This LOAN AND SECURITY AGREEMENT (this "Agreement") dated October 21,
1999, between SILICON VALLEY BANK ("Bank") and xXxxxxxx.xxx ("Borrower"),
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. Capitalized terms in this Agreement
shall have the meanings set forth in Section 14. This Agreement shall be
construed to impart upon Bank a duty to act reasonably at all times.
2. LOAN AND TERMS OF PAYMENT
2.1 Credit Extensions. Borrower will pay Bank the unpaid principal amount of all
Credit Extensions and interest on the unpaid principal amount of the Credit
Extensions.
2.1.1 Bridge Loan.
(a) Before its receipt of the Term Sheets, Bank will make advances
("Bridge Loan Advance" and, collectively, "Bridge Loan Advances") in an
aggregate amount up to One Million Six Hundred Fifty Thousand Dollars
($1,650,000). After its receipt of the Term Sheets, Borrower will make Bridge
Loan Advances in an aggregate amount not to exceed the Committed Bridge Loan.
All outstanding Bridge Loan Advances plus all accrued interest will be due and
payable on the Bridge Loan Maturity Date. Notwithstanding the foregoing,
Borrower may extend the Bridge Loan Maturity Date (the "Extended Bridge Loan
Maturity Date") to the earlier of (i) 120 days after the Closing Date, or (ii)
February 14, 2000, provided that Bank has received (a) written notice of such
extension from Borrower prior to the Bridge Loan Maturity Date, (b) a $12,250
extension fee which shall be fully earned and non-refundable, and (c) term
sheets signed by investors satisfactory to Bank in form and substance
satisfactory to Bank, evidencing such investors' intention to invest not less
than Four Million Dollars ($4,000,000) in Borrower in the form of Borrower's
equity securities. Bridge Loan Advances, when repaid, may not be reborrowed.
(b) To obtain a Bridge Loan Advance, Borrower must notify Bank (the
notice is irrevocable) by facsimile no later than 3:00 p.m. Pacific time 1
Business Day before the day on which the Bridge Loan is to be made. The notice
must be in the form of Exhibit B (Payment/Advance Form). The notice must be
signed by a Responsible Officer or designee.
2.1.2 Revolving Advances.
(a) Upon (i) the occurrence of an Equity Event, (ii) the pay off by
Borrower of all outstanding Bridge Loan Advances and accrued interest thereon,
(iii) the termination of Bank's obligation to make Bridge Loan Advances under
the Bridge Loan, (iv) Bank's receipt of a $6,250 conversion fee which shall be
fully earned and nonrefundable, and (v) an audit of Borrower's Accounts
satisfactory to Bank, Bank will make aggregate Advances not exceeding the
Committed Revolving Line or the Borrowing Base, whichever is less. 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 3:00 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 believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to that reliance.
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(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances and accrued interest thereon are immediately payable.
2.2 Overadvances. If Borrower's Obligations under Section 2.1.2 exceed the
lesser of either (i) the Committed Revolving Line or (ii) the Borrowing Base,
Borrower must immediately pay in cash to Bank the excess.
2.3 Interest Rate; Payments.
(a) Interest Rate. Bridge Loan Advances accrue interest on the
outstanding principal balance at a per annum rate of two and three quarters of
one percent (2.75%) above the Prime Rate. Advances accrue interest on the
outstanding principal balance at a per annum rate of one and one quarter of one
percent (1.25%) above the Prime Rate. After 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 is payable on the twentieth (20th) of each
month. Bank may debit any of Borrower's deposit accounts including Account
Number __________ for principal and interest payments or any amounts Borrower
owes Bank. Bank will 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 to Bank:
(a) Facility Fee. A fully earned, non-refundable facility fee of
$18,750 due on the Closing Date; and
(b) Bank Expenses. All Bank Expenses (including reasonable attorneys'
fees and expenses incurred through and after the Closing Date 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 it
receive the agreements, documents and fees it requires.
