Exhibit 10.1 - Loan and Security Agreement, dated June 25, 2003 by and
between Axeda Systems Operating Company, Inc. and Silicon Valley Bank
Silicon Valley Bank
Loan and Security Agreement
Borrower: Axeda Systems Operating Company, Inc.
Address: c/o Axeda Systems, Inc.
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Date: June 25, 2003
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 One
Newton Executive Park, Suite 200, 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000, and the borrower named above (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.)
1. LOANS.
1.1 Loans. Silicon will make loans to Borrower (the "Loans") 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
as Silicon reasonably establishes 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 notice Borrower after it debits Borrower's Deposit Accounts maintained
with Silicon.
1.3 Overadvances. If at any time or for any reason the total of all
outstanding Loans, Letters of Credit (including the face amount of issued and
undrawn Letters of Credit), Cash Management Services and FX Forward Contracts
and all FX Reserves, 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 (Eastern
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 Responsible Officer or his
or her designee or person whom Silicon believes is a Responsible Officer or his
or her designee 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,
plus the aggregate amount of all Cash Management Services (as defined in Section
1.7) from time to time outstanding, plus the the aggregate face amount of all FX
Forward Contracts and the amount of all FX Reserves (as defined in Section 1.8)
from time to time outstanding, shall not exceed the amount shown on the Schedule
(the "Services 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 standard bank charges (including
reasonable 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 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. Borrower hereby agrees to indemnify and hold
Silicon harmless from any loss, cost, expense, or liability, including payments
made by Silicon, reasonable 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 guaranteed 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 Cash Management Services. Borrower may use Silicon's Cash Management
Services, which may include direct deposit of payroll 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, plus the aggregate amount of
all Letters of Credit from time to time outstanding (including the face amount
of issued and undrawn Letters of Credit), plus the the aggregate face amount of
all FX Forward Contracts and the amount of all FX Reserves from time to time
outstanding, shall not exceed the Services 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. 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.
1.8 Foreign Exchange Sublimit. At the request of the 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, plus the aggregate
amount of all Letters of Credit from time to time outstanding (including the
face amount of issued and undrawn Letters of Credit), plus the the aggregate
face amount of all Cash Management Services from time to time outstanding, shall
not exceed the Services 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.
2. 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,
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.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.
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
Commonwealth of Massachusetts. 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. Listed in the Representations 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 in the Representations. Borrower will give Silicon at least thirty
(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 in the
Representations, except that Borrower may maintain sales offices in the ordinary
course of business at which not more than a total of $100,000 fair market value
of Equipment is located.
3.4 Title to Collateral; Perfection; Permitted Liens.
(a) Borrower is now, and will at all times have good title to of all the
Collateral, except for items of Equipment which are leased to Borrower. The
Collateral now is and will remain free and clear of any and all liens, charges,
security interests, encumbrances and adverse claims, except for Permitted Liens.
Silicon now has, and will continue to have, 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) Borrower has set forth in the Representations 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 reasonably 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 reasonably request in connection therewith.
(d) Except for the equipment and fixtures set forth in the Representations,
none of the Collateral having a value in the aggregate in excess of $50,000 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 and will not become 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 in which
any third party has an interest, Borrower shall, whenever requested by Silicon,
use commercially reasonable 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 and/or at Guarantor's office located in Xxxxxxx, Xxxxxxxxxxxx
00000 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 Guarantor as of March 31, 2003, and the related unaudited
consolidated statements of income, stockholders' equity and cash flows for the
three-month period then ended as reported in Guarantor's quarterly report on
Form 10-Q for the period ended March 31, 2003 filed with the Securities and
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 Guarantor, in accordance
with GAAP, at the times and for the periods therein stated. Since March 31,
2003, 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, in
accordance with GAAP, at the times and for the periods stated therein.
3.8 Tax Returns and Payments; Pension Contributions. Except as set forth in
the Representations, Borrower has timely filed, and will timely file, all
required tax returns and reports, and Borrower has timely paid, and will timely
pay, all 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. To the best of
the Responsible Officers' knowledge, there are no claims or adjustments proposed
for any of Borrower's prior tax years which could reasonably be expected to
result in any 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.
