EXHIBIT 10.15
SIILCON VALLEY BANK
LOAN AND SECURITY AGREEMENT
BORROWER: FOURTH SHIFT CORPORATION
ADDRESS: 0000 XXXXXXXXXXXXX XXXXX
XXXXXXXXXXX, XX 00000
DATE: MARCH 2, 1998
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK, COMMERCIAL FINANCE DIVISION ("Silicon"), whose address
is 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000 and the borrower(s)
named above (jointly and severally, the "Borrower"), whose chief executive
office is located at the above address ("Borrower's Address"). The Schedule
to this Agreement (the "Schedule") shall for all purposes be deemed to be a
part of this Agreement, and the same is an integral part of this Agreement.
(Definitions of certain terms used in this Agreement are set forth in Section
8 below.)
1. LOANS.
1.1 LOANS. Silicon will make loans to Borrower (the "Loans"), in amounts
determined by Silicon in its* , up to the amounts (the "Credit Limit") shown
on the Schedule, provided no Default or Event of Default has occurred and is
continuing, and subject to deduction of any Reserves for accrued interest and
such other Reserves as Silicon deems proper from time to time.
*GOOD FAITH BUSINESS JUDGMENT
1.2 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth
to the contrary in this Agreement. Interest shall be payable monthly, on the
last day of the month. Interest may, in Silicon's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the
same rate as the other Loans. Silicon may, in its discretion, charge
interest to Borrower's Deposit Accounts maintained with Silicon. Regardless
of the amount of Obligations that may be outstanding from time to time,
Borrower shall pay Silicon minimum monthly interest during the term of this
Agreement in the amount set forth on the Schedule (the "Minimum Monthly
Interest").
1.3 OVERADVANCES. If at any time or for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit (an
"Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon on demand the amount of any Overadvance, Borrower agrees to
pay Silicon interest on the outstanding amount of any Overadvance, on demand,
at a rate equal to the interest rate which would otherwise be applicable to
the Overadvance, plus an additional 2% per annum.
1.4 FEES. Borrower shall pay Silicon the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to Silicon and
are not refundable.
1.5 LETTERS OF CREDIT. [Not Applicable]
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of all of
the Obligations when due, Borrower hereby grants to Silicon a security
interest in all of Borrower's interest in the following, whether now owned or
hereafter acquired, and wherever located (collectively, the "Collateral"):
All Inventory, Equipment, Receivables, and General Intangibles, including,
without limitation, all of Borrower's Deposit Accounts, and all money, and
all property now or at any time in the future in Silicon's possession
(including claims and credit balances), and all proceeds (including proceeds
of any insurance policies, proceeds of proceeds and claims against third
parties), all products and all books and records related to any of the
foregoing (all of the foregoing, together with all other property in which
Silicon may now or in the future be granted a lien or security interest, is
referred to herein, collectively, as the "Collateral").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower
covenants that the following representations will continue to be true*, and
that
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Borrower will at all times comply with all of the following covenants:
*(AND IF ANY OF THE FOLLOWING REPRESENTATIONS BECOMES UNTRUE IN THE FUTURE
DUE TO A CHANGE IN APPLICABLE LAW, BORROWER WILL IMMEDIATELY TAKE SUCH ACTION
AS IS REQUIRED IN ORDER TO BE IN COMPLIANCE WITH SUCH NEW APPLICABLE LAW AND
IN ORDER FOR THE REPRESENTATIONS TO CONTINUE TO BE TRUE)
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation, is and
will continue to be, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. Borrower is and
will continue to be qualified and licensed to do business in all
jurisdictions in which any failure to do so would have a material adverse
effect on Borrower. The execution, delivery and performance by Borrower of
this Agreement, and all other documents contemplated hereby (i) have been
duly and validly authorized, (ii) are enforceable against Borrower in
accordance with their terms (except as enforcement may be limited by
equitable principles and by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to creditors' rights generally), and
(iii) do not violate Borrower's articles or certificate of incorporation, or
Borrower's by-laws, or any law or any material agreement or instrument which
is binding upon Borrower or its property, and (iv) do not constitute grounds
for acceleration of any material indebtedness or obligation under any
material agreement or instrument which is binding upon Borrower or its
property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are
all prior names of Borrower and all of Borrower's present and prior trade
names. Borrower shall give Silicon 30 days' prior written notice before
changing its name or doing business under any other name. Borrower has
complied, and will in the future comply, with all laws relating to the
conduct of business under a fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In
addition, Borrower has places of business and Collateral is located only at
the locations set forth on the Schedule. Borrower will give Silicon at least
30 days prior written notice before opening any additional place of business,
changing its chief executive office, or moving any of the Collateral to a
location other than Borrower's Address or one of the locations set forth on
the Schedule.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at
all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Borrower. The Collateral now is and
will remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. Silicon now
has, and will continue to have, a first-priority perfected and enforceable
security interest in all of the Collateral, subject only to the Permitted
Liens, and Borrower will at all times defend Silicon and the Collateral
against all claims of others. None of the Collateral now is or will be
affixed to any real property in such a manner, or with such intent, as to
become a fixture. Borrower is not and will not become a lessee under any real
property lease pursuant to which the lessor may obtain any rights in any of
the Collateral and no such lease now prohibits, restrains, impairs or will
prohibit, restrain or impair Borrower's right to remove any Collateral from
the leased premises. Whenever any Collateral is located upon premises in
which any third party has an interest (whether as owner, mortgagee,
beneficiary under a deed of trust, lien or otherwise), Borrower shall,
whenever requested by Silicon, use its best efforts to cause such third party
to execute and deliver to Silicon, in form acceptable to Silicon, such
waivers and subordinations as Silicon shall specify, so as to ensure that
Silicon's rights in the Collateral are, and will continue to be, superior to
the rights of any such third party. Borrower will keep in full force and
effect, and will comply with all the terms of, any lease of real property
where any of the Collateral now or in the future may be located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in
good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Silicon in writing of any
material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements
now or in the future delivered to Silicon have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and accurately reflect the financial condition of
Borrower, at the times and for the periods therein stated. Between the last
date covered by any such statement provided to Silicon and the date hereof,
there has been no material adverse change in the financial condition or
business of Borrower. Borrower is now and will continue to be solvent.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely
pay, all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good
faith contests Borrower's obligation to pay the taxes by appropriate
proceedings promptly and diligently instituted and conducted, (ii) notifies
Silicon in writing of the commencement of, and any material development in,
the proceedings, and (iii) posts bonds or takes any other steps required to
keep the contested taxes from becoming a lien upon any of the Collateral.
Borrower is unaware of any claims or adjustments proposed for any of
Borrower's prior tax years which could result in additional taxes becoming
due and payable by Borrower. Borrower has paid, and shall continue to pay
all amounts necessary to fund all present and future pension, profit sharing
and deferred compensation plans in accordance with their terms, and Borrower
has not and will not withdraw from participation in, permit partial or
complete termination of, or permit the occurrence of any other event with
respect to, any such plan which could result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
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successors or any other governmental agency. Borrower shall, at all times,
utilize the services of an outside payroll service providing for the
automatic deposit of all payroll taxes payable by Borrower.
