Exhibit 10.9
LOAN AND SECURITY AGREEMENT BETWEEN XXXX SYSTEMS, INC. AND SILICON VALLEY BANK
Silicon Valley Bank
Loan and Security Agreement
Borrower: Xxxx Systems, Inc.; Xxxx Systems (UK) Ltd.
Address: Xxx Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Date: September 24, 2002
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK ("Silicon"), whose address is 0000 Xxxxxx Xxxxx, Xxxxx
Xxxxx, Xxxxxxxxxx 00000 and with a loan production office located at 0000
Xxxxxxxxx Xxxx, XX, Xxxxx 000, Xxxxxxx, XX and the borrower(s) named above
(jointly and severally, the "Borrower"), whose chief executive office is located
at the above address ("Borrower's Address"). The Schedule to this Agreement (the
"Schedule") shall for all purposes be deemed to be a part of this Agreement, and
the same is an integral part of this Agreement. (Definitions of certain terms
used in this Agreement are set forth in Section 8 below.)
LOANS.
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1.1 Loans. Silicon will make loans to Borrower (the "Loans"), in amounts
determined by Silicon in its good faith business judgment, up to the amounts
(the "Credit Limit") shown on the Schedule, provided no Default or Event of
Default has occurred and is continuing, and subject to deduction of Reserves for
accrued interest and such other Reserves as Silicon deems proper from time to
time in its good faith business judgment.
1.2 Interest. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Silicon's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans. Silicon may, in its discretion, debit Borrower's
Deposit Accounts maintained with Silicon for interest payments due. Silicon will
promptly notify Borrower when it debits Borrower's Deposit Accounts.
1.3 Overadvances. If at any time or for any reason the total of all
outstanding Loans and all other monetary Obligations exceeds the Credit Limit
(an "Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon the amount of any Overadvance, Borrower agrees to pay Silicon
interest on the outstanding amount of any Overadvance, on demand, at the Default
Rate.
1.4 Fees. Borrower shall pay Silicon the fees shown on the Schedule, which
are in addition to all interest and other sums payable to Silicon and are not
refundable.
1.5 Loan Requests. To obtain a Loan, Borrower shall make a request to
Silicon by facsimile or telephone. Loan requests received after 12:00 Noon
(Pacific time) will not be considered by Silicon until the next Business Day.
Silicon may rely on any telephone request for a Loan given by a person whom
Silicon believes is an authorized signatory of Borrower, and Borrower will
indemnify Silicon for any loss Silicon suffers as a result of that reliance.
1.6 Letters of Credit. At the request of Borrower, Silicon may, in its good
faith business judgment, issue or arrange for the issuance of letters of credit
for the account of Borrower, in each case in form and substance satisfactory to
Silicon in its sole discretion (collectively, "Letters of Credit"). The
aggregate face amount of all Letters of Credit from time to time outstanding
shall not exceed the amount shown on the Schedule (the "Letter of Credit
Sublimit"), and shall be reserved against Loans which would otherwise be
available hereunder, and in the event at any time there are insufficient Loans
available to Borrower for such reserve, Borrower shall deposit and maintain with
Silicon cash collateral in an amount at all times equal to such deficiency,
which shall be held as Collateral for all purposes of this Agreement. Borrower
shall pay all bank charges (including charges of Silicon) for the issuance of
Letters of Credit, together with such additional fee as Silicon's letter of
credit department shall charge in connection with the issuance of the Letters of
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EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
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Credit. Any payment by Silicon under or in connection with a Letter of
Credit shall constitute a Loan hereunder on the date such payment is made. Each
Letter of Credit shall have an expiration date no later than thirty days prior
to the Maturity Date. Borrower hereby agrees to indemnify and hold Silicon
harmless from any loss, cost, expense, or liability, including payments made by
Silicon, expenses, and reasonable attorneys' fees incurred by Silicon arising
out of or in connection with any Letters of Credit. Borrower agrees to be bound
by the regulations and interpretations of the issuer of any Letters of Credit
guarantied by Silicon and opened for Borrower's account or by Silicon's
interpretations of any Letter of Credit issued by Silicon for Borrower's
account, and Borrower understands and agrees that Silicon shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower's instructions or those contained in the Letters of Credit or
any modifications, amendments, or supplements thereto. Borrower understands that
Letters of Credit may require Silicon to indemnify the issuing bank for certain
costs or liabilities arising out of claims by Borrower against such issuing
bank. Borrower hereby agrees to indemnify and hold Silicon harmless with respect
to any loss, cost, expense, or liability incurred by Silicon under any Letter of
Credit as a result of Silicon's indemnification of any such issuing bank. The
provisions of this Loan Agreement, as it pertains to Letters of Credit, and any
other Loan Documents relating to Letters of Credit are cumulative.
1.7 EximBank Loans. At the request of Borrower, as part of the Loans,
Silicon may, subject to the satisfaction of certain conditions set forth herein,
make certain Loans against Eligible Foreign Accounts (collectively, "Exim Loans"
and each an "Exim Loan"). The aggregate face amount of all Exim Loans from time
to time outstanding shall not exceed the amount shown on the Schedule (the "Exim
Loan Sublimit"), and shall be reserved against Loans which would otherwise be
available hereunder. Prior to making any Exim Loan, Silicon shall have received
(a) a fully executed Borrower Agreement in form and substance satisfactory to
Silicon, (b) a fully executed Loan Authorization Notice in form and substance
satisfactory to Silicon, (c) payment of the Exim Bank Loan Fee, (d) a fully
executed Exim Bank Loan and Security Agreement, and (e) such other documents as
Silicon may deem necessary in connection with the Exim Loans (collectively, the
"Exim Loan Documents").
1.8 Foreign Exchange Sublimit. At the request of Borrower, Silicon may, in
its good faith business judgment, permit the Borrower to enter into foreign
exchange forward contracts with Silicon under which Borrower commits to purchase
from or sell to Silicon a set amount of foreign currency more than one (1)
Business Day after the contract date (the "FX Forward Contract"). Silicon will
subtract ten percent (10%) of each outstanding FX Forward Contract (the "FX
Reserve") from the Foreign Exchange Sublimit (as hereinafter defined). The total
FX Forward Contracts at any one time may not exceed ten (10) times the amount of
the FX Reserve. Silicon may terminate the FX Forward Contracts if a Default or
an Event of Default occurs and is continuing. The aggregate face amount of all
FX Forward Contracts and the amount of all FX Reserves shall not exceed the
amount shown on the Schedule (the "Foreign Exchange Sublimit"), and shall be
reserved against Loans which would otherwise be available hereunder, and in the
event at any time there are insufficient Loans available to Borrower for such
reserve, Borrower shall deposit and maintain with Silicon cash collateral in an
amount at all times equal to such deficiency, which shall be held as Collateral
for all purposes of this Agreement.
1.9 Cash Management Services. Borrower may use up to Twenty Five Thousand
Dollars ($25,000) of the Loan for Silicon's Cash Management Services, which may
include merchant services, direct deposit of payroll, business credit card, and
check cashing services identified in various cash management services agreements
related to such services (the "Cash Management Services"). The aggregate face
amount of all Cash Management Services from time to time outstanding shall not
exceed the amount shown on the Schedule, and shall be reserved against Loans
which would otherwise be available hereunder, and in the event at any time there
are insufficient Loans available to Borrower for such reserve, Borrower shall
deposit and maintain with Silicon cash collateral in an amount at all times
equal to such deficiency, which shall be held as Collateral for all purposes of
this Agreement. Any amounts Silicon pays on behalf of Borrower or any amounts
that are not paid by Borrower for any Cash Management Services will be treated
as Loans and will accrue interest at the rate provided for herein.