3.9 Compliance with Law. Borrower has, to the best of the Responsible
Officers' 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. Except as set forth in the Representations, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of the
Responsible Officers' knowledge) threatened against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined 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 $100,000 or more, or involving $250,000
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."
4. ACCOUNTS.
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 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 and all such invoices,
instruments and other documents and all of Borrower's books and records are and
shall be genuine and in all 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 the Responsible Officers' 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. If the aggregate of
Borrower's unencumbered cash and/or Availability under the Loan falls below Five
Million Dollars ($5,000,000), at any time then at all times thereafter, all
proceeds of Collateral shall be deposited by Borrower into a lockbox account, or
such other "blocked account" as Silicon may reasonably specify, pursuant to a
blocked account agreement in such form as Silicon may reasonably specify in its
good faith business judgment. Borrower agrees to set up such lockbox with
Silicon promptly after the execution and delivery of this Agreement.
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 third Business Day after
receipt by Borrower, to be applied to the Obligations in such order as Silicon
shall determine until Borrower fully satisfies its Obligations and Silicon has
no further commitment to make any Loans, issue any Letters of Credit, provide
Cash Management Services or FX Forward Contracts (such occurrence being called,
the "Termination of Silicon's Commitment"), 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 $100,000 or less (for all such transactions in any
fiscal year). Borrower agrees that until the Termination of Silicon's Commitment
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 material 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. 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.
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 in this Agreement to the contrary shall,
relieve Silicon from liability for its own gross negligence or willful
misconduct.
5. ADDITIONAL DUTIES OF BORROWER.
5.1 Financial and Other Covenants. Borrower shall at all times until the
Termination of Silicon's Commitment 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. Silicon acknowledges that
Borrower's current level of insurance satisfies the above requirements as of the
date hereof.
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 two
(2) 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. In handling any confidential information, Silicon will exercise the
same degree of care that it exercise for its own proprietary information, 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 day (or such higher amount as
shall represent Silicon's then current standard charge for the same), 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
except in 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, the sale of obsolete or unneeded Equipment in the ordinary course of
business and except for non exclusive licenses for the use of the Borrower's
Intellectual Property 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 outside of
the ordinary course of business; (viii) except for indebtedness secured by
Permitted Liens, 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 outside the
ordinary course of business; (x) pay or declare any dividends on Borrower's
stock (except for dividends payable solely in stock of Borrower); (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 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 reasonable
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 its
reasonable discretion 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.
6. TERM.
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 (3) 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 one percent (1.0%) of the Maximum Credit
Limit, 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 one hundred five percent (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.
