EXHIBIT 10.16
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LOAN AND SECURITY AGREEMENT
SYNAPTICS INCORPORATED
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TABLE OF CONTENTS
Page
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1 ACCOUNTING AND OTHER TERMS...............................................4
2 LOAN AND TERMS OF PAYMENT................................................4
2.1 Promise to Pay.....................................................4
2.2 Overadvances.......................................................5
2.3 Interest Rate, Payments............................................5
2.4 Fees...............................................................5
3 CONDITIONS OF LOANS......................................................5
3.1 Conditions Precedent to Initial Credit Extension...................5
3.2 Conditions Precedent to all Credit Extensions......................6
4 CREATION OF SECURITY INTEREST............................................6
4.1 Grant of Security Interest.........................................6
4.2 Authorization of File..............................................6
5 REPRESENTATIONS AND WARRANTIES...........................................6
5.1 Due Organization and Authorization.................................7
5.2 Collateral.........................................................7
5.3 Litigation.........................................................7
5.4 No Material Adverse Change in Financial Statements.................7
5.5 Solvency...........................................................7
5.6 Regulatory Compliance..............................................8
5.7 Subsidiaries.......................................................8
5.8 Full Disclosure....................................................8
6 AFFIRMATIVE COVENANTS....................................................8
6.1 Government Compliance..............................................8
6.2 Financial Statements, Reports, Certificates........................8
6.3 Inventory; Returns.................................................9
6.4 Taxes..............................................................9
6.5 Insurance..........................................................9
6.6 Primary Accounts...................................................9
6.7 Financial Covenants...............................................10
6.8 Registration of Intellectual Property Rights......................10
6.9 Further Assurances................................................10
7 NEGATIVE COVENANTS......................................................10
7.1 Dispositions......................................................10
7.2 Changes in Business, Ownership, Management or Locations of
Collateral........................................................10
7.3 Mergers or Acquisitions...........................................11
7.4 Indebtedness......................................................11
7.5 Encumbrance.......................................................11
7.6 Distributions; Investments........................................11
7.7 Transactions with Affiliates......................................11
7.8 Subordinated Debt.................................................11
7.9 Compliance........................................................11
8 EVENTS OF DEFAULT.......................................................12
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8.1 Payment Default...................................................12
8.2 Covenant Default..................................................12
8.3 Material Adverse Change...........................................12
8.4 Attachment........................................................12
8.5 Insolvency........................................................12
8.6 Other Agreements..................................................12
8.7 Judgments.........................................................13
8.8 Misrepresentations................................................13
9 BANK'S RIGHTS AND REMEDIES..............................................13
9.1 Rights and Remedies...............................................13
9.2 Power of Attorney.................................................13
9.3 Accounts Collection...............................................14
9.4 Bank Expenses.....................................................14
9.5 Bank's Liability for Collateral...................................14
9.6 Remedies Cumulative...............................................14
9.7 Demand Waiver.....................................................14
10 NOTICES.................................................................14
11 CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER.............................15
12 GENERAL PROVISIONS......................................................15
12.1 Successors and Assigns............................................15
12.2 Indemnification...................................................15
12.3 Time of Essence...................................................15
12.4 Severability of Provision.........................................15
12.5 Amendments in Writing, Integration................................15
12.6 Counterparts......................................................16
12.7 Survival..........................................................16
12.8 Confidentiality...................................................16
12.9 Attorneys' Fees, Costs and Expenses...............................16
13 DEFINITIONS.............................................................16
13.1 Definitions.......................................................16
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THIS LOAN AND SECURITY AGREEMENT dated August 30, 2001, between SILICON
VALLEY BANK ("Bank"), whose address is 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx,
Xxxxxxxxxx 00000 and SYNAPTICS INCORPORATED ("Borrower"), whose address is 0000
Xxxxxx Xxxxx, Xxx Xxxx, Xxxxxxxxxx 00000 provides the terms on which Bank will
lend to Borrower and Borrower will repay Bank. The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement will be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document.
2 LOAN AND TERMS OF PAYMENT
2.1 PROMISE TO PAY.
Borrower promises to pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1 REVOLVING ADVANCES.
(a) Bank will make Advances not exceeding (i) the lesser of (A) the
Committed Revolving Line or (B) the Borrowing Base, minus (ii) the amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit), minus (iii) the FX Reserve, and minus (iv) all amounts for services
utilized under the Cash Management Services Sublimit. Amounts borrowed under
this Section may be repaid and reborrowed during the term of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 12:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank
reasonably believes is a Responsible Officer or designee. Borrower will
indemnify Bank for any loss Bank suffers due to such reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.
2.1.2 LETTERS OF CREDIT SUBLIMIT.
Bank will issue or have issued Letters of Credit for Borrower's account
not exceeding (i) the lesser of the Committed Revolving Line or the Borrowing
Base minus (ii) the outstanding principal balance of the Advances minus all
amounts for services utilized under the Cash Management Services Sublimit, minus
the FX Reserve; however, the face amount of outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit) may not exceed $4,200,000.
Each Letter of Credit will have an expiry date of no later than 180 days after
the Revolving Maturity Date, but Borrower's reimbursement obligation will be
secured by cash on terms acceptable to Bank at any time after the Revolving
Maturity Date if the term of this Agreement is not extended by Bank. Borrower
agrees to execute any further documentation in connection with the Letters of
Credit as Bank may reasonably request.
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2.1.3 FOREIGN EXCHANGE SUBLIMIT.
