the Capital Expenditure Loans in
the inverse order of their maturity. The foregoing to the contrary
notwithstanding, (a) each requested Capital Expenditure Loan shall be in a
principal amount of not less than (i) $250,000, or (ii) such lesser amount as
is the then unfunded balance of the Capital Expenditure Line Commitment, (b)
each Capital Expenditure Loan shall be in an amount, as determined by
Foothill, not to exceed 60% of Borrower's invoice cost (net of shipping,
freight, installation, and other so-called `soft costs') of (i) new Equipment
that is to be purchased by Borrower with the proceeds of such Capital
Expenditure Loan, or (ii) new Equipment that has been purchased by Borrower
within 90 days prior to the date of the making of such Capital Expenditure
Loan, (c) the new Equipment that is to be acquired or that has been purchased
by Borrower must be acceptable to Foothill in all respects, it must be
located at Borrower's place of business in the United States of America, it
must not be a fixture, and not be intended to be affixed to real property or
to become installed in or affixed to other goods, and (d) the aggregate
amount of all Capital
Expenditure Loans outstanding at any time (including giving effect to any
requested Capital Expenditure Loan) shall not exceed the lesser of cost or
fair market value, of all of the Equipment acquired or financed with the
proceeds of such Capital Expenditure Loans. All amounts outstanding under
the Capital Expenditure Loans shall constitute Obligations.
2.5 OVERADVANCES. If, at any time or for any reason, the amount
of Obligations owed by Borrower to Foothill pursuant to SECTIONS 2.1 AND 2.4
is greater than either the Dollar or percentage limitations set forth in
SECTIONS 2.1 OR 2.4 (an "Overadvance"), Borrower immediately shall pay to
Foothill, in cash, the amount of such excess to be used by Foothill first, to
repay Advances outstanding under SECTION 2.1 and, thereafter, to be held by
Foothill as cash collateral to secure Borrower's obligation to repay Foothill
for all amounts paid pursuant to Letters of Credit.
2.6 INTEREST, RATES, PAYMENTS, AND CALCULATIONS.
(a) Interest Rate. Except as provided in SECTION 2.6(c),
below, all Obligations shall bear interest on the Daily Balance as follows:
(i) each Eurodollar Rate Loan shall bear interest
at a per annum rate of 3.00 percentage points above the Adjusted Eurodollar
Rate; and
(ii) all other Obligations shall bear interest at a per
annum rate of 0.50 percentage points above the Reference Rate.
(b) [Intentionally Deleted]
(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, all Obligations shall bear interest on
the Daily Balance at a per annum rate equal to 4.50 percentage points above
the Reference Rate.
(d) Minimum Interest. In no event shall the rate of
interest chargeable hereunder for any day be less than 6.00% per annum. To
the extent that interest accrued hereunder at the rate set forth herein would
be less than the foregoing minimum daily rate, the interest rate chargeable
hereunder for such day automatically shall be deemed increased to the minimum
rate.
(e) Payments. Interest in respect of Reference Rate Loans
payable hereunder shall be due and payable, in arrears, on the first day of
each month during the term hereof. Interest in respect of each Eurodollar
Rate Loan shall be due and payable, in arrears, on (i) the last day of the
applicable Interest Period, and (ii) the first day of each month occurring
during the term thereof. Borrower hereby authorizes Foothill, at its option,
without prior notice to Borrower, to charge such interest, all Foothill
Expenses (as and when incurred), the fees and charges provided for in
SECTION 2.11 (as and when accrued or incurred), and all installments or other
payments due under the Capital Expenditure Loans, or any Loan
Document to Borrower's Loan Account, which amounts thereafter shall accrue
interest at the rate then applicable to Advances hereunder. Any interest not
paid when due shall be compounded and shall thereafter accrue interest at the
rate then applicable to Advances hereunder.
(f) Computation. The Reference Rate as of the date of
this Agreement is 8.50% per annum. In the event the Reference Rate is
changed from time to time hereafter, the applicable rate of interest
hereunder automatically and immediately shall be increased or decreased by an
amount equal to such change in the Reference Rate. All interest and fees
chargeable under the Loan Documents shall be computed on the basis of a 360
day year for the actual number of days elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate
permissible under any law that a court of competent jurisdiction shall, in a
final determination, deem applicable. Borrower and Foothill, in executing
and delivering this Agreement, intend legally to agree upon the rate or rates
of interest and manner of payment stated within it; PROVIDED, HOWEVER, that,
anything contained herein to the contrary notwithstanding, if said rate or
rates of interest or manner of payment exceeds the maximum allowable under
applicable law, then, IPSO FACTO as of the date of this Agreement, Borrower
is and shall be liable only for the payment of such maximum as allowed by
law, and payment received from Borrower in excess of such legal maximum,
whenever received, shall be applied to reduce the principal balance of the
Obligations to the extent of such excess.
2.7 COLLECTION OF ACCOUNTS. Borrower shall at all times
maintain lockboxes (the "Lockboxes") and, immediately after the Closing Date,
shall instruct all Account Debtors with respect to the Accounts, General
Intangibles, and Negotiable Collateral of Borrower to remit ALL Collections
in respect thereof to such Lockboxes. Borrower, Foothill, and the Lockbox
Banks shall enter into the Lockbox Agreements, which among other things shall
provide for the opening of a Lockbox Account for the deposit of Collections
at a Lockbox Bank. Borrower agrees that all Collections and other amounts
received by Borrower from any Account Debtor or any other source immediately
upon receipt shall be deposited into a Lockbox Account. No Lockbox Agreement
or arrangement contemplated thereby shall be modified by Borrower without the
prior written consent of Foothill. Upon the terms and subject to the
conditions set forth in the Lockbox Agreements, all amounts received in each
Lockbox Account shall be wired each Business Day into an account (the
"Foothill Account") maintained by Foothill at a depositary selected by
Foothill.
2.8 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The receipt
of any Collections by Foothill (whether from transfers to Foothill by the
Lockbox Banks pursuant to the Lockbox Agreements or otherwise) immediately
shall be applied provisionally to reduce the Obligations outstanding under
SECTION 2.1, but shall not be considered a payment on account unless such
Collection item is a wire transfer of immediately available federal funds
and is made to the Foothill Account or unless and until such Collection item
is honored when presented for payment. From and after the Closing Date,
Foothill shall be entitled to charge Borrower for one Business Day of
`clearance' or `float' at the rate set forth in SECTION 2.6(a)(i) or
SECTION 2.6(c)(ii), as applicable, on all Collections that are received by
Foothill (regardless of whether forwarded by the Lockbox Banks to Foothill,
whether provisionally applied to reduce the Obligations under SECTION 2.1, or
otherwise). This across-the-board one Business Day clearance or float charge
on all Collections is acknowledged by the parties to constitute an integral
aspect of the pricing of Foothill's financing of Borrower, and shall apply
irrespective of the characterization of whether receipts are owned by
Borrower or Foothill, and whether or not there are any outstanding Advances,
the effect of such clearance or float charge being the equivalent of charging
one Business Day of interest on such Collections. Should any Collection item
not be honored when presented for payment, then Borrower shall be deemed not
to have made such payment, and interest shall be recalculated accordingly.
Anything to the contrary contained herein notwithstanding, any Collection
item shall be deemed received by Foothill only if it is received into the
Foothill Account on a Business Day on or before 11:00 a.m. California time.
If any Collection item is received into the Foothill Account on a
non-Business Day or after 11:00 a.m. California time on a Business Day, it
shall be deemed to have been received by Foothill as of the opening of
business on the immediately following Business Day.
2.9 DESIGNATED ACCOUNT. Foothill is authorized to make the
Advances and the Capital Expenditure Loans under this Agreement based upon
telephonic or other instructions received from anyone purporting to be an
Authorized Person, or without instructions if pursuant to SECTION 2.6(e).
Borrower agrees to establish and maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances and the Capital Expenditure Loans requested by Borrower and made by
Foothill hereunder. Unless otherwise agreed by Foothill and Borrower, any
Advance and the Capital Expenditure Loans requested by Borrower and made by
Foothill hereunder shall be made to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS.
