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EXHIBIT 10.28
LOAN AND SECURITY AGREEMENT
AMONG
SILICON VALLEY BANK
AND
GENERAL ELECTRIC CAPITAL CORPORATION
AS CO-LENDERS
AND
MTI TECHNOLOGY CORPORATION
AS BORROWER
DATED AS OF
JULY 22, 1998
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TABLE OF CONTENTS
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Section 1. Definitions and Construction 1
Section 2. Credit Facilities and Terms of Payment 9
2.1 The Revolving Advances 9
2.2 Overadvances 10
2.3 Interest Rates, Payments, Calculations, Borrowing Procedures 10
2.3.1 Interest Rate 10
2.3.2 Default Rate 10
2.3.3 Payments 10
2.3.4 Computation 10
2.3.5 Borrowing Procedures 11
2.4 Crediting Payments 11
2.5 Fees 11
2.5.1 Facility Fee 11
2.5.2 Financial Examination and Appraisal Fees 11
2.5.3 Lenders' Expenses 12
2.6 Additional Costs 12
2.7 Prepayment Right 12
2.8 [Intentionally Omitted] 12
2.9 Term 12
Section 3. Conditions of Loans 13
3.1 Conditions Precedent to Initial Advance 13
3.2 Conditions Precedent to All Advances 13
Section 4. Creation of Security Interest 13
4.1 Grant of Security Interest 13
4.2 Delivery of Additional Documentation Required 13
4.3 Right to Inspect 14
4.4 [Intentionally Omitted] 14
4.5 Single Loan 14
4.6 Notice--Deposit Accounts 14
Section 5. Representations and Warranties 14
5.1 Due Organization and Qualification 14
5.2 Due Authorization; No Conflict 14
5.3 No Prior Encumbrances 14
5.4 Bona Fide Eligible Accounts 15
5.5 [Intentionally omitted.] 15
5.6 Name; Location of Chief Executive Office 15
5.7 Litigation 15
5.8 No Material Adverse Change in Financial Statements 15
5.9 Solvency 15
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5.10 Regulatory Compliance 15
5.11 Environmental Condition 15
5.12 Taxes 16
5.13 Subsidiaries 16
5.14 Government Consents 16
5.15 Full Disclosure 16
5.16 Intellectual Property 16
5.17 Customer and Trade Relations 16
5.18 EMC Contract 17
5.19 National Peripherals 17
Section 6. Affirmative Covenants 17
6.1 Good Standing 17
6.2 Government Compliance 17
6.3 Financial Statements, Reports, Certificates 18
6.4 Inventory; Returns 18
6.5 Taxes 19
6.6 Insurance. 19
6.7 Principal Depository 19
6.8 [Intentionally omitted] 19
6.9 Current Ratio 19
6.10 Debt-Net Worth Ratio 20
6.11 Tangible Net Worth 20
6.12 Profitability 20
6.13 [Intentionally omitted] 20
6.14 [Intentionally omitted] 20
6.15 [Intentionally omitted] 20
6.16 [Intentionally omitted] 20
6.17 [Intentionally omitted] 20
6.18 Registration of Intellectual Property Rights 20
6.19 Further Assurances 20
6.20 Landlords' Agreements, Mortgagee Agreements and Bailee Letters 20
6.21 Year 2000 21
Section 7. Negative Covenants 21
7.1 Dispositions 21
7.2 Change in Business 21
7.3 Mergers or Acquisitions 21
7.4 Indebtedness 22
7.5 Encumbrances 22
7.6 Distributions 22
7.7 Investments 22
7.8 Transactions with Affiliates 22
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7.9 Subordinated Debt 22
7.10 Inventory 22
7.11 Compliance 23
7.12 Cancellation of Indebtedness 23
7.13 No Speculative Transactions 23
7.14 Fiscal Year 23
Section 8. Events of Default 23
8.1 Payment Default 23
8.2 Covenant Default 23
8.3 Material Adverse Change 24
8.4 Attachment 24
8.5 Insolvency 24
8.6 Other Agreements 24
8.7 Subordinated Debt 24
8.8 Judgments 24
8.9 Misrepresentations 24
8.10 Invalidity 25
Section 9. Servicing Agent's and Lenders' Rights and Remedies 25
9.1 Rights and Remedies 25
9.1.2 [Intentionally Omitted] 25
9.2 Power of Attorney 26
9.3 Setoff 26
9.4 Accounts Collection 27
9.5 Lenders' Expenses 27
9.6 Lenders' Liability for Collateral 27
9.7 Remedies Cumulative 28
9.8 Demand; Protest 28
Section 10. Notices 28
Section 11. Assignments; Participations 29
11.1 Assignments 29
11.2 Assignee 30
11.3 New Notes 30
11.4 Participations 31
Section 12. Choice of Law And Venue; Jury Trial Waiver 31
12.1 Governing Law 31
12.2 Mutual Waiver of Jury Trial 31
Section 13. Servicing Agent 31
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13.1 Appointment and Authorization 31
13.2 Delegation of Duties 32
13.3 Liability of Servicing Agent 32
13.4 Reliance by Servicing Agent. 32
13.5 Notice of Default 33
13.6 Credit Decision 33
13.7 Indemnification of Servicing Agent 33
13.8 Servicing Agent in Individual Capacity; Other Loans by Lenders 34
13.9 Successor Servicing Agent 34
13.10 Collateral Matters 35
Section 14. General Provisions 35
14.1 Successors and Assigns 35
14.2 Expenses; Taxes; Indemnification; Survival 35
14.2.1 Expenses 35
14.2.2 Taxes, Etc. 36
14.2.3 General Indemnity 36
14.2.4 Survival; Defense 36
14.3 Time of Essence 36
14.4 Severability of Provisions 36
14.5 Amendments; Integration 36
14.6 Counterparts 37
14.7 Survival; Release of Security Interest 37
14.8 Confidentiality 38
SCHEDULES AND EXHIBITS
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Schedule to Loan and Security Agreement Revolving Commitments
Schedules to Loan and Security Agreement Disclosures
Exhibit A (Untitled)
Exhibit B Loan Payment/Advance Telephone Request Form
Exhibit C Borrowing Base Certificate
Exhibit D Compliance Certificate
Exhibit E Documents to be Delivered at Closing
Disbursement Request and Authorization
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THIS LOAN AND SECURITY AGREEMENT ("Agreement") is made and entered into
as of July 22, 1998 by and among MTI TECHNOLOGY CORPORATION ("Borrower"),
SILICON VALLEY BANK ("SVB") and GENERAL ELECTRIC CAPITAL CORPORATION ("GE
Capital") as co-lenders, and SVB, as Servicing Agent for the Lenders. (SVB and
GE Capital are sometimes referred to herein, individually, as "Lender", and
collectively, as the "Lenders".)
The parties agree as follows:
SECTION 1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following definitions:
"Accounts" means all presently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods, the licensing of software and other
technology, or the rendering of services by Borrower, whether or not earned by
performance, and any and all credit insurance, guaranties, and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower and
Borrower's Books relating to any of the foregoing.
"Advance" or "Advances" means an advance under the Committed Revolving
Line, or otherwise made hereunder.
"Affiliate" means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, partners and, for any Person that
is a limited liability company, such Persons, managers and members.
"Agent-Related Persons" means SVB and any successor agent arising under
Section 13.9, together with their respective Affiliates, and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Availability" means Revolving Advances available to Borrower pursuant
to SECTION 2.1 of this Agreement.
"Availability Reserves" shall mean such amounts as the Requisite Lenders
may from time to time establish and revise in their good faith business
judgment, with written notice thereof to Borrower, to reflect (a) any material
increase in dilution with respect to the Accounts or any material decline in the
general creditworthiness of obligors on the Accounts; and/or (b) events,
conditions, contingencies or risks which may substantially affect either the
Collateral or any other property which is security for the Obligations or its
value, or the assets, business or prospects of Borrower or the security
interests and other rights of the Lenders in the Collateral (including the
enforceability, perfection and priority thereof) and/or (c) Requisite Lenders'
good faith belief that any collateral report or financial information furnished
by or on behalf of Borrower to Lenders was false or misleading in a material
respect when made.
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"Borrower's Books" means all of Borrower's books and records including
ledgers; records concerning Borrower's assets or liabilities, the Collateral,
business operations or financial condition; and all computer programs, or tape
files, and the equipment containing such information.
"Borrowing Base" has the meaning set forth in SECTION 2.1 hereof.
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which banks in Santa Clara, California are authorized or required by law
or other governmental actions to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on EXHIBIT A attached hereto.
"Commitment" means, with respect to each Lender and with respect to each
credit facility hereunder, the amounts set forth in the Schedule and
"Commitments" means, with respect to each Lender or each facility hereunder, as
the case may be, all such amounts collectively, as each may be amended from time
to time.
"Commitment Percentage" means, as to any Lender, for any credit facility
hereunder, the percentage equivalent of such Lender's Commitment for such
facility divided by the aggregate amount of all Commitments under such facility.
"Committed Revolving Line" means THIRTY MILLION Dollars ($30,000,000).
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Credit Extension" means each Advance or any other extension of credit
by Lender for the benefit of Borrower hereunder.
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"Current Assets" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding Credit
Extensions made under this Agreement, including all Indebtedness that is payable
upon demand or within one year from the date of determination thereof unless
such Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Daily Balance" means the amount of the Obligations owed at the end of a
given day.
"Default" means an Event of Default or event or condition that, but for
the requirement that time elapse or notice be given, would constitute an Event
of Default.
"Dollars", "dollars" or "$" each means dollars in lawful currency of the
United States of America.
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrower's business that comply with all of Borrower's representations
and warranties to Servicing Agent and Lenders set forth in SECTION 5.4; provided
that standards of eligibility may be fixed and revised from time to time by
Requisite Lenders in their reasonable judgment and upon notification thereof to
Borrower in accordance with the provisions hereof. Unless otherwise agreed to by
Servicing Agent, with the approval of the Requisite Lenders, Eligible Accounts
shall not include the following:
(a) Accounts which the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within ninety (90)
days of invoice date;
(c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is an
Affiliate of Borrower;
(f) Accounts with respect to which the account debtor does not
have its principal place of business in the United States;
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(g) Accounts with respect to which the account debtor is a
federal, state, or local governmental entity or any department, agency, or
instrumentality thereof.
(h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed
twenty-five percent (25%) of all Accounts, to the extent such obligations exceed
the aforementioned percentage;
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Servicing Agent
believes, in its sole discretion, that there may be a basis for dispute (but
only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(k) Accounts the collection of which Servicing Agent or Requisite
Lenders reasonably determine to be doubtful.