If there is availability under the Committed Revolving Line and the
Borrowing Base, then Borrower may enter in foreign exchange forward contracts
with the Bank under which Borrower commits to purchase from or sell to Bank a
set amount of foreign currency more than one business day after the contract
date (the "FX Forward Contract"). Bank will subtract 10% of each outstanding FX
Forward Contract from the foreign exchange sublimit which is a maximum of
$4,200,000 (the "FX Reserve"). The total FX Forward Contracts at any one time
may not exceed 10 times the amount of the FX Reserve. Bank may terminate the FX
Forward Contracts if an Event of Default occurs and is continuing.
2.1.4 CASH MANAGEMENT SERVICES SUBLIMIT.
Borrower may use up to $4,200,000 for Bank's business credit card
services identified in various cash management services agreements related to
such services (the "Cash Management Services"). All amounts Bank pays for any
Cash Management Services will be treated as Advances under the Committed
Revolving Line.
2.2 OVERADVANCES.
If Borrower's Obligations under Section 2.1.1, 2.1.2, 2.1.3 and 2.1.4
exceed the lesser of either (i) the Committed Revolving Line or (ii) the
Borrowing Base, Borrower must immediately pay Bank the excess.
2.3 INTEREST RATE, PAYMENTS.
(a) Interest Rate. Advances accrue interest on the outstanding
principal balance at a per annum rate of 0.5 percentage points above the Prime
Rate. After an Event of Default and during the continuance of an Event of
Default, Obligations accrue interest at 5 percent above the rate effective
immediately before the Event of Default. The interest rate increases or
decreases when the Prime Rate changes. Interest is computed on a 360 day year
for the actual number of days elapsed.
(b) Payments. Interest due on the Committed Revolving Line is payable
on the 14th of each month. Bank may debit any of Borrower's deposit accounts
including Account Number 0000000-70 for principal and interest payments owing or
any amounts Borrower owes Bank. Bank will promptly notify Borrower when it
debits Borrower's accounts. These debits are not a set-off. Payments received
after 12:00 noon Pacific time are considered received at the opening of business
on the next Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees or interest
accrue.
2.4 FEES.
Borrower will pay:
(a) Facility Fee. A fully earned, non-refundable Facility Fee of
$20,000 due on the Closing Date; and
(b) Bank Expenses. All Bank Expenses (including reasonable attorneys'
fees and reasonable expenses) incurred through and after the date of this
Agreement, are payable when due.
3 CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.
Bank's obligation to make the initial Credit Extension is subject to
the condition precedent that:
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(a) It receive the agreements, documents and fees it requires; and
(b) Bank completes a Collateral audit with results satisfactory to
Bank.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.
Bank's obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension and no Event of Default may have occurred and be continuing, or
result from the Credit Extension. Each Credit Extension is Borrower's
representation and warranty on that date that the representations and warranties
of Section 5 remain materially true.
4 CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. After an Event of Default and continuance of an Event of Default,
Bank may place a "hold" on any deposit account pledged as Collateral.
Notwithstanding the foregoing, the security interest granted herein does not
extend to and the term "Collateral" does not include any license or contract
rights to the extent (i) the granting of a security interest in it would be
contrary to applicable law, or (ii) that such rights are nonassignable by their
terms (but only to the extent such prohibition is enforceable under applicable
law, including, without limitation, Section 9318(4) of the Code) without the
consent of the licensor or other party (but only to the extent such consent has
not been obtained). Except as disclosed on the Schedule, Borrower is not a party
to, nor is bound by, any license or other agreement that prohibits or otherwise
restricts Borrower from granting a security interest in Borrower's interest in
such license or agreement or any other property. Without prior notice to Bank,
Borrower shall not enter into, or become bound by, any such license or agreement
which is reasonably likely to have a material impact on Borrower's business or
financial condition. Borrower shall take such steps as Bank reasonably requests
to obtain the consent of, or waiver by, any person whose consent or waiver is
necessary for such licenses or contract rights to be deemed "Collateral" and for
Bank to have a security interest in it that might otherwise be restricted or
prohibited by law or by the terms of any such license or agreement, whether now
existing or entered into in the future. If this Agreement is terminated, Bank's
lien and security interest in the Collateral will continue until Borrower fully
satisfies its Obligations.
4.2 AUTHORIZATION OF FILE.
Borrower authorizes Bank to file financing statements without notice to
Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in
order to perfect or protect Bank's interest in the Collateral.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
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5.1 DUE ORGANIZATION AND AUTHORIZATION.
Borrower and each Subsidiary is duly existing and in good standing in
its state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change. Borrower has not
changed its state of formation or its organizational structure or type or any
organizational number (if any) assigned by its jurisdiction of formation.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it is
bound in which the default could reasonably be expected to cause a Material
Adverse Change.
5.2 COLLATERAL.
Borrower has good title to the Collateral, free of Liens except
Permitted Liens. Borrower has no other deposit account, other than the deposit
accounts described in the Schedule. The Accounts are bona fide, existing
obligations, and the service or property has been performed or delivered to the
account debtor or its agent for immediate shipment to and unconditional
acceptance by the account debtor. The Collateral is not in the possession of any
third party bailee (such as at a warehouse). In the event that Borrower, after
the date hereof, intends to store or otherwise deliver the Collateral to such a
bailee, then Borrower will provide notice to the Bank. Borrower has no notice of
any actual or imminent Insolvency Proceeding of any account debtor whose
accounts are an Eligible Account in any Borrowing Base Certificate. All
Inventory is in all material respects of good and marketable quality, free from
material defects. Borrower is the sole owner of the Intellectual Property,
except for licenses granted to its customers in the ordinary course of business.
Each Patent is valid and enforceable and no part of the Intellectual Property
has been judged invalid or unenforceable, in whole or in part, and to the
Borrower's knowledge no claim has been made that any part of the Intellectual
Property violates the rights of any third party, except to the extent such claim
could not reasonably be expected to cause a Material Adverse Change.