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
in Section 5 remain 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. Bank may place a "hold" on any
deposit account pledged as Collateral. If the Agreement is terminated, Bank's
lien and security interest in the Collateral will continue until Borrower fully
satisfies its Obligations.
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.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formations 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 cause a Material Adverse Change.
5.2 Collateral. Borrower has good title to the Collateral, free of Liens
except Permitted Liens. The Eligible 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. 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
non-exclusive 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 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 Borrower's knowledge, threatened by or against
Borrower or any Subsidiary in which an adverse decision could 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.
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 with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could 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. 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.
5.7 Subsidiaries. Borrower does not own any stock, partnership interest or
other equity securities except for Permitted Investments.
5.8 Full Disclosure. No representation, warranty or other statement of
Borrower in any certificate or written statement given to Bank contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained in the certificates or statements not
misleading.
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6. AFFIRMATIVE COVENANTS
Borrower will do all of the following:
6.1 Government Compliance. Borrower will maintain its and all Subsidiaries'
corporate existence and good standing in its jurisdiction of incorporation and
maintain qualification in each jurisdiction in which the failure to so qualify
could have 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 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, in a form acceptable to Bank and certified by a
Responsible Officer; (ii) as soon as available, but no later than 120 days after
the end of Borrower's fiscal year, consolidated financial statements prepared
under GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm
acceptable to Bank; (iii) or if Borrower is or becomes a public Company, then in
lieu of the requirements in this Section 6.2(a)(i) and 6.2(a)(ii), within 5 days
of filing, copies of all statements, reports and notices made available to
Borrower's security holders or to any holders of Subordinated Debt and all
reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission; (iv) a prompt report of any legal actions pending or threatened
against Borrower or any Subsidiary that could result in damages or costs to
Borrower or any Subsidiary of $100,000 or more; (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; and (vi) budgets, sales projections,
operating plans or other financial information Bank requests.
(b) Prior to the initial Advance, and 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 and accounts payable.
(c) Prior to the initial Advance, and 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) Bank has the right to audit Borrower's Accounts at Borrower's
expense, but the audits will be conducted no more often than prior to the
initial Advance and once every 6 months thereafter 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 as
they exist at the Closing Date. Borrower must promptly notify Bank of all
returns, recoveries, disputes and claims that involve more than $50,000.
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.
6.5 Insurance. Borrower will keep its business and the Collateral insured
for risks and in amounts, as Bank requests. Insurance policies will be in a
form, with companies, and in amounts that are satisfactory to Bank. All property
policies will have a lender's loss payable endorsement showing Bank as a 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
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of all premium payments. Proceeds payable under any policy will, at Bank's
option, be payable to Bank on account of the Obligations.
6.6 Primary Accounts. Borrower will maintain its primary depository and
operating accounts with Bank.
6.7 Financial Covenants.
Prior to the initial Advance and continuing thereafter, Borrower will
maintain as of the last day of each month, unless otherwise noted:
Quick Ratio. A ratio of Quick Assets to Current Liabilities of
at least 2.0 to 1.0.
Tangible Net Worth. A Tangible Net Worth plus Subordinated
Debt of at least $13,000,000.
Profitability/Losses. Prior to the initial Advance and
continuing thereafter, Borrower shall not suffer a loss in excess of
$9,000,000 for the fiscal quarter ending March 31, 2000. Borrower shall
not suffer a loss in excess of $9,500,000 for the fiscal quarter ending
June 30, 2000. Borrower shall not suffer a loss in excess of $7,500,000
for the fiscal quarter ending September 30, 2000.