(l) Accounts in which the Lenders do not have a fully perfected
first-priority security interest.
(m) Accounts arising from service contracts ("Service Contract
Accounts"). Because Borrower does not separately ▇▇▇▇ Service Contract Accounts,
the parties agree that, for purposes of this Agreement, 10% of all Accounts
which would otherwise be Eligible Accounts shall be deemed to be Service
Contract Accounts and shall be excluded from Eligible Accounts.
(n) Accounts arising from the licensing of software by Borrower
as licensor.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"Event of Default" has the meaning set forth in SECTION 8 hereof.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services including, without limitation,
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against any
person or entity under any provision of the United States Bankruptcy Code, as
amended, or under any other
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bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extension generally with
its creditors, or proceedings seeking reorganization, arrangement, or other
relief.
"Inventory" means all 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 at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above, and Borrower's Books relating to any of
the foregoing.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other interests or securities) any Person, or any loan,
advance or capital contribution to any Person.
"Lenders' Expenses" means all reasonable costs and expenses (including
reasonable attorneys' fees and expenses and reasonable expenses of other
advisors) incurred in connection with the preparation, negotiation,
administration, and enforcement of the Loan Documents; and Lenders' reasonable
attorneys' fees and expenses incurred in amending, enforcing or defending the
Loan Documents, whether or not suit is brought.
"Lien" means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or notes
executed by Borrower, and any and all other agreements, documents and
instruments executed and delivered by or on behalf or in support of Borrower to
Servicing Agent or any Lender or their authorized designee evidencing or
otherwise relating to the Advances and the Liens granted to Lenders, as the same
may from time to time be amended, modified, supplemented or restated.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper, and Borrower's Books relating
to any of the foregoing.
"Obligations" means all debt, principal, interest, Lenders' Expenses and
other amounts owed to Lenders or Servicing Agent by Borrower pursuant to this
Agreement or any other Loan Documents, whether absolute or contingent, due or to
become due, now existing or hereafter arising.
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"Permitted Indebtedness" means:
(A) Indebtedness of Borrower in favor of Lenders or Servicing
Agent arising under this Agreement or any other Loan Document;
(B) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(C) Subordinated Debt;
(D) Indebtedness to trade creditors which has been incurred in
the ordinary course of business and which is not more than 60 days past due;
(E) Other Indebtedness incurred in the ordinary course of
business in an aggregate amount not to exceed $250,000 at any time outstanding;
(F) Guarantees of loans to employees in an aggregate amount at
any one time outstanding not to exceed $250,000, and except for guarantees of
miscellaneous amounts employees in an aggregate amount at any one time
outstanding not to exceed $500,000, and except for guarantees of obligations of
Borrower's wholly-owned Subsidiaries in the ordinary course of business;
(G) Contingent Obligations arising under any currency hedge
agreement or other similar agreement or arrangement designated to protect
Borrower against fluctuation in currency exchange rates, entered into in the
ordinary course of business.
"Permitted Investment" means:
(A) Investments existing on the Closing Date disclosed in the
Schedule;
(B) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., and (iii) certificates
of deposit maturing no more than one (1) year from the date of investment
therein issued by SVB;
(C) (i) loans to employees in an aggregate amount at any one time
outstanding not to exceed $250,000, (ii) miscellaneous amounts in an aggregate
amount at any one time outstanding not to exceed $500,000, (iii) credit sales to
Account Debtors in the ordinary course of business, and (iv) loans of
demonstration equipment in the ordinary course of business;
(D) other Investments in an aggregate amount not at any time to
exceed 5% of the Borrower's Tangible Net Worth, provided that, at the date each
such Investment is made, and after giving effect to such Investment, Borrower
has Availability of $5,000,000 or more.
"Permitted Liens" means the following:
(A) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
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(B) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of
Servicing Agent's or any Lender's security interests and provided appropriate
reserves for the same under GAAP are maintained by the Borrower;
(C) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(D) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business which (i) do not in the aggregate materially detract from the value
of such property or assets or materially impair the use thereof in the operation
of the business of Borrower or any of its Subsidiaries, (ii) are not delinquent
or remain payable without penalty or which are being contested in good faith and
by appropriate proceedings, or (iii) proceedings have the effect of preventing
the forfeiture or sale of the property subject thereto;
(E) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(F) Liens on the property of such Person securing (i) the
non--delinquent performance of bids, trade contracts (other than for borrowed
money), leases, statutory obligations, (ii) contingent obligations on surety and
appeal bonds, and (iii) other non-delinquent obligations of a like nature; in
each case, incurred in the ordinary course of business;
(G) Liens consisting of judgment or judicial attachment liens;
provided, that the enforcement of such Liens is effectively stayed, all such
liens in the aggregate at any time outstanding for Borrower and its Subsidiaries
do not exceed $100,000 in excess of amounts covered fully by insurance, and all
such liens are reserved against by Borrower to the extent required by GAAP;
(H) easements, rights--of-way, zoning and other restrictions and
other similar charges or encumbrances incurred in the ordinary course of
business which do not impose material financial obligations on Borrower or any
of its Subsidiaries, and which do not in any case materially detract from the
value of the property subject thereto or materially interfere with the ordinary
conduct of the businesses of such Person;
(I) Liens securing capital leases obligations on assets subject
to such leases; provided, that such capital leases are otherwise permitted
hereunder;
(J) Liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a creditor
depository institution;
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(K) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (j) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the highest of the prime rates published in the Wall
Street Journal, as the base rate on corporate loans at large U.S. money center
commercial banks.
"Requisite Lenders" means, at any time, Lenders then holding at least
sixty-six and two-thirds percent (66.67%) of the then aggregate unpaid principal
amount of all Advances then outstanding or, if no Advances are then outstanding,
Lenders then having at least sixty-six and two-thirds percent (66.67%) of the
aggregate Commitments; provided, however, that in the event there shall be only
two (2) Lenders, then "Requisite Lenders" shall mean both of such Lenders.
"Responsible Officer" means each of the Chief Executive Officer, the
Chief Financial Officer, Treasurer, and the Controller of Borrower.
"Revolving Advance" means an Advance made to Borrower pursuant to
SECTION 2.1 of this Agreement.
"Revolving Commitment" means, as to each Lender, the amount of the
Commitment with respect to the Committed Revolving Line set forth in the
Schedule next to such Lender's name.
"Revolving Maturity Date" means the first anniversary of the date of
this Agreement, as such date may from time to time be extended by Lenders in
their sole discretion pursuant to this Agreement.
"Schedule" means the disclosure schedule and the schedule of commitments
attached hereto.
"Servicing Agent" means SVB, not in its individual capacity, but solely
in its capacity as agent for certain loan servicing functions, on behalf and for
the benefit of Lenders, and any successor agent, all as may be requested by the
Lenders, unanimously, from time to time.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Lenders and Servicing Agent on
terms approved by Requisite Lenders and Servicing Agent in writing.
"Subsidiary" means any Person which is an entity in which (i) any
general partnership interest or (ii) more than 50% of the stock or other equity
interest of which by the terms thereof ordinary voting power to elect the Board
of Directors, managing members, managers or trustees
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of the entity shall, at the time as of which any determination is being made, be
owned by Borrower, either directly or through an Affiliate.
"Tangible Net Worth" means, as at any date of determination, the
consolidated total assets of Borrower and its Subsidiaries minus, without
duplication, (i) the sum of any amounts attributable to (a) goodwill, (b) other
intangible items such as unamortized debt discount and expense, patents, trade
and service marks and names, copyrights and capitalized research and development
expenses except prepaid expenses, and (c) all reserves not already deducted from
assets, and (ii) Total Liabilities.
"Total Liabilities" means at any date as of which the amount thereof
shall be determined, all obligations that should, in accordance with GAAP, be
classified as liabilities on the consolidated balance sheet of Borrower,
including, in any event, all Indebtedness, but specifically excluding
Subordinated Debt.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto.
SECTION 2. CREDIT FACILITIES AND TERMS OF PAYMENT
2.1 THE REVOLVING ADVANCES. Subject to and upon the terms and conditions
hereof, and in reliance upon the representations and warranties of Borrower set
forth herein, each Lender severally agrees to make its Commitment Percentage of
Revolving Advances to Borrower up to the amount of the Committed Revolving Line
from time to time until the close of business on the Business Day immediately
preceding the Revolving Maturity Date, in such sums as Borrower may request,
provided that the aggregate principal amount of all Revolving Advances at any
one time outstanding shall not exceed the lesser of (i) the Committed Revolving
Line and (ii) the Borrowing Base less any Availability Reserves. For purposes of
this Agreement, "Borrowing Base" shall mean an amount equal to EIGHTY PERCENT
(80%) of Eligible Accounts, plus up to SIXTY PERCENT (60%) (the "EMC Percentage
Advance Rate") of the "Eligible EMC Payments" (as defined below). The EMC
Percentage Advance Rate shall be subject to revision by Lenders based on their
quarterly review of EMC, including its credit rating.
As used above, "Eligible EMC Payments" means the minimum guaranteed
payments ("Minimum EMC Payments") due to Borrower from ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ("EMC")
under that certain Asset Purchase Agreement dated February 9, 1996 between
Borrower and EMC (the "EMC Agreement").
In the event of any dispute between Borrower and EMC, the amount in
dispute shall be deducted from the "Eligible EMC Payments". In the event EMC
shall assert any right to withhold any Minimum EMC Payment or shall assert any
defense to the payment thereof, then the amount thereof shall be deducted from
"Eligible EMC Payments". In addition, the amount of the Eligible EMC Payments
shall be deemed to be zero if (i) EMC shall fail to make any Minimum EMC Payment
within thirty days after the date due, or (ii) EMC shall be the subject of any
Insolvency Proceeding.
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Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties set forth herein, amounts borrowed
pursuant to this SECTION 2.1 may be repaid and reborrowed at any time during the
term of this Agreement.
On the Revolving Maturity Date, Borrower promises to pay to Servicing
Agent for the account of each Lender, in lawful money of the United States of
America, the aggregate unpaid principal amount of all Revolving Advances made by
Servicing Agent and Lenders to Borrower. Borrower shall also pay interest on the
aggregate unpaid principal amount of such Advances at the rates and in
accordance with the terms hereof.
The Committed Revolving Line shall terminate on the Revolving Maturity
Date, at which time all Advances under this SECTION 2.1 and other amounts due
under this Agreement (except as otherwise expressly specified herein) and all
other Obligations shall be immediately due and payable.
2.2 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower under the Committed Revolving Line exceeds the
lesser of (i) the Committed Revolving Line or (ii) the Borrowing Base less any
Availability Reserves, Borrower shall immediately pay to Servicing Agent, on
behalf of Lenders, in cash, the amount of such excess.