5.3 LITIGATION.
Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers and legal
counsel, threatened by or against Borrower or any Subsidiary in which a likely
adverse decision could reasonably be expected to cause a Material Adverse
Change.
5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 SOLVENCY.
The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.
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5.6 REGULATORY COMPLIANCE.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate provision to pay, all material taxes,
except those being contested in good faith with adequate reserves under GAAP.
Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change.
5.7 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 FULL DISCLOSURE.
No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading. It
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected and forecasted results.
6 AFFIRMATIVE COVENANTS
Borrower will do all of the following for so long as Bank has an
obligations to lend, or there are outstanding Obligations:
6.1 GOVERNMENT COMPLIANCE.
Borrower will maintain its and all Subsidiaries' legal existence and
good standing in its jurisdiction of formation and maintain qualification in
each jurisdiction in which the failure to so qualify would reasonably be
expected to cause a material adverse effect on Borrower's business or
operations. Borrower will comply, and have each Subsidiary comply, with all
laws, ordinances and regulations to which it is subject, noncompliance with
which could have a material adverse effect on Borrower's business or operations
or would reasonably be expected to cause a Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) as soon as available, but no
later than 30 days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during the period certified by a Responsible Officer and in a form
acceptable to Bank; (ii) as soon as available, but no later than 120 days after
the last day of Borrower's fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an opinion
which is unqualified or otherwise consented to by Bank on the financial
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statements from an independent certified public accounting firm reasonably
acceptable to Bank; (iii) a prompt report of any legal actions pending or
threatened against Borrower or any Subsidiary that could result in damages or
costs to Borrower or any Subsidiary of $250,000 or more; (iv) budgets, sales
projections, operating plans or other financial information Bank reasonably
requests; and (v) prompt notice of any material change in the composition of the
Intellectual Property, including any subsequent ownership right of Borrower in
or to any Copyright, Patent or Trademark not shown in any intellectual property
security agreement between Borrower and Bank or knowledge of an event that
materially adversely affects the value of the Intellectual Property.
(b) Within 30 days after the last day of each month, Borrower will
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
the form of Exhibit C, with aged listings of accounts receivable by due date,
including payment terms, and accounts payable by due date, including payment
terms.
(c) Within 30 days after the last day of each month, Borrower will
deliver to Bank with the monthly financial statements a Compliance Certificate
signed by a Responsible Officer in the form of Exhibit D.
(d) Allow Bank to audit Borrower's Collateral at Borrower's expense,
provided each audit shall not exceed $1,500. Such audits will be conducted no
more often than every year unless an Event of Default has occurred and is
continuing.
6.3 INVENTORY; RETURNS.
Borrower will keep all Inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower and its account
debtors will follow Borrower's customary practices. Borrower must promptly
notify Bank of all returns, recoveries, disputes and claims, that involve more
than $250,000.
6.4 TAXES.
Borrower will make, and cause each Subsidiary to make, timely payment
of all material federal, state, and local taxes or assessments and will deliver
to Bank, on demand, appropriate certificates attesting to the payment except
those being contested in good faith with adequate reserves under GAAP.
6.5 INSURANCE.
Borrower will keep its business and the Collateral insured for risks
and in amounts, as Bank may reasonably request. Insurance policies will be in a
form, with companies, and in amounts that are satisfactory to Bank in Bank's
reasonable discretion. All property policies will have a lender's loss payable
endorsement showing Bank as an additional loss payee and all liability policies
will show the Bank as an additional insured and provide that the insurer must
give Bank at least 20 days notice before canceling its policy. At Bank's
request, Borrower will deliver certified copies of policies and evidence of all
premium payments. If no Event of Default has occurred and is continuing,
proceeds payable under any casualty policy will, at Borrower's option, be
payable to Borrower to replace the property subject to the claim, provided that
any such replacement property shall be deemed Collateral in which Bank has been
granted a first priority security interest. If an Event of Default has occurred
and is continuing, then, at Bank's option, proceeds payable under any policy
will be payable to Bank on account of the Obligations.
6.6 PRIMARY ACCOUNTS.
Borrower will maintain its primary banking relationship with Bank,
which relationship shall include Borrower maintaining account balances in any
accounts at or through Bank representing at least 50% of all account balances of
Borrower at any financial institution.
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6.7 FINANCIAL COVENANTS.
Borrower will maintain as of the last day of each month:
(i) QUICK RATIO. A ratio of Quick Assets to Current
Liabilities of at least 1.25 to 1.00.
(ii) PROFITABILITY. Borrower will have a minimum net
profit on a three month rolling average of $1 for each month.
6.8 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
Borrower will register with the United States Patent and Trademark
Office or the United States Copyright Office its Intellectual Property which the
Board of Directors of Borrower deems, in good faith, appropriate for the
development of Borrower's business and additional Intellectual Property rights
developed or acquired including revisions or additions with any product before
the sale or licensing of the product to any third party.
Borrower will (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in writing
of material infringements and (ii) allow any Intellectual Property to be
abandoned, forfeited or dedicated to the public with notification to Bank.
6.9 FURTHER ASSURANCES.
Borrower will execute any further instruments and take further action
as Bank reasonably requests to perfect or continue Bank's security interest in
the Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld, for so long as Bank has an
obligation to lend and there are any outstanding Obligations:
7.1 DISPOSITIONS.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers (i) of Inventory in the ordinary
course of business; (ii) of licenses and similar arrangements for the use of the
property of Borrower or its Subsidiaries in the ordinary course of business; or
(iii) of worn-out or obsolete Equipment; and (iv) other Transfers which in the
aggregate do not exceed $250,000 in any fiscal year.
7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR LOCATIONS OF COLLATERAL.