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and
local laws and regulations relating to Borrower, including, but not limited
to, those relating to Borrower's ownership of real or personal property, the
conduct and licensing of Borrower's business, and all environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of
Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which may result, either separately or in the aggregate, in any
material adverse change in the financial condition or business of Borrower,
or in any material impairment in the ability of Borrower to carry on its
business in substantially the same manner as it is now being conducted.
Borrower will promptly inform Silicon in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted by or
against Borrower involving any single claim of* or more, or involving* or
more in the aggregate.
*$250,000
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to
purchase or carry any "margin stock" or to extend credit to others for the
purpose of purchasing or carrying any "margin stock."
4. RECEIVABLES.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to Silicon as follows: Each Receivable with respect to which Loans
are requested by Borrower shall, on the date each Loan is requested and made,
(i) represent an undisputed bona fide existing unconditional obligation of
the Account Debtor created by the sale, delivery, and acceptance of goods or
the rendition of services in the ordinary course of Borrower's business, and
(ii) meet the Minimum Eligibility Requirements set forth in Section 8 below.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. All sales
and other transactions underlying or giving rise to each Receivable shall
fully comply with all applicable laws and governmental rules and regulations.
All signatures and indorsements on all documents, instruments, and
agreements relating to all Receivables are and shall be genuine, and all such
documents, instruments and agreements are and shall be legally enforceable in
accordance with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall deliver
to Silicon transaction reports and loan requests, schedules and assignments
of all Receivables, and schedules of collections, all on Silicon's standard
forms; provided, however, that Borrower's failure to execute and deliver the
same shall not affect or limit Silicon's security interest and other rights
in all of Borrower's Receivables, nor shall Silicon's failure to advance or
lend against a specific Receivable affect or limit Silicon's security
interest and other rights therein. Loan requests received after 12:00 Noon
will not be considered by Silicon until the next Business Day. * with each
such schedule and assignment, Borrower shall furnish Silicon with copies (or,
at Silicon's request, originals) of all contracts, orders, invoices, and
other similar documents, and all original shipping instructions, delivery
receipts, bills of lading, and other evidence of delivery, for any goods the
sale or disposition of which gave rise to such Receivables, and Borrower
warrants the genuineness of all of the foregoing. Borrower shall also
furnish to Silicon an aged accounts receivable trial balance in such form and
at such intervals as Silicon shall request. In addition, Borrower shall
deliver to Silicon the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or
securing any Receivables, immediately upon receipt thereof and in the same
form as received, with all necessary indorsements, all of which shall be with
recourse. Borrower shall also provide Silicon with copies of all credit
memos** within two days after the date issued.
*IF REQUESTED BY SILICON, TOGETHER
**IN EXCESS OF $20,000
4.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to collect
all Receivables, unless and until a Default or an Event of Default has
occurred. Borrower shall hold all payments on, and proceeds of, Receivables
in trust for Silicon, and Borrower shall immediately deliver all such
payments and proceeds to Silicon in their original form, duly endorsed in
blank, to be applied to the Obligations in such order as Silicon shall
determine. Silicon may, in its discretion, require that all proceeds of
Collateral be deposited by Borrower into a lockbox account, or such other
"blocked account" as Silicon may specify, pursuant to a blocked account
agreement in such form as Silicon may specify. Silicon or its designee may,
at any time, notify Account Debtors that the Receivables have been assigned
to Silicon.
4.5. REMITTANCE OF PROCEEDS. All proceeds arising from the disposition of
any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower*, to be applied to the Obligations in
such order as Silicon shall determine; provided that, if no Default or Event
of Default has occurred, Borrower shall not be obligated to remit to Silicon
the proceeds of the sale of worn out or obsolete equipment disposed of by
Borrower in good faith in an arm's length transaction for an aggregate
purchase price of $25,000 or less (for all such transactions in any fiscal
year). Borrower agrees that it will not commingle proceeds of Collateral
with any of Borrower's other funds
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or property, but will hold such proceeds separate and apart from such other
funds and property and in an express trust for Silicon. Nothing in this
Section limits the restrictions on disposition of Collateral set forth
elsewhere in this Agreement.
*(PROVIDED, HOWEVER, BORROWER MAY HOLD AND SUBMIT TO SILICON ON A WEEKLY
BASIS UP TO $500 OF PROCEEDS IN THE AGGREGATE ARISING FROM THE DISPOSITION OF
ANY COLLATERAL)
4.6 DISPUTES. Borrower shall notify Silicon promptly of all disputes or
claims relating to Receivables; Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in
full, or agree to do any of the foregoing, except that Borrower may do so,
provided that: (i) Borrower does so in good faith, in a commercially
reasonable manner, in the ordinary course of business, and in arm's length
transactions, which are reported to Silicon on the regular reports provided
to Silicon; (ii) no Default or Event of Default has occurred and is
continuing; and (iii) taking into account all such discounts settlements and
forgiveness, the total outstanding Loans will not exceed the Credit Limit.
Silicon may, at any time after the occurrence of an Event of Default, settle
or adjust disputes or claims directly with Account Debtors for amounts and
upon terms which Silicon considers advisable in its reasonable credit
judgment and, in all cases, Silicon shall credit Borrower's Loan account with
only the net amounts received by Silicon in payment of any Receivables.
4.7 RETURNS. Provided no Event of Default has occurred and is continuing,
if any Account Debtor returns any Inventory to Borrower in the ordinary
course of its business, Borrower shall promptly determine the reason for such
return and promptly issue a credit memorandum to the Account Debtor in the
appropriate amount (sending a copy to Silicon). In the event any attempted
return occurs after the occurrence of any Event of Default, Borrower shall
(i) hold the returned Inventory in trust for Silicon, (ii) segregate all
returned Inventory from all of Borrower's other property, (iii) conspicuously
label the returned Inventory as Silicon's property, and (iv) immediately
notify Silicon of the return of any Inventory, specifying the reason for such
return, the location and condition of the returned Inventory, and on
Silicon's request deliver such returned Inventory to Silicon.
4.8 VERIFICATION. Silicon may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters
relating to the Receivables, by means of mail, telephone or otherwise, either
in the name of Borrower or Silicon or such other name as Silicon may choose.
4.9 NO LIABILITY. Silicon shall not under any circumstances be
responsible or liable for any shortage or discrepancy in, damage to, or loss
or destruction of, any goods, the sale or other disposition of which gives
rise to a Receivable, or for any error, act, omission, or delay of any kind
occurring in the settlement, failure to settle, collection or failure to
collect any Receivable, or for settling any Receivable in good faith for less
than the full amount thereof, nor shall Silicon be deemed to be responsible
for any of Borrower's obligations under any contract or agreement giving rise
to a Receivable. Nothing herein shall, however, relieve Silicon from
liability for its own gross negligence or willful misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply
with the financial and other covenants set forth in the Schedule.
5.2 INSURANCE. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as
Silicon may reasonably require, and Borrower shall provide evidence of such
insurance to Silicon, so that Silicon is satisfied that such insurance is, at
all times, in full force and effect. All such insurance policies shall name
Silicon as an additional loss payee, and shall contain a lenders loss payee
endorsement in form reasonably acceptable to Silicon. Upon receipt of the
proceeds of any such insurance, Silicon shall apply such proceeds in
reduction of the Obligations as Silicon shall determine in its sole
discretion, except that, provided no Default or Event of Default has occurred
and is continuing, Silicon shall release to Borrower insurance proceeds with
respect to Equipment totaling less than $100,000, which shall be utilized by
Borrower for the replacement of the Equipment with respect to which the
insurance proceeds were paid. Silicon may require reasonable assurance that
the insurance proceeds so released will be so used. If Borrower fails to
provide or pay for any insurance, Silicon may, but is not obligated to,
obtain the same at Borrower's expense. Borrower shall promptly deliver to
Silicon copies of all reports made to insurance companies.