Foothill shall maintain an account on its books in the name of Borrower (the
"Loan Account") on which Borrower will be charged with all Advances, and all
Capital Expenditure Loans made by Foothill to Borrower or for Borrower's
account, including, accrued interest, Foothill Expenses, and any other
payment Obligations of Borrower. In accordance with SECTION 2.8, the Loan
Account will be credited with all payments received by Foothill from Borrower
or for Borrower's account, including all amounts received in the Foothill
Account from any Lockbox Bank. Foothill shall render statements regarding
the Loan Account to Borrower, including principal, interest, fees, and
including an itemization of all charges and expenses constituting Foothill
Expenses owing, and such statements shall be conclusively presumed to be
correct and accurate and constitute an account stated between Borrower and
Foothill unless, within 30 days after receipt thereof by Borrower, Borrower
shall deliver to Foothill written objection thereto describing the error or
errors contained in any such statements.
2.11 FEES. Borrower shall pay to Foothill the following fees:
(a) Closing Fee. On the Closing Date, a closing fee of
$250,000 shall be fully earned by Foothill. $125,000 of the closing fee
shall be payable on the Closing Date and $62,500 of such fee shall be payable
on each of the first and second anniversaries of the Closing Date;
(b) Unused Line Fee. On the first day of each month
during the term of this Agreement, an unused line fee in an amount equal to
0.25% per annum times the difference between the average Daily Balance of the
Advances that were outstanding during the immediately preceding month and
$5,000,000.
(c) Servicing Fee. On the first day of each month during
the term of this Agreement, and thereafter so long as any Obligations are
outstanding, a servicing fee in an amount equal to $2,500; and
(d) Financial Examination, Documentation, and Appraisal
Fees. Foothill's customary fee of $650 per day per examiner, plus
out-of-pocket expenses for each financial analysis and examination (i.e.,
audits) of Borrower performed by personnel employed by Foothill; Foothill's
customary appraisal fee of $1,500 per day per appraiser, plus out-of-pocket
expenses for each appraisal of the Collateral performed by personnel employed
by Foothill; and, the actual charges paid or incurred by Foothill if it
elects to employ the services of one or more third Persons to perform such
financial analyses and examinations (i.e., audits) of Borrower or to appraise
the Collateral; PROVIDED, HOWEVER, that prior to the occurrence of an Event
of Default, Borrower shall not be responsible to pay (i) for more than 20 man
days in any consecutive 12 month period for financial analysis and
examinations conducted by personal employed by Foothill plus (ii) Foothill's
out-of-pocket expenses.
2.12 EURODOLLAR RATE LOANS. Any other provisions herein to the
contrary notwithstanding, the following provisions shall govern with respect
to Eurodollar Rate Loans as to the matters covered:
(a) BORROWING; CONVERSION; CONTINUATION. Borrower may
from time to time, on or after the Closing Date (and subject to the
satisfaction of the requirements of SECTIONS 3.1 AND 3.2), request in a
written or telephonic communication with Foothill: (i) Advances to
constitute Eurodollar Rate Loans; (ii) that Reference Rate Loans be converted
into Eurodollar Rate Loans; or (iii) that existing Eurodollar Rate Loans
continue for an additional Interest Period. Any such request shall specify
the aggregate amount of the requested Eurodollar Rate Loans, the proposed
funding date therefor (which shall be a Business Day, and with respect to
continued Eurodollar Rate Loans shall be the last day of the Interest Period
of the existing Eurodollar Rate Loans being continued), and the proposed
Interest Period (in each case subject to the limitations set forth below).
Eurodollar Rate Loans may only be made, continued, or extended if, as of the
proposed funding date therefor, each of the following conditions is satisfied:
(v) no Event of Default exists;
(w) no more than five Interest Periods may be in
effect at any one time;
(x) the amount of each Eurodollar Rate Loan
borrowed, converted, or continued must be in an amount not less
than $1,000,000 and integral multiples of $250,000 in excess
thereof;
(y) Foothill shall have determined that the Interest
Period or Adjusted Eurodollar Rate is available to it and can be
readily determined as of the date of the request for such
Eurodollar Rate Loan by Borrower; and
(z) Foothill shall have received such request at
least two Business Days prior to the proposed funding date
therefor.
Any request by Borrower to borrow Eurodollar Rate Loans, to
convert Reference Rate Loans to Eurodollar Rate Loans, or to continue any
existing Eurodollar Rate Loans shall be irrevocable, except to the extent
that Foothill shall determine under SECTIONS 2.12(a), 2.13 or 2.14 that such
Eurodollar Rate Loans cannot be made or continued.
(b) DETERMINATION OF INTEREST PERIOD. By giving notice as
set forth in SECTION 2.12(a), Borrower shall select an Interest Period for
such Eurodollar Rate Loan. The determination of the Interest Period shall be
subject to the following provisions:
(i) in the case of immediately successive Interest
Periods, each successive Interest Period shall commence on the day
on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on
a day which is not a Business Day, the Interest Period shall be
extended to expire on the next succeeding Business Day; PROVIDED,
HOWEVER, that if the next succeeding Business Day occurs in the
following calendar month, then such Interest Period shall expire
on the immediately preceding Business Day;
(iii) if any Interest Period begins on the last
Business Day of a month, or on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period, then the Interest Period shall end on the
last Business Day of the calendar month at the end of such
Interest Period; and
(iv) Borrower may not select an Interest Period which
expires later than the Maturity Date.
(c) AUTOMATIC CONVERSION: OPTIONAL CONVERSION BY FOOTHILL.
Any Eurodollar Rate Loan shall automatically convert to a Reference Rate
Loan upon the last day of the applicable Interest Period, unless Foothill has
received a request to continue such Eurodollar Rate Loan at least two
Business Days prior to the end of such Interest Period in accordance with the
terms of SECTION 2.12(a). Any Eurodollar Rate Loan shall, at Foothill's
option, upon notice to Borrower, immediately convert to a Reference Rate Loan
in the event that (i) an Event of Default shall have occurred and be
continuing or (ii) this Agreement shall terminate, and Borrower shall pay to
Foothill any amounts required by SECTION 2.15 as a result thereof.
2.13 ILLEGALITY. Any other provision herein to the contrary
notwithstanding, if the adoption of or any change in any Requirement of Law
or in the interpretation or application thereof by a Governmental Authority
made subsequent to the Closing Date shall make it unlawful for Foothill to
make or maintain Eurodollar Rate Loans as contemplated by this Agreement, (a)
the obligation of Foothill hereunder to make Eurodollar Rate Loans, continue
Eurodollar Rate Loans as such, and convert Reference Rate Loans to Eurodollar
Rate Loans shall forthwith be suspended and (b) Foothill's then outstanding
Eurodollar Rate Loans, if any, shall be converted automatically to Reference
Rate Loans on the respective last days of the then current Interest Periods
with respect thereto or within such earlier period as required by law;
PROVIDED, HOWEVER, that before making any such demand, Foothill agrees to use
reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions and so long as such efforts would not be
disadvantageous to it, in its reasonable discretion, in any legal, economic,
or regulatory manner) to designate a different lending office if the making
of such a designation would allow Foothill or its lending office to continue
to perform its obligations to make Eurodollar Rate Loans. If any such
conversion of a Eurodollar Rate Loan occurs on a day which is not the last
day of the then current Interest Period with respect thereto, Borrower shall
pay to Foothill such amounts, if any, as may be required pursuant to
SECTION 2.14. If circumstances subsequently change so that Foothill shall
determine that it is no longer so affected, Foothill will promptly notify,
and upon receipt of such notice, the obligations of Foothill to make or
continue Eurodollar Rate Loans or to convert Reference Rate Loans into
Eurodollar Rate Loans shall be reinstated.