6.8 Registration of Intellectual Property Rights. Borrower will register
with the United States Copyright Office (i) any software material to the
business of Borrower it has, develops or acquires (including those in Exhibit A
to the Intellectual Property Security Agreement) within 30 days of the Closing
Date, and additional software rights developed or acquired, including
significant revisions, additions or improvements to the software or revisions,
additions or improvements which significantly improve the functionality of the
software, after the Closing Date before the sale or licensing to any third party
of the software or any product based on or containing any software. Borrower
will promptly notify Bank upon Borrower's filing of any application or
registration of any Intellectual Property rights with the United States Patent
and Trademark Office and Borrower will execute and deliver any and all
instruments and documents as Bank may require to evidence or perfect Bank's
security interest in such application or registration.
Borrower will: (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property; (ii) promptly advise Bank in
writing of material infringements of the Intellectual Property; and (iii) not
allow any Intellectual Property to be abandoned, forfeited or dedicated to the
public without Bank's written consent.
6.9 Further Assurances. Borrower will execute any further instruments and
take further action as Bank 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 the Bank's written
consent, which will not be unreasonably withheld:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than a Transfer (i) of Inventory
in the ordinary course of business; (ii) of non-exclusive 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.
7.2 Changes in Business, Ownership, Management or Business Locations.
Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses currently engaged in by Borrower or have a change in its
ownership (other than the sale of Borrower's equity securities in a public
offering or to venture capital investors approved by Bank) or management.
Borrower will not, without at least 30 days prior written notice to Bank,
relocate its principal executive office or add any new offices or business
locations.
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
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stock or property of another Person except where (i) such transactions do not
result in a decrease of more than 25% of Tangible Net Worth and (ii) no Event of
Default has occurred and is continuing or would exist after giving effect to the
transactions. 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 of Bank's first priority security interest in the
Collateral to change.
7.6 Investments; Distributions. (i) 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; or (ii) pay any
dividends or make any distribution or payment or redeem, retire or purchase any
capital stock.
7.7 Transactions with Affiliates. Directly or indirectly enter or permit
any material transaction with any Affiliate, except transactions that are in the
ordinary course of Borrower's business, on terms less favorable to Borrower than
would be obtained in an arm's length transaction with a non-affiliated Person.
7.8 Subordinated Debt. Make or permit any payment on any Subordinated Debt,
except under the terms of the Subordinated Debt, or amend any provision in any
document relating to the Subordinated Debt, without Bank's prior written
consent.
7.9 Compliance. Undertake as one of its important activities extending
credit to purchase or carry margin stock, or use the proceeds of any Advance 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 have a material adverse effect on Borrower's
business or operations or cause a Material Adverse Change, or permit any of its
Subsidiaries to do so.
8. EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 Payment Default. Borrower fails to pay any of the Obligations when due;
8.2 Covenant Default. Borrower does not perform any obligation in Section 6
or violates any covenant in Article 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 10
days after it occurs, or if the default cannot be cured within 10 days or cannot
be cured after Borrower's attempts in the 10 day period, and the default may be
cured within a reasonable time, then Borrower has an additional time, (of not
more than 30 days) to attempt to cure the default. During the additional period
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. (i) A material impairment in the perfection or
priority of Bank's security interest in the Collateral or in the value of such
Collateral which is not covered by adequate insurance occurs; or (ii) Bank
determines, based upon information available to it and in its reasonable
judgment, that there is a reasonable likelihood that Borrower will fail to
comply with one or more of the financial covenants in Section 6 during the next
succeeding financial reporting period;
8.4 Attachment. (i) Any material portion of Borrower's assets is attached,
seized, levied on, or comes into possession of a trustee or receiver and the
attachment, seizure or levy is not removed in 10 days; (ii) Borrower is
enjoined, restrained, or prevented by court order from conducting a material
part of its business; (iii) a judgment or other claim becomes a Lien on a
material portion of Borrower's assets; or (iv) a notice of lien, levy, or
assessment is
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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. (i) Borrower becomes insolvent; (ii) Borrower begins an
Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against
Borrower and not dismissed or stayed within 30 days (but no Credit Extensions
will be made before any Insolvency Proceeding is dismissed);
8.6 Misrepresentations. 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 requests and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral. Bank is 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. 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 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
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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 or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other person. Borrower bears
all risk of loss, damage or destruction of the Collateral.