SECURITY INTEREST. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Silicon a security interest in
all of the following (collectively, the "Collateral"): all right, title and
interest of Borrower in and to all of the following, whether now owned or
hereafter arising or acquired and wherever located: all Accounts; all Inventory;
all Equipment; all Deposit Accounts; all General Intangibles (including without
limitation all intellectual property); all Investment Property; all other
property; and any and all claims, rights and interests in any of the above, and
all guaranties and security for any of the above, and all substitutions and
replacements for, additions, accessions, attachments, accessories, and
improvements to, and proceeds (including proceeds of any insurance policies,
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EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
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proceeds of proceeds and claims against third parties) of, any and all of the
above, and all Borrower's books relating to any and all of the above.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.
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In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants, throughout the
term of this Agreement and until all Obligations have been paid and performed in
full:
3.1 Corporate Existence and Authority. Borrower is and will continue to be,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Borrower is and will continue to be qualified
and licensed to do business in all jurisdictions in which any failure to do so
would result in a Material Adverse Change. The execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby (i) have been duly and validly authorized, (ii) are enforceable against
Borrower in accordance with their terms (except as enforcement may be limited by
equitable principles and by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to creditors' rights generally), and (iii) do not
violate Borrower's articles or certificate of incorporation, or Borrower's
by-laws, or any law or any material agreement or instrument which is binding
upon Borrower or its property, and (iv) do not constitute grounds for
acceleration of any material indebtedness or obligation under any agreement or
instrument which is binding upon Borrower or its property.
3.2 Name; Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct name. Set forth on Schedule 3.2 are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Silicon thirty (30) days' prior written notice before
changing its name or doing business under any other name. Borrower has complied,
and will in the future comply, in all material respects, with all laws relating
to the conduct of business under a fictitious business name, except where the
failure to so comply would not reasonably be expected to result in a Material
Adverse Change.
3.3 Place of Business; Location of Collateral. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on Schedule 3.3. Borrower will give Silicon at least 30 days prior
written notice before opening any additional place of business, changing its
chief executive office, or moving any of the Collateral to a location other than
Borrower's Address or one of the locations set forth on Schedule 3.3, except
that Borrower may maintain sales offices in the ordinary course of business at
which not more than a total of $10,000 fair market value of Equipment is
located.
3.4 Title to Collateral; Perfection; Permitted Liens.
(a) Borrower is has good title to the Collateral, free and clear of any
and all liens, charges, security interests, encumbrances and adverse claims,
except for Permitted Liens. To Borrower's knowledge, Silicon has a
first-priority perfected and enforceable security interest in all of the
Collateral, subject only to the Permitted Liens, and Borrower will at all times
defend Silicon and the Collateral against all claims of others.
(b) Set forth on Schedule 3.4(b) is a list of all of Borrower's Deposit
Accounts, and Borrower will give Silicon five (5) Business Days advance written
notice before establishing any new Deposit Accounts and will cause the
institution where any such new Deposit Account is maintained to execute and
deliver to Silicon a control agreement in form sufficient to perfect Silicon's
security interest in the Deposit Account and otherwise satisfactory to Silicon
in its good faith business judgment. Nothing herein limits any requirements
which may be set forth in the Schedule as to where Deposit Accounts will be
maintained.
(c) In the event that Borrower shall at any time after the date hereof
have any commercial tort claims against others, which it is asserting or intends
to assert, and in which the potential recovery exceeds $100,000, Borrower shall
promptly notify Silicon thereof in writing and provide Silicon with such
information regarding the same as Silicon shall request (unless providing such
information would waive the Borrower's attorney-client privilege). Such
notification to Silicon shall constitute a grant of a security interest in the
commercial tort claim and all proceeds thereof to Silicon, and Borrower shall
execute and deliver all such documents and take all such actions as Silicon
shall request in connection therewith.
(d) None of the Collateral now is or will be affixed to any real
property in such a manner, or with such intent, as to become a fixture. Borrower
is not a lessee under any real property lease pursuant to which the lessor may
obtain any rights in any of the Collateral and no such lease now prohibits,
restrains, impairs or will prohibit, restrain or impair Borrower's right to
remove any Collateral from the leased premises. Whenever any Collateral is
located upon premises
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EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
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in which any third party has an interest, Borrower shall, whenever requested by
Silicon, use its best efforts to cause such third party to execute and deliver
to Silicon, in form acceptable to Silicon, such waivers and subordinations as
Silicon shall specify in its good faith business judgment. Borrower will keep in
full force and effect, and will comply with all material terms of, any lease of
real property where any of the Collateral now or in the future may be located.
3.5 Maintenance of Collateral. Borrower will maintain the Collateral in
good working condition (ordinary wear and tear excepted), and Borrower will not
use the Collateral for any unlawful purpose. Borrower will immediately advise
Silicon in writing of any material loss or damage to the Collateral.
3.6 Books and Records. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.
3.7 Financial Condition, Statements and Reports. The Borrower has
previously made available to Silicon copies of the unaudited consolidated
statements of financial condition of Borrower as of March 31, 2002, and the
related unaudited consolidated statements of income, stockholders' equity and
cash flows for the nine-month period then ended as reported in Borrower's
quarterly report on Form 10-Q for the period ended March 31, 2002 filed with the
Securities Exchange Commission under the Securities Exchange Act of 1934, as
amended. Such financial statements were prepared in conformity with GAAP and
fairly present the results of operations and financial condition of Borrower, in
accordance with GAAP, at the times and for the periods therein stated. Since
March 31, 2002, there has been no Material Adverse Change. All financial
statements delivered to Silicon in the future will be prepared in conformity
with GAAP and will fairly present the results of operations and the financial
condition of the Borrower, in accordance with GAAP, at the times and for the
periods stated therein.
3.8 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed, and will timely file, all required material tax returns and reports, and
Borrower has timely paid, and will timely pay, all material foreign, federal,
state and local taxes, assessments, deposits and contributions now or in the
future owed by Borrower. Borrower may, however, defer payment of any contested
taxes, provided that Borrower (i) in good faith contests Borrower's obligation
to pay the taxes by appropriate proceedings promptly and diligently instituted
and conducted, (ii) notifies Silicon in writing of the commencement of, and any
material development in, the proceedings, and (iii) posts bonds or takes any
other steps required to keep the contested taxes from becoming a lien upon any
of the Collateral. Borrower is unaware of any claims or adjustments proposed for
any of Borrower's prior tax years which could result in additional taxes
becoming due and payable by Borrower. Borrower has paid, and shall continue to
pay all amounts necessary to fund all present and future pension, profit sharing
and deferred compensation plans in accordance with their terms, and Borrower has
not and will not withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency that would result in a Material
Adverse Change.
3.9 Compliance with Law. Borrower has, to the best of its knowledge,
complied, and will comply, in all material respects, with all provisions of all
foreign, federal, state and local laws and regulations applicable to Borrower,
including, but not limited to, those relating to Borrower's ownership of real or
personal property, the conduct and licensing of Borrower's business, and all
environmental matters.
3.10 Litigation. There is no claim, suit, litigation, proceeding or
investigation pending or (to best of Borrower's knowledge) threatened against or
affecting Borrower in any court or before any governmental agency (or any basis
therefor known to Borrower) which could reasonably be expected to result, either
separately or in the aggregate, in any Material Adverse Change. Borrower will
promptly inform Silicon in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted against Borrower involving
any single claim of $50,000 or more, or involving $100,000 or more in the
aggregate.
3.11 Use of Proceeds. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
Accounts.
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4.1 Representations Relating to Accounts. Borrower represents and warrants
to Silicon as follows: Each Account with respect to which Loans are requested by
Borrower shall, on the date each Loan is requested and made, (i) represent an
undisputed bona fide existing unconditional obligation of the Account Debtor
created by the sale, delivery, and
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EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
BETWEEN XXXX SYSTEMS, INC. AND SILICON VALLEY BANK
acceptance of goods or the rendition of services, or the non-exclusive licensing
of Intellectual Property, in the ordinary course of Borrower's business, and
(ii) meet the Minimum Eligibility Requirements set forth in Section 8 below.
