EXHIBIT 10.29
LOAN AND SECURITY AGREEMENT
between
INTEGRATED PACKAGING ASSEMBLY CORPORATION
and
SILICON VALLEY FINANCIAL SERVICES,
a Division of Silicon Valley Bank
TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION 1
1.1. Definitions 1
1.2. Accounting and Other Terms 7
1.3. No Presumption Against Any Party 7
2. LOAN AND TERMS OF PAYMENT 8
2.1. Credit Extensions 8
2.2. Overadvances 9
2.3. Default Rates, Payments, and Calculations 9
2.4. Crediting Payments 9
2.5. Fees 9
2.6. Additional Costs 10
2.7. Term 10
3. CONDITIONS OF LOANS 10
3.1. Conditions Precedent to Initial Credit Extension 10
3.2. Conditions Precedent to all Loans Credit Extensions 11
4. CREATION OF SECURITY INTEREST 11
4.1. Grant of Security Interest 11
4.2. Delivery of Additional Documentation Required 11
4.3. Right to Inspect 12
5. REPRESENTATIONS AND WARRANTIES 12
5.1. Due Organization and Qualification 12
5.2. Due Authorization; No Conflict 12
5.3. No Prior Encumbrances 12
5.4. Intellectual Property 12
5.5. Name; Location of Chief Executive Office 13
5.6. Financial Statements 13
5.7. Regulatory Compliance 13
5.8. Environmental Condition 13
5.9. Taxes 13
5.10. Subsidiaries 13
5.11. Government Consents 14
5.12. Full Disclosure 14
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6. AFFIRMATIVE COVENANTS 14
6.1. Good Standing 14
6.2. Government Compliance 14
6.3. Financial Statements, Reports, Certificates 14
6.4. Taxes 15
6.5. Insurance 15
6.6. Principal Depository 15
6.7. Registration of Intellectual Property Rights 15
6.8. Further Assurances 16
7. NEGATIVE COVENANTS 16
7.1. Dispositions 16
7.2. Changes in Business, Ownership, or Management,
Business Locations 16
7.3. Mergers or Acquisitions 16
7.4. Indebtedness 17
7.5. Distributions 17
7.6. Investments 17
7.7. Transactions with Affiliates 17
7.8. Intellectual Property Agreements 17
7.9. Subordinated Debt 17
7.10. Compliance 17
8. EVENTS OF DEFAULT 17
8.1. Payment Default 18
8.2. Covenant Default 18
8.3. Insolvency 18
8.4. Misrepresentations 18
8.5. Guaranty 18
9. BANK'S RIGHTS AND REMEDIES 18
9.1. Rights and Remedies 18
9.2. Power of Attorney 20
9.3. Accounts Collection 20
9.4. Bank Expenses 20
9.5. Bank's Liability for Collateral 21
9.6. Remedies Cumulative 21
9.7. Demand; Protest 21
10. NOTICES 21
11. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL 22
12. GENERAL PROVISIONS 22
12.1. Successors and Assigns 22
12.2. Indemnification 22
12.3. Time of Essence 22
12.4. Severability of Provisions 22
12.5. Amendments in Writing, Integration 22
12.6. Counterparts 23
12.7. Survival 23
12.8. Confidentiality 23
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This LOAN AND SECURITY AGREEMENT, dated as of December ___, 1998 is between
SILICON VALLEY FINANCIAL SERVICES, a division of Silicon Valley Bank
("Bank") and INTEGRATED PACKAGING ASSEMBLY CORPORATION, a Delaware
corporation ("Borrower").
The parties agree as follows:
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 (including, without
limitation, 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.
"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.
"Bank Expenses" means all reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection
with the preparation, negotiation, administration, and enforcement of the
Loan Documents; and Bank's reasonable attorneys' fees and expenses incurred
in amending, enforcing or defending the Loan Documents, (including fees and
expenses of appeal or review, or those incurred in any Insolvency
Proceeding) whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including, without limitation: 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.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the date of this Agreement.
"Collateral" means the property described on Exhibit A attached
hereto.
Page 1
"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 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 that such
amount shall not in any event exceed the maximum amount of the obligations
under the guarantee or other support arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Credit Extension" means each Revolving Loan, or any other
extension of credit by Bank for the benefit of Borrower hereunder.
"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.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
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"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.
"GAAP" means generally accepted accounting principles as in
effect in the United States from time to time.
"Guarantor" means any present or future guarantor of the
Obligations, including, without limitation, CONFIDENTIAL.
"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 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.
"Intellectual Property Collateral" means
(a) Copyrights, Trademarks, Patents, and Mask Works;
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to
Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but
not the obligation, to xxx for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights,
Patents, Trademarks, or Mask Works, and all license fees and royalties
arising from such use to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks, Patents, or Mask Works; and
(g) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
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"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.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance
or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance (or any agreement to grant any of the
foregoing, whether or not contingent on the happening of any future event).