2.3 INTEREST RATES, PAYMENTS, CALCULATIONS, BORROWING PROCEDURES.
2.3.1 INTEREST RATE. Except as set forth in SECTION 2.3.2, any
Credit Extension shall bear interest on the average Daily Balance at a rate
equal to the Prime RATE.
2.3.2 DEFAULT RATE. All Obligations shall bear interest, from and
after the occurrence, and during the continuance, of an Event of Default, at a
rate equal to three (3) percentage points above the interest rate applicable
immediately prior to the occurrence of the Event of Default.
2.3.3 PAYMENTS. Interest hereunder shall be due and payable on
the last day of each month during the term hereof. Borrower hereby authorizes
Servicing Agent to debit any accounts with Servicing Agent, including, without
limitation, Account Number 600415670 for payments of principal and interest due
on the Obligations and any other amounts owing by Borrower to Lenders. Servicing
Agent shall notify Borrower of all debits which Servicing Agent makes against
Borrower's accounts. Any such debits against Borrower's accounts in no way shall
be deemed a set-off. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
2.3.4 COMPUTATION. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
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2.3.5 BORROWING PROCEDURES. Whenever Borrower desires a Credit
Extension hereunder, Borrower shall notify Servicing Agent by facsimile
transmission or telephone no later than 11:00 a.m. California time, on the
Business Day on which a Credit Extension is to be made. Servicing Agent shall
promptly deliver such notice to the Lenders. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
EXHIBIT B hereto. Servicing Agent is authorized to make Credit Extensions under
this Agreement, based upon instructions received by Servicing Agent from a
Responsible Officer, or without instructions if in Servicing Agent's discretion
such Credit Extensions are necessary to meet Obligations which have become due
and remain unpaid. Servicing Agent and Lender shall be entitled to rely on any
telephonic notice given by an individual whom Servicing Agent or any Lender
reasonably believes to be a Responsible Officer, and Borrower shall indemnify
and hold Servicing Agent and Lenders harmless for any damages or loss suffered
by Servicing Agent or Lenders as a result of such reliance. Each Lender will
wire or credit, as appropriate, the amount of Advances in United States Dollars
made under Section 2.1 to a Borrower deposit account held by Servicing Agent, as
specified by Borrower.
2.4 CREDITING PAYMENTS. Prior to the occurrence of an Event of Default,
Servicing Agent shall credit a wire transfer of funds, check or other item of
payment paid by Borrower to Servicing Agent on behalf of Lenders to such deposit
account or Obligation as Borrower specifies. After the occurrence of an Event of
Default, the receipt by Servicing Agent on behalf of Lenders of any wire
transfer of funds, check, or other item of payment shall be immediately applied
to conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, for purposes
of calculating interest and for all other purposes, (i) any wire transfer or
payment received by Servicing Agent or any Lender prior to 12:00 noon California
time shall be deemed to have been received by Servicing Agent or such Lender as
of the opening of business on the next Business Day, and (ii) any wire transfer
or payment received by Servicing Agent or any Lender after 12:00 noon California
time shall be deemed to have been received by Servicing Agent or such Lender as
of the opening of business on the second following Business Day. Whenever any
payment to Servicing Agent or any Lender under the Loan Documents would
otherwise be due (except by reason of acceleration) on a date which is not a
Business Day, such payment shall instead be due on the next Business Day, and
additional fees or interest, as applicable, shall accrue and be payable for the
period of such extension.
2.5 FEES. Borrower shall pay to Servicing Agent on behalf of Lenders the
following:
2.5.1 FACILITY FEE. A Facility Fee equal to One Hundred Thousand
Dollars ($100,000), which fee shall be shared equally by Lenders, shall be due
on the Closing Date and shall be fully earned and non-refundable;
2.5.2 FINANCIAL EXAMINATION AND APPRAISAL FEES. Each Lender's
customary fees and out-of-pocket expenses for its audits of Borrower's Accounts
(subject to the limitations set forth in Section 6.3 below), and for each
appraisal of Collateral and financial analysis and examination of Borrower
performed from time to time by Servicing Agent or its agents or any Lender;
2.5.3 LENDERS' EXPENSES. Upon the date hereof, all Lenders'
Expenses incurred through the date hereof, including reasonable attorneys' fees
and expenses.
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2.6 ADDITIONAL COSTS. In case any change in any law, regulation, treaty
or official directive or the interpretation or application thereof by any court
or any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law):
2.6.1 subjects Servicing Agent or any Lender to any tax with
respect to payments of principal or interest or any other amounts
payable hereunder by Borrower or otherwise with respect to the
transactions contemplated hereby (except for taxes on the overall net
income of Servicing Agent or such Lender imposed by the United States of
America or any political subdivision thereof);
2.6.2 imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against
assets held by, or deposits in or for the account of, or loans by,
Servicing Agent or any Lender; or
2.6.3 imposes upon Servicing Agent or any Lender any other
condition with respect to its performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Servicing
Agent or such Lender, reduce the income receivable by Servicing Agent or such
Lender or impose any expense upon Servicing Agent or such Lender with respect to
any loans, Servicing Agent or such Lender, as applicable, shall notify Borrower
thereof. Borrower agrees to pay to Servicing Agent or such Lender the amount of
such increase in cost, reduction in income or additional expense as and when
such cost, reduction or expense is incurred or determined, upon presentation by
Servicing Agent or such Lender of a statement of the amount and setting forth
Servicing Agent's or such Lender's calculation thereof, all in reasonable
detail, which statement shall be deemed true and correct absent manifest error.
2.7 PREPAYMENT RIGHT. Borrower shall have the right to pre-pay the
Obligations, in whole or in part, without penalty or premium.
2.8 [INTENTIONALLY OMITTED]
2.9 TERM. Except as otherwise set forth herein, this Agreement shall
become effective on the Closing Date and, subject to SECTIONS 14.2.4 and 14.7,
shall continue in full force and effect for a term ending on the REVOLVING
MATURITY DATE. Notwithstanding the foregoing, Lenders shall have the right to
terminate their obligation to make Credit Extensions under this Agreement
immediately and without notice upon the occurrence and during the continuance of
an Event of Default. Notwithstanding termination, Lenders' Lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.
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SECTION 3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of Lenders
to make the initial Advance is subject to the condition precedent that Lenders
shall have received, in form and substance satisfactory to Lenders, the
following:
(A) the documents listed on EXHIBIT E hereto.
(B) payment of the fees and expenses (including, without
limitation, Lenders' Expenses) then due specified in SECTION 14.2.1 hereof; and
(C) confirmation that, after giving effect to the initial Advance
to be made, and bringing Borrower's payables to within 60 days of due date, the
remaining Availability shall be at least $6,000,000.
(D) such other documents, and completion of such other matters,
as Lenders may reasonably deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of Lenders to
make each Advance, including the initial Advance, is further subject to the
following conditions:
(A) timely receipt by Servicing Agent on behalf of Lenders of the
Payment/Advance Form as provided in SECTION 2.3.5;
(B) the representations and warranties contained in SECTION 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each ADVANCE as though made at
and as of each such date, and no Event of Default shall have occurred and be
continuing, or would result from such Advance. The making of each Advance shall
be deemed to be a representation and warranty by Borrower on the date of such
Advance as to the accuracy of the facts referred to in this SECTION 3.2(B).
SECTION 4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower grants and pledges to Lenders,
a continuing security interest in all presently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Such security interest
constitutes a valid, first priority security interest in the presently existing
Collateral, and will constitute a valid, first priority security interest in
Collateral acquired after the date hereof, subject only to Permitted Liens.
Borrower acknowledges that Lenders may place a "hold" on any Deposit Account
pledged as Collateral to secure the Obligations, after the occurrence and during
the continuance of an Event of Default.
4.2 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time and from
time to time Borrower shall, and shall cause each of its Subsidiaries to,
execute and deliver all Negotiable Collateral, all financing statements and
other documents and take such further action as Servicing Agent or Lenders may
reasonably request, in form satisfactory to Lenders, to perfect and continue
perfected Lenders' security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents;
provided that
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Borrower need not deliver Negotiable Collateral having an aggregate value of
$100,000 or less, unless an Event of Default has occurred and is continuing.
4.3 RIGHT TO INSPECT. Any Lender (through any of their officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral, subject to the limitations set
forth in Section 6.3.
4.4 [INTENTIONALLY OMITTED]
4.5 SINGLE LOAN. All of the Obligations of Borrower to Servicing Agent
or Lenders arising under or in connection with this Agreement, or any of the
Loan Documents, shall constitute one general obligation of Borrower and shall be
secured by all of the Collateral.
4.6 NOTICE--DEPOSIT ACCOUNTS. The Lenders hereby give notice to SVB, in
its capacity as the organization with which Borrower's present and future
deposit accounts are maintained, of the Lenders' security interest in all
present and future deposit accounts of the Borrower, in accordance with Section
9302(1)(g) of the Code.
SECTION 5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower and each Subsidiary is
a corporation duly existing and in good standing under the laws of its state of
organization and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified, except where the failure to do so
would not have a Material Adverse Effect.
5.2 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws (or
similar constituent documents), nor will they constitute an event of default
under any material agreement to which Borrower is a party or by which Borrower
is bound. Borrower is not in default under any agreement to which it is a party
or by which it is bound, which default could have a Material Adverse Effect. The
execution, delivery, and performance of the Loan Documents do not require the
consent of any Person which has not been obtained.
5.3 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible title to
the Collateral, free and clear of Liens, except for Permitted Liens, and except
for the DEC 4000AXP computer which is on loan to Borrower pursuant to the
Settlement Agreement between Borrower and Digital Equipment Corporation dated
December 4, 1992.
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5.4 BONA FIDE ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide
existing obligations. Each Eligible Account has arisen from a bona fide
completed sale of goods, or the performance of services, which goods or services
have been delivered to, or performed for and in any of the foregoing cases
accepted by, the account debtor. Borrower has not received notice of an actual
or imminent Insolvency Proceeding of any account debtor for any Account which is
included in any Borrowing Base Certificate as an Eligible Account.
5.5 [Intentionally omitted.]
5.6 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE. Except as disclosed in the
Schedule or in compliance with this Agreement, Borrower has not done business
under any name other than that specified on the signature page hereof. The chief
executive office of Borrower is located at the address indicated in SECTION 10
hereof.
5.7 LITIGATION. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision is reasonably
expected to have a Material Adverse Effect or a material adverse effect on
Borrower's interest or Lenders' security interests in the Collateral. Borrower
does not have actual knowledge of any such pending or threatened actions or
proceedings.