9.6 Remedies Cumulative. Bank's rights and remedies under this Agreement,
the Loan Documents, and all other agreements are cumulative. Bank has all rights
and remedies provided under the Code, by law, or in equity. Bank's exercise of
one right or remedy is not an election, and Bank's waiver of any Event of
Default is not a continuing waiver. Bank's delay is not a waiver, election, or
acquiescence. No waiver 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 guaranties held by Bank on which Borrower is
liable.
10. NOTICES
All notices or demands by any party to this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile at the addresses listed at the beginning of this
Agreement. 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 OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement binds and is for the benefit of
the successors and permitted assigns of each party. Borrower may not assign this
Agreement or any rights or Obligations under it without Bank's prior written
consent which may be granted or withheld in Bank's discretion. Bank has the
right, without the consent of or notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits under this Agreement, the Loan Documents
or any related agreement.
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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 signed by both Bank and Borrower. This Agreement and the Loan
Documents represent the entire agreement about this subject matter, and
supersedes prior or contemporaneous negotiations or agreements. All prior or
contemporaneous agreements, understandings, representations, warranties, and
negotiations between the parties about the subject matter of this Agreement and
the Loan Documents merge into this Agreement and the Loan Documents.
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, are one
Agreement.
12.7 Survival. All covenants, representations and warranties made in this
Agreement continue in full force while any Obligations remain outstanding.
Notwithstanding the foregoing, Bank's rights set forth under Section 13 of this
Agreement shall survive termination of this Agreement. 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; (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; or (b) is disclosed
to Bank by a third party, if Bank does not know that the third party is
prohibited from disclosing the information.
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 costs
and expenses incurred, in addition to any other relief to which it may be
entitled, whether or not a lawsuit is filed.
13. BANK'S RIGHT TO INVEST IN BORROWER. Bank shall have the right, but not
the obligation, to participate as an investor with a one-time option to invest
up to $250,000 in cash in a future round of equity of Borrower following its
Series D Preferred Stock offering, or prior to the occurrence of Borrower's
first bona fide offering pursuant to a registration statement under the
Securities Act of 1933, as amended (the "IPO"), Borrower shall recommend to its
underwriters that Bank be allowed to invest up to $250,000 in cash in the IPO.
14. DEFINITIONS
14.1 Definitions.
"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.
9
"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.
"Bank Expenses" are all audit fees and expenses and reasonable costs or
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 (i) Eighty percent (80%) of Eligible Accounts, as
determined by Bank from Borrower's most recent Borrowing Base Certificate.
Bridge Loan Advance" is defined in Section 2.1.1
"Bridge Loan Maturity Date" is, subject to the extension set forth in
Section 2.1.1, the earlier of (i) the Equity Event, (ii) ninety (90) days from
the Closing Date, or (iii) January 14, 2000.
"Business Day" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.
"Closing Date" is the date of this Agreement.
"Code" is the California Uniform Commercial Code.
"Collateral" is the property described on Exhibit A.
"Committed Bridge Loan" is a Credit Extension of up to Two Million Five
Hundred Thousand Dollars ($2,500,000).
"Committed Revolving Line" is a Credit Extension of up to Two Million
Five Hundred Thousand Dollars ($2,500,000).
"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, Bridge Loan Advance, or any other
extension of credit by Bank for Borrower's benefit.
10
"Current Assets" are amounts that under GAAP should be included on that
date as current assets on Borrower's consolidated balance sheet.