5.3 REPORTS. Borrower, at its expense, shall provide Silicon with the
written reports set forth in the Schedule, and such other written reports
with respect to Borrower (including budgets, sales projections, operating
plans and other financial documentation), as Silicon shall from time to time
reasonably specify.
5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on
one Business Day's notice, Silicon, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records. Silicon shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit, but Silicon shall have
the right to disclose any such information to its auditors, regulatory
agencies, and attorneys, and pursuant to any subpoena or other legal process.
The foregoing inspections and audits shall be at Borrower's expense and the
charge therefor shall be $500 per person per day (or such higher amount as
shall represent Silicon's then current standard charge for the same), plus
reasonable out of pocket expenses. Borrower will not enter into any
agreement with any accounting firm, service bureau or third party to store
Borrower's books or records at any location other than Borrower's Address,
without first obtaining Silicon's written consent, which may be conditioned
upon such accounting firm, service bureau or other third party agreeing to
give Silicon the same rights with respect to access to books and records and
related rights as Silicon has under this Loan Agreement. Borrower waives the
benefit of any accountant-client privilege or other evidentiary privilege
precluding or limiting the disclosure, divulgence or
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delivery of any of its books and records (except that Borrower does not waive
any attorney-client privilege).
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule,
Borrower shall not, without Silicon's prior written consent, do any of the
following: (i) merge or consolidate with another corporation or entity; (ii)
acquire any assets, except in the ordinary course of business; (iii) enter
into any other transaction outside the ordinary course of business; (iv) sell
or transfer any Collateral, except for the sale of finished Inventory in the
ordinary course of Borrower's business, and except for the sale of obsolete
or unneeded Equipment in the ordinary course of business; (v) store any
Inventory or other Collateral with any warehouseman or other third party;
(vi) sell any Inventory on a sale-or-return, guaranteed sale, consignment, or
other contingent basis; (vii) make any loans of any money or other assets*;
(viii) incur any debts, outside the ordinary course of business, which would
have a material, adverse effect on Borrower or on the prospect of repayment
of the Obligations; (ix) guarantee or otherwise become liable with respect to
the obligations of another party or entity; (x) pay or declare any dividends
on Borrower's stock (except for dividends payable solely in stock of
Borrower); (xi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Borrower's stock; (xii) make any change in Borrower's
capital structure which would have a material adverse effect on Borrower or
on the prospect of repayment of the Obligations; or (xiii) pay total
compensation, including salaries, fees, bonuses, commissions, and all other
payments, whether directly or indirectly, in money or otherwise, to
Borrower's executives, officers and directors (or any relative thereof) in an
amount in excess of the amount set forth on the Schedule; or (xiv) dissolve
or elect to dissolve. Transactions permitted by the foregoing provisions of
this Section are only permitted if no Default or Event of Default would occur
as a result of such transaction.
*IN EXCESS OF $20,000
5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or in any
manner relating to Borrower, Borrower shall, without expense to Silicon, make
available Borrower and its officers, employees and agents and Borrower's
books and records, to the extent that Silicon may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
5.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may deem
reasonably necessary or useful in order to perfect and maintain Silicon's
perfected security interest in the Collateral, and in order to fully
consummate the transactions contemplated by this Agreement.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"); provided that
the Maturity Date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, unless one party gives written notice to the other, not less than
sixty days prior to the next Maturity Date, that such party elects to
terminate this Agreement effective on the next Maturity Date.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three Business Days
after written notice of termination is given to Silicon; or (ii) by Silicon
at any time after the occurrence of an Event of Default*, without notice,
effective immediately. If this Agreement is terminated by Borrower or by
Silicon under this Section 6.2**, Borrower shall pay to Silicon a termination
fee in an amount equal to one percent (1.0%) of the Maximum Credit Limit***.
The termination fee shall be due and payable on the effective date of
termination and thereafter shall bear interest at a rate equal to the highest
rate applicable to any of the Obligations.
*WHICH IS STILL CONTINUING
**PRIOR TO THE FIRST ANNIVERSARY OF THIS AGREEMENT
***PROVIDED, HOWEVER, NO SUCH TERMINATION FEE SHALL BE CHARGED IF THE CREDIT
FACILITY HEREUNDER IS REPLACED WITH A NEW FACILITY FROM ANOTHER DIVISION OF
SILICON VALLEY BANK.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations*, whether evidenced by installment notes or otherwise, and
whether or not all or any part of such Obligations are otherwise then due and
payable. Without limiting the generality of the foregoing, if on the
Maturity Date, or on any earlier effective date of termination, there are
any outstanding Letters of Credit issued by Silicon or issued by another
institution based upon an application, guarantee, indemnity or similar
agreement on the part of Silicon, then on such date Borrower shall provide to
Silicon cash collateral in an amount equal to the face amount of all such
Letters of Credit plus all interest, fees and cost due or to become due in
connection therewith, to secure all of the Obligations relating to said
Letters of Credit, pursuant to Silicon's then standard form cash pledge
agreement. Notwithstanding any termination of this Agreement, all of
Silicon's security interests in all of the Collateral and all of the terms
and provisions of this Agreement shall continue in full force and effect
until all Obligations have been paid and performed in full; provided that,
without limiting the fact that Loans are subject to the discretion of
Silicon, Silicon may, in its sole discretion, refuse to make any further
Loans after termination. No termination shall in any way affect or impair
any right or remedy of Silicon, nor shall any such termination relieve
Borrower of any Obligation to Silicon, until all of the Obligations have been
paid and performed in full. Upon payment and performance in full of all the
Obligations and termination of this Agreement, Silicon shall promptly deliver
to Borrower termination statements, requests for reconveyances and such other
documents as may be required to fully terminate Silicon's security interests.