5.8 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All consolidated
financial statements related to Borrower and any Subsidiary which have been
delivered by Borrower to Lenders fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Lenders.
5.9 SOLVENCY. Borrower is solvent and able to pay its debts (including
trade debts) as they mature.
5.10 REGULATORY COMPLIANCE. Borrower and each Subsidiary has met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.11 ENVIRONMENTAL CONDITION. None of Borrower's or any Subsidiary's
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with then
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applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment, which would reasonably be expected
to cost $150,000 or more to remedy.
5.12 TAXES. Borrower and each Subsidiary has filed or caused to be filed
all tax returns required to be filed within the required time periods (including
any applicable extensions), and has paid, or has made adequate provision for the
payment of, all taxes reflected therein.
5.13 SUBSIDIARIES. Borrower does not own any stock, partnership interest
or other equity securities of any Person, except for Permitted Investments and
except as set forth on the Schedule. Except as set forth in the Schedule,
Borrower is not engaged in any joint venture or partnership with any other
Person, nor is it an Affiliate of any other Person.
5.14 GOVERNMENT CONSENTS. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities which are necessary
for the continued operation of Borrower's business as currently conducted,
except where the failure to do so would not have a Material Adverse Effect.
5.15 FULL DISCLOSURE. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Servicing
Agent or any Lender contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained in
such certificates or statements not misleading as of the date furnished.
5.16 INTELLECTUAL PROPERTY. As of the Closing Date, Borrower owns or has
rights to use all intellectual property necessary to continue to conduct its
business as now or heretofore conducted by it or proposed to be conducted by it,
and each patent, trademark, copyright and license is listed, together with
application or registration numbers, as applicable, in the Intellectual Property
Security Agreement between Lenders and Borrower of even date. Each Borrower
conducts its business and affairs without infringement of or interference with
any intellectual property of any other Person. None of the Accounts include sums
due for the licensing of software by the Borrower to its customers, except where
the same are separately billed, and in that case such Accounts will be
separately noted on the Borrower's Borrowing Base Certificates and Borrower
acknowledges that the same will not be Eligible Accounts.
5.17 CUSTOMER AND TRADE RELATIONS. As of the Closing Date, there exists
no actual or, to the knowledge of any Borrower, threatened termination or
cancellation of, or any material adverse modification or change in: the business
relationship of any Borrower with any customer
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or group of customers whose purchases during the preceding twelve (12) months
caused them to be ranked among the ten largest customers of such Borrower; or
the business relationship of any Borrower with any supplier material to its
operations.
5.18 EMC CONTRACT. Borrower has provided the Lenders with a true and
correct copy of the EMC Agreement referred to in Section 2.1 above (except for
the deletion, in the places indicated on such copy, of confidential information
Borrower was permitted to delete from the copy filed with the Securities and
Exchange Commission and which neither has nor will have any bearing or effect on
the amount or timing of the Minimum EMC Payments. The EMC Agreement is presently
in full force and effect in the form provided to the Lenders, and has not been
modified or amended. There are no disputes between Borrower and EMC relating to
the EMC Agreement or any other matter which would give EMC a right to withhold
any Minimum EMC Payments under the EMC Agreement. The Minimum EMC Payments and
their due dates are as follows: (i) fixed payments due from EMC to the Borrower
under Section 1.3.1 of the EMC Agreement in the total amount of $15,000,000,
payable in three equal payments of $5,000,000 each, on January 15 of 1999, 2000,
and 2001, respectively, and (ii) minimum royalties due from EMC to the Borrower
under Section 1.3.2 of the EMC Agreement in the amount of $2,000,000 per year,
payable on March 15 of 1999, 2000 and 2001, respectively. Borrower shall give
Lenders immediate written notice in the event EMC shall fail to make any Minimum
EMC Payment on the date due, or EMC shall assert any right to withhold any
Minimum EMC Payment or shall assert any defense to the payment thereof, or any
dispute shall arise which relates to the EMC Agreement or which gives or may
give EMC a right to withhold any Minimum EMC Payment.
5.19 NATIONAL PERIPHERALS. National Peripherals is an affiliate of
Borrower, but the same does not, and will not, during the term of this
Agreement, have assets with a value of over $5,000.
SECTION 6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Lenders may have any commitment to
make an Advance hereunder, Borrower shall do all of the following:
6.1 GOOD STANDING. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation or formation and maintain qualification in each jurisdiction in
which the failure to so qualify could have a Material Adverse Effect. Borrower
shall maintain, and shall cause each of its Subsidiaries to maintain, to the
extent consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 GOVERNMENT COMPLIANCE. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Lenders' Lien on the Collateral.
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6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall deliver
to Lenders: (a) as soon as available, but in any event within thirty (30) days
after the end of each month, a company-prepared consolidated and consolidating
balance sheet and income statement covering Borrower's consolidated operations
during such period, certified by an officer of Borrower reasonably acceptable to
Lenders; (b) as soon as available, but in any event within ninety (90) days
after the end of Borrower's fiscal year, audited consolidated and consolidating
financial statements of Borrower prepared in accordance with GAAP, consistently
applied (including consolidated and consolidating statements of cash flow),
together with an unqualified opinion of an independent certified public
accounting firm with respect to such financial statements, reasonably acceptable
to Lenders; (c) within five (5) days of filing, copies of all statements,
reports and notices sent or made available generally by Borrower to its security
holders or to any holders of Subordinated Debt and all reports on Forms 10-K,
10-Q or 8-K filed with the Securities and Exchange Commission; (d) promptly upon
receipt of notice thereof, a report of any legal actions pending or threatened
against Borrower or any Subsidiary which is reasonably expected to result in
damages or costs to Borrower or such Subsidiary of One Hundred Thousand Dollars
($100,000) or more; and (e) such budgets, sales projections, operating plans or
other financial information as Lenders may reasonably request from time to time.
Within 5 days after the last day of each month, Borrower shall deliver
to Lenders a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of EXHIBIT C hereto, together with aged listings of
accounts receivable and accounts payable, PROVIDED THAT such Borrowing Base
Certificate and aged listings of accounts receivable and accounts payable shall
be provided by Borrower to Lenders as frequently as requested by the Requisite
Lenders, if the Availability at any time within the prior 60 days was less than
$7,500,000.
Within 30 days after the last day of each month, Borrower shall deliver
to Lenders, with the monthly financial statements, a Compliance Certificate
signed by a Responsible Officer in substantially the form of EXHIBIT D hereto.
Lenders shall have a right from time to time hereafter to audit
Borrower's Accounts and books and records at Borrower's expense, provided that
(i) such audits will be conducted no more often than once every twelve months
(except that if Availability is less than $7,500,000 as of the last day of a
month for three consecutive months, then, thereafter, such audits will be
conducted no more often than once every six months), and (ii) the limitations on
audits in clause (i) above shall not apply during any period after an Event of
Default has occurred and while the same is continuing, nor shall such
limitations limit the Lenders' right, from time to time, at the election of the
Requisite Lenders, to conduct such audits at the Lenders' expense.
6.4 INVENTORY; RETURNS. Borrower shall keep all Inventory in good and
marketable condition in all material respects, free from all material defects.
Returns and allowances, if any, as between Borrower and its account debtors
shall be on the same basis and in accordance with the usual customary practices
of Borrower, as they exist at the time of the execution and delivery of this
Agreement. Borrower shall promptly notify Servicing Agent of all returns and
recoveries and of all disputes and claims, where the return, recovery, dispute
or claim involves more than One Hundred Thousand Dollars ($100,000).
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6.5 TAXES. Borrower shall make, and shall cause each Subsidiary to make,
due and timely payment or deposit of all material foreign, federal, state, and
local taxes, assessments, duties or contributions required of Borrower or such
Subsidiary by law, and will execute and deliver to Lenders, on demand,
appropriate certificates attesting to the payment or deposit thereof; and
Borrower shall make, and shall cause each Subsidiary to make, timely payment or
deposit of all material tax payments and withholding taxes required of Borrower
or such Subsidiary by applicable laws, including, but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, federal and
foreign income taxes, and will, upon request, furnish Lenders with proof
satisfactory to Lenders indicating that Borrower or such Subsidiary has made
such payments or deposits; provided that Borrower or such Subsidiary need not
make any payment if the amount or validity of such payment is contested in good
faith by appropriate proceedings and is reserved against by Borrower to the
extent required by GAAP.
6.6 INSURANCE.
6.6.1 Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts as are ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and types
as are customary to businesses similar to Borrower's.
6.6.2 All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Lenders. All
such policies of property insurance shall provide that the proceeds of such
policies shall be payable solely to Lenders, pursuant to a standard first
mortgage endorsement substantially equivalent to the Lenders Loss Payable
Endorsement 438BFU, in form satisfactory to Lenders and all liability insurance
policies shall name Lenders, as additional insureds, and shall specify that the
insurer must give at least thirty (30) days' notice to Lenders before canceling
its policy for any reason. Borrower shall deliver to Lenders a certificate of
insurance with respect to all such policies of insurance and evidence of the
payments of all premiums therefor. All proceeds payable under any such policy,
in excess of $100,000 in the aggregate in any calendar year, shall, at the
option of Lenders, be payable to Lenders to be applied on account of the
Obligations.
6.7 PRINCIPAL DEPOSITORY. Borrower shall maintain its principal domestic
depository and operating accounts with SVB.
6.8 [Intentionally omitted]
6.9 CURRENT RATIO. Borrower shall maintain, (i) as of the last day of
each calendar month which is also the end of a fiscal quarter of Borrower, a
ratio of Current Assets to Current Liabilities of at least 1.0 to 1.0., and (ii)
as of the last day of each calendar month, which is not the end of a fiscal
quarter of Borrower, a ratio of Current Assets to Current Liabilities of at
least 0.75 to 1.0.
6.10 DEBT-NET WORTH RATIO. Borrower shall maintain, as of the last day
of each calendar month, a ratio of Total Liabilities to Tangible Net Worth plus
Subordinated Debt of not more than 4.0 to 1.0.
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6.11 TANGIBLE NET WORTH. Borrower shall maintain, as of the last day of
each calendar month, a Tangible Net Worth of not less than Eighteen Million
Dollars ($18,000,000).
6.12 PROFITABILITY. Borrower shall be profitable for each fiscal
quarter.