7. EVENTS OF DEFAULT AND REMEDIES.
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 upon
having knowledge thereof give Silicon immediate written notice thereof: (a) Any
warranty, representation, statement, report or certificate made or delivered to
Silicon by (i) the Borrower or any of the Borrower's officers, employees or
agents, or (ii) the Guarantor (as hereinafter defined) or any of Guarantor'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 within two (2) days of when due any Loan or any interest
thereon or any other monetary Obligation, it being understood that during the
additional period the failure to cure the default is not an Event of Default
(but no Loans or other extensions of credit will be made during the cure
period); or (c) the total Loans and other Obligations outstanding at any time
shall exceed the Credit Limit and is not repaid within two (2) days, it being
understood that during the additional period the failure to cure the default is
not an Event of Default (but no Loans or other extensions of credit will be made
during the cure period); 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 (including, without limitation, any covenants set
forth in the Representations) 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 or Guarantor shall fail to perform any other
non-monetary Obligation (including, without limitation, any covenants set forth
in the Representations), which failure is not cured within ten (10) days after
the date due; provided, however, that if the default cannot by its nature be
cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed thirty (30) days) to
attempt to cure such default, and within such reasonable time period the failure
to have cured such default shall not be deemed an Event of Default (provided
that no Loans or other credit extensions will be made during such cure period);
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 having a
value in excess of $10,000 which is not cured within ten (10) 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 waived in writing by the holder of the Permitted Lien; or (h)
Borrower or Guarantor breaches any material contract or obligation, which has
resulted or would reasonably be expected to result in a Material Adverse Change;
or (i) dissolution, termination of existence, insolvency or business failure of
Borrower or Guarantor; 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 or Guarantor 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
the 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 thirty (30) days after the date commenced; or
(k) revocation or termination of, or limitation or denial of liability upon, the
Guaranty (as hereinafter defined) of the Obligations or any attempt to do any of
the foregoing, or commencement of proceedings by the 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 or
Guarantor 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 forty percent (40%) of the outstanding shares of
stock of Borrower or Guarantor, in one or more transactions, compared to the
ownership of outstanding shares of stock of Borrower or Guarantor in effect on
the date hereof, without the prior written consent of Silicon, which consent
shall not be unreasonably withheld (other than the sale of Guarantor's equity
securities in a public offering or to venture capital investors so long as
Borrower identifies and advises Silicon of the venture capital investors prior
to the closing of the investment or to strategic investors so long as Borrower
identifies the strategic investor prior to closing of the investment); or (o)
Borrower or Guarantor shall generally not pay its debts as they become due, or
Borrower or Guarantor 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) Silicon shall have
reasonably determined that a Material Adverse Change has occurred; 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. 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 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 (5) 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.; (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 reasonably 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 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 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.
8. 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.
"Availability" means the difference between (a) the lesser of (i) the Maximum
Credit Limit or (ii) the Borrowing Base, minus all outstanding Loans and all
amounts outstanding under the Services Sublimit (including the face amount of
issued and undrawn Letters of Credit).
"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
Commonwealth of Massachusetts 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 (the "Eligibility Period"),
(ii) the Account must not represent progress xxxxxxxx, or be due under a
fulfillment or requirements contract with the Account Debtor, provided that up
to $150,000 of Eligible Accounts may be comprised of xxxxxxxx on fixed price
contracts, (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
material 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 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 twenty-five percent (25%) of the total
Accounts outstanding. In addition, if more than fifty percent (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 two
(2) days prior 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.
"Guarantor" means any present or future guarantor of the Obligations,
including, Axeda Systems Inc., a Delaware corporation.
"Guaranty" means that certain Unconditional Guaranty from the Guarantor to
Silicon of even date herewith.
"including" means including (but not limited to).
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"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 Intellectual
Property Security Agreement by and between the Borrower and Silicon of even date
herewith; the Guaranty; the Warrant to Purchase Stock in favor of Silicon of
even date herewith; 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.
"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; (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, other than normal depreciation,
which is not covered by adequate insurance.
"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 Massachusetts Uniform
Commercial Code.
"Permitted Liens" means the following: (a) purchase money security interests
in specific items of Equipment, including without limitation, (i) specific
Equipment currently financed elsewhere, and (ii) specific Equipment encumbered
by purchase money security interests incurred during the term of the Loan; (b)
leases of specific items of Equipment; (c) security interests in specific
Intellectual Property owned by Digital Video Software and licensed to
STMicroElectronics and Sonic Solutions; (d) liens for taxes not yet payable; (e)
additional security interests and liens consented to in writing by Silicon,
which consent may be withheld in its good faith business judgment; (f) security
interests being terminated substantially concurrently with this Agreement; (g)
liens of materialmen, mechanics, warehousemen, carriers, or other similar liens
arising in the ordinary course of business and securing obligations which are
not delinquent; (h) liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described above in
clauses (a) or (b) 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; (i) liens in favor of customs and revenue authorities which secure
payment of customs duties in connection with the importation of goods, (j)
licenses or sublicenses granted in the ordinary course of Borrower's business
and any interest or title of a licensor or under any license or sublicense; (k)
liens existing on the date hereof and shown on the Schedule or arising under
this Agreement or other Loan Documents; (l) liens to secure payment of worker's
compensation, employment insurance, old-age pensions, social security and other
like obligations incurred in the ordinary course of business; (m) liens on
insurance proceeds in favor of insurance companies granted solely as security
for financed premiums, provided such liens are confined to such premiums and
further; and (n) liens arising in the ordinary course of business which
constitute rights of offset of a customary nature. Silicon will have the right
to require, as a condition to its consent under subparagraph (e) 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, limited liability
company, corporation, government, or any agency or political division thereof,
or any other entity.