*(INCLUDING, WITHOUT LIMITATION, ALL OBLIGATIONS RELATING TO THE DOMESTIC
TERM LOAN)
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default" under this Agreement, and
Borrower shall give Silicon immediate written notice thereof: (a) Any
warranty, representation, statement, report or certificate made or delivered
to Silicon by Borrower or any of Borrower's officers, employees or agents,
now or in the future, shall
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be untrue or misleading in a material respect; or (b) Borrower shall fail to
pay when due any Loan or any interest thereon or any other monetary
Obligation; or (c) the total Loans and other Obligations outstanding at any
time shall exceed the Credit Limit; or (d) Borrower shall fail to comply with
any of the financial covenants set forth in the Schedule or shall fail to
perform any other non-monetary Obligation which by its nature cannot be
cured; or (e) Borrower shall fail to perform any other non-monetary
Obligation, which failure is not cured within 5 Business Days after the date
due; or (f) Any levy, assessment, attachment, seizure, lien or encumbrance
(other than a Permitted Lien) is made on all or any part of the Collateral
which is not cured within 10 days after the occurrence of the same; or (g)
any default or event of default occurs under any obligation secured by a
Permitted Lien, which is not cured within any applicable cure period or
waived in writing by the holder of the Permitted Lien; or (h) Borrower
breaches any material contract or obligation, which has or may reasonably be
expected to have a material adverse effect on Borrower's business or
financial condition; or (i) Dissolution, termination of existence, insolvency
or business failure of Borrower; or appointment of a receiver, trustee or
custodian, for all or any part of the property of, assignment for the benefit
of creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower
or any guarantor of any of the Obligations under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in
effect, which is not cured by the dismissal thereof within 30 days after the
date commenced; or (k) revocation or termination of, or limitation or denial
of liability upon, any guaranty of the Obligations or any attempt to do any
of the foregoing, or commencement of proceedings by any guarantor of any of
the Obligations under any bankruptcy or insolvency law; or (l) revocation or
termination of, or limitation or denial of liability upon, any pledge of any
certificate of deposit, securities or other property or asset of any kind
pledged by any third party to secure any or all of the Obligations, or any
attempt to do any of the foregoing, or commencement of proceedings by or
against any such third party under any bankruptcy or insolvency law; or (m)
Borrower makes any payment on account of any indebtedness or obligation which
has been subordinated to the Obligations other than as permitted in the
applicable subordination agreement, or if any Person who has subordinated
such indebtedness or obligations terminates or in any way limits his
subordination agreement; or (o) Borrower shall generally not pay its debts
as they become due, or Borrower shall conceal, remove or transfer any part of
its property, with intent to hinder, delay or defraud its creditors, or make
or suffer any transfer of any of its property which may be fraudulent under
any bankruptcy, fraudulent conveyance or similar law; or (p) there shall be a
material adverse change in Borrower's business or financial condition; or (q)
Silicon, acting in good faith and in a commercially reasonable manner, deems
itself insecure because of the occurrence of an event prior to the effective
date hereof of which Silicon had no knowledge on the effective date or
because of the occurrence of an event on or subsequent to the effective date.
Silicon may cease making any Loans hereunder during any of the above cure
periods, and thereafter if an Event of Default has occurred.
7.2 REMEDIES. Upon the occurrence of any Event of Default, and at any
time thereafter, Silicon, at its option, and without notice or demand of any
kind (all of which are hereby expressly waived by Borrower), may do any one
or more of the following: (a) Cease making Loans or otherwise extending
credit to Borrower under this Agreement or any other document or agreement;
(b) Accelerate and declare all or any part of the Obligations to be
immediately due, payable, and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation; (c) Take possession of any or all of the Collateral wherever it
may be found, and for that purpose Borrower hereby authorizes Silicon without
judicial process to enter onto any of Borrower's premises without
interference to search for, take possession of, keep, store, or remove any of
the Collateral, and remain on the premises or cause a custodian to remain on
the premises in exclusive control thereof, without charge for so long as
Silicon deems it reasonably necessary in order to complete the enforcement of
its rights under this Agreement or any other agreement; provided, however,
that should Silicon seek to take possession of any of the Collateral by Court
process, Borrower hereby irrevocably waives: (i) any bond and any surety or
security relating thereto required by any statute, court rule or otherwise as
an incident to such possession; (ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (iii)
any requirement that Silicon retain possession of, and not dispose of, any
such Collateral until after trial or final judgment; (d) Require Borrower to
assemble any or all of the Collateral and make it available to Silicon at
places designated by Silicon which are reasonably convenient to Silicon and
Borrower, and to remove the Collateral to such locations as Silicon may deem
advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Silicon shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its
condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private
sales, in lots or in bulk, for cash, exchange or other property, or on
credit, and to adjourn any such sale from time to time without notice other
than oral announcement at the time scheduled for sale. Silicon shall have
the right to conduct such disposition on Borrower's premises without charge,
for such time or times as Silicon deems reasonable, or on Silicon's premises,
or elsewhere and the Collateral need not be located at the place of
disposition. Silicon may directly or through any affiliated company purchase
or lease any Collateral at any such public disposition, and if permissible
under applicable law, at any private disposition. Any sale or other
disposition of Collateral shall not relieve Borrower of any liability
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Borrower may have if any Collateral is defective as to title or physical
condition or otherwise at the time of sale; (g) Demand payment of, and
collect any Receivables and General Intangibles comprising Collateral and, in
connection therewith, Borrower irrevocably authorizes Silicon to endorse or
sign Borrower's name on all collections, receipts, instruments and other
documents, to take possession of and open mail addressed to Borrower and
remove therefrom payments made with respect to any item of the Collateral or
proceeds thereof, and, in Silicon's sole discretion, to grant extensions of
time to pay, compromise claims and settle Receivables and the like for less
than face value; (h) Offset against any sums in any of Borrower's general,
special or other Deposit Accounts with Silicon; and (i) Demand and receive
possession of any of Borrower's federal and state income tax returns and the
books and records utilized in the preparation thereof or referring thereto.
All reasonable attorneys' fees, expenses, costs, liabilities and obligations
incurred by Silicon with respect to the foregoing shall be added to and
become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of
the Obligations. Without limiting any of Silicon's rights and remedies, from
and after the occurrence of any Event of Default, the interest rate
applicable to the Obligations shall be increased by an additional four
percent per annum.
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in
a newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale
commences at any time between 8:00 a.m. and 6:00 p.m; (v) Payment of the
purchase price in cash or by cashier's check or wire transfer is required;
(vi) With respect to any sale of any of the Collateral, Silicon may (but is
not obligated to) direct any prospective purchaser to ascertain directly from
Borrower any and all information concerning the same. Silicon shall be free
to employ other methods of noticing and selling the Collateral, in its
discretion, if they are commercially reasonable.
7.4 POWER OF ATTORNEY. Upon the occurrence of any Event of Default, without
limiting Silicon's other rights and remedies, Borrower grants to Silicon an
irrevocable power of attorney coupled with an interest, authorizing and
permitting Silicon (acting through any of its employees, attorneys or agents)
at any time, at its option, but without obligation, with or without notice to
Borrower, and at Borrower's expense, to do any or all of the following, in
Borrower's name or otherwise, but Silicon agrees to exercise the following
powers in a commercially reasonable manner: (a) Execute on behalf of
Borrower any documents that Silicon may, in its sole discretion, deem
advisable in order to perfect and maintain Silicon's security interest in the
Collateral, or in order to exercise a right of Borrower or Silicon, or in
order to fully consummate all the transactions contemplated under this
Agreement, and all other present and future agreements; (b) Execute on behalf
of Borrower any document exercising, transferring or assigning any option to
purchase, sell or otherwise dispose of or to lease (as lessor or lessee) any
real or personal property which is part of Silicon's Collateral or in which
Silicon has an interest; (c) Execute on behalf of Borrower, any invoices
relating to any Receivable, any draft against any Account Debtor and any
notice to any Account Debtor, any proof of claim in bankruptcy, any Notice of
Lien, claim of mechanic's, materialman's or other lien, or assignment or
satisfaction of mechanic's, materialman's or other lien; (d) Take control in
any manner of any cash or non-cash items of payment or proceeds of
Collateral; endorse the name of Borrower upon any instruments, or documents,
evidence of payment or Collateral that may come into Silicon's possession;
(e) Endorse all checks and other forms of remittances received by Silicon;
(f) Pay, contest or settle any lien, charge, encumbrance, security interest
and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; (g)
Grant extensions of time to pay, compromise claims and settle Receivables and
General Intangibles for less than face value and execute all releases and
other documents in connection therewith; (h) Pay any sums required on account
of Borrower's taxes or to secure the release of any liens therefor, or both;
(i) Settle and adjust, and give releases of, any insurance claim that relates
to any of the Collateral and obtain payment therefor; (j) Instruct any third
party having custody or control of any books or records belonging to, or
relating to, Borrower to give Silicon the same rights of access and other
rights with respect thereto as Silicon has under this Agreement; and (k) Take
any action or pay any sum required of Borrower pursuant to this Agreement and
any other present or future agreements. Any and all reasonable sums paid and
any and all reasonable costs, expenses, liabilities, obligations and
attorneys' fees incurred by Silicon with respect to the foregoing shall be
added to and become part of the Obligations, shall be payable on demand, and
shall bear interest at a rate equal to the highest interest rate applicable
to any of the Obligations. In no event shall Silicon's rights under the
foregoing power of attorney or any of Silicon's other rights under this
Agreement be deemed to indicate that Silicon is in control of the business,
management or properties of Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale of the Collateral shall be applied by Silicon first to the reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Silicon shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled
thereto; Borrower shall remain liable to Silicon for any deficiency. If,
Silicon, in its sole discretion, directly or indirectly enters into a
deferred payment or other credit transaction with any purchaser at any sale
of Collateral, Silicon shall have the option, exercisable at any time, in its
sole discretion, of either reducing the Obligations by the principal amount
of purchase price or deferring the reduction of the Obligations until the
actual receipt by Silicon of the cash therefor.