4.2 Representations Relating to Documents and Legal Compliance. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Accounts are and shall be true and correct in all material
respects and all such invoices, instruments and other documents and all of
Borrower's books and records are and shall be genuine and in all material
respects what they purport to be. All sales and other transactions underlying or
giving rise to each Account shall comply in all material respects with all
applicable laws and governmental rules and regulations. To the best of
Borrower's knowledge, all signatures and endorsements on all documents,
instruments, and agreements relating to all Accounts are and shall be genuine,
and all such documents, instruments and agreements are and shall be legally
enforceable in accordance with their terms.
4.3 Schedules and Documents relating to Accounts. Borrower shall deliver to
Silicon transaction reports and schedules of collections, as provided in the
Schedule, on Silicon's standard forms; provided, however, that Borrower's
failure to execute and deliver the same shall not affect or limit Silicon's
security interest and other rights in all of Borrower's Accounts, nor shall
Silicon's failure to advance or lend against a specific Account affect or limit
Silicon's security interest and other rights therein. If requested by Silicon,
Borrower shall furnish Silicon with copies (or, at Silicon's request, originals)
of all contracts, orders, invoices, and other similar documents, and all
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Accounts, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to Silicon an aged accounts receivable trial balance
as provided in the Schedule. In addition, Borrower shall deliver to Silicon, on
its request, the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Accounts, in the same form as received, with all necessary indorsements, and
copies of all credit memos.
4.4 Collection of Accounts. Borrower shall have the right to collect all
Accounts, unless and until a Default or an Event of Default has occurred and is
continuing. Whether or not an Event of Default has occurred and is continuing,
Borrower shall hold all payments on, and proceeds of, Accounts in trust for
Silicon, and Borrower shall immediately deliver all such payments and proceeds
to Silicon in their original form, duly endorsed, to be applied to the
Obligations in such order as Silicon shall determine. Silicon may, in its good
faith business judgment, require that all proceeds of Collateral be deposited by
Borrower into a lockbox account, or such other "blocked account" as Silicon may
specify, pursuant to a blocked account agreement in such form as Silicon may
specify in its good faith business judgment.
4.5. Remittance of Proceeds. All proceeds arising from the disposition of
any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in such
order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred and is continuing, Borrower shall not be obligated to remit
to Silicon the proceeds of the sale of worn out or obsolete Equipment disposed
of by Borrower in good faith in an arm's length transaction for an aggregate
purchase price of $50,000 or less (for all such transactions in any fiscal
year). Borrower agrees that it will not commingle proceeds of Collateral with
any of Borrower's other funds or property, but will hold such proceeds separate
and apart from such other funds and property and in an express trust for
Silicon. Nothing in this Section limits the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
4.6 Disputes. Borrower shall notify Silicon promptly of all disputes or
claims relating to Accounts. Borrower shall not forgive (completely or
partially), compromise or settle any Account for less than payment in full, or
agree to do any of the foregoing, except that Borrower may do so, provided that:
(i) Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts, settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit.
4.7 Returns. Provided no Event of Default has occurred and is continuing,
if any Account Debtor returns any Inventory to Borrower, Borrower shall promptly
determine the reason for such return and promptly issue a credit memorandum to
the Account Debtor in the appropriate amount as soon as commercially
practicable. In the event any attempted return occurs after the occurrence and
during the continuance of any Event of Default, Borrower shall hold the returned
Inventory in trust for Silicon, and immediately notify Silicon of the return of
the Inventory.
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EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
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4.8 Verification. Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Accounts, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.
4.9 No Liability. Silicon shall not be responsible or liable for any
shortage or discrepancy in, damage to, or loss or destruction of, any goods, the
sale or other disposition of which gives rise to an Account, or for any error,
act, omission, or delay of any kind occurring in the settlement, failure to
settle, collection or failure to collect any Account, or for settling any
Account in good faith for less than the full amount thereof, nor shall Silicon
be deemed to be responsible for any of Borrower's obligations under any contract
or agreement giving rise to an Account. Nothing herein shall, however, relieve
Silicon from liability for its own gross negligence or willful misconduct.
ADDITIONAL DUTIES OF BORROWER.
5.1 Financial and Other Covenants. Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.
5.2 Insurance. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require and that are customary and in accordance with standard
practices for Borrower's industry and locations, and Borrower shall provide
evidence of such insurance to Silicon. All such insurance policies shall name
Silicon as an additional loss payee, and shall contain a lenders loss payee
endorsement in form reasonably acceptable to Silicon. Upon receipt of the
proceeds of any such insurance, Silicon shall apply such proceeds in reduction
of the Obligations as Silicon shall determine in its good faith business
judgment, except that, provided no Default or Event of Default has occurred and
is continuing, Silicon shall release to Borrower insurance proceeds with respect
to Equipment totaling less than $100,000, which shall be utilized by Borrower
for the replacement of the Equipment with respect to which the insurance
proceeds were paid. Silicon may require reasonable assurance that the insurance
proceeds so released will be so used. If Borrower fails to provide or pay for
any insurance, Silicon may, but is not obligated to, obtain the same at
Borrower's expense. Borrower shall promptly deliver to Silicon copies of all
material reports made to insurance companies.
5.3 Reports. Borrower, at its expense, shall provide Silicon with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as Silicon shall from time to time specify in
its good faith business judgment.
5.4 Access to Collateral, Books and Records. At reasonable times, and on
one Business Day's notice, Silicon, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records. Silicon shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit, but Silicon shall have the
right to disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $750 per person per, plus reasonable out of pocket expenses.
5.5 Negative Covenants. Except as may be permitted in the Schedule,
Borrower shall not, without Silicon's prior written consent (which shall be a
matter of its good faith business judgment), do any of the following: (i) merge
or consolidate with another corporation or entity; (ii) acquire any assets,
except in the ordinary course of business; (iii) enter into any other
transaction outside the ordinary course of business; (iv) sell or transfer any
Collateral, except for the sale of finished Inventory in the ordinary course of
Borrower's business, and except for the sale of obsolete or unneeded Equipment
in the ordinary course of business; (v) store any Inventory or other Collateral
with any warehouseman or other third party; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii)
make any loans of any money or other assets; (viii) incur any debts, outside the
ordinary course of business, which would result in a Material Adverse Change;
(ix) guarantee or otherwise become liable with respect to the obligations of
another party or entity; (x) pay or declare any dividends on Borrower's stock
(except for dividends payable solely in stock of Borrower or as may be required
by the Borrower's governing documents); (xi) redeem, retire, purchase or
otherwise acquire, directly or indirectly, any of Borrower's stock; (xii) make
any change in Borrower's capital structure which would result in a Material
Adverse Change; or (xiii) engage, directly or indirectly, in any business other
than the businesses currently engaged in by Borrower or reasonably related
thereto; or (xiv) dissolve or elect to dissolve. Transactions permitted by the
foregoing provisions of this Section are only permitted if no Default or Event
of Default would occur as a result of such transaction.
5.6 Litigation Cooperation. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Silicon, make available Borrower
and its
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EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
BETWEEN XXXX SYSTEMS, INC. AND SILICON VALLEY BANK
officers, employees and agents and Borrower's books and records, to the
extent that Silicon may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.
5.7 Further Assurances. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may, in its
good faith business judgment, deem necessary or useful in order to perfect and
maintain Silicon's perfected first-priority security interest in the Collateral
(subject to Permitted Liens), and in order to fully consummate the transactions
contemplated by this Agreement.
TERM.
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6.1 Maturity Date. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"), subject to
Section 6.3 below.