2.14 REQUIREMENTS OF LAW.
(a) If the adoption of or any change in any Requirement of
Law or in the interpretation or application thereof by a Governmental
Authority made subsequent to the Closing Date or compliance by Foothill with
any request or directive (whether or not having the force of law) from any
central bank or other Governmental Authority made subsequent to the Closing
Date
(i) shall subject Foothill to any tax, levy, charge,
fee, reduction, or withholding of any kind whatsoever with respect
to Eurodollar Rate Loans, or change the basis of taxation of
payments to Foothill in respect
thereof (except for the establishment of a tax based on the net
income of Foothill or changes in the rate of tax on the net income
of Foothill);
(ii) shall in respect of Eurodollar Rate Loans
impose, modify or hold applicable any reserve, special deposit,
compulsory loan, or similar requirement against assets held by,
deposits or other liabilities in or for the account of, Advances
or other extensions of credit by, or any other acquisition of
funds by, any office of Foothill; or
(iii) shall impose on Foothill any other condition
with respect to Eurodollar Rate Loans;
and the result of any of the foregoing is to increase the cost to Foothill,
by an amount which Foothill deems to be material, of making, converting into,
continuing, or maintaining Eurodollar Rate Loans or to increase the cost to
Foothill in respect of Eurodollar Rate Loans, by an amount which Foothill
deems to be material, or to reduce any amount receivable hereunder in respect
of Eurodollar Rate Loans, or to forego any other sum payable thereunder or
make any payment on account thereof in respect of Eurodollar Rate Loans,
then, in any such case, Borrower shall promptly pay Foothill, upon its
demand, any additional amounts necessary to compensate Foothill for such
increased cost or reduced amount receivable; PROVIDED, HOWEVER, that before
making any such demand, Foothill agrees to use reasonable efforts (consistent
with its internal policy and legal and regulatory restrictions and so long as
such efforts would not be disadvantageous to it, in its reasonable
discretion, in any legal, economic, or regulatory manner) to designate a
different Eurodollar lending office if the making of such designation would
allow Foothill or its Eurodollar lending office to continue to perform its
obligations to make Eurodollar Rate Loans or to continue to fund or maintain
Eurodollar Rate Loans and avoid the need for, or materially reduce the amount
of, such increased cost. If Foothill becomes entitled to claim any
additional amounts pursuant to this SECTION 2.14, Foothill shall promptly
notify Borrower of the event by reason of which it has become so entitled. A
certificate as to any additional amounts payable pursuant to this SECTION 2.14
submitted in reasonable detail by Foothill to Borrower shall be conclusive in
the absence of manifest error. Within five Business Days after Foothill
notifies Borrower of any increased cost pursuant to the foregoing provisions
of this SECTION 2.14, Borrower may convert all Eurodollar Rate Loans then
outstanding into Reference Rate Loans in accordance with SECTION 2.12 and,
additionally, reimburse Foothill for any cost in accordance with SECTION 2.15.
This covenant shall survive the termination of this Agreement and the payment
of the Advances and all other amounts payable hereunder for nine months
following such termination and repayment.
(b) If Foothill shall have determined that the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof by a Governmental Authority made
subsequent to the Closing Date or compliance by Foothill or any Person
controlling Foothill with any request or directive regarding capital adequacy
(whether or not having the force of law) from any Governmental
Authority made subsequent to the Closing Date does or shall have the effect
of increasing the amount of capital required to be maintained or reducing the
rate of return on Foothill's or such Person's capital as a consequence of its
obligations hereunder to a level below that which Foothill or such Person
could have achieved but for such change or compliance (taking into
consideration Foothill's or such Person's policies with respect to capital
adequacy) by an amount deemed by Foothill to be material, then from time to
time, after submission by Foothill to Borrower of a prompt written request
therefor, Borrower shall pay to Foothill such additional amount or amounts as
will compensate Foothill or such Person for such reduction. This covenant
shall survive the termination of this Agreement and the payment of the
Advances and all other amounts payable hereunder for nine months following
such termination and repayment.
2.15 INDEMNITY. Borrower agrees to indemnify Foothill and to
hold Foothill harmless from any loss or expense which Foothill may sustain or
incur as a consequence of (a) default by Borrower in payment when due of the
principal amount of or interest on any Eurodollar Rate Loan, (b) default by
Borrower in making a Borrowing of, conversion into, or continuation of
Eurodollar Rate Loans after Borrower has given a notice requesting the same
in accordance with the provisions of this Agreement, (c) default by Borrower
in making any prepayment of a Eurodollar Rate Loan after Borrower has given a
notice thereof in accordance with the provisions of this Agreement, or (d)
the making of a prepayment of Eurodollar Rate Loans on a day which is not the
last day of an Interest Period with respect thereto (whether due to the
termination of this Agreement, upon an Event of Default, or otherwise),
including, in each case, any such loss or expense (but excluding loss of
margin or anticipated profits) arising from the reemployment of funds
obtained by it or from fees payable to terminate the deposits from which such
funds were obtained; PROVIDED, HOWEVER, that Foothill, if requesting
indemnification, shall have delivered to the Borrower a certificate as to the
amount of such loss or expense, which certificate shall be conclusive in the
absence of manifest error. Calculation of all amounts payable to Foothill
under this SECTION 2.15 shall be made as though Foothill had actually funded
the relevant Eurodollar Rate Loan through the purchase of a deposit bearing
interest at the Eurodollar Rate in an amount equal to the amount of such
Eurodollar Rate Loan and having a maturity comparable to the relevant
Interest Period; PROVIDED, HOWEVER, that Foothill may fund each of the
Eurodollar Rate Loans in any manner it sees fit, and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this
SECTION 2.15. This covenant shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder for a
period of nine months thereafter.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE AND THE INITIAL
CAPITAL EXPENDITURE LOAN. The obligation of Foothill to make the initial
Advance or to make the initial Capital Expenditure Loan is subject to the
fulfillment, to the satisfaction of Foothill and its counsel, of each of the
following conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before September 30,
1998;
(b) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
a. the Lockbox Agreements;
b. [intentionally deleted];
c. the Intellectual Property Security Agreement;
d. the Stock Pledge Agreement;
(c) Foothill shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing its execution, delivery, and performance of this
Agreement and the other Loan Documents to which Borrower is a party and
authorizing specific officers of Borrower to execute the same;
(d) Foothill shall have received copies of Borrower's
Governing Documents, as amended, modified, or supplemented to the Closing
Date, certified by the Secretary of Borrower;
(e) Foothill shall have received a certificate of status
with respect to Borrower, dated within 10 days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of Borrower, which certificate shall indicate that Borrower is
in good standing in such jurisdiction;
(f) Foothill shall have received certificates of status
with respect to Borrower, each dated within 15 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which its failure to be duly qualified or licensed would constitute a
Material Adverse Change, which certificates shall indicate that Borrower is
in good standing in such jurisdictions;
(g) Foothill shall have received a certificate of
insurance, together with the endorsements thereto, as are required by
SECTION 6.10, the form and substance of which shall be satisfactory to
Foothill and its counsel;
(h) Foothill shall have received confirmation that its
UCC-1 Financing Statements have been duly filed with all appropriate
jurisdictions;
(i) Foothill shall have received an opinion of Borrower's
counsel in form and substance satisfactory to Foothill in its discretion;
(j) Foothill shall have received evidence, satisfactory to
it, that Borrower has paid its 1997 property taxes, in full;
(k) Foothill shall have received letters from Borrower to
its Account Debtors notifying them of Foothill's security interest in the
Accounts, which letters will not be sent out by Foothill unless an Event of
Default has occurred; and
(l) all other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been
delivered, executed, or recorded and shall be in form and substance
satisfactory to Foothill and its counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES AND ALL CAPITAL
EXPENDITURE LOANS. The following shall be conditions precedent to all
Advances and all Capital Expenditure Loans hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have occurred and
be continuing on the date of such extension of credit, nor shall either
result from the making thereof; and
(c) no injunction, writ, restraining order, or other order
of any nature prohibiting, directly or indirectly, the extending of such
credit shall have been issued and remain in force by any governmental
authority against Borrower, Foothill, or any of their Affiliates.
3.3 CONDITIONS SUBSEQUENT. As conditions subsequent to initial
closing hereunder, Borrower shall perform or cause to be performed the
following (the failure by Borrower to so perform or cause to be performed
constituting an Event of Default):
(a) within 45 days of the Closing Date, deliver to
Foothill Collateral Access Agreements with the lessors of Borrower's
locations in Sunnyvale, California;
(b) within 90 days of the Closing Date, deliver to
Foothill the certified copies of the policies of insurance, together with the
endorsements thereto, as are required by SECTION 6.10, the form and substance
of which shall be satisfactory to Foothill and its counsel;
(c) within 90 days of the Closing Date, deliver to
Foothill the Control Agreement; and
(d) promptly upon Foothill's request, deliver to Foothill
any and all documents, instruments, or the like that Foothill may reasonably
require in order to perfect its
security interest in any Collateral now or in the future located in,
including intellectual property rights registered in, the Philippines or
Japan.