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7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth
in this Agreement, Silicon shall have all the other rights and remedies
accorded a secured party under the California Uniform Commercial Code and
under all other applicable laws, and under any other instrument or agreement
now or in the future entered into between Silicon and Borrower, and all of
such rights and remedies are cumulative and none is exclusive. Exercise or
partial exercise by Silicon of one or more of its rights or remedies shall
not be deemed an election, nor bar Silicon from subsequent exercise or
partial exercise of any other rights or remedies. The failure or delay of
Silicon to exercise any rights or remedies shall not operate as a waiver
thereof, but all rights and remedies shall continue in full force and effect
until all of the Obligations have been fully paid and performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"ACCOUNT DEBTOR" means the obligor on a Receivable.
"AFFILIATE" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"BUSINESS DAY" means a day on which Silicon is open for business.
"CODE" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"COLLATERAL" has the meaning set forth in Section 2.1 above.
"DEFAULT" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"DEPOSIT ACCOUNT" has the meaning set forth in Section 9105 of the code.
"ELIGIBLE INVENTORY" [NOT APPLICABLE].
"ELIGIBLE RECEIVABLES" means Receivables arising in the ordinary course
of Borrower's business from the sale of goods or rendition of services, which
Silicon, in its sole judgment, shall deem eligible for borrowing, based on
such considerations as Silicon may from time to time deem appropriate.
*Without limiting the fact that the determination of which Receivables are
eligible for borrowing is a matter of Silicon's discretion, the following
(the "MINIMUM ELIGIBILITY REQUIREMENTS") are the minimum requirements for a
Receivable to be an Eligible Receivable: (i) the Receivable must not be
outstanding for more than 90 days from its invoice date**, (ii) the
Receivable must not represent progress xxxxxxxx, or be due under a
fulfillment or requirements contract with the Account Debtor, (iii) the
Receivable must not be subject to any contingencies (including Receivables
arising from sales on consignment, guaranteed sale or other terms pursuant to
which payment by the Account Debtor may be conditional), (iv) the Receivable
must not be owing from an Account Debtor with whom the Borrower has any
dispute (whether or not relating to the particular Receivable), (v) the
Receivable must not be owing from an Affiliate of Borrower, (vi) the
Receivable must not be owing from an Account Debtor which is subject to any
insolvency or bankruptcy proceeding, or whose financial condition is not
acceptable to Silicon, or which, fails or goes out of a material portion of
its business, (vii) the Receivable must not be owing from the United States
or any department, agency or instrumentality thereof (unless there has been
compliance, to Silicon's satisfaction, with the United States Assignment of
Claims Act), (viii) the Receivable must not be owing from an Account Debtor
located outside the United States or Canada (unless pre-approved by Silicon
in its discretion in writing, or backed by a letter of credit satisfactory to
Silicon, or FCIA insured satisfactory to Silicon), (ix) the Receivable must
not be owing from an Account Debtor to whom Borrower is or may be liable for
goods purchased from such Account Debtor or otherwise. Receivables owing from
one Account Debtor will not be deemed eligible Receivables to the extent they
exceed 25% of the total eligible Receivables outstanding. In addition, if
more than 50% of the Receivables owing from an Account Debtor are outstanding
more than 90 days from their invoice date (without regard to unapplied
credits) or are otherwise not eligible Receivables, then all Receivables
owing from that Account Debtor will be deemed ineligible for borrowing.
Silicon may, from time to time, in its discretion, revise the Minimum
Eligibility Requirements, upon written notice to the Borrower.
*ELIGIBLE RECEIVABLES SHALL ALSO INCLUDE RECEIVABLES RELATING TO
MAINTENANCE CONTRACT XXXXXXXX, WHICH SILICON, IN ITS SOLE JUDGMENT, SHALL
DEEM ELIGIBLE FOR BORROWING, BASED ON SUCH CONSIDERATIONS AS SILICON MAY FROM
TIME TO TIME DEEM APPROPRIATE (THE "MAINTENANCE RECEIVABLES").
**PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY RECEIVABLE FOR WHICH EXTENDED
PAYMENT TERMS HAVE BEEN GRANTED ("EXTENDED TERM RECEIVABLES"), AND PROVIDED
ALL PRIOR PAYMENTS DUE ON SUCH EXTENDED TERM RECEIVABLES HAVE BEEN MADE, THE
PORTION OF SUCH EXTENDED TERM RECEIVABLES WHICH IS DUE AND PAYABLE WITHIN THE
CURRENT 90 DAY PAYMENT PERIOD OF SUCH INVOICE WILL BE DEEMED AN ELIGIBLE
RECEIVABLE
"EQUIPMENT" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any
interest in any of the foregoing, and all attachments, accessories,
accessions, replacements, substitutions, additions or improvements to any of
the foregoing, wherever located.
"EVENT OF DEFAULT" means any of the events set forth in Section 7.1 of
this Agreement.
"GENERAL INTANGIBLES" means all general intangibles of Borrower, whether
now owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings,
blueprints, patents, patent applications, trademarks and the goodwill of the
business symbolized thereby, names, trade names, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, security
and other deposits, rights in all litigation presently or hereafter pending
for any cause or claim (whether in contract, tort or otherwise), and all
judgments
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now or hereafter arising therefrom, all claims of Borrower against Silicon,
rights to purchase or sell real or personal property, rights as a licensor or
licensee of any kind, royalties, telephone numbers, proprietary information,
purchase orders, and all insurance policies and claims (including without
limitation life insurance, key man insurance, credit insurance, liability
insurance, property insurance and other insurance), tax refunds and claims,
computer programs, discs, tapes and tape files, claims under guaranties,
security interests or other security held by or granted to Borrower, all
rights to indemnification and all other intangible property of every kind and
nature (other than Receivables).