6.2 Early Termination. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three Business Days after
written notice of termination is given to Silicon; or (ii) by Silicon at any
time after the occurrence and during the continuance of an Event of Default,
without notice, effective immediately. If this Agreement is terminated by
Borrower or by Silicon under this Section 6.2, Borrower shall pay to Silicon a
termination fee in an amount equal to $50,000 to terminate the credit facility
prior to March 23, 2003 (six (6) months from the date hereof) and a fee equal to
$25,000 to terminate the credit facility prior to September 23, 2003, provided
that no termination fee shall be charged if the credit facility hereunder is
replaced with a new facility from another division of Silicon Valley Bank. The
termination fee shall be due and payable on the effective date of termination
and thereafter shall bear interest at a rate equal to the highest rate
applicable to any of the Obligations.
6.3 Payment of Obligations. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or on
any earlier effective date of termination, there are any outstanding Letters of
Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to 105% of the face amount of all such Letters of Credit plus all
interest, fees and cost due or to become due in connection therewith (as
estimated by Silicon in its good faith business judgment), to secure all of the
Obligations relating to said Letters of Credit, pursuant to Silicon's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Silicon's security interests in all of the Collateral and all
of the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided that
Silicon may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of Silicon, nor shall any such termination relieve Borrower of any
Obligation to Silicon, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, Silicon shall promptly terminate its financing
statements with respect to the Borrower and deliver to Borrower such other
documents as may be required to fully terminate Silicon's security interests.
EVENTS OF DEFAULT AND REMEDIES.
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7.1 Events of Default. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect when made or deemed to be made; or
(b) Borrower shall fail to pay when due any Loan or any interest thereon or any
other monetary Obligation prior to the expiration of any applicable cure period;
or (c) the total Loans and other Obligations outstanding at any time shall
exceed the Credit Limit; or (d) Borrower shall fail to comply with any of the
financial covenants set forth in the Schedule, or shall fail to perform any
other non-monetary Obligation which by its nature cannot be cured, or shall fail
to permit Silicon to conduct an inspection or audit as specified in Section 5.4
hereof; or (e) Borrower shall fail to perform any other non-monetary Obligation,
which failure is not cured within ten (10) Business Days after the date due; or
(f) any levy, assessment, attachment, seizure, lien or encumbrance (other than a
Permitted Lien) is made on all or any part of the Collateral which is not cured
within ten (10) Business Days after the occurrence of the same; or (g) any
default or event of default occurs under any obligation secured by a Permitted
Lien, which is not cured within any applicable cure period (or ten (10) Business
Days after the occurrence of the same, if no cure period is applicable) or
waived in writing by the holder of the Permitted Lien; or (h) Borrower breaches
any material contract or obligation, which has resulted or may reasonably be
expected to result in a Material Adverse Change; or (i) Dissolution, termination
of existence, insolvency or
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EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
BETWEEN XXXX SYSTEMS, INC. AND SILICON VALLEY BANK
business failure of Borrower; or appointment of a receiver, trustee or
custodian, for all or any part of the property of, assignment for the benefit of
creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower or
any guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, which is not cured
by the dismissal thereof within 30 days after the date commenced; or (k)
revocation or termination of, or limitation or denial of liability upon, any
guaranty of the Obligations or any attempt to do any of the foregoing, or
commencement of proceedings by any guarantor of any of the Obligations under any
bankruptcy or insolvency law; or (l) revocation or termination of, or limitation
or denial of liability upon, any pledge of any certificate of deposit,
securities or other property or asset of any kind pledged by any third party to
secure any or all of the Obligations, or any attempt to do any of the foregoing,
or commencement of proceedings by or against any such third party under any
bankruptcy or insolvency law; or (m) Borrower makes any payment on account of
any indebtedness or obligation which has been subordinated to the Obligations
other than as permitted in the applicable subordination agreement, or if any
Person who has subordinated such indebtedness or obligations terminates or in
any way limits his subordination agreement; or (n) there shall be a change in
the record or beneficial ownership of an aggregate of more than 20% of the
outstanding shares of stock of Borrower, in one or more transactions, compared
to the ownership of outstanding shares of stock of Borrower in effect on the
date hereof, without the prior written consent of Silicon; or (o) Borrower shall
generally not pay its debts as they become due, or Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or (p) a Material Adverse Change shall occur; or (q) Silicon, acting in
good faith and in a commercially reasonable manner, deems itself insecure
because of the occurrence of an event prior to the effective date hereof of
which Silicon had no knowledge on the effective date or because of the
occurrence of an event on or subsequent to the effective date. Silicon may cease
making any Loans hereunder during any of the above cure periods, and thereafter
if an Event of Default has occurred and is continuing.
7.2 Remedies. Upon the occurrence and during the continuance of any Event
of Default, and at any time thereafter, Silicon, at its option, and without
notice or demand of any kind (all of which are hereby expressly waived by
Borrower), may do any one or more of the following: (a) Cease making Loans or
otherwise extending credit to Borrower under this Agreement or any other Loan
Document; (b) Accelerate and declare all or any part of the Obligations to be
immediately due, payable, and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation; (c) Take possession of any or all of the Collateral wherever it may
be found, and for that purpose Borrower hereby authorizes Silicon without
judicial process to enter onto any of Borrower's premises without interference
to search for, take possession of, keep, store, or remove any of the Collateral,
and remain on the premises or cause a custodian to remain on the premises in
exclusive control thereof, without charge for so long as Silicon deems it
necessary, in its good faith business judgment, in order to complete the
enforcement of its rights under this Agreement or any other agreement; provided,
however, that should Silicon seek to take possession of any of the Collateral by
court process, Borrower hereby irrevocably waives: (i) any bond and any surety
or security relating thereto required by any statute, court rule or otherwise as
an incident to such possession; (ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (iii) any
requirement that Silicon retain possession of, and not dispose of, any such
Collateral until after trial or final judgment; (d) Require Borrower to assemble
any or all of the Collateral and make it available to Silicon at places
designated by Silicon which are reasonably convenient to Silicon and Borrower,
and to remove the Collateral to such locations as Silicon may deem advisable;
(e) Complete the processing, manufacturing or repair of any Collateral prior to
a disposition thereof and, for such purpose and for the purpose of removal,
Silicon shall have the right to use Borrower's premises, vehicles, hoists,
lifts, cranes, and other Equipment and all other property without charge; (f)
Sell, lease or otherwise dispose of any of the Collateral, in its condition at
the time Silicon obtains possession of it or after further manufacturing,
processing or repair, at one or more public and/or private sales, in lots or in
bulk, for cash, exchange or other property, or on credit, and to adjourn any
such sale from time to time without notice other than oral announcement at the
time scheduled for sale. Silicon shall have the right to conduct such
disposition on Borrower's premises without charge, for such time or times as
Silicon deems reasonable, or on Silicon's premises, or elsewhere and the
Collateral need not be located at the place of disposition. Silicon may directly
or through any affiliated company purchase or lease any Collateral at any such
public disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale; (g) Demand payment
of, and collect any Accounts and General Intangibles comprising Collateral and,
in connection therewith, Borrower irrevocably authorizes Silicon to endorse or
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EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
BETWEEN XXXX SYSTEMS, INC. AND SILICON VALLEY BANK
sign Borrower's name on all collections, receipts, instruments and other
documents, to take possession of and open mail addressed to Borrower and remove
therefrom payments made with respect to any item of the Collateral or proceeds
thereof, and, in Silicon's good faith business judgment, to grant extensions of
time to pay, compromise claims and settle Accounts and the like for less than
face value; (h) Offset against any sums in any of Borrower's general, special or
other Deposit Accounts with Silicon against any or all of the Obligations; and
(i) Demand and receive possession of any of Borrower's federal and state income
tax returns and the books and records utilized in the preparation thereof or
referring thereto. All reasonable attorneys' fees, expenses, costs, liabilities
and obligations incurred by Silicon with respect to the foregoing shall be added
to and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. Without limiting any of Silicon's rights and remedies, from and
after the occurrence and during the continuance of any Event of Default, the
interest rate applicable to the Obligations shall be increased by an additional
four percent per annum (the "Default Rate").