3.4 TERM. This Agreement shall become effective upon the
execution and delivery hereof by Borrower and Foothill and shall continue in
full force and effect for a term ending on the date (the "Maturity Date")
that is three years from the Closing Date, unless sooner terminated pursuant
to the terms hereof. The foregoing notwithstanding, Foothill shall have the
right to terminate its obligations under this Agreement immediately and
without notice upon the occurrence and during the continuation of an Event of
Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrower with respect to any outstanding Letters of Credit) immediately shall
become due and payable without notice or demand. No termination of this
Agreement, however, shall relieve or discharge Borrower of Borrower's duties,
Obligations, or covenants hereunder, and Foothill's continuing security
interests in the Collateral shall remain in effect until all Obligations have
been fully and finally discharged and Foothill's obligation to provide
additional credit hereunder is terminated.
3.6 EARLY TERMINATION BY BORROWER. The provisions of SECTION
3.4 that allow termination of this Agreement by Borrower only on the Maturity
Date, notwithstanding, Borrower has the option, at any time upon 90 days
prior written notice to Foothill, to terminate this Agreement by paying to
Foothill, in cash, the Obligations, in full, together with a premium (the
"Early Termination Premium") equal to (a) 2.00% of the Maximum Amount if such
termination occurs within one year of the Closing Date, and (b) 1.00% of the
Maximum Amount if such termination occurs after one year from the Closing
Date but prior to six months before the Termination Date. If such termination
occurs within six months of the Termination Date there shall not be an Early
Termination Premium.
3.7 TERMINATION UPON EVENT OF DEFAULT. If Foothill terminates
this Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrower shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the Early
Termination Premium. The Early Termination Premium shall be presumed to be
the amount of damages sustained by Foothill as the result of the early
termination and Borrower agrees that it is reasonable under the circumstances
currently existing. The Early Termination Premium provided for in this
SECTION 3.7 shall be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to
Foothill a continuing security interest in all currently 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.
Foothill's security interests in the Collateral shall attach to all
Collateral without further act on the part of Foothill or Borrower. Anything
contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for the sale of Inventory to buyers in the ordinary
course of business, Borrower has no authority, express or implied, to dispose
of any item or portion of the Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower, immediately upon the request of Foothill, shall endorse and deliver
physical possession of such Negotiable Collateral to Foothill.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. Foothill or Foothill's designee may at any time that an Event of
Default has occurred and has not been cured by Borrower or waived by Foothill
(a) notify customers or Account Debtors of Borrower that the Accounts,
General Intangibles, or Negotiable Collateral have been assigned to Foothill
or that Foothill has a security interest therein, and (b) collect the
Accounts, General Intangibles, and Negotiable Collateral directly and charge
the collection costs and expenses to the Loan Account. Borrower agrees that
it will hold in trust for Foothill, as Foothill's trustee, any Collections
that it receives and immediately will deliver said Collections to Foothill in
their original form as received by Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time
upon the request of Foothill, Borrower shall execute and deliver to Foothill
all financing statements, continuation financing statements, fixture filings,
security agreements, pledges, assignments, control agreements, endorsements
of certificates of title, applications for title, affidavits, reports,
notices, schedules of accounts, letters of authority, and all other documents
that Foothill reasonably may request, in form satisfactory to Foothill, to
perfect and continue perfected Foothill's security interests in the
Collateral, and in order to fully consummate all of the transactions
contemplated hereby and under the other the Loan Documents.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers,
employees, or agents designated by Foothill) as Borrower's true and lawful
attorney, with power to (a) if Borrower refuses to, or fails timely to
execute and deliver any of the documents described in SECTION 4.4, sign the
name of Borrower on any of the documents described in SECTION 4.4, (b) at any
time that an Event of Default has occurred and is continuing or Foothill
deems itself insecure, 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, (c) send requests for verification of Accounts,
(d) endorse Borrower's name on any Collection item that may come into
Foothill's possession, (e) at any time that an Event of Default has occurred
and is continuing or Foothill deems itself insecure, notify the post office
authorities to change the address for delivery of Borrower's mail to an
address designated by Foothill, to receive and open all mail addressed to
Borrower, and to retain all mail relating to the Collateral and forward all
other mail to Borrower, (f) at any time that an Event of Default has occurred
and is continuing or Foothill deems itself insecure, make, settle, and adjust
all claims under Borrower's policies of insurance and make all determinations
and decisions with respect to such policies of insurance, and (g) at any time
that an Event of Default has occurred and is continuing or Foothill deems
itself insecure, settle and adjust disputes and claims respecting the
Accounts directly with Account Debtors, for amounts and upon terms that
Foothill determines to be reasonable, and Foothill may cause to be executed
and delivered any documents and releases that Foothill determines to be
necessary. The appointment of Foothill as Borrower's attorney, and each and
every one of Foothill's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully and finally repaid
and performed and Foothill's obligation to extend credit hereunder is
terminated.
4.6 RIGHT TO INSPECT. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect Borrower's Books and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, Borrower
makes the following representations and warranties which shall be true,
correct, and complete in all respects as of the date hereof, and shall be
true, correct, and complete in all respects as of the Closing Date, and at
and as of the date of the making of each Advance or Capital Expenditure Loan
made thereafter, as though made on and as of the date of such Advance or
Capital Expenditure Loan (except to the extent that such representations and
warranties relate solely to an earlier date) and such representations and
warranties shall survive the execution and delivery of this Agreement:
5.1 NO ENCUMBRANCES. Borrower has good and indefeasible title
to the Collateral, free and clear of Liens except for Permitted Liens.
5.2 ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide
existing obligations created by the sale and delivery of Inventory or the
rendition of services to Account Debtors in the ordinary course of Borrower's
business, unconditionally owed to Borrower without defenses, disputes,
offsets, counterclaims, or rights of return or cancellation. 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 bankruptcy,
insolvency, or material impairment of the financial condition of any Account
Debtor regarding any Eligible Account.
5.3 INTENTIONALLY OMITTED.
5.4 EQUIPMENT. All of the Equipment is used or held for use in
Borrower's business and is fit for such purposes.
5.5 LOCATION OF INVENTORY AND EQUIPMENT. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party
(without Foothill's prior written consent) and are located only at the
locations identified on SCHEDULE 6.12 or otherwise permitted by SECTION 6.12.
5.6 INVENTORY RECORDS. Borrower keeps correct and accurate
records itemizing and describing the kind, type, quality, and quantity of the
Inventory, and Borrower's cost therefor.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief
executive office of Borrower is located at the address indicated in the
preamble to this Agreement and Borrower's FEIN is 00-0000000.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction of its incorporation and
qualified and licensed to do business in, and in good standing in, any state
where the failure to be so licensed or qualified reasonably could be expected
to cause a Material Adverse Change.
(b) Set forth on SCHEDULE 5.8, is a complete and accurate
list of Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their incorporation; (ii) the number of shares of each class
of common and preferred stock authorized for each of such Subsidiaries; and
(iii) the number and the percentage of the outstanding shares of each such
class owned directly or indirectly by Borrower. All of the outstanding
capital stock of each such Subsidiary has been validly issued and is fully
paid and non-assessable.
(c) Except as set forth on SCHEDULE 5.8, no capital stock
(or any securities, instruments, warrants, options, purchase rights,
conversion or exchange rights, calls, commitments or claims of any character
convertible into or exercisable for capital stock) of any direct or indirect
Subsidiary of Borrower is subject to the issuance of any security,
instrument, warrant, option, purchase right, conversion or exchange right,
call, commitment or claim of any right, title, or interest therein or thereto.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by Borrower
of this Agreement and the Loan Documents to which it is a party have been
duly authorized by all necessary corporate action.
(b) The execution, delivery, and performance by Borrower
of this Agreement and the Loan Documents to which it is a party do not and
will not (i) violate any provision of federal, state, or local law or
regulation (including Regulations T, U, and X of the Federal Reserve Board)
applicable to Borrower, the Governing Documents of Borrower, or any order,
judgment, or decree of any court or other Governmental Authority binding on
Borrower, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation or material lease of Borrower, (iii) result in or require the
creation or imposition of any Lien of any nature whatsoever upon any
properties or assets of Borrower, other than Permitted Liens, or (iv) require
any approval of stockholders or any approval or consent of any Person under
any material contractual obligation of Borrower.