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto or have a material change in its ownership or management of greater than
25% of Borrower's Board of Directors (other than by the sale of Borrower's
equity securities in a public offering or to venture capital investors so long
as Borrower identifies the venture capital investors prior to the closing of the
investment). Borrower will not, without at least 30 days prior written notice,
relocate its chief executive office, change its state of formation (including
reincorporation), change its organizational number or name or add any new
offices or business locations (such as warehouses) in which Borrower maintains
or stores over $5,000 in Collateral.
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7.3 MERGERS OR ACQUISITIONS.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action during the term of this
Agreement; (ii) such transactions do not in the aggregate exceed $ 10,000,000;
or (iii) such transaction would not result in a decrease of more than 25% of
Tangible Net Worth. A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.
7.4 INDEBTEDNESS.
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 ENCUMBRANCE.
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
here, subject to Permitted Liens.
7.6 DISTRIBUTIONS; INVESTMENTS.
Directly or indirectly acquire or own any Person, or make any
Investment in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so. Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock except for repurchases of stock
from former employees or directors of Borrower under the terms of applicable
repurchase agreements in an aggregate amount not to exceed $250,000 in the
aggregate in any fiscal year, provided that no Event of Default has occurred, is
continuing or would exist after giving effect to the repurchases.
7.7 TRANSACTIONS WITH AFFILIATES.
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in
the ordinary course of Borrower's business, upon fair and reasonable terms that
are no less favorable to Borrower than would be obtained in an arm's length
transaction with a nonaffiliated Person.
7.8 SUBORDINATED DEBT.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.
7.9 COMPLIANCE.
Become an "investment company" or a company controlled by an
"investment company," under the Investment Company Act of 1940 or undertake as
one of its important activities extending credit to purchase or carry margin
stock, or use the proceeds of any Credit Extension for that purpose; fail to
meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change, or permit any of its Subsidiaries to do so.
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8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT.
If Borrower fails to pay any of the Obligations within 5 days after
their due date. During the additional period the failure to cure the default is
not an Event of Default (but no Credit Extension will be made during the cure
period);
8.2 COVENANT DEFAULT.
If Borrower does not perform any obligation in Section 6 or violates
any covenant in Section 7 or does not perform or observe any other material
term, condition or covenant in this Agreement, any Loan Documents, or in any
agreement between Borrower and Bank and as to any default under a term,
condition or covenant that can be cured, has not cured the default within 20
days after it occurs, or if the default cannot be cured within 20 days or cannot
be cured after Borrower's attempts within 20 day period, and the default may be
cured within a reasonable time, then Borrower has an additional period (of not
more than 45 days) to attempt to cure the default. During the additional time,
the failure to cure the default is not an Event of Default (but no Credit
Extensions will be made during the cure period);
8.3 MATERIAL ADVERSE CHANGE.
If there (i) occurs a material adverse change in the business,
operations, or condition (financial or otherwise) of the Borrower, or (ii) is a
material impairment of the prospect of repayment of any portion of the
Obligations; or (iii) is a material impairment of the value or priority of
Bank's security interests in the Collateral.
8.4 ATTACHMENT.
If any material portion of Borrower's assets is attached, seized,
levied on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period);
8.5 INSOLVENCY.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 45 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);
8.6 OTHER AGREEMENTS.
If there is a default in any agreement between Borrower and a third
party that gives the third party the right to accelerate any Indebtedness
exceeding $250,000 or that could cause a Material Adverse Change;
12
8.7 JUDGMENTS.
If a money judgment(s) in the aggregate of at least $250,000 is
rendered against Borrower and is unsatisfied and unstayed for 30 days (but no
Credit Extensions will be made before the judgment is stayed or satisfied); or
8.8 MISREPRESENTATIONS.
In the Bank's reasonable judgement, if Borrower or any Person acting
for Borrower makes any material misrepresentation or material misstatement now
or later in any warranty or representation in this Agreement or in any
communication delivered to Bank or to induce Bank to enter this Agreement or any
Loan Document.
9 BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and continues Bank may, without notice
or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
and
(g) Dispose of the Collateral according to the Code.
9.2 POWER OF ATTORNEY.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or
13
security; (ii) sign Borrower's name on any invoice or xxxx of lading for any
Account or drafts against account debtors, (iii) make, settle, and adjust all
claims under Borrower's insurance policies; (iv) settle and adjust disputes and
claims about the Accounts directly with account debtors, for amounts and on
terms Bank determines reasonable; and (v) transfer the Collateral into the name
of Bank or a third party as the Code permits. Bank may exercise the power of
attorney to sign Borrower's name on any documents necessary to perfect or
continue the perfection of any security interest regardless of whether an Event
of Default has occurred. Bank's appointment as Borrower's attorney in fact, and
all of Bank's rights and powers, coupled with an interest, are irrevocable until
all Obligations have been fully repaid and performed and Bank's obligation to
provide Credit Extensions terminates.
9.3 ACCOUNTS COLLECTION.
When an Event of Default occurs and continues, Bank may notify any
Person owing Borrower money of Bank's security interest in the funds and verify
the amount of the Account. Borrower must collect all payments in trust for Bank
and, if requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank's waiver of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices and Section 9-207 of
the Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any
loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or
other person. Borrower bears all risk of loss, damage or destruction of the
Collateral.
9.6 REMEDIES CUMULATIVE.
Bank's rights and remedies under this Agreement, the Loan Documents,
and all other agreements are cumulative. Bank has all rights and remedies
provided under the Code, by law, or in equity. Bank's exercise of one right or
remedy is not an election, and Bank's waiver of any Event of Default is not a
continuing waiver. Bank's delay is not a waiver, election, or acquiescence. No
waiver is effective unless signed by Bank and then is only effective for the
specific instance and purpose for which it was given.