7.3 Standards for Determining Commercial Reasonableness. Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least ten days prior to the sale, and, in the case of a public sale,
notice of the sale is published at least five days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m.; or (v) Payment of the purchase
price in cash or by cashier's check or wire transfer is required; (vi) With
respect to any sale of any of the Collateral, Silicon may (but is not obligated
to) direct any prospective purchaser to ascertain directly from Borrower any and
all information concerning the same. Silicon shall be free to employ other
methods of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
7.4 Power of Attorney. Upon the occurrence and during the continuance of
any Event of Default, without limiting Silicon's other rights and remedies,
Borrower grants to Silicon an irrevocable power of attorney coupled with an
interest, authorizing and permitting Silicon (acting through any of its
employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise, but Silicon agrees
that if it exercises any right hereunder, it will do so in good faith and in a
commercially reasonable manner: (a) Execute on behalf of Borrower any documents
that Silicon may, in its good faith business judgment, deem advisable in order
to perfect and maintain Silicon's security interest in the Collateral, or in
order to exercise a right of Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
Loan Documents; (b) Execute on behalf of Borrower, any invoices relating to any
Account, any draft against any Account Debtor and any notice to any Account
Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien; (c) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name of
Borrower upon any instruments, or documents, evidence of payment or Collateral
that may come into Silicon's possession; (d) Endorse all checks and other forms
of remittances received by Silicon; (e) Pay, contest or settle any lien, charge,
encumbrance, security interest and adverse claim in or to any of the Collateral,
or any judgment based thereon, or otherwise take any action to terminate or
discharge the same; (f) Grant extensions of time to pay, compromise claims and
settle Accounts and General Intangibles for less than face value and execute all
releases and other documents in connection therewith; (g) Pay any sums required
on account of Borrower's taxes or to secure the release of any liens therefor,
or both; (h) Settle and adjust, and give releases of, any insurance claim that
relates to any of the Collateral and obtain payment therefor; (i) Instruct any
third party having custody or control of any books or records belonging to, or
relating to, Borrower to give Silicon the same rights of access and other rights
with respect thereto as Silicon has under this Agreement; and (j) Take any
action or pay any sum required of Borrower pursuant to this Agreement and any
other Loan Documents. Any and all reasonable sums paid and any and all
reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations.
In no event shall Silicon's rights under the foregoing power of attorney or any
of Silicon's other rights under this Agreement be deemed to indicate that
Silicon is in control of the business, management or properties of Borrower.
7.5 Application of Proceeds. All proceeds realized as the result of any
sale of the Collateral shall be applied by Silicon first to the reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Silicon shall determine in its sole discretion.
Any surplus shall be paid to
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EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
BETWEEN XXXX SYSTEMS, INC. AND SILICON VALLEY BANK
Borrower or other persons legally entitled thereto; Borrower shall remain liable
to Silicon for any deficiency. If, Silicon, in its good faith business judgment,
directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale of Collateral, Silicon shall have the
option, exercisable at any time, in its good faith business judgment, of either
reducing the Obligations by the principal amount of purchase price or deferring
the reduction of the Obligations until the actual receipt by Silicon of the cash
therefor.
7.6 Remedies Cumulative. In addition to the rights and remedies set forth
in this Agreement, Silicon shall have all the other rights and remedies accorded
a secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
Definitions. As used in this agreement, the following terms have the following
meanings:
"Account Debtor" means the obligor on an Account.
"Accounts" means all present and future "accounts" as defined in the Code
in effect on the date hereof with such additions to such term as may hereafter
be made, and includes without limitation all accounts receivable and other sums
owing to Borrower.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Business Day" means a day on which Silicon is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.
"Collateral" has the meaning set forth in Section 2 above.
"continuing" and "during the continuance of" when used with reference to a
Default or Event of Default means that the Default or Event of Default has
occurred and has not been either waived in writing by Silicon or cured within
any applicable cure period.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Default Rate" has the meaning set forth in Section 7.2 above.
"Deposit Accounts" means all present and future "deposit accounts" as
defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all general and
special bank accounts, demand accounts, checking accounts, savings accounts and
certificates of deposit.
"Eligible Accounts" means Accounts and General Intangibles arising in the
ordinary course of Borrower's business from the sale of goods or the rendition
of services, or the non-exclusive licensing of Intellectual Property, which
Silicon, in its good faith business judgment, shall deem eligible for borrowing.
Without limiting the fact that the determination of which Accounts are eligible
for borrowing is a matter of Silicon's good faith business judgment, the
following (the "Minimum Eligibility Requirements") are the minimum requirements
for a Account to be an Eligible Account: (i) the Account must not be outstanding
for more than ninety (90) days from its invoice date if a domestic receivable
or, if a maintenance pre-billing, not more than thirty (30) days prior to the
renewal date (the "Eligibility Period"), (ii) the Account must not represent
progress xxxxxxxx, or be due under a fulfillment or requirements contract with
the Account Debtor, (iii) the Account must not be subject to any contingencies
(including Accounts arising from sales on consignment, guaranteed sale or other
terms pursuant to which payment by the Account Debtor may be conditional), (iv)
the Account must not be owing from an Account Debtor with whom Borrower has any
dispute (whether or not relating to the particular Account), (v) the Account
must not be owing from an Affiliate of Borrower, (vi) the Account must not be
owing from an Account Debtor which is subject to any insolvency or bankruptcy
proceeding, or whose financial condition is not acceptable to Silicon, or which,
fails or goes out of a material portion of its business, (vii) the Account must
not be owing from the United States or any department, agency or instrumentality
thereof (unless there has been compliance, to Silicon's satisfaction, with the
United States Assignment of Claims Act), (viii) the Account must not be owing
from an Account Debtor located outside the United States or Canada (unless
pre-approved by Silicon in its
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EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
BETWEEN XXXX SYSTEMS, INC. AND SILICON VALLEY BANK
discretion in writing, or backed by a letter of credit satisfactory to Silicon,
or FCIA insured satisfactory to Silicon), (ix) the Account must not be owing
from an Account Debtor to whom Borrower is or may be liable for goods purchased
from such Account Debtor or otherwise (but, in such case, the Account will be
deemed not eligible only to the extent of any amounts owed by Borrower to such
Account Debtor). Accounts owing from one Account Debtor will not be deemed
Eligible Accounts to the extent they exceed 25% of the total Accounts
outstanding. In addition, if more than 50% of the Accounts owing from an Account
Debtor are outstanding for a period longer than their Eligibility Period
(without regard to unapplied credits) or are otherwise not Eligible Accounts,
then all Accounts owing from that Account Debtor will be deemed ineligible for
borrowing. Silicon may, from time to time, in its good faith business judgment,
revise the Minimum Eligibility Requirements, upon written notice to Borrower.
"Equipment" means all present and future "equipment" as defined in the Code
in effect on the date hereof with such additions to such term as may hereafter
be made, and includes without limitation all machinery, fixtures, goods,
vehicles (including motor vehicles and trailers), and any interest in any of the
foregoing.
"Event of Default" means any of the events set forth in Section 7.1 of this
Agreement.
"GAAP" means generally accepted accounting principles consistently applied.
"General Intangibles" means all present and future "general intangibles" as
defined in the Code in effect on the date hereof with such additions to such
term as may hereafter be made, and includes without limitation all Intellectual
Property, payment intangibles, royalties, contract rights, goodwill, franchise
agreements, purchase orders, customer lists, route lists, telephone numbers,
domain names, claims, income tax refunds, security and other deposits, options
to purchase or sell real or personal property, rights in all litigation
presently or hereafter pending (whether in contract, tort or otherwise),
insurance policies (including without limitation key man, property damage, and
business interruption insurance), payments of insurance and rights to payment of
any kind.