"Representations" means the written Perfection Certificate 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 reasonably establish and revise in its good faith business
judgment, including, without limitation, amounts for accrued interest and any
other liabilities, including any set forth in the Representations, 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 reasonably determined by Silicon in its good faith business judgment,
do or could be reasonably expected to 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.
"Responsible Officer" is each of the Chief Executive Officer, the Chief
Financial Officer and the Controller of Borrower.
"Trigger Event" means the failure of Borrower to maintain at any time a sum
of unencumbered cash plus Availability equal to or greater than Four Million
Dollars ($4,000,000)
"Trigger Event Period" means the period of time commencing immediately,
without notice immediately upon the occurrence of any Trigger Event and
continuing thereafter until such time as Silicon determines, in its sole but
reasonable discretion, to end such Trigger Event Period.
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.
9. GENERAL PROVISIONS.
9.1 Interest Computation. In computing interest on the Obligations, 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 three (3) Business Days after receipt by
Silicon of immediately available funds, and, for purposes of the foregoing, any
such funds received after 12:00 Noon (Eastern 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 ninety (90) 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 (1) Business
Day following delivery to the private delivery service, or two (2) 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 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 attorneys
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 (1) 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 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 Commonwealth of Massachusetts. 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 Massachusetts, provided, however, that if for any reason Silicon
cannot avail itself of such courts in the Commonwealth of Massachusetts,
Borrower accepts jurisdiction of the courts and venue in Santa Clara,
California.; (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.
[signatures are on the following page]
Borrower: Silicon:
AXEDA SYSTEMS OPERATING CO. SILICON VALLEY BANK
By: /s/Xxxxxx X. Xxxxxxx By: /s/Xxxx X. Xxxxxxxxx
-------------------- ------------------------
Name:Xxxxxx X. Xxxxxxx Name: Xxxx X. Xxxxxxxxx
Title: EVP & CFO Title: Vicd President
Schedule to
Loan and Security Agreement
Borrower: Axeda Systems Operating Company, Inc.
Address: c/o Axeda Systems, Inc.
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Date: June 25, 2003
This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above named borrower of even date herewith.
================================================================================
1. Credit Limit
(Section 1.1): An amount not to exceed the lesser
of: (i) Two Million and No/100 Dollars
($2,000,000.00) at any one time
outstanding (the "Maximum Credit
Limit"); or (ii) eighty percent (80%)
(the "Advance Rate") of the amount of
Borrower's Eligible Accounts (the
"Borrowing Base").
Silicon may, from time to time, with
prior notice to Borrower, modify the
Advance Rate, in its good faith business
judgment, upon two (2) days 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.
Services Sublimit
(Sections 1.6 - 1.8): One Million and No/100 Dollars
($1,000,000.00)
================================================================================
2. Interest.
================================================================================
Interest Rate (Section 1.2): (a) Except during
any Trigger Event Period, a rate equal
to the "Prime Rate" in effect from time
to time, plus one percent (1%) per
annum, provided that the interest rate
in effect on any day shall not be less
than five and one quarter percent
(5.25%) per annum.
================================================================================
(b) During any Trigger Event Period,
a rate equal to the "Prime Rate" in
effect from time to time, plus two
percent (2%) per annum, provided that
the interest rate in effect on any day
shall not be less than six and one
quarter percent (6.25%) 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: Twenty Thousand Dollars ($20,000)
Collateral Monitoring
Fee: During any Trigger Event Period, One
Thousand Dollars ($1,000) per month,
payable in arrears (prorated for any
partial month at the beginning and at
termination of this Agreement); provided
however, that if any Non-Borrowing
Period occurs during any Trigger Event
Period, the collateral monitoring fee
shall be Five Hundred Dollars ($500).