(c) Other than the filing of appropriate financing
statements, fixture filings, and mortgages, the execution, delivery, and
performance by Borrower of this Agreement and the Loan Documents to which
Borrower is a party do not and will not require any registration with,
consent, or approval of, or notice to, or other action with or by, any
federal, state, foreign, or other Governmental Authority or other Person.
(d) This Agreement and the Loan Documents to which
Borrower is a party, and all other documents contemplated hereby and thereby,
when executed and delivered by Borrower will be the legally valid and binding
obligations of Borrower, enforceable against Borrower in accordance with
their respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or
similar laws relating to or limiting creditors' rights generally.
(e) The Liens granted by Borrower to Foothill in and to
its properties and assets pursuant to this Agreement and the other Loan
Documents are validly created, perfected, and first priority Liens, subject
only to Permitted Liens.
5.10 LITIGATION. There are no actions or proceedings pending by
or against Borrower before any court or administrative agency and Borrower
does not have knowledge or belief of any pending, threatened, or imminent
litigation, governmental investigations, or claims, complaints, actions, or
prosecutions involving Borrower or any guarantor of the Obligations, except
for: (a) ongoing collection matters in which Borrower is the plaintiff; (b)
matters disclosed on SCHEDULE 5.10; and (c) matters arising after the date
hereof that, if decided adversely to Borrower, would not cause a Material
Adverse Change.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements
relating to
Borrower or any guarantor of the Obligations that have been delivered by
Borrower to Foothill have been prepared in accordance with GAAP (except, in
the case of unaudited financial statements, for the lack of footnotes and
being subject to year-end audit adjustments) and fairly present Borrower's
(or such guarantor's, as applicable) financial condition as of the date
thereof and Borrower's results of operations for the period then ended.
There has not been a Material Adverse Change with respect to Borrower (or
such guarantor, as applicable) since the date of the latest financial
statements submitted to Foothill on or before the Closing Date.
5.12 SOLVENCY. Borrower is Solvent. No transfer of property is
being made by Borrower and no obligation is being incurred by Borrower in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of Borrower.
5.13 EMPLOYEE BENEFITS. None of Borrower, any of its
Subsidiaries, or any of their ERISA Affiliates maintains or contributes to
any Benefit Plan.
5.14 ENVIRONMENTAL CONDITION. None of Borrower's properties or
assets has ever been used by Borrower 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 Materials. 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
Materials 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 or operated by Borrower. Borrower has not received a summons,
citation, notice, or directive from the Environmental Protection Agency or
any other federal or state governmental agency concerning any action or
omission by Borrower resulting in the releasing or disposing of Hazardous
Materials into the environment.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrower shall do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a standard and modern system of
accounting that enables Borrower to produce financial statements in
accordance with GAAP, and maintain records pertaining to the Collateral that
contain information as from time to time may be requested by Foothill.
Borrower also shall keep a modern inventory reporting system that shows all
additions, sales, claims, returns, and allowances with respect to the
Inventory.
6.2 COLLATERAL REPORTING. Provide Foothill with the following
documents at the following times in form satisfactory to Foothill: (a) on
each Business Day, a sales journal, collection journal, and credit register
since the last such schedule and a calculation of the Borrowing Base as of
such date, (b) on a monthly basis and, in any event, by no later than
the 15th day of each month during the term of this Agreement, (1) a detailed
calculation of the Borrowing Base, (2) a detailed aging, by total, of the
Accounts, together with a reconciliation to the detailed calculation of the
Borrowing Base previously provided to Foothill, and (3) an Inventory report
specifying Borrower's cost and the wholesale market value of its Inventory by
category, with additional detail showing additions to and deletions from the
Inventory, (c) on a monthly basis and, in any event, by no later than the
15th day of each month during the term of this Agreement, a summary aging, by
vendor, of Borrower's accounts payable segregating current accounts payable
from those that are past due by 30 days or more, and any book overdraft, (d)
on each Business Day, notice of all returns, disputes, or claims, (e) upon
request, copies of invoices in connection with the Accounts, customer
statements, credit memos, remittance advices and reports, deposit slips,
shipping and delivery documents in connection with the Accounts and for
Inventory and Equipment acquired by Borrower, purchase orders and invoices,
(f) on a quarterly basis, a detailed list of Borrower's customers, (g) on a
monthly basis, a calculation of the Dilution for the prior month; (h) upon
request, Borrower's electronic data and (i) such other reports as to the
Collateral or the financial condition of Borrower as Foothill may reasonably
request from time to time.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to
Foothill: (a) as soon as available, but in any event within 30 days after
the end of each month during each of Borrower's fiscal years, a company
prepared balance sheet, income statement, and statement of cash flow covering
Borrower's operations during such period; and (b) as soon as available, but
in any event within 90 days after the end of each of Borrower's fiscal years,
financial statements of Borrower for each such fiscal year, audited by
independent certified public accountants reasonably acceptable to Foothill
and certified, without any qualifications, by such accountants to have been
prepared in accordance with GAAP, together with a certificate of such
accountants addressed to Foothill stating that such accountants do not have
knowledge of the existence of any Default or Event of Default under
SECTIONS 6.1, 6.11, 6.13, 7.1, 7.10, 7.11, 7.12, 7.13 and 7.18. Such audited
financial statements shall include a balance sheet, profit and loss
statement, and statement of cash flow and, if prepared, such accountants'
letter to management. If Borrower is a parent company of one or more
Subsidiaries or Affiliates, or is a Subsidiary or Affiliate of another
company, then, in addition to the financial statements referred to above,
Borrower agrees to deliver financial statements prepared on a consolidating
basis so as to present Borrower and each such related entity separately, and
on a consolidated basis.
Together with the above, Borrower also shall deliver to
Foothill Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports,
and Form 8-K Current Reports, and any other filings made by Borrower with the
Securities and Exchange Commission, if any, as soon as the same are filed, or
any other information that is provided by Borrower to its shareholders, and
any other report reasonably requested by Foothill relating to the financial
condition of Borrower.
Each month, together with the financial statements provided
pursuant to SECTION 6.3(a), Borrower shall deliver to Foothill a certificate
signed by its chief financial
officer to the effect that: (i) all financial statements delivered or caused
to be delivered to Foothill hereunder have been prepared in accordance with
GAAP (except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and fairly present
the financial condition of Borrower, (ii) the representations and warranties
of Borrower contained in this Agreement and the other Loan Documents are true
and correct in all material respects on and as of the date of such
certificate, as though made on and as of such date (except to the extent that
such representations and warranties relate solely to an earlier date), (iii)
for each month that also is the date on which a financial covenant in SECTION
7.20 is to be tested, a Compliance Certificate demonstrating in reasonable
detail compliance at the end of such period with the applicable financial
covenants contained in SECTION 7.20, and (iv) on the date of delivery of such
certificate to Foothill there does not exist any condition or event that
constitutes a Default or Event of Default (or, in the case of clauses (i),
(ii), or (iii), to the extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge and what action
Borrower has taken, is taking, or proposes to take with respect thereto).
6.4 TAX RETURNS. Deliver to Foothill copies of each of
Borrower's future federal income tax returns, and any amendments thereto,
within 30 days of the filing thereof with the Internal Revenue Service.
6.5 INFORMATION ABOUT ACCOUNT DEBTORS. Annually Borrower shall
provide Foothill with updated financial information for each Account Debtor
that is anticipated to have Accounts equal to or greater than 10.00% of
Eligible Accounts at any time.
6.6 RETURNS. Cause returns and allowances, if any, as between
Borrower and its Account Debtors to 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. If, at a time when no Event of
Default has occurred and is continuing, any Account Debtor returns any
Inventory to Borrower, Borrower promptly shall determine the reason for such
return and, if Borrower accepts such return, issue a credit memorandum (with
a copy to be sent to Foothill) in the appropriate amount to such Account
Debtor. If, at a time when an Event of Default has occurred and is
continuing, any Account Debtor returns any Inventory to Borrower, Borrower
promptly shall determine the reason for such return and, if Foothill consents
(which consent shall not be unreasonably withheld), issue a credit memorandum
(with a copy to be sent to Foothill) in the appropriate amount to such
Account Debtor.