"good faith business judgment" means honesty in fact and good faith (as
defined in Section 1201 of the Code) in the exercise of Silicon's business
judgment.
"including" means including (but not limited to).
"Intellectual Property" means all present and future (a) copyrights,
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, (b) trade secret rights, including all rights to
unpatented inventions and know-how, and confidential information; (c) mask work
or similar rights available for the protection of semiconductor chips; (d)
patents, patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same; (e) trademarks, servicemarks, trade styles,
and trade names, whether or not any of the foregoing are registered, and all
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Borrower connected with and symbolized by
any such trademarks; (f) computer software and computer software products; (g)
designs and design rights; (h) technology; (i) all claims for damages by way of
past, present and future infringement of any of the rights included above; (j)
all licenses or other rights to use any property or rights of a type described
above.
"Inventory" means all present and future "inventory" as defined in the Code
in effect on the date hereof with such additions to such term as may hereafter
be made, and includes without limitation all merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products,
including without limitation such inventory as is temporarily out of Borrower's
custody or possession or in transit and including any returned goods and any
documents of title representing any of the above.
"Investment Property" means all present and future investment property,
securities, stocks, bonds, debentures, debt securities, partnership interests,
limited liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts, and all financial assets held
in any securities account or otherwise, and all options and warrants to purchase
any of the foregoing, wherever located, and all other securities of every kind,
whether certificated or uncertificated.
"Loan Documents" means, collectively, this Agreement, the Representations,
and all other present and future documents, instruments and agreements between
Silicon and Borrower, including, but not limited to those relating to this
Agreement, and all amendments and modifications thereto and replacements
therefor.
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EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
BETWEEN XXXX SYSTEMS, INC. AND SILICON VALLEY BANK
"Material Adverse Change" means any of the following: (i) a material
adverse change in the business, operations, or financial or other condition of
the Borrower, or (ii) a material impairment of the prospect of repayment of any
portion of the Obligations; or (iii) a material impairment of the value or
priority of Silicon's security interests in the Collateral.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, or otherwise, whether arising from an
extension of credit, opening of a letter of credit, banker's acceptance, loan,
guaranty, indemnification or otherwise, whether direct or indirect (including,
without limitation, those acquired by assignment and any participation by
Silicon in Borrower's debts owing to others), absolute or contingent, due or to
become due, including, without limitation, all interest, charges, expenses,
fees, attorney's fees, expert witness fees, audit fees, letter of credit fees,
collateral monitoring fees, closing fees, facility fees, termination fees,
minimum interest charges and any other sums chargeable to Borrower under this
Agreement or under any other Loan Documents.
"Other Property" means the following as defined in the Code in effect on
the date hereof with such additions to such term as may hereafter be made, and
all rights relating thereto: all present and future "commercial tort claims"
(including without limitation any commercial tort claims identified in the
Representations), "documents", "instruments", "promissory notes", "chattel
paper", "letters of credit", "letter-of-credit rights", "fixtures", "farm
products" and "money"; and all other goods and personal property of every kind,
tangible and intangible, whether or not governed by the California Uniform
Commercial Code.
"Permitted Liens" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens consented to in writing by Silicon, which consent may be
withheld in its good faith business judgment; (v) security interests being
terminated substantially concurrently with this Agreement; (vi) liens of
materialmen, mechanics, warehousemen, carriers, or other similar liens arising
in the ordinary course of business and securing obligations which are not
delinquent; (vii) liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described above in
clauses (i) or (ii) above, provided that any extension, renewal or replacement
lien is limited to the property encumbered by the existing lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase; (viii) Liens in favor of customs and revenue authorities which
secure payment of customs duties in connection with the importation of goods.
Silicon will have the right to require, as a condition to its consent under
subparagraph (iv) above, that the holder of the additional security interest or
lien sign an intercreditor agreement on Silicon's then standard form,
acknowledge that the security interest is subordinate to the security interest
in favor of Silicon, and agree not to take any action to enforce its subordinate
security interest so long as any Obligations remain outstanding, and that
Borrower agree that any uncured default in any obligation secured by the
subordinate security interest shall also constitute an Event of Default under
this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Representations" means the written Representations and Warranties provided
by Borrower to Silicon referred to in the Schedule.
"Reserves" means, as of any date of determination, such amounts as Silicon
may from time to time establish and revise in its good faith business judgment,
reducing the amount of Loans, Letters of Credit and other financial
accommodations which would otherwise be available to Borrower under the lending
formula(s) provided in the Schedule: (a) to reflect events, conditions,
contingencies or risks which, as determined by Silicon in its good faith
business judgment, do or may adversely affect (i) the Collateral or any other
property which is security for the Obligations or its value (including without
limitation any increase in delinquencies of Accounts), (ii) the assets, business
or prospects of Borrower or any guarantor of the Obligations, or (iii) the
security interests and other rights of Silicon in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect Silicon's
good faith belief that any collateral report or financial information furnished
by or on behalf of Borrower or any Guarantor to Silicon is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which Silicon determines in good faith constitutes an
Event of Default or may, with notice or passage of time or both, constitute an
Event of Default.
Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with GAAP,
consistently applied. All other terms contained in this Agreement, unless
otherwise indicated, shall have the meanings provided by the Code, to the extent
such terms are defined therein.
12
EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
BETWEEN XXXX SYSTEMS, INC. AND SILICON VALLEY BANK
GENERAL PROVISIONS.
-------------------
9.1 Interest Computation. In computing interest on the Obligations, all
wire transfers shall be deemed applied on account of the Obligations on the day
of receipt by Silicon thereof and all checks and other items of payment received
by Silicon (including proceeds of Accounts and payment of the Obligations in
full) shall be deemed applied by Silicon on account of the Obligations two (2)
Business Days after receipt by Silicon, and, for purposes of the foregoing, any
such funds received after 12:00 Noon (Pacific Time) on any day shall be deemed
received on the next Business Day.. Silicon shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to Silicon in its good faith business judgment, and Silicon may
charge Borrower's loan account for the amount of any item of payment which is
returned to Silicon unpaid.
9.2 Application of Payments. All payments with respect to the Obligations
may be applied, and in Silicon's good faith business judgment reversed and
re-applied, to the Obligations, in such order and manner as Silicon shall
determine in its good faith business judgment.
9.3 Charges to Accounts. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable to the Loans. Silicon may also, in its discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.
9.4 Monthly Accountings. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within 60 days after such account is
rendered, describing the nature of any alleged errors or omissions.
9.5 Notices. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to Silicon or Borrower at each of the addresses shown in
the heading to this Agreement, or at any other address designated in writing by
one party to the other party. Notices to Silicon shall be directed to the
Commercial Finance Division, to the attention of the Division Manager or the
Division Credit Manager. All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered, or at the expiration of
one Business Day following delivery to the private delivery service, or two
Business Days following the deposit thereof in the United States mail, with
postage prepaid.
9.6 Severability. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
9.7 Integration. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Silicon and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There are
no oral understandings, representations or agreements between the parties which
are not set forth in this Agreement or in other written agreements signed by the
parties in connection herewith.
9.8 Waivers; Indemnity. The failure of Silicon at any time or times to
require Borrower to strictly comply with any of the provisions of this Agreement
or any other Loan Document shall not waive or diminish any right of Silicon
later to demand and receive strict compliance therewith. Any waiver of any
default shall not waive or affect any other default, whether prior or
subsequent, and whether or not similar. None of the provisions of this Agreement
or any other Loan Document shall be deemed to have been waived by any act or
knowledge of Silicon or its agents or employees, but only by a specific written
waiver signed by an authorized officer of Silicon and delivered to Borrower.