6.13 [Intentionally omitted]
6.14 [Intentionally omitted]
6.15 [Intentionally omitted]
6.16 [Intentionally omitted]
6.17 [Intentionally omitted]
6.18 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS. Borrower shall
register or cause to be registered (to the extent not already registered) with
the United States Patent and Trademark Office or the United States Copyright
Office, as applicable, those intellectual property rights listed on EXHIBITS A,
B and C to the Collateral Assignment, Patent Mortgage and Security Agreement
delivered to Lenders by Borrower in connection with this Agreement within thirty
(30) days of the date of this Agreement. Borrower shall register or cause to be
registered with the United States Patent and Trademark Office or the United
States Copyright Office, as applicable, those additional intellectual property
rights developed or acquired by Borrower from time to time in connection with
any product, prior to the sale or licensing of such product to any third party
including, without limitation, revisions or additions to the intellectual
property rights listed on such EXHIBITS A, B and C, provided that, (i) in the
case of copyrights to be registered with the United States Copyright Office,
Borrower shall have 90 days after the date of any such sale or licensing in
which to so register such copyrights, and (ii) in the case of patents, Borrower
shall be required to file applications for such patents within a reasonable time
after the date of any such sale or licensing and thereafter diligently pursue
the same. Borrower shall provide to Lenders, at least quarterly, a written
report as to all such additional intellectual property rights, including,
without limitation, revisions or additions to the intellectual property rights
listed on such EXHIBITS A, B and C, together with copies of all filings with
respect thereto made with United States Patent and Trademark Office or the
United States Copyright Office, as applicable. Borrower shall execute and
deliver such additional instruments and documents from time to time as Lenders
shall reasonably request to perfect Lenders' security interests in such
additional intellectual property rights.
6.19 FURTHER ASSURANCES. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Servicing Agent or Lenders to effect the
purposes of this Agreement.
6.20 LANDLORDS' AGREEMENTS, MORTGAGEE AGREEMENTS AND BAILEE LETTERS.
Borrower shall, upon request of the Requisite Lenders, obtain a landlord's
agreement, mortgagee agreement or bailee letter, as applicable, from the lessor
of each leased property or mortgagee of
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owned property or with respect to any warehouse, processor or converter facility
or other location where Collateral is located, which agreement or letter shall
contain a waiver or subordination of all Liens or claims that the landlord,
mortgagee or bailee may assert against the Inventory or Collateral at that
location, and shall otherwise be satisfactory in form and substance to the
Requisite Lenders.
6.21 YEAR 2000. On or before June 30, 1999, Borrower shall eliminate all
limitations on its capacity or the readiness of its system software, network
software, applications software, date bases, computer files, firmware and
hardware to accurately accept, create, manipulate, sort, sequence, calculate,
compare, and produce calendar date information with respect to calendar year
1999 or any subsequent calendar year beginning on or after January 1, 2000.
SECTION 7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Lenders may have any commitment to make any Advances, Borrower
will not do any of the following, without the prior written consent of the
Requisite Lenders:
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 their respective businesses or properties, other than: (i)
Transfers of Inventory in the ordinary course of business; (ii) Transfers in the
ordinary course of business of non-exclusive licenses or similar arrangements
for the use of the property of Borrower or its Subsidiaries; (iii) Transfers of
worn-out or obsolete Equipment in the ordinary course of business; (iv) other
Transfers in the ordinary course of business, in an aggregate amount not in
excess of $100,000 in any fiscal year; (v) licenses of technology pursuant to
the Settlement Agreement between Borrower and Digital Equipment Corporation
dated December 4, 1992.
7.2 CHANGE IN BUSINESS. Engage in any business, or permit any of its
Subsidiaries to engage in, any business, other than (i) the businesses currently
engaged in by Borrower or its Subsidiaries and (ii) any business substantially
similar or related thereto (or incidental thereto), or suffer a change in
control of the outstanding stock of Borrower having the power to elect a
majority of the Board of Directors of Borrower. Borrower shall not, without
thirty (30) days prior written notification to Lenders, relocate its chief
executive office or change its name, and, in connection therewith, Borrower
shall execute and deliver all UCC filings and other documents and instruments
reasonably requested by Lenders in order to continue in effect and perfect
Lenders' security interests.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person, except
that (i) Borrower may merge or consolidate with another corporation if Borrower
is the surviving corporation in the merger, and the aggregate value of the
assets acquired in the merger does not exceed 25% of Borrower's Tangible Net
Worth as of the end of the month prior to the effective date of the merger, and
the assets of the corporation acquired in the merger are not subject to any
liens or encumbrances, except liens that would constitute Permitted Liens after
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giving effect to such merger, and (ii) Borrower may acquire assets if the
aggregate purchase price of such assets does not exceed 25% of Borrower's
consolidated Tangible Net Worth as of the end of the month prior to the
effective date of the acquisition, and (iii) Borrower may merge or consolidate
with another corporation, even if the aggregate value of the assets acquired in
the merger exceeds 25% of Borrower's Tangible Net Worth as of the end of the
month prior to the effective date of the merger, if Borrower is the surviving
corporation in the merger, and the assets of the corporation acquired in the
merger are not subject to any liens or encumbrances, except liens that would
constitute Permitted Liens after giving effect to such merger, and Borrower
obtains the prior written consent of the Requisite Lenders, which shall not be
unreasonably withheld.
7.4 INDEBTEDNESS. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 ENCUMBRANCES. Create, incur, assume or suffer to exist any Lien with
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 DISTRIBUTIONS. Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any of its
capital stock, except that Borrower may repurchase or redeem shares of its
capital stock pursuant to employee stock option plans for an aggregate purchase
price not to exceed $50,000 per fiscal year.
7.7 INVESTMENTS. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a Person not an Affiliate.
7.9 SUBORDINATED DEBT. Make any payment in respect of any Subordinated
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt and any related
subordination agreement, or amend any provision contained in any documentation
relating to the Subordinated Debt without Lenders' prior written consent.
7.10 INVENTORY. Store any Inventory with a bailee, warehouseman, or
similar party unless Lenders have received a pledge of the warehouse receipt
covering such Inventory. Except for (i) Inventory sold in the ordinary course of
business, (ii) such other locations as Lenders may approve in writing, and (iii)
sales offices in states in which Borrower has assets totaling less than $25,000,
Borrower shall keep the Inventory only at the location set forth in SECTION 10
hereof and such other locations of which Borrower gives Lenders prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Lenders' security interest.
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7.11 COMPLIANCE. Become an "investment company" or a Person controlled
by an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose or fail to meet the minimum funding requirements of ERISA, or permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, or
fail to comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Lenders' Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.
7.12 CANCELLATION OF INDEBTEDNESS. No Borrower shall cancel any claim or
debt owing to it, except for reasonable consideration negotiated on an
arm's-length basis and in the ordinary course of its business consistent with
past practices.
7.13 NO SPECULATIVE TRANSACTIONS. No Borrower shall engage in any
transaction involving commodity options, futures contracts or similar
transactions, except solely to hedge against fluctuations in the prices of
commodities owned or purchased by it and the values of foreign currencies
receivable or payable by it and interest swaps, caps or collars.
7.14 FISCAL YEAR. Make any change in its fiscal year.
SECTION 8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an event of
default by Borrower under this Agreement (an "Event of Default"):
8.1 PAYMENT DEFAULT. If Borrower fails to pay, when due, any of the
Obligations.
8.2 COVENANT DEFAULT.
8.2.1 If Borrower fails to perform any obligation under SECTIONS
6.3, 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, 6.11, 6.12, OR 6.18 or violates any of the
covenants contained in SECTION 7 of this Agreement, or
8.2.2 If Borrower fails or neglects to perform, keep, or observe
any other term, provision, condition or covenant contained in this Agreement or
in any of the other Loan Documents, and as to any default of such other term,
provision, condition or covenant which can be cured, has failed to cure such
default within ten (10) days after Borrower receives notice thereof or any
officer of Borrower becomes aware thereof; provided, however, that if such
default cannot by its nature be cured within the ten (10) day period or cannot,
after diligent attempts by Borrower, be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional reasonable period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an Event
of Default (provided that no Credit Extension will be required to be made during
such cure period);
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8.3 MATERIAL ADVERSE CHANGE. If there occurs a Material Adverse Change
in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Lenders' security interests in
the Collateral;
8.4 ATTACHMENT. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within twenty (20) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within twenty (20)
days after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period if
the amount of any of the foregoing is in excess of $250,000);
8.5 INSOLVENCY. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 OTHER AGREEMENTS. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or which could have a Material Adverse Effect;
8.7 SUBORDINATED DEBT. If Borrower makes any payment on account of
Subordinated Debt, in violation of any subordination provisions in the
instruments evidencing or relating to such Subordinated Debt or in violation of
any agreement entered into between the holders of such Subordinated Debt and
Lenders;
8.8 JUDGMENTS. If a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of thirty (30) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment); or
8.9 MISREPRESENTATIONS. If any material misrepresentation or material
misstatement exists now or hereafter (as of the date made) in any warranty or
representation set forth herein or in any certificate delivered to Servicing
Agent or any Lender by any Responsible Officer pursuant to this Agreement or to
induce Servicing Agent or any Lender to enter into this Agreement or any other
Loan Document.
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8.10 INVALIDITY. Borrower shall challenge the enforceability of any Loan
Document or shall assert in writing, or engage in any action or inaction based
on any such assertion, that any provision of any of the Loan Documents has
ceased to be or otherwise is not valid, binding and enforceable in accordance
with its terms), or any security interest created under any Loan Document shall
cease to be a valid and perfected first priority security interest or Lien
(except as otherwise permitted herein or therein) in any of the collateral
purported to be covered thereby.
SECTION 9. SERVICING AGENT'S AND LENDERS' RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence and during the continuance
of a Default or Event of Default, neither Servicing Agent nor any Lender shall
have any further obligation to advance money or extend other credit to or for
the benefit of Borrower under this Agreement or under any other agreement
between or among Borrower or Servicing Agent or any Lender. In addition, upon
the occurrence and during the continuance of an Event of Default Lenders, or
Servicing Agent, on behalf of Lenders, at the election of Requisite Lenders,
may, without notice of their election and without demand, do any one or more of
the following, all of which are hereby authorized by Borrower:
9.1.1 Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
SECTION 8.5 all Obligations shall become immediately due and payable without any
action by Servicing Agent or Lenders);
9.1.2 [Intentionally Omitted]
9.1.3 Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order Lenders reasonably
consider advisable;
9.1.4 Without notice to or demand upon Borrower, make such
payments and do such acts as Servicing Agent or Lenders consider necessary or
reasonable to protect Lenders' security interest in the Collateral. Borrower
agrees to assemble the Collateral if Lenders so require, and to make the
Collateral available to Lenders in such a manner as Lenders may designate.