6.7 TITLE TO EQUIPMENT. Upon Foothill's request, Borrower
immediately shall deliver to Foothill, properly endorsed, any and all
evidences of ownership of, certificates of title, or applications for title
to any items of Equipment.
6.8 MAINTENANCE OF EQUIPMENT. Maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make
all necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be
maintained and preserved. Other than those items of Equipment that
constitute fixtures on the Closing Date, Borrower shall not permit any item
of Equipment to become a fixture to real estate or an accession to other
property, and such Equipment shall at all times remain personal property.
6.9 TAXES. Cause all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Borrower or any of its property to be paid in full, before
delinquency or before the expiration of any extension period, except to the
extent that the validity of such assessment or tax shall be the subject of a
Permitted Protest. Borrower shall make due and timely payment or deposit of
all such federal, state, and local taxes, assessments, or contributions
required of it by law, and will execute and deliver to Foothill, on demand,
appropriate certificates attesting to the payment thereof or deposit with
respect thereto. Borrower will make timely payment or deposit of all tax
payments and withholding taxes required of it by applicable laws, including
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 Foothill with proof
satisfactory to Foothill indicating that Borrower has made such payments or
deposits.
6.10 INSURANCE.
(a) At its expense, keep the Collateral (other than
Accounts) insured against loss or damage by fire, theft, explosion,
sprinklers, and all other hazards and risks, and in such amounts, as are
ordinarily insured against by other owners in similar businesses. Borrower
also shall maintain business interruption, public liability, product
liability, and property damage insurance relating to Borrower's ownership and
use of the Collateral, as well as insurance against larceny, embezzlement,
and criminal misappropriation.
(b) All such policies of insurance shall be in such form,
with such companies, and in such amounts as may be reasonably satisfactory to
Foothill. All insurance required herein shall be written by companies which
are authorized to do insurance business in the State of California. All
hazard insurance and such other insurance as Foothill shall specify, shall
contain a mortgagee endorsement satisfactory to Foothill, showing Foothill as
sole loss payee thereof, and shall contain a waiver of warranties. Every
policy of insurance referred to in this SECTION 6.10 shall contain an
agreement by the insurer that it will not cancel such policy except after 30
days prior written notice to Foothill and that any loss payable thereunder
shall be payable notwithstanding any act or negligence of Borrower or
Foothill which might, absent such agreement, result in a forfeiture of all or
a part of such insurance payment. Borrower shall deliver to Foothill
certified copies of such policies of insurance and evidence of the payment of
all premiums therefor.
(c) Original policies or certificates thereof satisfactory
to Foothill evidencing such insurance shall be delivered to Foothill at least
30 days prior to the expiration of the existing or preceding policies.
Borrower shall give Foothill prompt notice of any loss covered by such
insurance, and Foothill shall have the right to adjust any loss. Foothill
shall
have the exclusive right to adjust all losses payable under any such
insurance policies without any liability to Borrower whatsoever in respect of
such adjustments. Any monies received as payment for any loss under any
insurance policy including the insurance policies mentioned above, shall be
paid over to Foothill to be applied at the option of Foothill either to the
prepayment of the Obligations without premium, in such order or manner as
Foothill may elect, or shall be disbursed to Borrower under stage payment
terms satisfactory to Foothill for application to the cost of repairs,
replacements, or restorations. All repairs, replacements, or restorations
shall be effected with reasonable promptness and shall be of a value at least
equal to the value of the items or property destroyed prior to such damage or
destruction. Upon the occurrence of an Event of Default, Foothill shall have
the right to apply all prepaid premiums to the payment of the Obligations in
such order or form as Foothill shall determine.
(d) Borrower shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required to
be maintained under this SECTION 6.10, unless Foothill is included thereon as
named insured with the loss payable to Foothill under a standard mortgagee
endorsement, or its local equivalent. Borrower immediately shall notify
Foothill whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the
same, and originals of such policies immediately shall be provided to
Foothill.
6.11 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and
under the other Loan Documents by or on behalf of Borrower without setoff or
counterclaim and free and clear of, and without deduction or withholding for
or on account of, any federal, state, or local taxes.
6.12 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory and
Equipment only at the locations identified on SCHEDULE 6.12; PROVIDED,
HOWEVER, that Borrower may amend SCHEDULE 6.12 so long as such amendment
occurs by written notice to Foothill not less than 30 days prior to the date
on which the Inventory or Equipment is moved to such new location, so long as
such new location is within the continental United States, and so long as, at
the time of such written notification, Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected
Foothill's security interests in such assets and also provides to Foothill a
Collateral Access Agreement.
6.13 COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any governmental
authority, including the Fair Labor Standards Act and the Americans With
Disabilities Act, other than laws, rules, regulations, and orders the
non-compliance with which, individually or in the aggregate, would not have
and could not reasonably be expected to cause a Material Adverse Change.
6.14 INTENTIONALLY OMITTED.
6.15 LEASES. Pay when due all rents and other amounts payable
under any leases to which Borrower is a party or by which Borrower's
properties and assets are bound,
unless such payments are the subject of a Permitted Protest. To the extent
that Borrower fails timely to make payment of such rents and other amounts
payable when due under its leases, Foothill shall be entitled, in its
discretion, to reserve an amount equal to such unpaid amounts against the
Borrowing Base.
6.16 YEAR 2000 COMPLIANCE. Borrower's accounting and financial
record systems are Year 2000 Compliant.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrower will not do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to
any Indebtedness, except:
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness set forth in SCHEDULE 7.1;
(c) Indebtedness secured by Permitted Liens; and
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this SECTION 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the
terms and conditions of such refinancings, renewals, or extensions do not
materially impair the prospects of repayment of the Obligations by Borrower,
(ii) the net cash proceeds of such refinancings, renewals, or extensions do
not result in an increase in the aggregate principal amount of the
Indebtedness so refinanced, renewed, or extended, (iii) such refinancings,
renewals, refundings, or extensions do not result in a shortening of the
average weighted maturity of the Indebtedness so refinanced, renewed, or
extended, and (iv) to the extent that Indebtedness that is refinanced was
subordinated in right of payment to the Obligations, then the subordination
terms and conditions of the refinancing Indebtedness must be at least as
favorable to Foothill as those applicable to the refinanced Indebtedness.
7.2 LIENS. Create, incur, assume, or permit to exist, directly
or indirectly, any Lien on or with respect to any of its property or assets,
of any kind, whether now owned or hereafter acquired, or any income or
profits therefrom, except for Permitted Liens (including Liens that are
replacements of Permitted Liens to the extent that the original Indebtedness
is refinanced under SECTION 7.1(d) and so long as the replacement Liens only
encumber those assets or property that secured the original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation, reorganization, or recapitalization, or reclassify its capital
stock, or liquidate, wind up, or dissolve itself (or suffer any liquidation
or dissolution), or convey, sell, assign, lease, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its property or assets.
7.4 DISPOSAL OF ASSETS. Sell, lease, assign, transfer, or
otherwise dispose of any of Borrower's properties or assets other than sales
of Inventory to buyers in the ordinary course of Borrower's business as
currently conducted.
7.5 CHANGE NAME. Change Borrower's name, FEIN, corporate
structure (within the meaning of Section 9402(7) of the Code), or identity,
or add any new fictitious name.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable
with respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or
which are transmitted or turned over to Foothill.
7.7 NATURE OF BUSINESS. Make any change in the principal nature
of Borrower's business.
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by
SECTION 7.1(d), prepay, redeem, retire, defease, purchase, or otherwise
acquire any Indebtedness owing to any third Person, other than the
Obligations in accordance with this Agreement, and
(b) Directly or indirectly, amend, modify, alter,
increase, or change any of the terms or conditions of any agreement,
instrument, document, indenture, or other writing evidencing or concerning
Indebtedness permitted under SECTIONS 7.1(b), (c), or (d).
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 CONSIGNMENTS. Except for consigned Inventory at Borrower's
distributors, consign any Inventory or sell any Inventory on xxxx and hold,
sale or return, sale on approval, or other conditional terms of sale.