"INVENTORY" means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including without limitation
all raw materials, work in process, finished goods and goods in transit), and
all materials and supplies of every kind, nature and description which are or
might be used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all warehouse receipts, documents of
title and other documents representing any of the foregoing.
"OBLIGATIONS" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at
any time owing by Borrower to Silicon, whether evidenced by this Agreement or
any note or other instrument or document, whether arising from an extension
of credit, opening of a letter of credit, banker's acceptance, loan,
guaranty, indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment and any
participation by Silicon in Borrower's debts owing to others), absolute or
contingent, due or to become due, including, without limitation, all
interest, charges, expenses, fees, attorney's fees, expert witness fees,
audit fees, letter of credit fees, collateral monitoring fees, closing fees,
facility fees, termination fees, minimum interest charges and any other sums
chargeable to Borrower under this Agreement or under any other present or
future instrument or agreement between Borrower and Silicon.
"PERMITTED LIENS" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens consented to in writing by Silicon, which consent shall
not be unreasonably withheld; (v) security interests being terminated
substantially concurrently with this Agreement; (vi) liens of materialmen,
mechanics, warehousemen, carriers, or other similar liens arising in the
ordinary course of business and securing obligations which are not
delinquent; (vii) liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described above
in clauses (i) or (ii) above, provided that any extension, renewal or
replacement lien is limited to the property encumbered by the existing lien
and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase; (viii) Liens in favor of customs and revenue
authorities which secure payment of customs duties in connection with the
importation of goods. Silicon will have the right to require, as a condition
to its consent under subparagraph (iv) above, that the holder of the
additional security interest or lien sign an intercreditor agreement on
Silicon's then standard form, acknowledge that the security interest is
subordinate to the security interest in favor of Silicon, and agree not to
take any action to enforce its subordinate security interest so long as any
Obligations remain outstanding, and that Borrower agree that any uncured
default in any obligation secured by the subordinate security interest shall
also constitute an Event of Default under this Agreement.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"RECEIVABLES" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents and all other forms
of obligations at any time owing to Borrower, all guaranties and other
security therefor, all merchandise returned to or repossessed by Borrower,
and all rights of stoppage in transit and all other rights or remedies of an
unpaid vendor, lienor or secured party.
"RESERVES" means, as of any date of determination, such amounts as
Silicon may from time to time establish and revise in good faith reducing the
amount of Loans and Letters of Credit which would otherwise be available to
Borrower under the lending formula(s) provided in the Schedule: (a) to
reflect events, conditions, contingencies or risks which, as determined by
Silicon in good faith, do or may affect either (i) the Collateral or any
other property which is security for the Obligations or its value, (ii) the
assets, business or prospects of Borrower or any Guarantor or (iii) the
security interests and other rights of Silicon in the Collateral (including
the enforceability, perfection and priority thereof), or (b) to reflect
Silicon's good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower or any Guarantor to Silicon
is or may have been incomplete, inaccurate or misleading in any material
respect, or (c) in respect of any state of facts which Silicon determines in
good faith constitutes an Event of Default or may, with notice or passage of
time or both, constitute an Event of Default.
OTHER TERMS. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in
accordance with generally accepted accounting principles, consistently
applied. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Silicon
(including proceeds of Receivables and payment of the Obligations in full)
shall be deemed applied by Silicon on account of the Obligations three
Business Days after receipt by Silicon of immediately available funds, and,
for purposes of the foregoing, any such funds received after 12:00 Noon on
any day shall be deemed received on the next Business Day. Silicon shall
not, however, be required to credit Borrower's account for the amount of any
item of
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payment which is unsatisfactory to Silicon in its sole discretion, and
Silicon may charge Borrower's loan account for the amount of any item of
payment which is returned to Silicon unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the Obligations
may be applied, and in Silicon's sole discretion reversed and re-applied, to
the Obligations, in such order and manner as Silicon shall determine in its
sole discretion.
9.3 CHARGES TO ACCOUNTS. Silicon may, in its discretion, require that
Borrower pay monetary obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which event they will bear interest at the same
rate applicable to the Loans. Silicon may also, in its discretion, charge
any monetary Obligations to Borrower's Deposit Accounts maintained with
Silicon.
9.4 MONTHLY ACCOUNTINGS. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless
Borrower notifies Silicon in writing to the contrary within thirty days after
each account is rendered, describing the nature of any alleged errors or
admissions.
9.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to Silicon or Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by
one party to the other party. Notices to Silicon shall be directed to the
Commercial Finance Division, to the attention of the Division Manager or the
Division Credit Manager. All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered, or at the expiration of
one Business Day following delivery to the private delivery service, or two
Business Days following the deposit thereof in the United States mail, with
postage prepaid.
9.6 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect
shall not affect the remainder of this Agreement, which shall continue in
full force and effect.
9.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Silicon and
supersede all prior and contemporaneous negotiations and oral representations
and agreements, all of which are merged and integrated in this Agreement.
THERE ARE NO ORAL UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE
PARTIES WHICH ARE NOT SET FORTH IN THIS AGREEMENT OR IN OTHER WRITTEN
AGREEMENTS SIGNED BY THE PARTIES IN CONNECTION HEREWITH.
9.8 WAIVERS. The failure of Silicon at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or
any other present or future agreement between Borrower and Silicon shall not
waive or diminish any right of Silicon later to demand and receive strict
compliance therewith. Any waiver of any default shall not waive or affect
any other default, whether prior or subsequent, and whether or not similar.
None of the provisions of this Agreement or any other agreement now or in the
future executed by Borrower and delivered to Silicon shall be deemed to have
been waived by any act or knowledge of Silicon or its agents or employees,
but only by a specific written waiver signed by an authorized officer of
Silicon and delivered to Borrower. Borrower waives demand, protest, notice
of protest and notice of default or dishonor, notice of payment and
nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, instrument, account, General Intangible, document or
guaranty at any time held by Silicon on which Borrower is or may in any way
be liable, and notice of any action taken by Silicon, unless expressly
required by this Agreement.
9.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Silicon shall be liable for any claims,
demands, losses or damages, of any kind whatsoever, made, claimed, incurred
or suffered by Borrower or any other party through the ordinary negligence of
Silicon, or any of its directors, officers, employees, agents, attorneys or
any other Person affiliated with or representing Silicon, but nothing herein
shall relieve Silicon from liability for its own gross negligence or willful
misconduct.
9.10 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Silicon.
9.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.12 ATTORNEYS FEES AND COSTS. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title
insurance, appraisal, audit, and other reasonable costs incurred by Silicon,
pursuant to, or in connection with, or relating to this Agreement (whether or
not a lawsuit is filed), including, but not limited to, any reasonable
attorneys' fees and costs Silicon incurs in order to do the following:
prepare and negotiate this Agreement and the documents relating to this
Agreement; obtain legal advice in connection with this Agreement or Borrower;
enforce, or seek to enforce, any of its rights; prosecute actions against, or
defend actions by, Account Debtors; commence, intervene in, or defend any
action or proceeding; initiate any complaint to be relieved of the automatic
stay in bankruptcy; file or prosecute any probate claim, bankruptcy claim,
third-party claim, or other claim; examine, audit, copy, and inspect any of
the Collateral or any of Borrower's books and records; protect, obtain
possession of, lease, dispose of, or otherwise enforce Silicon's security
interest in, the Collateral; and otherwise represent Silicon in any
litigation relating to Borrower. IN SATISFYING BORROWER'S OBLIGATION
HEREUNDER TO REIMBURSE SILICON FOR ATTORNEYS FEES, BORROWER MAY, FOR
CONVENIENCE, ISSUE CHECKS DIRECTLY TO SILICON'S ATTORNEYS, LEVY, SMALL &
XXXXXX, BUT BORROWER ACKNOWLEDGES AND AGREES THAT LEVY, SMALL & XXXXXX IS
REPRESENTING ONLY SILICON AND NOT BORROWER IN CONNECTION WITH THIS AGREEMENT.