Borrower authorizes each Lender to enter the premises where the Collateral is
located, to take and maintain possession of the Collateral, or any part of it,
and to pay, purchase, contest, or compromise any encumbrance, charge, or Lien
which in Requisite Lenders' determination appears to be prior or superior to its
security interest and to pay all expenses incurred in connection therewith. With
respect to any of Borrower's owned premises, Borrower hereby grants to Lenders
license to enter into possession of such premises and to occupy the same,
without charge, for up to one hundred twenty (120) days in order to exercise any
of Lenders' rights or remedies provided herein, at law, in equity, or otherwise;
9.1.5 Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Each Lender is hereby granted a license or other right,
solely pursuant to the provisions of this SECTION 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Lenders' exercise of their rights under this
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SECTION 9.1, Borrower's rights under all licenses and all franchise agreements
shall inure to Lenders' benefit;
9.1.6 Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Lenders
determine to be commercially reasonable;
9.1.7 Servicing Agent or any Lender may credit bid and purchase
at any public sale; and
9.1.8 Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 POWER OF ATTORNEY. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints
Lenders, (and any of Lenders' designated officers, or employees) as Borrower's
true and lawful attorney to: (a) send requests for verification of Accounts or
notify account debtors of Lenders' security interest in the Accounts; (b)
endorse Borrower's name on any checks or other forms of payment or security that
may come into Lenders' possession; (c) sign Borrower's name on any invoice or
▇▇▇▇ of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle, and adjust all claims under and decisions
with respect to Borrower's policies of insurance; and (e) settle and adjust
disputes and claims respecting the accounts directly with account debtors, for
amounts and upon terms which Lenders determine to be reasonable; provided
Lenders may exercise such power of attorney to sign the name of Borrower on any
of the documents described in SECTION 4.2 regardless of whether an Event of
Default has occurred. The appointment of Lenders as Borrower's attorney in fact,
and each and every one of Lenders' rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully repaid and
performed and Lenders' obligation to provide Credit Extension hereunder is
terminated. Lenders shall provide Borrower with a copy of any documents signed
pursuant to this Section 9.2 within two Business Days after the date such
document is executed and delivered.
9.3 SETOFF.
9.3.1 Regardless of the adequacy of any collateral or other means
of obtaining repayment of the Obligations, any deposits, balances or other sums
credited by or due from the head offices of Lenders or any of their branch
offices to Borrower may, at any time and from time to time after the occurrence
and during the continuance of an Event of Default hereunder, without notice to
Borrower or compliance with any other condition precedent now or hereafter
imposed by statute, rule of law, or otherwise (all of which are hereby expressly
waived) be set off, appropriated, and applied by Lenders against any and all
obligations of Borrower to Lenders or any of their Affiliates in such manner as
the head offices of Lenders or any of their branch offices in their sole
discretion may determine, and Borrower hereby grants Lenders a continuing
security interest in such deposits, balances or other sums for the payment and
performance of all such obligations.
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9.3.2 Unless otherwise expressly provided herein, all interest,
fees and principal payments on the Loans to Borrower hereunder are to be divided
among Lenders in the same proportion as each Lender's pro rata share of the
aggregate Commitments. Any sums obtained from Borrower or any Subsidiary by any
Lender by reason of the exercise of its rights of setoff or banker's lien or
otherwise shall be shared among all Lenders in the same proportion and applied
first to Obligations of Borrower under this Agreement or any of the other Loan
Documents. Nothing in this SECTION 9.3.2 shall be deemed to require the sharing
of Lenders of collections (other than by setoff or banker's lien) with respect
to any other Obligations of Borrower or any Subsidiary to any Lender.
9.4 ACCOUNTS COLLECTION. At any time from the date of this Agreement,
Servicing Agent may notify any Person owing funds to Borrower of Lenders'
security interest in such funds and verify the amount of such Account. Borrower
shall collect, on behalf of Servicing Agent, all amounts owing to Borrower of
every kind (including without limitation amounts owing to Borrower on Accounts,
instruments, documents and general intangibles), receive in trust all payments
on the foregoing as Servicing Agent's and Lenders' trustee, and immediately
deliver such payments to Servicing Agent, on behalf of Lenders, in their
original form as received by Borrower, with proper endorsements for deposit. If
any Event of Default has occurred and is continuing, Servicing Agent, on behalf
of the Lenders (at the election of Requisite Lenders), shall have the right (but
not the obligation), without notice to or demand on Borrower, to demand payment
of, and collect all Accounts and all other Collateral and, in connection
therewith, Borrower irrevocably authorizes Servicing Agent to endorse or sign
Borrower's name on all collections, receipts, instruments and other documents,
and, in Servicing Agent's sole discretion, to grant extensions of time to pay,
compromise claims and settle Accounts and other Collateral for less than face
value.
9.5 LENDERS' EXPENSES. If Borrower fails to pay any amounts or furnish
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Lenders may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Committed Revolving Line as Lenders deem necessary to protect
Lenders from the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type discussed in SECTION 6.6 of this Agreement, and
take any action with respect to such policies as Lenders deem prudent. Any
amounts so paid or deposited by Lenders shall constitute Lenders' Expenses,
shall be immediately due and payable, and shall bear interest at the then
applicable rate hereinabove provided, and shall be secured by the Collateral.
Any payments made by Lenders shall not constitute an agreement by Lenders to
make similar payments in the future or a waiver by Lenders of any Event of
Default under this Agreement.
9.6 LENDERS' LIABILITY FOR COLLATERAL. No Lender shall in any way or
manner be liable or responsible for: (a) the safekeeping of the Collateral; (b)
any loss or damage thereto occurring or arising in any manner or fashion from
any cause; (c) any diminution in the value thereof; or (d) any act or default of
any carrier, warehouseman, bailee, forwarding agency, or other Person
whomsoever. All risk of loss, damage or destruction of the Collateral shall be
borne by Borrower. Nothing in this Section 9.6 is intended to relieve Servicing
Agent or any Lender of liability for its own gross negligence or willful
misconduct.
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9.7 REMEDIES CUMULATIVE. Lenders' rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Lenders shall have all other rights and remedies not inconsistent herewith as
provided under the Code, at law, or in equity. No exercise by Lenders of one
right or remedy shall be deemed an election, and no waiver by Lenders of any
Event of Default on Borrower's part shall be deemed a continuing waiver. No
delay by Lenders shall constitute a waiver, election, or acquiescence by them.
No waiver by Lenders shall be effective unless made in a written document signed
by Servicing Agent and Requisite Lenders and then shall be effective only in the
specific instance and for the specific purpose for which it was given.
9.8 DEMAND; PROTEST. Except as expressly provided herein, Borrower
waives demand, protest, notice of protest, 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 at any time held by Servicing Agent
or any Lender on which Borrower may in any way be liable.
SECTION 10. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telecopy to Borrower or to Servicing Agent or any Lender, as the case may be,
at its addresses set forth below:
If to Borrower: MTI TECHNOLOGY CORPORATION
▇▇▇▇ ▇. ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With copy to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
fax: ▇▇▇-▇▇▇-▇▇▇▇
If to SVB or
Servicing Agent: SILICON VALLEY BANK
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
fax: ▇▇▇-▇▇▇-▇▇▇▇
With copies to: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Legal Department
Fax: ▇▇▇-▇▇▇-▇▇▇▇
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▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇.
Levy, Small & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
fax: ▇▇▇-▇▇▇-▇▇▇▇
If to GE Capital: GENERAL ELECTRIC CAPITAL CORPORATION
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Account Manager (MTI Technology)
fax: ▇▇▇-▇▇▇-▇▇▇▇
With copies to: GENERAL ELECTRIC CAPITAL CORPORATION
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Corporate Counsel
fax: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Hill ▇▇▇▇▇▇▇▇, III, Esq.
fax: ▇▇▇-▇▇▇-▇▇▇▇
If to any Lender, at its address specified on the signature pages hereto, or at
any other address specified by such Lender. NOTICES TO ONE LENDER SHALL NOT BE
DEEMED NOTICE TO ANY OTHER LENDER.
Notices shall be deemed given as follows: (i) on the date of personal delivery
in the case of notices given by personal delivery, or (ii) three business days
after the date of mailing, in the case of notices given by mail as set forth
above, or (iii) on the next business day after delivery to the private delivery
service, in the case of notices given by overnight delivery service as set forth
above, or (iv) on receipt during business hours in the case of notices sent by
telecopy with the concurrent sending of the notice by one of the other methods
referred to above.
The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.
SECTION 11. ASSIGNMENTS; PARTICIPATIONS
11.1 ASSIGNMENTS. Any Lender may, with the written consent of Borrower
which consent shall not be unreasonably withheld (but no consent of Borrower
shall be required during the existence of an Event of Default), and with the
written consent of each other Lender at any
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time assign and delegate to one or more assignees (provided that no written
consent of Borrower or any Lender shall be required in connection with any
assignment and delegation by a Lender to an affiliate of such Lender) (each an
"Assignee") all, or any ratable part of all, of the Advances, the Commitments
and the other rights and obligations of such Lender hereunder, in a minimum
amount of $2,500,000 provided, however, that (i) no such assignment shall be
made to an Assignee if Borrower would be required to make any additional
payments under this Agreement to such Assignee, which Borrower had not been
required to make with respect to the assigning Lender (including any amounts
payable pursuant to Sections 2.6 and 14.2.2), and (ii) Borrower may continue to
deal solely and directly with such Lender in connection with the interest so
assigned to an Assignee until (A) written notice of such assignment, together
with payment instructions, addresses and related information with respect to the
Assignee, shall have been given to Borrower by such Lender and the Assignee; (B)
such Lender and its Assignee shall have delivered to Borrower an Assignment and
Acceptance ("Assignment and Acceptance") in the form of EXHIBIT F hereto,
together with any note or notes subject to such assignment. In the event a
Lender (the "Transferring Lender") desires to assign and delegate to another
Person (other than an Affiliate of such Lender) (the "Proposed Transferee") all,
or any ratable part of all, of the Advances, the Commitments and the other
rights and obligations of such Lender hereunder (a "Loan Transfer"), the
Transferring Lender will first give written notice thereof to the other Lenders
of the same and the terms and conditions on which the Loan Transfer is to take
place, including the name of the Proposed Transferee. The other Lenders shall
have a right of first refusal to become the transferee in the Loan Transfer, on
the same terms and conditions, by giving written notice thereof to the
Transferring Lender within 15 days after receipt of such notice. If the other
Lenders do not exercise such right of first refusal with respect to all of the
interests proposed to be transferred in the Loan Transfer, then the Transferring
Lender shall be free, thereafter, to effect the Loan Transfer to the Proposed
Transferee on the same terms and conditions set forth in the notice to the other
Lenders.