Unused Portion Fee:
The Borrower shall pay to Silicon
a fee (collectively, the "Unused
Line Fees" and individually, an
"Unused Line Fee") as follows:
(a) In any month where a Trigger
Event has not occurred, 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.
(b) In any month where a Trigger
Event has occurred, in an amount equal
to one-half of one percent (0.50%) 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 on
the Maturity Date.
Early Termination Fee
(Section 6.2): Twenty Thousand Dollars ($20,000)
================================================================================
4. Maturity Date
(Section 6.1):
June ___, 2004. Provided no Event of Default has occurred
and is continuing, Silicon in accordance with its customary
practices will, upon written request of Borrower consider an
extension of the Loans for an additional period of one year.
Borrower understands and agrees that nothing in this Section
or in any of the Loan Documents constitutes a commitment on
behalf of Silicon or should be relied upon by Borrower or
any person as a commitment to extend the current maturity
date.
================================================================================
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 Cash/
Excess Availability: Borrower and Guarantor,
collectively shall maintain at all times
minimum unencumbered cash and/or excess
Availability under the Loans of not less
than Five Hundred Thousand Dollars
($500,000).
Minimum Tangible
Net Worth:
Borrower and Guarantor, collectively shall maintain a
Tangible Net Worth, to be tested quarterly, of not less than
the sum of (a) and (b) as follows:
(a) The amount as of the date listed below:
May ___ - June 30, 2003 $4,000,000;
July 1 - September 30, 2003 $2,000,000;
October 1 and thereafter $1,000,000;
plus
(b) Eighty percent (80%) of the net
proceeds from any issuance by the
Borrower or Guarantor of equity or
subordinate debt after the date hereof.
Definitions. For purposes of the foregoing financial
covenants, the following term shall have
the following meaning:
"Current assets", "current liabilities"
and "liabilities" shall have the meaning
ascribed thereto by GAAP.
"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. During any Trigger Event Period, 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.
4. During any Trigger Event Period, 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. During any Trigger Event Period, monthly
perpetual inventory reports for the
Inventory valued on a first-in,
first-out basis at the lower of cost or
market (in accordance with GAAP) or such
other inventory reports as are requested
by Silicon in its good faith business
judgment, all within fifteen (15) days
after the end of each month.
6. Monthly unaudited financial statements,
as soon as available, and in any event
within thirty (30) days after the end
of each month.
7. 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
whether there were any held checks.
8. 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.
9. Annual operating budgets (including
income statements, balance sheets and
cash flow statements, by month) for the
upcoming fiscal year of Borrower within
thirty days (30) prior to the end of
each fiscal year of Borrower.
10. 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.
Non-Borrowing Period. Borrower may elect to suspend
all Loans under this Agreement, by
notifying Bank of its intention that it
desires a non borrowing period (a
"Non-Borrowing Period").
Reporting Requirements. During any Non-Borrowing
Period, in lieu of the weekly
transaction reports otherwise required
hereunder, Borrower shall provide
Silicon with monthly transaction reports
and schedules of collections, on
Silicon's standard form; and
Termination of Non-Borrowing
Period.
Borrower shall provide Silicon with at least thirty (30) days' prior
written notice of Borrower's desire to terminate a Non-Borrowing Period and have
Silicon make any future Loans to Borrower (the "30 Day Notice"). Such Loans, if
any, shall be made in accordance with the terms and conditions of this
Agreement. Prior to Silicon making such Loans, Silicon shall have received the
results, satisfactory to Silicon in its good faith business judgment, of an
audit as provided for in Section 5.4 of this Agreement. Provided, Silicon may
shorten the thirty (30) day period above, in its sole discretion after receipt
and satisfactory review of the foregoing audit.