9.7 DEMAND WAIVER.
Borrower waives demand, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
10 NOTICES
All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses set forth at the beginning of
this Agreement. Bank will use its good faith efforts to make sure notices are
directed to the attention of
14
the Chief Executive Officer and Chief Financial Officer. A party may change its
notice address by giving the other party written notice.
11 CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER
California law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Santa Xxxxx County, California.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.
12.2 INDEMNIFICATION.
Borrower will indemnify, defend and hold harmless Bank and its
officers, employees, and agents against: (a) all obligations, demands, claims,
and liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge into this
Agreement and the Loan Documents.
15
12.6 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 SURVIVAL.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8 CONFIDENTIALITY.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their present or prospective business relations with
Borrower, (ii) to prospective transferees or purchasers of any interest in the
loans (provided, however, Bank shall use commercially reasonable efforts in
obtaining such prospective transferee or purchasers written agreement of the
terms of this provision), (iii) as required by law, regulation, subpoena, or
other order, (iv) as required in connection with Bank's examination or audit and
(v) as Bank considers appropriate in exercising remedies under this Agreement.
Confidential information does not include information that either: (a) is in the
public domain or in Bank's possession when disclosed to Bank, or becomes part of
the public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, if Bank does reasonably not know that the
third party is prohibited from disclosing the information.
12.9 ATTORNEYS' FEES, COSTS AND EXPENSES.
In any action or proceeding between Borrower and Bank arising out of
the Loan Documents, the prevailing party will be entitled to recover its
reasonable attorneys' fees and other reasonable costs and expenses incurred, in
addition to any other relief to which it may be entitled.
13 DEFINITIONS
13.1 DEFINITIONS.
In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
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"BANK EXPENSES" are all audit fees and expenses and reasonable costs
and expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.
"BORROWING BASE" is 75% of Eligible Accounts as determined by Bank from
Borrower's most recent Borrowing Base Certificate; provided, however, that Bank
may lower the percentage of the Borrowing Base after performing an audit of
Borrower's Collateral.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.
"CASH MANAGEMENT SERVICES" are defined in Section 2.1.4.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the Uniform Commercial Code, as applicable.
"COLLATERAL" is the property described on Exhibit A.
"COMMITTED REVOLVING LINE" is $4,200,000 outstanding at any one time.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"COPYRIGHTS" are all copyright rights, applications or registrations
and like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"CREDIT EXTENSION" is each Advance, Letter of Credit, Exchange
Contract, or any other extension of credit by Bank for Borrower's benefit.
"CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year.
"ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5;
but Bank may reasonably change eligibility standards by giving Borrower 30 days
prior written notice. Unless Bank agrees otherwise in writing, Eligible Accounts
will not include:
(a) Accounts that the account debtor has not paid within 90 days (105
days for Accounts from Quanta) of invoice date;
17
(b) Accounts for an account debtor, 50% or more of whose Accounts have
not been paid within 90 days of invoice date;
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, except for Quanta
for which the percentage may be 45% for the amounts that exceed that
percentage, unless the Bank approves in writing.
(e) Accounts for which the account debtor does not have its principal
place of business in the United States; except Accounts owing from
Samsung, LG Electronics, Compal, Acer, Quanta, Inventec, Panasonic,
Arima and Foxconn and those pre-approved by Bank on a case by case
basis
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality;
(g) Accounts for which Borrower owes the account debtor, but only up to
the amount owed (sometimes called "contra" accounts, accounts payable,
customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on
approval, xxxx and hold, or other terms if account debtor's payment may
be conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes
any claim and Bank believes there may be a basis for dispute (but only
up to the disputed or claimed amount), or if the Account Debtor is
subject to an Insolvency Proceeding, or becomes insolvent, or goes out
of business;
(k) Accounts for which Bank reasonably determines after inquiry and
consultation with Borrower collection to be doubtful.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"FX FORWARD CONTRACT" is defined in Section 2.1.3.
"FX RESERVE " is defined in Section 2.1.3.
"GAAP" is generally accepted accounting principles.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
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"INTELLECTUAL PROPERTY" is all of Borrower's:
(a) Copyrights, Trademarks, Patents, and Mask Works including
amendments, renewals, extensions, and all licenses or other rights to use and
all license fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created, acquired
or held;
(c) All design rights which may be available to Borrower now or later
created, acquired or held;
(d) Any claims for damages (past, present or future) for infringement
of any of the rights above, with the right, but not the obligation, to xxx and
collect damages for use or infringement of the intellectual property rights
above;
All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.
"INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"LETTER OF CREDIT" is defined in Section 2.1.2.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes
or guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
"MASK WORKS" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"MATERIAL ADVERSE CHANGE" is defined in Section 8.3.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"PATENTS" are patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues, extensions
and continuations-in-part of the same.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or any other
Loan Document;
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(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business;
(e) Indebtedness secured by Permitted Liens;
(f) Indebtedness of Borrower to any Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of Borrower (provided
that the primary obligations are not prohibited hereby), and Indebtedness of any
Subsidiary to any other Subsidiary and Contingent Obligations of any Subsidiary
with respect to obligations of any other Subsidiary (provided that the primary
obligations are not prohibited hereby);
(g) Other Indebtedness not otherwise permitted by Section 7.4 not
exceeding Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate
outstanding at any time; and
(h) Extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (f) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Schedule and existing on the Closing Date;
and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within 1
year from its acquisition, (ii) commercial paper maturing no more than 1 year
after its creation and having the highest rating from either Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc., and (iii) Bank's certificates of
deposit issued maturing no more than 1 year after issue, and (iv) any
Investments permitted by Borrower's investment policy, as amended from time to
time, provided that such investment policy (and any such amendment thereto) has
been approved by Bank;
(c) Investments consisting of the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
Borrower;
(d) Investments accepted in connection with Transfers permitted by
Section 7.1;
(e) Investments of Subsidiaries in or to other Subsidiaries or Borrower
and Investments by Borrower in Subsidiaries not to exceed $250,000 in the
aggregate in any fiscal year
(f) Investments consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plans or agreements approved by Borrower's Board of
Directors
(g) Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business;
(h) Investments consisting of notes receivable of, or prepaid royalties
and other credit extensions, to customers and suppliers who are not Affiliates,
in the ordinary course of business; provided that this paragraph (h) shall not
apply to Investments of Borrower in any Subsidiary; and
20
(i) Joint ventures or strategic alliances in the ordinary course of
Borrower's business consisting of the licensing of technology, the development
of technology or the providing of technical support, provided that any cash
investments by Borrower do not exceed $250,000 in the aggregate in any fiscal
year;
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;
(d) 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;
(e) Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
(g) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.4 or 8.7;
(h) Liens in favor of other financial institutions arising in
connection with Borrower's deposit accounts held at such institutions, provided
that Bank has a perfected security interest in the amounts held in such deposit
accounts; and
(i) Other Liens not described above arising in the ordinary course of
business and not having or not reasonably likely to have a material adverse
effect on Borrower and its Subsidiaries taken as a whole.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.
"QUICK ASSETS" is, on any date, the Borrower's consolidated,
unrestricted cash, cash equivalents, net billed accounts receivable and
investments with maturities of fewer than 12 months determined according to
GAAP.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"REVOLVING MATURITY DATE" is August 29, 2002.
"SCHEDULE" is any attached schedule of exceptions.
21
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.
"SUBSIDIARY" is for any Person, or any other business entity of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, Copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.
"TRADEMARKS" are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.
BORROWER:
SYNAPTICS INCORPORATED
By: /s/ X. X. Xxxxxxx
-------------------------------------------------
Title: VP & CFO
----------------------------------------------
BANK:
SILICON VALLEY BANK
By: /s/ Xxx X. Xxxxx
-------------------------------------------------
Title: VP
----------------------------------------------
22
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest
in and to the following:
All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles (as such definitions may be
amended from time to time according to the Code), now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind,;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower (as such definitions may be amended from time
to time according to the Code) whether or not earned by performance, and any and
all credit insurance, insurance (including refund) claims and proceeds,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, letter of credit rights, certificates of deposit, instruments
and chattel paper and electronic chattel paper now owned or hereafter acquired
and Borrower's Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
23
EXHIBIT B
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T.
FAX TO: DATE: _____________________________
____________________________________________________________________________________________________________________________________
[ ] LOAN PAYMENT:
SYNAPTICS INCORPORATED
From Account #__________________________________ To Account #_________________________________________
(Deposit Account #) (Loan Account #)
Principal $_____________________________ and/or Interest $_____________________________________________________
All Borrower's representation and warranties in the Loan and Security Agreement are true, correct and complete in all material
respects to on the date of the telephone transfer request for and advance, but those representations and warranties expressly
referring to another date shall be true, correct and complete in all material respects as of the date:
AUTHORIZED SIGNATURE: ______________________________________________________ Phone Number: _____________________________________
____________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
[ ] LOAN ADVANCE:
COMPLETE OUTGOING WIRE REQUEST SECTION BELOW IF ALL OR A PORTION OF THE
FUNDS FROM THIS LOAN ADVANCE ARE FOR AN OUTGOING WIRE.
From Account #__________________________________ To Account #_________________________________________
(Loan Account #) (Deposit Account #)
Amount of Advance $______________________________
All Borrower's representation and warranties in the Loan and Security Agreement are true, correct and complete in all material
respects to on the date of the telephone transfer request for and advance, but those representations and warranties expressly
referring to another date shall be true, correct and complete in all material respects as of the date:
AUTHORIZED SIGNATURE: ______________________________________________________ Phone Number: _____________________________________
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
OUTGOING WIRE REQUEST
COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO BE WIRED.
Deadline for same day processing is 12:00 pm, P.S.T.
Beneficiary Name: ____________________________________ Amount of Wire: $________________________________
Beneficiary Bank: ____________________________________ Account Number: ________________________________
City and Sate: ________________________________________________
Beneficiary Bank Transit (ABA) #: __ __ __ __ __ __ __ __ Beneficiary Bank Code (Swift, Sort, Chip, etc.): _____________________
(FOR INTERNATIONAL WIRE ONLY)
Intermediary Bank: ___________________________________ Transit (ABA) #: ____________________________________________
For Further Credit to: _________________________________________________________________________________________
Special Instruction: ___________________________________________________________________________________________
By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and
subject to the terms and conditions set forth in the agreements(s) covering funds transfer service(s), which agreements(s) were
previously received and executed by me (us).