If either Silicon or
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Borrower files any lawsuit against the other predicated on a breach of this
Agreement, the prevailing party in such action shall be entitled to recover
its reasonable costs and attorneys' fees, including (but not limited to)
reasonable attorneys' fees and costs incurred in the enforcement of,
execution upon or defense of any order, decree, award or judgment. All
attorneys' fees and costs to which Silicon may be entitled pursuant to this
Paragraph shall immediately become part of Borrower's Obligations, shall be
due on demand, and shall bear interest at a rate equal to the highest
interest rate applicable to any of the Obligations.
9.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Silicon; provided,
however, that Borrower may not assign or transfer any of its rights under
this Agreement without the prior written consent of Silicon, and any
prohibited assignment shall be void. No consent by Silicon to any assignment
shall release Borrower from its liability for the Obligations.
9.14 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.15 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower
against Silicon, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or
any other present or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by Silicon, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of
an action or proceeding in a court of competent jurisdiction by the filing of
a complaint within one year after the first act, occurrence or omission upon
which such claim or cause of action, or any part thereof, is based, and the
service of a summons and complaint on an officer of Silicon, or on any other
person authorized to accept service on behalf of Silicon, within thirty (30)
days thereafter. Borrower agrees that such one-year period is a reasonable
and sufficient time for Borrower to investigate and act upon any such claim
or cause of action. The one-year period provided herein shall not be waived,
tolled, or extended except by the written consent of Silicon in its sole
discretion. This provision shall survive any termination of this Loan
Agreement or any other present or future agreement.
9.16 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used
in this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe,
limit, define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between
the parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Silicon or Borrower under any
rule of construction or otherwise.
9.17 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California. As a material part
of the consideration to Silicon to enter into this Agreement, Borrower (i)
agrees that all actions and proceedings relating directly or indirectly to
this Agreement shall, at Silicon's option, be litigated in courts located
within California, and that the exclusive venue therefor shall be Santa Xxxxx
County; (ii) consents to the jurisdiction and venue of any such court and
consents to service of process in any such action or proceeding by personal
delivery or any other method permitted by law; and (iii) waives any and all
rights Borrower may have to object to the jurisdiction of any such court, or
to transfer or change the venue of any such action or proceeding.
9.18 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND SILICON EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT,
ACTS OR OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR
BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.
BORROWER:
FOURTH SHIFT CORPORATION
BY /S/ XXXXXX XXXXXX XXXXXXX
---------------------------------
PRESIDENT OR VICE PRESIDENT
BY /S/ XXXXX X. XXXXXX
---------------------------------
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY /S/ XXXXXXXXXXX X. XXXX
---------------------------------
TITLE VICE PRESIDENT
------------------------------
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[LOGO] SILICON VALLEY BANK
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: FOURTH SHIFT CORPORATION
ADDRESS: 0000 XXXXXXXXXXXXX XXXXX
XXXXXXXXXXX, XX 00000
DATE: MARCH 2, 1998
This Schedule forms an integral part of the Loan and Security Agreement
between Silicon Valley Bank and the above-borrower of even date.
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1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of:
(i) $5,000,000 at any one time outstanding (the
"Maximum Credit Limit"); or
(ii) the sum of:
(a) 75% of the amount of Borrower's Eligible
Receivables (as defined in Section 8 above),
excluding, however, Maintenance Receivables
(as defined in Section 8 above); PLUS
(b) 65% of the amount of Borrower's eligible
Maintenance Receivables which are (I) until
April 30, 1998, not outstanding more than 60
days from its invoice date, and (II) after
April 30, 1998, not outstanding more than 30
days from its invoice date; PLUS
(c) The unpaid principal balance of the Domestic
Term Loan.
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2. INTEREST.
INTEREST RATE (Section 1.2):
A rate equal to the "Prime Rate" in effect from
time to time, plus 2.0% per annum. Interest shall
be calculated on the basis of a 360-day year for
the actual number of days elapsed. "Prime Rate"
means the rate announced from time to time by
Silicon as its "prime rate;" it is a base rate upon
which other rates charged by Silicon are based, and
it is not necessarily the best rate available at
Silicon. The interest rate applicable to the
Obligations shall change on each date there is a
change in the Prime Rate. With respect to the
Domestic Term Loan, the interest rate shall be as
set forth in the Existing Loan Documents.
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
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MINIMUM MONTHLY
INTEREST (Section 1.2): None.
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3. FEES (Section 1.4):
Loan Fee: $50,000, payable concurrently herewith. (Any
Commitment Fee previously paid by the Borrower in
connection with this loan shall be credited against
this Fee.)
Collateral
Monitoring
Fee: $1,200, per calendar month, payable in arrears
(prorated for any partial calendar month at the
beginning and at termination of this Agreement).
Unused Line Fee: Borrower shall pay Silicon an Unused Line Fee, in
addition to all interest and other fees payable
hereunder. The amount of the Unused Line Fee shall
be 0.125% per month multiplied by an amount equal
to the Maximum Credit Limit minus the average daily
balance of the outstanding Loans. The Unused Line
Fee shall be computed and paid monthly, in arrears
(prorated for any partial calendar month at the
beginning and at termination of this Agreement),
and shall be due on the last day of each calendar
month.
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4. MATURITY DATE
(Section 6.1): One year from the date of this Agreement, subject to
automatic renewal as provided in Section 6.1 above,
and early termination as provided in Section 6.2
above.
With respect to the Domestic Term Loan, the maturity
date thereof shall be as set forth in the Existing
Loan Documents, subject to the provisions of Section
6.3 above.
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5. FINANCIAL COVENANTS
(Section 5.1): Borrower shall comply with all of the following
covenants. Compliance shall be determined as of
the end of each month, except as otherwise
specifically provided below:
MINIMUM TANGIBLE
NET WORTH: Borrower shall maintain a Tangible Net Worth of not
less than ($250,000).
DEFINITIONS. For purposes of the foregoing financial covenants,
the following terms shall have the following
meanings:
"Current assets", "current liabilities" and
"liabilities" shall have the meanings ascribed to
them by generally accepted accounting principles.
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
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"Tangible Net Worth" shall mean the excess of total
assets over total liabilities, determined in
accordance with generally accepted accounting
principles, with the following adjustments:
(A) there shall be excluded from assets: (i)
notes, accounts receivable and other obligations
owing to the Borrower from its officers or other
Affiliates, and (ii) all assets which would be
classified as intangible assets under generally
accepted accounting principles, including
without limitation goodwill, licenses, patents,
trademarks, trade names, copyrights, capitalized
software and organizational costs, licenses and
franchises
(B) there shall be excluded from liabilities:
all indebtedness which is subordinated to the
Obligations under a subordination agreement in
form specified by Silicon or by language in the
instrument evidencing the indebtedness which is
acceptable to Silicon in its discretion.