7.11 DISTRIBUTIONS. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital stock) on, or
purchase, acquire, redeem, or retire any of Borrower's capital stock, of any
class, whether now or hereafter outstanding; PROVIDED, HOWEVER, that Borrower
may make open market purchases of its common stock so long as (a) all such
purchases do not, in the aggregate, exceed $3,000,000 during the term of this
Agreement, (b) after giving effect to each such purchase there shall exist at
least $2,000,000 of
unused Borrowing Base availability under Section 2.1(a), (c) no Event of
Default has occurred and is continuing, and (d) (i) if such purchase occurs
on or before December 31, 1999, Foothill has given its consent thereto (which
consent shall not be unreasonably withheld) or (ii) if such purchase occurs
after December 31, 1999, Borrower can demonstrate to Foothill that it has
achieved a net income of at least $1.00 for its fiscal year 1999.
7.12 ACCOUNTING METHODS. Modify or change its method of
accounting or enter into, modify, or terminate any agreement currently
existing, or at any time hereafter entered into with any third party
accounting firm or service bureau for the preparation or storage of
Borrower's accounting records without said accounting firm or service bureau
agreeing to provide Foothill information regarding the Collateral or
Borrower's financial condition. Borrower waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Foothill
pursuant to or in accordance with this Agreement, and agrees that Foothill
may contact directly any such accounting firm or service bureau in order to
obtain such information.
7.13 INVESTMENTS. Directly or indirectly make, acquire, or incur
any liabilities (including contingent obligations) for or in connection with
(a) the acquisition of the securities (whether debt or equity) of, or other
interests in, a Person, (b) loans, advances, capital contributions, or
transfers of property to a Person (except for loans to employees and
Affiliates in an aggregate amount not to exceed $500,000 outstanding at any
one time), or (c) the acquisition of all or substantially all of the
properties or assets of a Person.
7.14 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 fully disclosed
to Foothill, and that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-Affiliate.
7.15 SUSPENSION. Suspend or go out of a substantial portion of
its business.
7.16 COMPENSATION. Increase the annual fee or per-meeting fees
paid to directors during any year by more than 15% over the prior year; pay
or accrue total cash compensation, during any year, to officers and senior
management employees in an aggregate amount in excess of 130% of that paid or
accrued in the prior year.
7.17 USE OF PROCEEDS. Use (a) the proceeds of the Advances for
any purpose other than (i) on the Closing Date, to pay transactional costs
and expenses incurred in connection with this Agreement, and (ii) thereafter,
consistent with the terms and conditions hereof, for its lawful and permitted
corporate purposes, and (b) the proceeds of the Capital Expenditure Loans
made hereunder for any purpose other than to finance new Equipment in
accordance with SECTION 2.4.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND
EQUIPMENT WITH BAILEES. Relocate its chief executive office to a new
location without providing 30 days prior written notification thereof to
Foothill and so long as, at the time of such written notification, Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected Foothill's security interests and also provides to
Foothill a Collateral Access Agreement with respect to such new location. The
Inventory and Equipment shall not at any time now or hereafter be stored with
a bailee, warehouseman, or similar party without Foothill's prior written
consent.
7.19 INTENTIONALLY OMITTED.
7.20 FINANCIAL COVENANT. Fail to maintain Tangible Net Worth of
at least $30,000,000 at all times during the term of this Agreement, measured
on a fiscal quarter ending basis; PROVIDED, HOWEVER that Foothill shall be
entitled to reset this financial covenant for each fiscal quarter after
December 31, 1999, based upon Borrower's financial projections for the year
2000.
7.21 CAPITAL EXPENDITURES. Make capital expenditures in any
fiscal year in excess of $15,000,000.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event
of default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of
principal, interest (including any interest which, but for the provisions of
the Bankruptcy Code, would have accrued on such amounts), fees and charges
due Foothill, reimbursement of Foothill Expenses, or other amounts
constituting Obligations); PROVIDED, HOWEVER, that in the case of
Overadvances that are caused by the charging of interest, fees, or Foothill
Expenses to the Loan Account, such event shall not constitute an Event of
Default if, within five days of incurring such Overadvance, Borrower repays,
or otherwise eliminates, such Overadvance;
8.2 (a) If Borrower fails to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in SECTION 6.2
(Collateral Reporting), 6.3 (Financial Statements, Reports, Certificates),
6.4 (Tax Returns), 6.7 (Location of Inventory and Equipment), 6.3 (Compliance
with Laws), or 6.15 (Leases) of this Agreement and such failure continues for
a period of five Business Days; (b) If Borrower fails or neglects to perform,
keep, or observe any term, provision, condition, covenant, or agreement
contained in SECTION 6.1 (Accounting System) or 6.8 (Maintenance of
Equipment) of this Agreement and such failure continues for a period of 10
Business Days; or (c) If Borrower fails or neglects to perform, keep, or
observe any other term, provision, condition, covenant, or agreement
contained in this Agreement, or in any of the other Loan Documents (giving
effect to any grace periods, cure periods, or required notices, if any,
expressly provided for in such Loan Document); in each
case, other than any such term, provision, condition, covenant, or agreement
that is the subject of another provision of this SECTION 8, in which event
such other provision of this SECTION 8 shall govern;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of Borrower's properties or assets
is attached, seized, subjected to a writ or distress warrant, or is levied
upon, or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower
and any of the following events occur: (a) Borrower consents to the
institution of the Insolvency Proceeding against it; (b) the petition
commencing the Insolvency Proceeding is not timely controverted; (c) the
petition commencing the Insolvency Proceeding is not dismissed within 60
calendar days of the date of the filing thereof; PROVIDED, HOWEVER, that,
during the pendency of such period, Foothill shall be relieved of its
obligation to extend credit hereunder; (d) an interim trustee is appointed to
take possession of all or a substantial portion of the properties or assets
of, or to operate all or any substantial portion of the business of,
Borrower; or (e) an order for relief shall have been issued or entered
therein;
8.7 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;
8.8 If a notice of Lien, levy, or assessment is filed of record
with respect to any of Borrower's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a
Lien, whether xxxxxx or otherwise, upon any of Borrower's properties or
assets and the same is not paid on the payment date thereof;
8.9 If a judgment or other claim becomes a Lien or encumbrance
upon any material portion of Borrower's properties or assets;
8.10 If there is a default in any material agreement to which
Borrower is a party with one or more third Persons and such default (a)
occurs at the final maturity of the obligations thereunder, or (b) results in
a right by such third Person(s), irrespective of whether exercised, to
accelerate the maturity of Borrower's obligations thereunder;
8.11 If Borrower makes any payment on account of Indebtedness
that has been contractually subordinated in right of payment to the payment
of the Obligations, except to the extent such payment is permitted by the
terms of the subordination provisions applicable to such Indebtedness;
8.12 If any material misstatement or misrepresentation exists at
the time made in any warranty, representation, statement, or report made to
Foothill by Borrower or any officer, employee, agent, or director of
Borrower, or if any such warranty or representation is withdrawn; or
8.13 If the obligation of any guarantor under its guaranty or
other third Person under any Loan Document is limited or terminated by
operation of law or by the guarantor or other third Person thereunder, or any
such guarantor or other third Person becomes the subject of an Insolvency
Proceeding.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default Foothill 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;
(b) Cease advancing money or extending credit to or for
the benefit of Borrower under this Agreement, under any of the Loan
Documents, or under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Foothill, but without
affecting Foothill's rights and security interests in the Collateral and
without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Foothill considers
advisable, and in such cases, Foothill will credit Borrower's Loan Account
with only the net amounts received by Foothill in payment of such disputed
Accounts after deducting all Foothill Expenses incurred or expended in
connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust
for Foothill, segregate all returned Inventory from all other property of
Borrower or in Borrower's possession and conspicuously label said returned
Inventory as the property of Foothill;
(f) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Foothill considers
necessary or reasonable to protect its security interests in the Collateral.
Borrower agrees to assemble the Collateral if Foothill so requires, and to
make the Collateral available to Foothill as Foothill may designate.