"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 5.2;
but Bank may 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 of
invoice date;
(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, for the amounts that exceed
that percentage, unless Bank approves in writing;
(e) Accounts for which the account debtor does not have its principal
place of business in the United States (except for Eligible Foreign Accounts);
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality except for
Accounts of the United States if the payee has assigned its payment rights to
Bank and the assignment has been acknowledged under the Assignment of Claims Act
of 1940 (31 U.S.C. 3727);
(g) Accounts for which Borrower owes the account debtor, but only up to
the amount owed (sometimes called "contra" accounts, accounts payable, customer
deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on approval, xxxx
and hold, or other terms if account debtor's payment may be conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes
any claim and Bank believes there may be a basis for dispute (but only up to the
disputed or claimed amount), or if the Account Debtor is subject to an
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
"Eligible Foreign Accounts" are Accounts for which the account debtor
does not have its principal place of business in the United States but are: (1)
covered by credit insurance satisfactory to Bank, less any deductible; or (2)
supported by letter(s) of credit acceptable to Bank; or (3) that Bank approves
in writing.
"Equipment" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"Equity Event" means the receipt by Borrower of not less than Forty
Million Dollars ($40,000,000) of proceeds from the sale or issuance after the
Closing Date of its equity securities to investors satisfactory to Bank.
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
11
"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" is any proceeding by or against any Person
under the United States Bankruptcy Code, or any other bankruptcy or insolvency
law, including assignments for the benefit of creditors, compositions,
extensions generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Intellectual Property" is:
(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.
"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.
"Material Adverse Change" is defined in Section 8.3.
"Mask Works" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"Maturity Date" is the Revolving Maturity Date.
"Obligations" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including 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.
12
"Permitted Indebtedness" is:
(a) Borrower's indebtedness to Bank under this Agreement or the Loan
Documents;
(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; and
(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 $50,000 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 $50,000 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;
13
(i) Joint ventures or strategic alliances {in the ordinary course of
Borrower's business} consisting of the {non-exclusive} licensing of technology,
the development of technology or the providing of technical support, provided
that any cash investments by Borrower do not exceed $50,000 in the aggregate in
any fiscal year; and
(j) Other Investments not otherwise permitted by Section 7.7 not
exceeding $50,000 in the aggregate outstanding at any time.
"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) Leases or subleases and licenses or sublicenses granted in the
ordinary course of Borrower's business, if the leases, subleases, licenses and
sublicenses permit granting Bank a security interest;
(e) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (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;
(f) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.4 or 8.7;
(g) 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
(h) 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, 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 less 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 the earlier of (i) twelve (12) months
following the Closing Date, or (ii) November 1, 2000.
"Schedule" is any attached schedule of exceptions.
14
"Subordinated Debt" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (and identified as subordinated by Borrower and Bank).
"Subsidiary" is for any Person, joint venture, or any other business
entity of which more than 50% of the voting stock or other equity interests is
owned or controlled, directly or indirectly, by the Person or one or more
Affiliates of the Person.
"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 plus Subordinated Debt.
"Term Sheets" means term sheets signed by investors satisfactory to
Bank in form and substance satisfactory to Bank, evidencing such investors'
intention to invest not less than Seven Million Five Hundred Thousand Dollars
($7,500,000) in Borrower in the form of Borrower's equity securities.