Borrower waives the benefit of all statutes of limitations relating to any of
the Obligations or this Agreement or any other Loan Document, and Borrower
waives demand, protest, notice of protest and notice of default or dishonor,
notice of payment and nonpayment, release, compromise, settlement, extension or
renewal of any commercial paper, instrument, account, General Intangible,
document or guaranty at any time held by Silicon on which Borrower is or may in
any way be liable, and notice of any action taken by Silicon, unless expressly
required by this Agreement. Borrower hereby agrees to indemnify Silicon and its
affiliates, subsidiaries, parent, directors, officers, employees, agents, and
attorneys, and to hold them harmless from and against any and all claims, debts,
liabilities, demands, obligations, actions, causes of action, penalties, costs
and expenses (including reasonable attorneys' fees), of every kind, which they
may sustain or incur based upon or arising out of any of the Obligations, or any
relationship or agreement between Silicon and Borrower, or any
13
EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
BETWEEN XXXX SYSTEMS, INC. AND SILICON VALLEY BANK
other matter, relating to Borrower or the Obligations; provided that this
indemnity shall not extend to damages proximately caused by the indemnitee's own
gross negligence or willful misconduct. Notwithstanding any provision in this
Agreement to the contrary, the indemnity agreement set forth in this Section
shall survive any termination of this Agreement and shall for all purposes
continue in full force and effect.
9.9 No Liability for Ordinary Negligence. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Silicon, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon, but nothing herein shall relieve Silicon from
liability for its own gross negligence or willful misconduct.
9.10 Amendment. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Silicon.
9.11 Time of Essence. Time is of the essence in the performance by Borrower
of each and every obligation under this Agreement.
9.12 Attorneys Fees and Costs. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and all present and future documents relating to this Agreement;
obtain legal advice in connection with this Agreement or Borrower; enforce, or
seek to enforce, any of its rights; prosecute actions against, or defend actions
by, Account Debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim; examine, audit, copy, and inspect any of the Collateral or any of
Borrower's books and records; protect, obtain possession of, lease, dispose of,
or otherwise enforce Silicon's security interest in, the Collateral; and
otherwise represent Silicon in any litigation relating to Borrower. In
satisfying Borrower's obligation hereunder to reimburse Silicon for attorney's
fees, Borrower may, for convenience, issue checks directly to Silicon's
attorneys, Xxxxxxxx Xxxxxxx LLP, but Borrower acknowledges and agrees that
Xxxxxxxx Xxxxxxx LLP is representing only Silicon and not Borrower in connection
with this Agreement. If either Silicon or Borrower files any lawsuit against the
other predicated on a breach of this Agreement, the prevailing party in such
action shall be entitled to recover its reasonable costs and attorneys' fees,
including (but not limited to) reasonable attorneys' fees and costs incurred in
the enforcement of, execution upon or defense of any order, decree, award or
judgment. All attorneys' fees and costs to which Silicon may be entitled
pursuant to this Paragraph shall immediately become part of Borrower's
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations.
9.13 Benefit of Agreement. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Silicon; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Silicon, and any prohibited
assignment shall be void. No consent by Silicon to any assignment shall release
Borrower from its liability for the Obligations.
9.14 Joint and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.15 Limitation of Actions. Any claim or cause of action by Borrower
against Silicon, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other Loan Document, or any other transaction contemplated hereby or thereby or
relating hereto or thereto, or any other matter, cause or thing whatsoever,
occurred, done, omitted or suffered to be done by Silicon, its directors,
officers, employees, agents, accountants or attorneys, shall be barred unless
asserted by Borrower by the commencement of an action or proceeding in a court
of competent jurisdiction by the filing of a complaint within one year after the
first act, occurrence or omission upon which such claim or cause of action, or
any part thereof, is based, and the service of a summons and complaint on an
officer of Silicon, or on any other person authorized to accept service on
behalf of Silicon, within thirty (30) days thereafter. Borrower agrees that such
one-year period is a reasonable and sufficient time for Borrower to investigate
and act upon any such claim or cause of action. The one-year period provided
herein shall not
14
EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
BETWEEN XXXX SYSTEMS, INC. AND SILICON VALLEY BANK
be waived, tolled, or extended except by the written consent of Silicon in its
sole discretion. This provision shall survive any termination of this Loan
Agreement or any other Loan Document.
9.16 Paragraph Headings; Construction. Paragraph headings are only used in
this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. This Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed strictly
against Silicon or Borrower under any rule of construction or otherwise.
9.17 Governing Law; Jurisdiction; Venue. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of Georgia. As a material part of the
consideration to Silicon to enter into this Agreement, Borrower (i) agrees that
all actions and proceedings relating directly or indirectly to this Agreement
shall, at Silicon's option, be litigated in courts located within Georgia, and
that the exclusive venue therefor shall be Xxxxxx County; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process in
any such action or proceeding by personal delivery or any other method permitted
by law; and (iii) waives any and all rights Borrower may have to object to the
jurisdiction of any such court, or to transfer or change the venue of any such
action or proceeding.
9.18 Mutual Waiver of Jury Trial.
Borrower and Silicon each hereby waive the right to trial by jury in any
action or proceeding based upon, arising out of, or in any way relating to, this
Agreement or any other present or future instrument or agreement between Silicon
and Borrower, or any conduct, acts or omissions of Silicon or Borrower or any of
their directors, officers, employees, agents, attorneys or any other persons
affiliated with Silicon or Borrower, in all of the foregoing cases, whether
sounding in contract or tort or otherwise.
Borrower: Silicon:
XXXX SYSTEMS, INC. SILICON VALLEY BANK
By By
---------------------------------- ------------------------
President or Vice President Title
------------------------
By
----------------------------------
Secretary or Ass't Secretary
XXXX SYSTEMS (UK) LTD.
By
----------------------------------
President or Vice President
By
----------------------------------
Secretary or Ass't Secretary
15
EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
BETWEEN XXXX SYSTEMS, INC. AND SILICON VALLEY BANK
Silicon Valley Bank
Schedule to Loan and Security Agreement
Borrower: XXXX SYSTEMS, INC.
XXXX SYSTEMS (UK) LTD.
Address: Xxx Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Date: September 24, 2002
This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.
================================================================================
1. Credit Limit An amount not to exceed the lesser of:
(Section 1.1): (i) $5,000,000 at any one time
outstanding (the "Maximum Credit
Limit"); or (ii) 70% (the "Advance
Rate") of the amount of Borrower's
Eligible Accounts (as defined in Section
8 above). Silicon may, from time to
time, modify the Advance Rate, in its
good faith business judgment, upon
notice to the Borrower, based on changes
in collection experience with respect to
Accounts or other issues or factors
relating to the Accounts or other
Collateral.
Letter of Credit Sublimit
(Section 1.6): $0
Export Import Bank Sublimit
(Section 1.7) One million Dollars ($1,000,000)
Foreign Exchange Sublimit
(Section 1.8) Five Hundred Thousand Dollars ($500,000)
Cash Management Sublimit
(Section 1.9) Twenty Five Thousand Dollars ($25,000)
===============================================================================
2. Interest.
Interest Rate (Section 1.2): A rate equal to the "Prime Rate" in
effect from time to time, plus 2% per
annum. Interest shall be calculated on
the basis of a 360-day year for the
actual number of days elapsed. "Prime
Rate" means the rate announced from time
to time by Silicon as its "prime rate;"
it is a base rate upon which other rates
charged by Silicon are based, and it is
not necessarily the best rate available
at Silicon. The interest rate applicable
to the Obligations shall change on each
date there is a change in the Prime
Rate.
================================================================================
3. Fees (Section 1.4):
Loan Fee: $50,000, payable concurrently herewith.
Collateral Monitoring $1,000, per month, payable in arrears
Fee: (prorated for any partial month at the
beginning and at termination of this
Agreement).