Authorized Signature: _____________________________________ 2nd Signature (If Required): ________________________________
Print Name/Title:__________________________________________ Print Name/Title:____________________________________________
Telephone # _______________________________________________ Telephone # _________________________________________________
2
Schedule to Loan and Security Agreement
The exact correct corporate name of Borrower is (attach a copy of the formation
documents, e.g., articles, partnership agreement): _____________________________
Borrower's State of formation: _________________________________
Borrower has operated under only the following other names (if none, so state):
________________________________________________________________________
All other address at which the Borrower does business are as follows (attach
additional sheets if necessary and include all warehouse addresses):
_____________________________________________________________________________
Borrower has deposit accounts and/or investment accounts located only at the
following institutions:
_____________________________________________________________________________
List Acct. Numbers:__________________________________________________________
Liens existing on the Closing Date and disclosed to and accepted by Bank in
writing:
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
Investments existing on the Closing Date and disclosed to and accepted by Bank
in writing:
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
SUBORDINATED DEBT:
Indebtedness on the Closing Date and disclosed to and consented to by Bank in
writing:
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
The following is a list of the Borrower's copyrights (including copyrights of
software) which are registered with the United States Copyright Office. (Please
include name of the copyright and registration number ):
_____________________________________________________________________________
_____________________________________________________________________________
The following is a list of all software which the Borrower sells, distributes or
licenses to others, which is not registered with the United States Copyright
Office. (Please include versions which are not registered:
_____________________________________________________________________________
The following is a list of all of the Borrower's patents which are registered
with the United States Patent Office. (Please include name of the patent and
registration number .):
_____________________________________________________________________________
_____________________________________________________________________________
The following is a list of all of the Borrower's patents which are pending with
the United States Patent Office. (Please include name of the patent .):
______________________________________________________________
3
The following is a list of all of the Borrower's registered trademarks. (Please
include name of the trademark and a copy of the registration.):
_____________________________________________________________________________
Borrower is not currently aware of any litigation which would have a material
adverse effect on the Borrower's financial condition, except the following
(attach additional comments, if needed):
_____________________________________________________________________________
_____________________________________________________________________________
Tax ID Number ______________________________________________
Organizational Number, if any:______________________________
4
EXHIBIT C
BORROWING BASE CERTIFICATE
________________________________________________________________________________
Borrower: SYNAPTICS INCORPORATED Bank: Silicon Valley Bank
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Commitment Amount: $4,200,000
________________________________________________________________________________
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of _________________ $_______________
2. Additions (please explain on reverse) $_______________
3. TOTAL ACCOUNTS RECEIVABLE $_______________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due** $_______________
5. Balance of 50% over 90 day accounts $_______________
6. Credit balances over 90 days $_______________
7. Concentration Limits*** $_______________
8. Foreign Accounts* $_______________
9. Governmental Accounts $_______________
10. Contra Accounts $
11. Promotion or Demo Accounts $_______________
12. Intercompany/Employee Accounts $_______________
13. Other (please explain on reverse) $_______________
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_______________
15. Eligible Accounts (#3 minus #14) $_______________
16. LOAN VALUE OF ACCOUNTS (75% of #15) $_______________
* The borrowing base includes Accounts owing from Samsung, LG Electronics,
Compal, Acer, Quanta, Inventec, Panasonic, Arima, Foxconn and those pre-approved
by Bank on a case by case basis.
** 105 days for Quanta
*** 45% for Quanta
BALANCES
17. Maximum Loan Amount $_______________
18. Total Funds Available [Lesser of #17 or #16] $_______________
19. Present balance owing on Line of Credit $_______________
20. Outstanding under Sublimits (LC or FX or CM) $_______________
21. RESERVE POSITION (#18 minus #19 and #20) $_______________
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.
COMMENTS:
_________________________
BANK USE ONLY
Rec'd By: ___________
Auth. Signer
Date: ______________
Verified: ___________
Auth. Signer
Date: ______________
____________________
5
SYNAPTICS INCORPORATED
By: _________________________________________________
Authorized Signer
6
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
FROM: SYNAPTICS INCORPORATED
The undersigned authorized officer on behalf of SYNAPTICS INCORPORATED
("Borrower") certifies that under the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending _______________ with all required
covenants except as noted below and (ii) all representations and warranties in
the Agreement are true and correct in all material respects on this date.
Attached are the required documents supporting the certification. The Officer
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) consistently applied from one period to the next
except as explained in an accompanying letter or footnotes. The Officer
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
and Compliance Certificate
Annual (Audited) FYE within 120 days Yes No
A/R & A/P Agings (by invoice date) Monthly within 30 days Yes No
Borrowing Base Certificate Monthly within 30 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio 1.25:1.00 _____:1.00 Yes No
Profitability: *$1.00 $__________ Yes No
*on a three month rolling average
Have there been updates to Borrower's intellectual property, if appropriate?
Yes / No
______________________________________________
COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
Received by: _________________________________
Sincerely, AUTHORIZED SIGNER
Date: ________________________________________
SYNAPTICS INCORPORATED
Verified: ____________________________________
_____________________________________________ AUTHORIZED SIGNER
SIGNATURE
Date: ________________________________________
_____________________________________________
TITLE
Compliance Status: Yes No
______________________________________________
_____________________________________________
DATE
2
[SILICON VALLEY BANK LOGO]
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: SYNAPTICS INCORPORATED
LOAN OFFICER: XXXXX XXXXXXXX
DATE: AUGUST 15, 2001
REVOLVING LOAN FEE $20,000.00
CREDIT REPORT 35.00
UCC SEARCH FEE 200.00
UCC FILING FEE 75.00
INTELLECTUAL PROPERTY FILING FEES 550.00
DOCUMENTATION FEE 1,500.00
TOTAL FEE DUE $22,360.00
==========
PLEASE INDICATE THE METHOD OF PAYMENT:
[ ] A CHECK FOR THE TOTAL AMOUNT IS ATTACHED.
[ ] DEBIT DDA # __________________ FOR THE TOTAL AMOUNT.
[X] LOAN PROCEEDS
BORROWER:
BY:/S/ X. X. XXXXXXX, VP & CFO
-----------------------------------------
(AUTHORIZED SIGNER)
/S/ XXX X. XXXXX, 9/4/01
--------------------------------------------
SILICON VALLEY BANK (DATE)
ACCOUNT OFFICER'S SIGNATURE
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement is entered into as of
August 30, 2001 by and between SILICON VALLEY BANK ("Bank") and SYNAPTICS
INCORPORATED ("Grantor").