11.2 ASSIGNEE. From and after the date on which each other Lender
notifies the assignor Lender that it has received an executed Assignment and
Acceptance (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Lender under the Loan Documents, and (ii) the assignor Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Loan Documents.
11.3 NEW NOTES. Within five (5) Business Days after its receipt of a
fully executed counterpart of the Assignment and Acceptance and any original
notes with respect to the Commitments and Advances to be assigned, Borrower
shall execute and deliver to the Assignee a new note evidencing such Assignee's
assigned Advances and Commitment and, if the assignor Lender has retained a
portion of its Advances and its Commitment, a replacement note in the principal
amount of the Advances retained by the assignor Lender (such note to be in
exchange for, but not in payment of, the note held by such assigning Lender).
Immediately upon each Assignee's making its processing fee payment under the
Assignment and Acceptance, this Agreement shall be deemed to be amended to the
extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Commitments arising
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therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.
11.4 PARTICIPATIONS. Any Lender may at any time sell to one or more
commercial banks or other Persons not Affiliates of Borrower (a "Participant")
participating interests in any Credit Extensions, the Commitment of such Lender
and the other interests of such Lender (the "Originating Lender") hereunder and
under the other Loan Documents; provided, however, that (i) the Originating
Lender's obligations under this Agreement shall remain unchanged, (ii) the
Originating Lender shall remain solely responsible for the performance of such
obligations, (iii) Borrower shall continue to deal solely and directly with the
Originating Lender in connection with the Originating Lender's rights and
obligations under this Agreement and the other Loan Documents, (iv) no Lender
shall transfer or grant any participating interest under which the Participant
shall have rights to approve any amendment to, or any consent or waiver with
respect to, this Agreement or any other Loan Document, except to the extent such
amendment, consent or waiver would otherwise require unanimous consent of the
Lenders, and (v) unless an Event of Default has occurred and is continuing a
Lender shall not sell participating interests to any competitor of Borrower.
SECTION 12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
12.1 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of California, without regard
to principles of conflicts of law. Each of Borrower, Servicing Agent and Lenders
hereby submits to the exclusive jurisdiction of the state and Federal courts
located in the State of California.
12.2 MUTUAL WAIVER OF JURY TRIAL. EACH OF BORROWER, SERVICING AGENT AND
LENDERS HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY
RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
SECTION 13. SERVICING AGENT
13.1 APPOINTMENT AND AUTHORIZATION. Each Lender hereby irrevocably
(subject to Section 13.9) appoints, designates and authorizes the Servicing
Agent to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such duties
as are expressly delegated to it by the terms of this Agreement or any other
Loan Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Servicing Agent shall not have any
duties or responsibilities,
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except those expressly set forth herein, nor shall the Servicing Agent have or
be deemed to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against the Servicing Agent.
13.2 DELEGATION OF DUTIES. The Servicing Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Servicing Agent shall not
be responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects with reasonable care.
13.3 LIABILITY OF SERVICING AGENT. None of the Agent-Related Persons
shall (i) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct or that of its officers, employees, agents or attorneys in fact), or
(ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by the Borrower or any Subsidiary or
Affiliate of the Borrower, or any officer thereof, contained in this Agreement
or in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Servicing Agent
under or in connection with, this Agreement or any other Loan Document, or for
the value of or title to any Collateral, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Borrower or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Borrower or any of the Borrower's
Subsidiaries or Affiliates.
13.4 RELIANCE BY SERVICING AGENT.
(a) The Servicing Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed in good faith by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Borrower), independent accountants and other experts selected by the
Servicing Agent. The Servicing Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless it shall first receive such advice or concurrence of the Requisite
Lenders as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Servicing Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Requisite Lenders and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Lenders.
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(b) For purposes of determining compliance with the conditions
specified in SECTION 3.1, each Lender that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Servicing Agent to such Lender for
consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lender.
13.5 NOTICE OF DEFAULT. The Servicing Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Servicing Agent for the account of the Lenders, unless the
Servicing Agent shall have received written notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". The Servicing Agent will
notify the Lenders of its receipt of any such notice. The Servicing Agent shall
take such action with respect to such Default or Event of Default as may be
requested by the Requisite Lenders in accordance with Section 9; provided,
however, that unless and until the Servicing Agent has received any such
request, the Servicing Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable or in the best interests of the
Lenders.
13.6 CREDIT DECISION. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Servicing Agent hereinafter taken, including any review of the
affairs of the Borrower and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Servicing Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Borrower and its Subsidiaries, the
value of and title to any Collateral, and all applicable bank regulatory laws
relating to the transactions contemplated hereby, and made its own decision to
enter into this Agreement and to extend credit to the Borrower hereunder. Each
Lender also represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Borrower. Except for notices,
reports and other documents expressly herein required to be furnished to the
Lenders by the Servicing Agent, the Servicing Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Borrower which may come into the possession
of any of the Agent-Related Persons.
13.7 INDEMNIFICATION OF SERVICING AGENT. Whether or not the transactions
contemplated hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Borrower and without limiting the obligation of the Borrower to do so), pro rata
(based on their respective Commitment Percentages), from and against any and all
Indemnified Liabilities; provided, however, that no
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Lender shall be liable for the payment to any Agent-Related Persons of any
portion of such Indemnified Liabilities resulting from such person's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender shall reimburse the Servicing Agent upon demand for its ratable share of
any costs or out-of-pocket expenses (including Lenders' Expenses) incurred by
the Servicing Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that the
Servicing Agent is not reimbursed for such expenses by or on behalf of the
Borrower. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of the Servicing Agent.
13.8 SERVICING AGENT IN INDIVIDUAL CAPACITY; OTHER LOANS BY LENDERS.
(a) SVB and its Affiliates may make loans to, issue letters of
credit for the account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial advisory, underwriting
or other business with the Borrower and its Subsidiaries and Affiliates as
though SVB were not the Servicing Agent hereunder and without notice to or
consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, SVB or its Affiliates may receive information regarding the Borrower
or its Affiliates (including information that may be subject to confidentiality
obligations in favor of the Borrower or such Subsidiary) and acknowledge that
the Servicing Agent shall be under no obligation to provide such information to
them. With respect to its loans, SVB shall have the same rights and powers under
this Agreement as any other Lender and may exercise the same as though it were
not the Servicing Agent, and the terms "Lender" and "Lenders" include SVB in its
individual capacity.
(b) Any Lender make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and generally
engage in any kind of banking, trust, financial advisory, underwriting or other
business with the Borrower and its Subsidiaries and Affiliates without notice to
or consent of the other Lenders. The Lenders acknowledge that, pursuant to such
activities, such Lender may receive information regarding the Borrower or its
Affiliates (including information that may be subject to confidentiality
obligations in favor of the Borrower or such Subsidiary) and acknowledge that
such Lender shall be under no obligation to provide such information to them.
With respect to its loans, SVB shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
the Servicing Agent, and the terms "Lender" and "Lenders" include SVB in its
individual capacity.
(c) Any security interests acquired by SVB, its Affiliates or any
other Lender under this Section 13.8 shall be subordinate in all respects to the
security interests granted to the Lenders (including SVB) under or in connection
with this Agreement.
13.9 SUCCESSOR SERVICING AGENT. The Servicing Agent may, and at the
request of the Requisite Lenders shall, resign as Servicing Agent upon 30 days'
notice to the Lenders. If the Servicing Agent resigns under this Agreement, the
Requisite Lenders shall appoint from among the Lenders a successor agent for the
Lenders which successor agent shall, if no Default or Event
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of Default then exists, be approved by the Borrower. If no successor agent is
appointed prior to the effective date of the resignation of the Servicing Agent,
the Servicing Agent may appoint, after consulting with the Lenders and the
Borrower, a successor agent from among the Lenders. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall succeed to
all the rights, powers and duties of the retiring Servicing Agent and the term
"Servicing Agent" shall mean such successor agent and the retiring Servicing
Agent's appointment, powers and duties as Servicing Agent shall be terminated.
After any retiring Servicing Agent's resignation hereunder as Servicing Agent,
the provisions of this Section 13 and Sections 14.2.1 and 14.2.3 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Servicing Agent under this Agreement. If no successor agent has accepted
appointment as Servicing Agent by the date which is 30 days following a retiring
Servicing Agent's notice of resignation, the retiring Servicing Agent's
resignation shall nevertheless thereupon become effective and the Lenders shall
perform all of the duties of the Servicing Agent hereunder until such time, if
any, as the Requisite Lenders appoint a successor agent as provided for above.
13.10 COLLATERAL MATTERS.
(a) The Servicing Agent is authorized on behalf of all the
Lenders, without the necessity of any notice to or further consent from the
Lenders, from time to time to take any action with respect to any Collateral or
the Loan Documents which may be necessary to perfect and maintain perfected the
security interest in and Liens upon the Collateral granted pursuant to the Loan
Documents.
(b) Each Lender agrees with and in favor of each other (which
agreement shall not be for the benefit of the Borrower or any Subsidiary) that
the Borrower's obligation to such Lender under this Agreement and the other Loan
Documents is not and shall not be secured by any real property collateral now or
hereafter acquired by such Lender.
SECTION 14. GENERAL PROVISIONS
14.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without each Lender's prior written consent, which
consent may be granted or withheld in each Lender's sole discretion.
14.2 EXPENSES; TAXES; INDEMNIFICATION; SURVIVAL.
14.2.1 EXPENSES. Borrower shall pay, within 10 days of invoice
therefor, all reasonable expenses of the Servicing Agent and Lenders in
connection with the preparation, waiver or amendment of this Agreement, the Loan
Documents or other documents executed in connection therewith, or the
administration, default or collection of the Advances or other Obligations or
administration, default, collection in connection with the Servicing Agent's or
any Lender's exercise, preservation or enforcement of any of its rights,
remedies or options thereunder, including, without limitation, reasonable fees
of outside legal counsel or the allocated costs of in-house legal counsel,
accounting, consulting, brokerage or other similar professional
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fees or expenses, and any fees or expenses associated with any travel or other
costs relating to any appraisals or examinations conducted in connection with
the Obligations or any collateral therefor, and the amount of all such expenses
shall bear interest at the rate applicable to principal hereunder (including any
default rate) from the date due until the date paid. Servicing Agent shall have
the right, but not the obligations, to charge any expenses payable by Borrower
hereunder to Borrower's Loan account.