Unused Portion Fee: The Borrower shall pay to Silicon a fee
(collectively, the "Unused Line Fees"
and individually, a "Unused Line Fee")
in an amount equal to one quarter of one
percent (0.25%) per annum of the average
daily unused and undisbursed portion of
the Maximum Credit Limit accruing during
each month. The accrued and unpaid
portion of the Unused Line Fee shall be
paid by the Borrower to Silicon on the
last day of each month, commencing on
the first such date following the date
hereof, and ending on the Maturity Date.
16
EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
BETWEEN XXXX SYSTEMS, INC. AND SILICON VALLEY BANK
Line Renewal: The Borrower shall pay to Silicon a fee
(collectively, the "Line Renewal Fees"
and individually, a "Line Renewal Fee")
in the amount of $25,000 upon review and
renewal by Silicon on the first
anniversary of the date of this
Agreement
Termination: The Borrower shall pay to Silicon a fee
(the "Termination Fee") equal to $50,000
to terminate the credit facility prior
to March 23, 2003 (six (6) months from
the date hereof) and a fee equal to
$25,000 to terminate the credit facility
prior to September 23, 2003.
================================================================================
4. Maturity Date Two (2) years from the date of this
(Section 6.1): Agreement (i.e. September 23, 2004),
with annual review and renewal by
Silicon at the end of the first year.
================================================================================
5. Financial Covenants
(Section 5.1): Borrower shall comply with each of the
following covenants. Compliance shall be
determined as of the end of each month,
except as otherwise specifically
provided below:
Minimum Tangible
Net Worth: Borrower shall maintain a Tangible Net
Worth of not less than ($1,400,000) plus
fifty percent (50%) of quarterly EBITDA
earning with intra quarter losses not to
exceed $1,000,000 per month. Minimum
Cash with Silicon: $500,000
Minimum Cash
and Accounts: $1,500,000 during each fiscal quarter and
$2,000,000 as of the end of each fiscal
quarter
Positive EBITDA: Borrower shall maintain quarterly a
positive EBITDA of not less than 50% of
the financial plan approved by the
Borrower's board
Definitions. For purposes of the foregoing financial
covenants, the following term shall have
the following meaning:
"Tangible Net Worth" shall mean the
excess of total assets over total
liabilities, determined in accordance
with GAAP, with the following
adjustments:
(A) there shall be excluded from
assets: (i) notes, accounts receivable
and other obligations owing to Borrower
from its officers or other Affiliates,
and (ii) all assets which would be
classified as intangible assets under
GAAP, including without limitation
goodwill, licenses, patents, trademarks,
trade names, copyrights, capitalized
software and organizational costs,
licenses and franchises
(B) there shall be excluded from
liabilities: all indebtedness which is
subordinated to the Obligations under a
subordination agreement in form
specified by Silicon or by language in
the instrument evidencing the
indebtedness which Silicon agrees in
writing is acceptable to Silicon in its
good faith business judgment.
================================================================================
6. Reporting.
(Section 5.3):
Borrower shall provide Silicon with the following:
1. Weekly transaction reports and schedules of collections, on
Silicon's standard form.
2. Monthly accounts receivable agings, aged by invoice date,
within fifteen (15) days after the end of each month.
3. Monthly accounts payable agings, aged by invoice date, and
outstanding or held check registers, if any, within fifteen
(15) days after the end of each month.
17
EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
BETWEEN XXXX SYSTEMS, INC. AND SILICON VALLEY BANK
4. Monthly reconciliations of accounts receivable agings (aged
by invoice date), transaction reports, and general ledger,
within fifteen (15) days after the end of each month.
5. Monthly unaudited financial statements, as soon as
available, and in any event within thirty (30) days after
the end of each month.
6. Monthly Compliance Certificates, within thirty (30) days
after the end of each month, in such form as Silicon shall
reasonably specify, signed by the Chief Financial Officer of
Borrower, certifying that as of the end of such month
Borrower was in full compliance with all of the terms and
conditions of this Agreement, and setting forth calculations
showing compliance with the financial covenants set forth in
this Agreement and such other information as Silicon shall
reasonably request, including, without limitation, a
statement that at the end of such month there were no held
checks.
7. Quarterly unaudited financial statements, as soon as
available, and in any event within forty-five (45) days
after the end of each fiscal quarter of Borrower.
8. Annual operating budgets (including income statements,
balance sheets and cash flow statements, by month) for the
upcoming fiscal year of Borrower within thirty (30) days
prior to the end of each fiscal year of Borrower.
9. Annual financial statements, as soon as available, and in
any event within one hundred twenty (120) days following the
end of Borrower's fiscal year, certified by, and with an
unqualified opinion of, independent certified public
accountants acceptable to Silicon.
================================================================================
7. Borrower Information: Borrower represents and warrants that
the information set forth in the
Representations and Warranties of the
Borrower dated July 20, 2002 previously
submitted to Silicon (the
"Representations") is true and correct
as of the date hereof.
================================================================================
8. ADDITIONAL PROVISIONS
1. Banking Relationship. Borrower shall at all times maintain
its primary banking relationship with Silicon. Without
limiting the generality of the foregoing, Borrower shall, at
all times, maintain not less than 100% of its total cash (US
Dollars)and investments (US Dollars) in the custody of Xxxx
Systems, Inc. on deposit with Silicon. As to any Deposit
Accounts and investment accounts maintained with another
institution, Borrower shall act in good faith to cause such
institution, within thirty (30) days after the date of this
Agreement, to enter into a control agreement in form
acceptable to Silicon in its good faith business judgment in
order to perfect Silicon's first-priority security interest
in said Deposit Accounts and investment accounts.
Notwithstanding the foregoing, Borrower may continue to use
Bank of America for payroll processing.
2. Subordination of Inside Debt. All present and future
indebtedness of Borrower to its officers, directors and
shareholders ("Inside Debt") shall, at all times, be
subordinated to the Obligations pursuant to a subordination
agreement on Silicon's standard form. Borrower represents
and warrants that there is no Inside Debt presently
outstanding, except for the following: $2,000,000
Convertible Preferred Stock. Prior to incurring any Inside
Debt in the future, Borrower shall cause the person to whom
such Inside Debt will be owed to execute and deliver to
Silicon a subordination agreement on Silicon's standard
form.
3. Intellectual Property Security Agreement. As a condition
precedent to the effectiveness of this Agreement, the
Borrower shall have executed and delivered an Intellectual
Property Security Agreement (the "IP Security Agreement"),
substantially in the form attached hereto as Exhibit B.
18
EXHIBIT 10.9 - LOAN AND SECURITY AGREEMENT
BETWEEN XXXX SYSTEMS, INC. AND SILICON VALLEY BANK
4. Xxxx Systems (UK) Ltd. Cash. Provided that no Default or
Event of Default exists, and provided that the proceeds of
the Loans are not used directly to support foreign
operations, the Borrower may maintain in a bank account in
the United Kingdom a balance sufficient to cover the
operating expenses of Xxxx Systems (UK) Ltd for a period not
to exceed two (2) months. All sums in excess of that allowed
to be maintained in a bank account in the United Kingdom
shall be remitted to Silicon immediately and not less
frequently than on a monthly basis.
5. Limitation on Advances. Notwithstanding any provision
contained herein to the contrary, advances hereunder shall
not exceed the lesser of (a) $4,000,000 or (b) the Advance
Rate until all conditions precedent to funding the Exim Loan
Sublimit have been satisfied in the sole discretion of
Silicon.
Borrower: Silicon:
XXXX SYSTEMS, INC. SILICON VALLEY BANK
By By
---------------------------------- ------------------------------
President or Vice President
Title
--------------------------
By
----------------------------------
Secretary or Ass't Secretary
XXXX SYSTEMS (UK) LTD.
By
----------------------------------
President or Vice President
By
----------------------------------
Secretary or Ass't Secretary
19