"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 service xxxx 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:
xXxxxxxx.xxx
By: _____________________________________
Title: ___________________________________
SILICON VALLEY BANK
By: _____________________________________
Title: ___________________________________
15
EXHIBIT A
---------
COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT
All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created, written, produced or
acquired, including, but not limited to:
(a) all accounts receivable, accounts, chattel paper, contract
rights (including, without limitation, royalty agreements, license agreements
and distribution agreements), documents, instruments, money, deposit accounts
and general intangibles, including, without limitation, returns, repossessions,
books and records relating thereto, and equipment containing said books and
records, all investment property, including securities and securities
entitlements;
(b) all software, computer source codes and other computer
programs (collectively, the "Software Products"), and all common law and
statutory copyrights and copyright registrations, applications for registration,
now existing or hereafter arising, United States of America and foreign,
obtained or to be obtained on or in connection with the Software Products, or
any parts thereof or any underlying or component elements of the Software
Products together with the right to copyright and all rights to renew or extend
such copyrights and the right (but not the obligation) of Bank (herein referred
to as "Bank" or "Secured Party") to xxx in its own name and/or the name of the
Debtor for past, present and future infringements of copyright;
(c) all goods, including, without limitation, equipment and
inventory (including, without limitation, all export inventory);
(d) all guarantees and other security therefor;
(e) all trademarks, service marks, trade names and service
names and the goodwill associated therewith;
(f) (a) all patents and patent applications filed in the
United States Patent and Trademark Office or any similar office of any foreign
jurisdiction, and interests under patent license agreements, including, without
limitation, the inventions and improvements described and claimed therein, (b)
licenses pertaining to any patent whether Debtor is licensor or licensee, (c)
all income, royalties, damages, payments, accounts and accounts receivable now
or hereafter due and/or payable under and with respect thereto, including,
without limitation, damages and payments for past, present or future
infringements thereof, (d) the right (but not the obligation) to xxx for past,
present and future infringements thereof, (e) all rights corresponding thereto
throughout the world in all jurisdictions in which such patents have been issued
or applied for, and (f) the reissues, divisions, continuations, renewals,
extensions and continuations-in-part with any of the foregoing (all of the
foregoing patents and applications and interests under patent license
agreements, together with the items described in clauses (a) through (f) in this
paragraph are sometimes herein individually and collectively referred to as the
"Patents"); and
(g) all products and proceeds, including, without limitation,
insurance proceeds, of any of the foregoing.
16
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT DIVISION DATE: _______________
FAX #: (000) 000-0000 TIME: _______________
--------------------------------------------------------------------------------
FROM: _________________________________________________________________________
CLIENT NAME (BORROWER)
REQUESTED BY: _________________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:__________________________________________________________
PHONE NUMBER: _________________________________________________________________
FROM ACCOUNT # ______________________ TO ACCOUNT # ________________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
$_____________________________
PRINCIPAL INCREASE (ADVANCE) $_____________________________
PRINCIPAL PAYMENT (ONLY) $_____________________________
INTEREST PAYMENT (ONLY) $_____________________________
PRINCIPAL AND INTEREST (PAYMENT) $_____________________________
OTHER INSTRUCTIONS: __________________________________________________________
--------------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Amended
and Restated Loan Agreement are true, correct and complete in all material
respects as of the date of the telephone request for and Advance confirmed by
this Borrowing Certificate; provided, however, that those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BANK USE ONLY
TELEPHONE REQUEST:
------------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
_____________________________ _____________________________
Authorized Requester Phone #
_____________________________ _____________________________
Received By (Bank) Phone #
_____________________________
Authorized Signature (Bank)
17
EXHIBIT C
BORROWING BASE CERTIFICATE
--------------------------------------------------------------------------------
Borrower: xXxxxxxx.xxx Lender: Silicon Valley Bank
Commitment Amount: $2,500,000
--------------------------------------------------------------------------------
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 (80% of #15) $__________
BALANCES
17. Maximum Loan Amount $2,500,000
18. Total Funds Available [Lesser of #17 or #16] $__________
19. Present balance owing on Line of Credit $__________
20. Outstanding under Sublimits (if any) $__________
21. RESERVE POSITION (#18 minus #19 and #20) $__________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
------------------------------
COMMENTS:
By: ___________________________________
Authorized Signer
------------------------------
18
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: xXxxxxxx.xxx
The undersigned authorized officer of xXxxxxxx.xxx 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
Annual (CPA Audited) FYE within 120 days Yes No
10-Q, 10K and 8-K Within 5 days after filing with SEC Yes No
A/R & A/P Agings Monthly within 30 days Yes No
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio 2.0:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $13,000,000 $___________ Yes No
Profitability/Losses Quarterly* $___________ $___________ Yes No
*$9,000,000 for FQE 3/31/00, $9,500,000 for FQE 6/30/00, and
$7,500,000 for FQE 9/30/00
---------------------------------
Comments Regarding Exceptions: See Attached.