Borrower authorizes Foothill 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 that in Foothill's
determination appears to conflict with its security interests and to pay all
expenses incurred in connection therewith. With respect to any of Borrower's
owned or leased premises, Borrower hereby grants Foothill a license to enter
into possession of such premises and to occupy the same, without charge, for
up to 120 days in order to exercise any of Foothill's rights or remedies
provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9505 of the
Code), set off and apply to the Obligations any and all (i) balances and
deposits of Borrower held by Foothill (including any amounts received in the
Lockbox Accounts), or (ii) indebtedness at any time owing to or for the
credit or the account of Borrower held by Foothill;
(h) Hold, as cash collateral, any and all balances and
deposits of Borrower held by Foothill, and any amounts received in the
Lockbox Accounts, to secure the full and final repayment of all of the
Obligations;
(i) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Foothill is hereby granted a license or
other right to use, without charge, 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 Borrower's rights under all licenses and
all franchise agreements shall inure to Foothill's benefit;
(j) 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 Foothill determines is commercially reasonable. It is not necessary that
the Collateral be present at any such sale;
(k) Foothill shall give notice of the disposition of the
Collateral as follows:
(1) Foothill shall give Borrower and each holder of
a security interest in the Collateral who has filed with Foothill a written
request for notice, a notice in writing of the time and place of public sale,
or, if the sale is a private sale or some other disposition other than a
public sale is to be made of the Collateral, then the time on or after which
the private sale or other disposition is to be made;
(2) The notice shall be personally delivered or
mailed, postage prepaid, to Borrower as provided in SECTION 12, at least 5
days before the date fixed for the sale, or at least 5 days before the date
on or after which the private sale or other disposition
is to be made; no notice needs to be given prior to the disposition of any
portion of the Collateral that is perishable or threatens to decline speedily
in value or that is of a type customarily sold on a recognized market.
Notice to Persons other than Borrower claiming an interest in the Collateral
shall be sent to such addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill
also shall give notice of the time and place by publishing a notice one time
at least 5 days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held;
(l) Foothill may credit bid and purchase at any public
sale; and
(m) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Foothill to Borrower.
9.2 REMEDIES CUMULATIVE. Foothill's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by Foothill of one right or remedy shall be deemed an election, and
no waiver by Foothill of any Event of Default shall be deemed a continuing
waiver. No delay by Foothill shall constitute a waiver, election, or
acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to
make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Foothill
determines that such failure by Borrower could result in a Material Adverse
Change, in its discretion and without prior notice to Borrower, Foothill may
do any or all of the following: (a) make payment of the same or any part
thereof; (b) set up such reserves in Borrower's Loan Account as Foothill
deems necessary to protect Foothill from the exposure created by such
failure; or (c) obtain and maintain insurance policies of the type described
in SECTION 6.10, and take any action with respect to such policies as
Foothill deems prudent. Any such amounts paid by Foothill shall constitute
Foothill Expenses. Any such payments made by Foothill shall not constitute
an agreement by Foothill to make similar payments in the future or a waiver
by Foothill of any Event of Default under this Agreement. Foothill need not
inquire as to, or contest the validity of, any such expense, tax, or Lien and
the receipt of the usual official notice for the payment thereof shall be
conclusive evidence that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Foothill on which Borrower may in any way be
liable.
11.2 FOOTHILL'S LIABILITY FOR COLLATERAL. So long as Foothill
complies with its obligations, if any, under Section 9207 of the Code,
Foothill 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. All risk of loss, damage, or
destruction of the Collateral shall be borne by Borrower.
11.3 INDEMNIFICATION. Borrower shall pay, indemnify, defend, and
hold Foothill, each Participant, and each of their respective officers,
directors, employees, counsel, agents, and attorneys-in-fact (each, an
"Indemnified Person") harmless (to the fullest extent permitted by law) from
and against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as
and when they are incurred and irrespective of whether suit is brought), at
any time asserted against, imposed upon, or incurred by any of them in
connection with or as a result of or related to the execution, delivery,
enforcement, performance, and administration of this Agreement and any other
Loan Documents or the transactions contemplated herein, and with respect to
any investigation, litigation, or proceeding related to this Agreement, any
other Loan Document, or the use of the proceeds of the credit provided
hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities").
Borrower shall have no obligation to any Indemnified Person under this
SECTION 11.3 with respect to any Indemnified Liability that a court of
competent jurisdiction finally determines to have resulted from the gross
negligence or willful misconduct of such Indemnified Person. This provision
shall survive the termination of this Agreement and the repayment of the
Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other Loan Document
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 registered or certified
mail (postage prepaid, return receipt requested), overnight courier, or
telefacsimile to Borrower or to Foothill, as the case may be, at its address
set forth below:
IF TO BORROWER: SILICON STORAGE TECHNOLOGY, INC.
0000 Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Fax No. 000.000.0000
WITH COPIES TO: XXXXXX GODWARD LLP
0 Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Fax No. 000.000.0000
IF TO FOOTHILL: FOOTHILL CAPITAL CORPORATION
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Business Finance Division Manager
Fax No. 000.000.0000
WITH COPIES TO: BUCHALTER, NEMER, FIELDS & YOUNGER
000 X. Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax No. 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. All notices or demands sent in accordance with this SECTION 12,
other than notices by Foothill in connection with Sections 9504 or 9505 of
the Code, shall be deemed received on the earlier of the date of actual
receipt or 3 days after the deposit thereof in the mail. Borrower
acknowledges and agrees that notices sent by Foothill in connection with
Sections 9504 or 9505 of the Code shall be deemed sent when deposited in the
mail or personally delivered, or, where permitted by law, transmitted by
telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE
RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING
HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED
UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED
AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY
OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS
AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY.
EACH OF BORROWER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13. BORROWER AND FOOTHILL 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 OF BORROWER AND
FOOTHILL REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED
AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill
four months after they are delivered to or received by Foothill, unless
Borrower requests, in writing, the return of said documents, schedules, or
other papers and makes arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS.
15.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.
15.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure
to the benefit of the respective successors and assigns of each of the
parties; PROVIDED, HOWEVER, that Borrower may not assign this Agreement or
any rights or duties hereunder without Foothill's prior written consent and
any prohibited assignment shall be absolutely void. No consent to an
assignment by Foothill shall release Borrower from its Obligations. Foothill
may assign this Agreement and its rights and duties hereunder and no consent
or approval by Borrower is required in connection with any such assignment.
Foothill reserves the right to sell, assign, transfer, negotiate, or grant
participations in all or any part of, or any interest in Foothill's rights
and benefits hereunder. In connection with any such assignment or
participation, Foothill may disclose all documents and information which
Foothill now or hereafter may have relating to Borrower or Borrower's
business. To the extent that Foothill assigns its rights and obligations
hereunder to a third Person, Foothill thereafter shall be released from such
assigned obligations to Borrower and such assignment shall effect a novation
between Borrower and such third Person.
15.3 SECTION HEADINGS. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.
15.4 INTERPRETATION. Neither this Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against Foothill or
Borrower, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of all parties hereto.
15.5 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.
15.6 AMENDMENTS IN WRITING. This Agreement can only be amended
by a writing signed by both Foothill and Borrower.
15.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. 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. Delivery of an executed
counterpart of this Agreement by telefacsimile shall be equally as effective
as delivery of an original executed counterpart of this Agreement. Any party
delivering an executed counterpart of this Agreement by telefacsimile also
shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Agreement.
15.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence
or payment of the Obligations by Borrower or any guarantor of the Obligations
or the transfer by either or both of such parties to Foothill of any property
of either or both of such parties should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, and other voidable or recoverable
payments of money or transfers of property (collectively, a "Voidable
Transfer"), and if Foothill is required to repay or restore, in whole or in
part, any such Voidable Transfer, or elects to do so upon the reasonable
advice of its counsel, then, as to any such Voidable Transfer, or the amount
thereof that Foothill is required or elects to repay or restore, and as to
all reasonable costs, expenses, and attorneys fees of Foothill related
thereto, the liability of Borrower or such guarantor automatically shall be
revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.
15.9 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to
the transactions contemplated hereby and shall not be contradicted or
qualified by any other agreement, oral or written, before the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in Los Angeles, California.
SILICON STORAGE TECHNOLOGY, INC.,
a California corporation
By /s/ Xxxxxxx X. Xxxxx
---------------------------------------
Title: VP/CFO
------------------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ Xxxxxx X. Xxxxxxx
---------------------------------------
Title: S.V.P.
------------------------------------