RECITALS
A. Bank has agreed to make certain advances of money and to
extend certain financial accommodation to Grantor (the "Loans") in the amounts
and manner set forth in that certain Loan and Security Agreement by and between
Bank and Grantor dated August 30, 2001 (as the same may be amended, modified or
supplemented from time to time, the "Loan Agreement"; capitalized terms used
herein are used as defined in the Loan Agreement). Bank is willing to make the
Loans to Grantor, but only upon the condition, among others, that Grantor shall
grant to Bank a security interest in certain Copyrights, Trademarks, Patents,
and Mask Works to secure the obligations of Grantor under the Loan Agreement.
B. Pursuant to the terms of the Loan Agreement, Grantor has
granted to Bank a security interest in all of Grantor's right, title and
interest, whether presently existing or hereafter acquired, in, to and under all
of the Collateral.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, and intending to be legally bound, as collateral
security for the prompt and complete payment when due of its obligations under
the Loan Agreement, Grantor hereby represents, warrants, covenants and agrees as
follows:
AGREEMENT
To secure its obligations under the Loan Agreement, Grantor grants and
pledges to Bank a security interest in all of Grantor's right, title and
interest in, to and under its Intellectual Property Collateral (including
without limitation those Copyrights, Patents, Trademarks and Mask Works listed
on Schedules A, B, C, and D hereto), and including without limitation all
proceeds thereof (such as, by way of example but not by way of limitation,
license royalties and proceeds of infringement suits), the right to xxx for
past, present and future infringements, all rights corresponding thereto
throughout the world and all re-issues, divisions continuations, renewals,
extensions and continuations-in-part thereof.
This security interest is granted in conjunction with the security
interest granted to Bank under the Loan Agreement. The rights and remedies of
Bank with respect to the security interest granted hereby are in addition to
those set forth in the Loan Agreement and the other Loan Documents, and those
which are now or hereafter available to Bank as a matter of law or equity. Each
right, power and remedy of Bank provided for herein or in the Loan Agreement or
any of the Loan Documents, or now or hereafter existing at law or in equity
shall be cumulative and concurrent and shall be in addition to every right,
power or remedy provided for herein and the exercise by Bank of any one or more
of the rights, powers or remedies provided for in this Intellectual Property
Security Agreement, the Loan Agreement or any of the other Loan Documents, or
now or hereafter existing at law or in equity, shall not preclude the
simultaneous or later exercise by any Bank designee, including Bank, of any or
all other rights, powers or remedies.
IN WITNESS WHEREOF, the parties have cause this Intellectual Property
Security Agreement to be duly executed by its officers thereunto duly authorized
as of the first date written above.
GRANTOR:
Address of Grantor: SYNAPTICS INCORPORATED
0000 Xxxxxx Xxxxx By: X. X. Xxxxxxx
----------------------------------- -----------------------------------
Xxx Xxxx, XX 00000
-----------------------------------
Title: VP & CFO
--------------------------------
Attn: CFO
-----------------------------
BANK:
Address of Bank: SILICON VALLEY BANK
0000 Xxxxxx Xxxxx By: /s/ Xxx X. Xxxxx
-----------------------------------
Xxxxx Xxxxx, XX 00000-0000
Title: VP
--------------------------------
Attn:
-----------------------------
2
EXHIBIT A
Copyrights
Description Registration/ Registration/
----------- Application Application
Number Date
------ ----
EXHIBIT B
Patents
Description Registration/ Registration/
----------- Application Application
Number Date
------ ----
EXHIBIT C
Trademarks
Description Registration/ Registration/
----------- Application Application
Number Date
------ ----
EXHIBIT D
Mask Works
Description Registration/ Registration/
----------- Application Application
Number Date
------ ----
CORPORATE BORROWING RESOLUTION
BORROWER: SYNAPTICS INCORPORATED BANK: SILICON VALLEY BANK
0000 XXXXXX XXXXX 0000 XXXXXX XXXXX
XXX XXXX, XX 00000 XXXXX XXXXX, XX 00000-0000
I, THE SECRETARY OR ASSISTANT SECRETARY OF SYNAPTICS INCORPORATED ("BORROWER"),
CERTIFY that Borrower is a corporation existing under the laws of the State of
California.
I certify that at a meeting of Borrower's Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.
It is resolved that ANY ONE of the following officers of Borrower, whose name,
title and signature is below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
Xxxxxxx Xxx President & CEO /s/ Xxxxxxx Xxx
-------------------------------------- ------------------------------------- ------------------------------
Xxxxxxx X. Xxxxxxx VP & CFO /s/ X. X. Xxxxxxx
-------------------------------------- ------------------------------------- ------------------------------
-------------------------------------- ------------------------------------- ------------------------------
-------------------------------------- ------------------------------------- ------------------------------
may act for Borrower and:
BORROW MONEY. Borrow money from Silicon Valley Bank ("Bank").
EXECUTE LOAN DOCUMENTS. Execute any loan documents Bank requires.
GRANT SECURITY. Grant Bank a security interest in any of Borrower's
assets.
NEGOTIATE ITEMS. Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an
interest and receive cash or otherwise use the proceeds.
LETTERS OF CREDIT. Apply for letters of credit from Bank.
FOREIGN EXCHANGE CONTRACTS. Execute spot or forward foreign exchange
contracts.
FURTHER ACTS. Designate other individuals to request advances, pay fees
and costs and execute other documents or agreements (including
documents or agreement that waive Borrowers right to a jury trial) they
think necessary to effectuate these Resolutions.
Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.
I certify that the persons listed above are Borrower's officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.
CERTIFIED TO AND ATTESTED BY:
X /s/ X. X. Xxxxxxx
------------------------------------------------------
*Secretary or Assistant Secretary
X /s/ Xxxxxxxx Xxxxxx, Chairman of the Board
------------------------------------------------------
*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.
2