BANK USE ONLY
Received by:_____________________
Sincerely, AUTHORIZED SIGNER
Date:____________________________
____________________________________________ Verified:________________________
SIGNATURE AUTHORIZED SIGNER
____________________________________________ Date:____________________________
TITLE
Compliance Status Yes No
____________________________________________
DATE
---------------------------------
19
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: xXxxxxxx.xxx Bank: Silicon Valley Bank
================================================================================
LOAN TYPE. This is a Variable Rate bridge loan converting to a revolving line of
credit up to $2,500,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Short term Working
Capital.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Bridge
Amount paid to Borrower directly: $_________
Undisbursed Funds $_________
Principal $2,500,000
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Charges Paid in Cash:
$18,750 Initial Loan Fee
$TBD Outside Counsel Fees and Expenses
Total Charges Paid in Cash: $___________
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered _____________ the amount of any loan payment. If the
funds in the account are insufficient to cover any payment, Bank shall not be
obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF OCTOBER _______, 1999.
BORROWER:
xXxxxxxx.xxx
______________________________________
Authorized Officer
AGREEMENT TO PROVIDE INSURANCE
Grantor: xXxxxxxx.xxx Bank: Silicon Valley Bank
================================================================================
INSURANCE REQUIREMENTS. xXxxxxxx.xxx ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or the
providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation
that coverage will not be canceled or
diminished without a minimum of twenty (20)
days' prior written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of October ______, 1999, or earlier. Grantor acknowledges and
agrees that if Grantor fails to provide any required insurance or fails to
continue such insurance in force, Bank may do so at Grantor's expense as
provided in the Loan and Security Agreement. The cost of such insurance, at the
option of Bank, shall be payable on demand or shall be added to the indebtedness
as provided in the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO
PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION
AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN;
HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE
INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED OCTOBER
_______, 1999.
GRANTOR:
xXxxxxxx.xxx
x_______________________________
Authorized Officer
================================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE:_____________________________________________________ PHONE:_________
AGENT'S NAME:_____________________________________________
INSURANCE COMPANY:________________________________________
POLICY NUMBER:____________________________________________
EFFECTIVE DATES:__________________________________________
COMMENTS:_________________________________________________
================================================================================
CORPORATE RESOLUTIONS TO BORROW
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Borrower: xXxxxxxx.xxx
--------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of xXxxxxxx.xxx
(the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the State of _______________.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Certificate of Incorporation and Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the
Corporation, duly called and held, at which a quorum was present and voting (or
by other duly authorized corporate action in lieu of a meeting), the following
resolutions were adopted.
BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
_____________________ ____________________ _____________________
_____________________ ____________________ _____________________
_____________________ ____________________ _____________________
_____________________ ____________________ _____________________
_____________________ ____________________ _____________________
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
Borrow Money. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated as of October ______, 1999, as amended
from time to time (the "Loan Agreement").
Execute Notes. To execute and deliver to Bank the promissory note or
notes of the Corporation, on Lender's forms, at such rates of interest and on
such terms as may be agreed upon, evidencing the sums of money so borrowed or
any indebtedness of the Corporation to Bank, and also to execute and deliver to
Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion of
the notes.
Grant Security. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
Negotiate Items. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
Warrants. To issue a warrants to purchase the Corporation's capital
stock.
Letters of Credit; Foreign Exchange. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
Cash Management Services. To enter into that certain Cash Management
Services Agreement by and between Borrower and Bank authorizing Bank to perform
Cash Management Services as defined therein.
Further Acts. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances thereunder, and
in all cases, to do and perform such other acts and things, to pay any and all
fees and costs, and to execute and deliver such other documents and agreements
as they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the Corporation;
and that the Resolutions are in full force and effect and have not been modified
or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on _______________,
19___ and attest that the signatures set opposite the names listed above are
their genuine signatures.
CERTIFIED TO AND ATTESTED BY:
X____________________________
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