14.2.2 TAXES, ETC. Borrower agrees to pay all governmental taxes,
assessments and other charges (except income, gross receipts, ad valorem,
intangibles, franchise or other similar taxes imposed on Servicing Agent or
Lenders), including any interest or penalties thereon, at any time payable or
ruled to be payable in respect of the existence, execution or delivery of the
Loan Documents or the issuance of the notes hereunder by reason of any existing
or hereafter enacted federal, state, local or foreign statute, and to indemnify
and hold Servicing Agent and Lenders and each of their successors and assigns
harmless against liability in connection with any such taxes, assessments or
other charges.
14.2.3 GENERAL INDEMNITY. Borrower shall pay, indemnify, and hold
each Lender, the Servicing Agent and each of their respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses or disbursements (including reasonable attorneys' fees and
costs) of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement and any other Loan
Documents, or the transactions contemplated hereby and thereby, and with respect
to any investigation, litigation or proceeding (including any proceeding in
bankruptcy or appellate proceeding) related to this Agreement or the Advances or
the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided that Borrower shall have no obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities arising from the gross negligence
or willful misconduct of such Indemnified Person, as finally determined by a
court of competent jurisdiction.
14.2.4 SURVIVAL; DEFENSE. The obligations in SECTIONS 14.2.2 and
14.2.3 shall survive payment of all other Obligations. At the election of any
Indemnified Person, Borrower shall defend such Indemnified Person using legal
counsel reasonably satisfactory to such Indemnified Person, at the sole cost and
expense of Borrower. All amounts owing under SECTION 14.2 shall be paid within
thirty (30) days after demand.
14.3 TIME OF ESSENCE. Time is of the essence for the performance of all
obligations set forth in this Agreement.
14.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
14.5 AMENDMENTS; INTEGRATION. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be in
writing and signed by the
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Requisite Lenders and Borrower and then such waiver shall be effective only in
the specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment or consent shall, unless in writing and
signed by all Lenders and Borrower, do any of the following:
(a) increase or extend the Commitment of any Lender (or reinstate
any Commitment terminated pursuant to this Agreement) or subject any
Lender to any additional obligations;
(b) postpone or delay any date fixed for any payment of
principal, interest, fees or other amounts due to the Lenders (or any of
them) hereunder or under any Loan Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or of any fees or other amounts payable hereunder or
under any Loan Document;
(d) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Advances which shall be required for the
Lenders or any of them to take any action hereunder;
(e) amend this SECTION 14.5 or any other provision herein
requiring the consent or other action of all Lenders; or
(f) discharge any guarantor of the Obligations, or release all or
substantially all of any collateral for the Obligations except as
otherwise may be provided in the Loan Documents or except where the
consent of the Requisite Lenders only is specifically provided for;
and, provided, further, that no amendment, waiver or consent shall, unless in
writing and signed by Servicing Agent in addition to the Requisite Lenders or
all the Lenders, as the case may be, affect the rights or duties of Servicing
Agent under this Agreement or any other Loan Document.
As between Borrower, on the one hand, and Lenders or Servicing Agent on
the other hand, all prior agreements, understandings, representations,
warranties, and negotiations between the parties hereto with respect to the
subject matter of this Agreement, if any, are merged into this Agreement and the
Loan Documents.
14.6 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, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
14.7 SURVIVAL; RELEASE OF SECURITY INTEREST. All covenants,
representations and warranties made in this Agreement shall continue in full
force and effect so long as any Obligations remain outstanding. Upon the
indefeasible payment or other complete satisfaction of the Obligations and
provided that Lenders shall then have no commitment to make any Credit
Extensions or to make any other loans to Borrower, Lenders shall release all
security interests
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granted hereunder and redeliver all Collateral held by them in accordance with
applicable law.
14.8 CONFIDENTIALITY. In handling any confidential information each
Lender shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or Affiliates of such Lender in connection with its
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower, (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order and (iv) as may be required
in connection with the examination, audit or similar investigation of such
Lender. Confidential information hereunder shall not include information that
either: (a) is in the public domain or in the knowledge or possession of any
Lender when disclosed to such Lender, or becomes part of the public domain after
disclosure to such Lender through no fault of such Lender; or (b) is disclosed
to such Lender by a third party, provided such Lender does not have actual
knowledge that such third party is prohibited from disclosing such information.
Each Lender acknowledges that it is aware that the United States securities laws
prohibit any person who has material non-public information about a company,
which has been obtained from such company, from purchasing or selling securities
of such company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
BORROWER: LENDER:
MTI TECHNOLOGY CORPORATION SILICON VALLEY BANK
By______________________________ By______________________________
Title______________________ Title______________________
LENDER: SERVICING AGENT:
GENERAL ELECTRIC CAPITAL CORPORATION SILICON VALLEY BANK
By______________________________ By______________________________
Title______________________ Title______________________
38
44
SCHEDULE
TO
LOAN AND SECURITY AGREEMENT
REVOLVING COMMITMENTS
----------------------------------------------------------------------------------
Lender Commitment Commitment Percentage
----------------------------------------------------------------------------------
Silicon Valley Bank $15,000,000 50%
----------------------------------------------------------------------------------
GE Capital Commercial Finance, Inc. $15,000,000 50%
----------------------------------------------------------------------------------
1.
45
SCHEDULES
TO
LOAN AND SECURITY AGREEMENT
DISCLOSURES
2.
46
EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of
credit, certificates of deposit, investment property, instruments and chattel
paper now owned or hereafter acquired and Borrower's Books relating to the
foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
3.
47
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 11:00 A.M., CALIFORNIA TIME
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
FAX#: (▇▇▇) ▇▇▇-▇▇▇▇ TIME:
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.
______________________________________________________ Phone #__________________
Authorized Requester
______________________________________________________ Phone #__________________
Received By (Bank)
________________________________________________________________________________
Authorized Signature (Bank)
FROM: _______________________________________
CLIENT NAME (BORROWER)
REQUESTED BY: _______________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE: __________________________________________________________
PHONE NUMBER:___________________________________________________________________
FROM ACCOUNT #_____________________________TO ACCOUNT #_________________________
Date to be made
REQUESTED TRANSACTION TYPE
--------------------------
REQUESTED DOLLAR AMOUNT
-----------------------
PRINCIPAL INCREASE (ADVANCE) $_____________________
PRINCIPAL PAYMENT (ONLY) $_____________________
INTEREST PAYMENT (ONLY) $_____________________
PRINCIPAL AND INTEREST (PAYMENT) $_____________________
CONVERSION/CONTINUATION (SPECIFY) $_____________________
Date to be made
OTHER INSTRUCTIONS:
All representations and warranties of Borrower stated in the 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.
48
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: MTI TECHNOLOGY CORPORATION
Servicing Agent: SILICON VALLEY BANK
Commitment Amount: $_________________________________________________________
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. Concentration Limits $________
7. Foreign Accounts $________
8. Governmental Accounts $________
9. Contra Accounts $________
10. Promotion or Demo Accounts $________
11. Intercompany/Employee Accounts $________
12. Other (please explain on reverse) $________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $________
14. Eligible Accounts (#3 minus #13) $________
15. LOAN VALUE OF ACCOUNTS (____% of #14) $________
BALANCES
16. Maximum Loan Amount $____________
17. Total Funds Available [Lesser of #18 or
(#15 plus #17)] $____________
18. Present balance owing on Line of Credit $____________
19. Outstanding under Sublimits ( ) $____________
20. RESERVE POSITION (#19 minus #20 and #21) $____________
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 among the undersigned, Silicon Valley Bank, as Servicing
Agent and Lenders.
BANK USE ONLY
-------------
Rec'd By:___________________________________
Auth. Signer
Date:______________________________
Verified:___________________________________
Auth. Signer
Date:______________________________
BANK USE ONLY
-------------
Rec'd By:___________________________________
Auth. Signer
Date:______________________________
Verified:___________________________________
Auth. Signer
Date:______________________________
MTI TECHNOLOGY CORPORATION
By:__________________________
Authorized Signer
49
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: _____________________________________
The undersigned authorized officer of _____________________ MTI
TECHNOLOGY CORPORATION hereby certifies that in accordance with the terms and
conditions of the Loan and Security Agreement among Borrower, Servicing Agent
and Lenders (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 of Borrower stated in
the Agreement are true and correct in all material respects as of the date
hereof. Attached herewith are the required documents supporting the above
certification. The Officer further certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 15 days Yes No
A/R Audit Initial and Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Minimum Current Ratio 1:0 (calendar month Yes No
which is end of fiscal
quarter 0.75:1
(calendar month which
is not end of fiscal
quarter)
Maximum Debt/Tangible 4:1 (monthly) Yes No
Net Worth
Minimum Tangible Net $18,000,000 (monthly) Yes No
Worth
Profitability: Quarterly Yes No
50
Comments Regarding Exceptions:
Sincerely,
____________________________________________
SIGNATURE
TITLE___________________________
DATE____________________________
BANK USE ONLY
Received by:________________________
AUTHORIZED SIGNER
Date:_______________________________
Verified:___________________________
AUTHORIZED SIGNER
Date:_______________________________
Compliance Status: Yes No
2.
51
EXHIBIT E
DOCUMENTS TO BE DELIVERED AT CLOSING
1. Loan and Security Agreement.
2. Intellectual Property Security Agreement.
3. Corporate Borrowing Resolution of Borrower.
4. Legal Opinion of ▇▇▇▇▇▇▇▇ &Foerster.
5. Letter from ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ relating to EMC Agreement.
6. Insurance-Lender's Loss Payee Indorsement.
52
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: MTI TECHNOLOGY CORPORATION Servicing Agent: Silicon Valley Bank
--------------------------------------------------------------------------------
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $_______________.
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 Lenders' conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line
Amount paid to Borrower directly: $________
Undisbursed Funds $________
Principal $________
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Prepaid Finance Charges Paid in Cash: $________
$________ Loan Fee
$________ Accounts Receivables Audit
Other Charges Paid in Cash: $________
$________ UCC Search Fees
$________ UCC Filing Fees
$________ Patent Filing Fees
$________ Trademark Filing Fees
$________ Copyright Filing Fees
$________ Outside Counsel Fees and Expenses (Estimate)
Total Charges Paid in Cash $________
AUTOMATIC PAYMENTS. Borrower hereby authorizes Servicing Agent 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,
Servicing Agent, on behalf of Lenders, shall not be obligated to advance funds
to cover the payment. At any time and for any reason, Borrower or Servicing
Agent may voluntarily terminate Automatic Payments.
2.
53
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO Servicing Agent AND LENDERS 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 LENDERS. THIS AUTHORIZATION IS DATED AS OF ______________, 19__/200_.
BORROWER:
_____________________________
_____________________________
Authorized Officer
3.