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6. REPORTING.
(Section 5.3):
Borrower shall provide Silicon with the following:
1. Monthly Receivable agings, aged by invoice
date, and Extended Terms Receivables agings,
aged by invoice date, and Maintenance
Receivables agings, aged by invoice date, all
within fifteen days after the end of each month.
2. Monthly accounts payable agings, aged by
invoice date within fifteen days after the end
of each month.
3. Monthly outstanding or held check registers
within thirty days after the end of each month.
4. Monthly reconciliations of Receivable agings
(aged by invoice date), and transaction reports
not less frequently than thirty days after the
end of each month.
5. Monthly unaudited financial statements, as soon
as available, and in any event within thirty
days after the end of each month.
6. Monthly Compliance Certificates, within thirty
days after the end of each month, in such form
as Silicon shall reasonably specify, signed by
the Chief Financial Officer of Borrower,
certifying that as of the end of such month
Borrower was in full compliance with all of the
terms and conditions of this Agreement, and
setting forth calculations showing compliance
with the financial covenants set forth in this
Agreement and such other information as Silicon
shall reasonably request.
7. Quarterly unaudited financial statements, as
soon as available, and in any event within
thirty days after the end of each fiscal
quarter of Borrower.
8. Annual operating budgets (including income
statements, balance sheets and cash flow
statements, by month) for the upcoming fiscal
year of Borrower within thirty days after the
end of each fiscal year of Borrower.
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
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9. Annual financial statements, as soon as
available, and in any event within 120 days
following the end of Borrower's fiscal year,
certified by independent certified public
accountants acceptable to Silicon.
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7. COMPENSATION
(Section 5.5): Not Applicable.
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8. BORROWER INFORMATION:
PRIOR NAMES OF
BORROWER
(Section 3.2): See Representations and Warranties of Borrower
dated March 5, 1998.
PRIOR TRADE
NAMES OF BORROWER
(Section 3.2): See Representations and Warranties of Borrower
dated March 5, 1998.
EXISTING TRADE
NAMES OF BORROWER
(Section 3.2): See Representations and Warranties of Borrower
dated March 5, 1998.
OTHER LOCATIONS AND
ADDRESSES
(Section 3.3): See Representations and Warranties of Borrower
dated March 5, 1998.
MATERIAL ADVERSE
LITIGATION
(Section 3.10): None
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
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9. OTHER COVENANTS
(Section 5.1): Borrower shall at all times comply with all of the
following additional covenants:
(1) BANKING RELATIONSHIP. Borrower shall at all
times maintain its primary banking relationship
with Silicon.
(2) FOREIGN TERM NOTE. Concurrently with the
initial Loan made under this Agreement, Borrower
shall cause all Obligations pertaining to that
certain Promissory Note executed by Borrower in
favor of Silicon, dated September 24, 1996 and
in the original principal amount of $600,000 to
be paid and performed in full.
(3) COPYRIGHT FILINGS. Borrower has previously
executed and delivered to Silicon that certain
Collateral Assignment, Patent Mortgage and
Security Agreement dated October 23, 1995
(the "Intellectual Property Agreement").
Within 120 days after the date hereof, Borrower
shall (i) cause all of its unregistered software
to be filed for registration with the United
States Copyright Office (the "Copyrights'), (ii)
cause the Intellectual Property Agreement to be
amended to include such Copyrights and (iii)
cause such amendment to filed in the Copyright
Office.
Borrower: Silicon:
FOURTH SHIFT CORPORATION SILICON VALLEY BANK
BY /s/ XXXXXX XXXXXX XXXXXXX BY /s/ XXXXXXXXXXX X. XXXX
-------------------------------- ------------------------------------
President or Vice President Title Vice President
------------------------------
BY /s/ XXXXX X. XXXXXX
--------------------------------
Secretary or Ass't Secretary
3/16/95 -
-5-
[LOGO] SILICON VALLEY BANK
AMENDMENT TO LOAN DOCUMENTS
BORROWER: FOURTH SHIFT CORPORATION
DATE: MARCH 2, 1998
THIS AMENDMENT TO LOAN DOCUMENTS is entered into between SILICON VALLEY
BANK ("Silicon") and the borrower named above (the "Borrower"), with
reference to the various loan and security agreements and other documents,
instruments and agreements between them, including but not limited to that
certain Loan and Security Agreement dated November 6, 1995 (as amended,
collectively, the "Existing Loan Documents").
The Parties agree to amend the Existing Loan Documents, as follows:
1. PRESENT LOAN BALANCE. Borrower acknowledges that the present unpaid
principal balance of the Borrower's indebtedness, liabilities and obligations
to Silicon under the Existing Loan Documents, including interest accrued
through March 5, 1998 is $ 3,599,799.95 (the "Present Loan Balance"), and
that said sum is due and owing without any defense, offset, or counterclaim
of any kind.
2. AMENDMENT TO EXISTING LOAN DOCUMENTS. The Existing Loan Documents
are hereby amended in their entirety to read as set forth in the Loan and
Security Agreement being executed concurrently (collectively, the "New Loan
Documents"). The Borrower acknowledges that the Present Loan Balance shall be
the opening balance of the Loans pursuant to the New Loan Documents as of the
date hereof, and shall, for all purposes, be deemed to be Loans made by
Silicon to the Borrower pursuant to the New Loan Documents. Notwithstanding
the execution of the New Loan Documents, the following Existing Loan
Documents shall continue in full force and effect and shall continue to
secure all present and future indebtedness, liabilities, guarantees and other
Obligations (as defined in the New Loan Documents): That portion of the
Existing Loan Documents pertaining to Equipment Advances in the original
aggregate principal amount of $1,500,000 (the "Domestic Term Loan"); all
standard documents of Silicon entered into by the Borrower in connection with
Letters of Credit and/or Foreign Exchange Contracts; all security agreements,
collateral assignments and mortgages, including but not limited to those
relating to patents, trademarks, copyrights and other intellectual property;
all lockbox agreements and/or blocked account agreements; and all UCC-1
financing statements and other documents filed with governmental offices
which perfect liens or security interests in favor of Silicon. In addition,
in the event the Borrower has previously issued any stock options, stock
purchase warrants or securities to Silicon, the same and all documents and
agreements relating thereto shall also continue in full force and effect.
3. GENERAL PROVISIONS. This Amendment and the New Loan Documents set
forth in full all of the representations and agreements of the parties with
respect to the subject matter
LEVY, SMALL & XXXXXX
TRANSMITTAL NOTE
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Page 2
hereof and supersede all prior discussions, representations, agreements and
understandings between the parties with respect to the subject hereof.
BORROWER: SILICON:
FOURTH SHIFT CORPORATION SILICON VALLEY BANK
BY /S/ XXXXXX XXXXXX XXXXXXX BY /S/ XXXXXXXXXXX X. XXXX
--------------------------------- -------------------------------
PRESIDENT OR VICE PRESIDENT TITLE VICE PRESIDENT
BY /S/ XXXXX X. XXXXXX
---------------------------------
SECRETARY OR ASS'T SECRETARY