================================================================================
7. Borrower Information:
Borrower represents and warrants that
the information set forth in the
Perfection Certificate of the Borrower
dated June ___, 2003 previously
submitted to Silicon (the
"Representations") is true and correct
in all material respects as of the date
hereof.
================================================================================
8. ADDITIONAL PROVISIONS
1. Banking Relationship. Borrower shall at all times until the Termination
of Silicon's Commitment maintain its primary banking relationship with Silicon.
Without limiting the generality of the foregoing, prior to any Trigger Event
Period, Borrower shall at all times maintain a majority of its total cash and
investments on deposit with Silicon and after any Trigger Event Period, Borrower
shall at all times maintain all of its cash and investments on deposit with
Silicon. As to any Deposit Accounts and investment accounts maintained with
another institution, Borrower shall 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.
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, except for Inside Debt in an aggregate
amount not to exceed $300,000 at any time incurred pursuant to agreements
entered into with officers and directors in the form provided to Silicon (each,
a "Salary Deferral Agreement"). Borrower represents and warrants that there is
no Inside Debt presently outstanding, except pursuant to Salary Deferral
Agreements. Prior to incurring any Inside Debt in the future, except pursuant to
a Salary Deferral Agreement, 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.
Borrower: Silicon:
AXEDA SYSTEMS OPERATING SILICON VALLEY BANK
COMPANY, INC.
By: /s/Xxxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxxxxx
-------------------- -------------------------
Name:Xxxxxx X. Xxxxxxx Name: Xxxx X. Xxxxxxxxx
Title: EVP & CFO Title: Vicd President
COMPLIANCE CERTIFICATE
To: Silicon Valley Bank
Xxx Xxxxxx Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxxxxx 00000
From: Axeda Systems Operating Company, Inc.
c/o Axeda Systems, Inc.
Xxxxxxx, Xxxxxxxxxxxx 00000
The undersigned authorized Officer of AXEDA SYSTEMS OPERATING COMPANY,
INC. ("Borrower"), hereby certifies that in accordance with the terms and
conditions of the Loan and Security Agreement, as modified from time to time,
the Borrower is in complete compliance for the period ending _____________ of
all required conditions and terms except as noted below. Attached herewith are
the required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistent from one period to the next
except as explained in an accompanying letter or footnotes.
Please indicate compliance status by circling Yes/No under "Complies" column.
REPORTING COVENANT REQUIRED COMPLIES
Financials & Comp. Cert. Monthly w/in 30 days YES/NO
Quarterly Financials Quarterly w/in 45 days YES/NO
Unaudited Monthly Financials Monthly w/in 30 days YES/NO
Receivable agings (invoice date) Monthly w/in 15 days YES/NO
Reconciliations of A/R agings, Monthly w/in 15 days YES/NO
Accounts Payables agings Monthly w/in 15 days YES/NO
Held Checks YES/NO
If YES, Held Checks Register Monthly w/in 15 days YES/NO
Audited Annual Financials FYE w/in 120 days YES/NO
Annual Operating Budget W/in 30 days prior to FYE YES/NO
In addition, if during Trigger Event Period:
Transaction Report Weekly w/in 3 business days YES/NO
In addition, during any Non-Borrowing Period:
Transaction Report Monthly w/in 15 days YES/NO
FINANCIAL COVENANT REQUIRED ACTUAL
Minimum Tangible Net Worth (a) + (b)
(a) April 1 - June 30, 2003 $4,000,000 $________
July 1 - September 30, 2003 $2,000,000 $________
October 1 - Maturity $1,000,000 $________
(Tested Quarterly)
(b) + 80% of equity issued Total $________
Complies? YES/NO
Minimum Cash/Excess Availability
(At all times): $500,000 $________
Complies? YES/NO
Terms are defined in the Schedule to the Loan Agreement,
Section 5.1.
Comments regarding financial covenants:
AXEDA SYSTEMS OPERATING COMPANY, INC.
By: ____________________________
Name: __________________________
Title: ___________________________
Received:
By: _____________________________
Name:___________________________
Title:___________________