"Loan Documents" means, collectively, this Agreement, any note
or notes executed by Borrower, and any other present or future agreement
entered into between Borrower and/or for the benefit of Bank in connection
with this Agreement, all as amended, extended or restated from time to time.
"Mask Works" means all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired;
"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, (ii) the ability of Borrower to repay
the Obligations or otherwise perform its obligations under the Loan
Documents, (iii) the value or priority of Bank's security interests in the
Collateral.
"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.
"Obligations" means all debt, principal, interest, Bank Expenses
and other amounts owed to Bank by Borrower pursuant to this Agreement,
whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability,
or obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Patents" means all patents, patent applications and like
protections including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of
the same.
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"Payment Date" means the last calendar day of each month.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank 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 incurred in the ordinary
course of business;
and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(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 Xxxxx'x Investors Service,
Inc., and (iii) certificates of deposit maturing no more than one (1) year
from the date of investment therein issued by Bank.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date or arising under
this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings and as to which adequate reserves are maintained on
Borrower's Books in accordance with GAAP, provided the same have no priority
over any of Bank's security interests;
(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) Leases or subleases and licenses or sublicenses granted to
others in the ordinary course of Borrower's business not interfering in any
material respect with the business of Borrower and its Subsidiaries taken as
a whole, and any interest or title of a lessor, licensor or under any lease
or license provided that such leases, subleases, licenses and sublicenses do
not prohibit the grant of the security interest granted hereunder; and
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(e) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) 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 variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Responsible Officer" means each of the Chief Executive Officer,
the President, the Chief Financial Officer and the Controller of Borrower.
"Revolving Commitment" means a credit extension of up to
$6,950,000.00.
"Revolving Loan" means a loan advance under the Revolving
Commitment.
"Revolving Maturity Date" means June 1, 1999.
"Schedule" means the schedule of exceptions attached hereto, if
any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to
Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means with respect to any Person, corporation,
partnership, company association, joint venture, or any other business
entity of which more than 50% of the voting stock or other equity interests
is owned or controlled, directly or indirectly, by such Person.
"Total Liabilities" means as of any applicable date, 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.
"Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same
and like protections, and the entire goodwill of the business of Borrower
connected with and symbolized by such trademarks.
Page 6
"UCC" means the California Uniform Commercial Code.
"Year 2000 Problem" means the inability of computers, as well as
embedded microchips in non-computing devices, to properly perform date-
sensitive functions with respect to certain dates prior to and after
December 31, 1999.
1.2. Accounting and Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP and
all calculations and determinations made hereunder shall be made in
accordance with GAAP. When used herein, the term "financial statements"
shall include the notes and schedules thereto. In the computation of
periods of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each mean
"to but excluding." Periods of days referred to in this Agreement shall be
counted in calendar days unless otherwise stated. References to the plural
include the singular and to the singular include the plural, references to
any gender include any other gender, the part includes the whole, the term
"including" is not limiting, and the term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or." The
words "hereof," "herein," "hereby," "hereunder," and similar terms in this
Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. Article, section, subsection, clause, exhibit
and schedule references are to this Agreement, unless otherwise specified.
All of the exhibits and schedules attached hereto shall be deemed
incorporated herein by reference. All terms contained in this Agreement
which are not otherwise specifically defined herein (including the term
"good faith") shall have the meanings provided by the UCC to the extent the
same are used or defined therein.
1.3. No Presumption Against Any Party. Neither this Agreement nor
any other Loan Document nor any uncertainty or ambiguity herein or therein
shall be construed or resolved using any presumption against any party
hereto or thereto, whether under any rule of construction or otherwise. On
the contrary, this Agreement and the other Loan Documents have been reviewed
by each of the parties and their counsel and, in the case of any ambiguity
or uncertainty, shall be construed and interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and
intentions of all parties hereto.
Page 7
2. LOAN AND TERMS OF PAYMENT
2.1. Credit Extensions. Borrower promises to pay to the order of
Bank, in lawful money of the United States of America, the aggregate unpaid
principal amount of all Credit Extensions made by Bank to Borrower
hereunder. Borrower shall also pay interest on the unpaid principal amount
of such Loans at rates in accordance with the terms hereof.
2.1.1. (a) Subject to and upon the terms and conditions of
this Agreement, Bank agrees to make Revolving Loans to Borrower in an
aggregate outstanding amount not to exceed the Revolving Commitment,
provided, however, that the aggregate amount of the Revolving Loans made in
each of the hereafter described time periods shall not exceed the amount
hereafter specified for such time period: (i) $1,454,200.00 during the
period from December 1, 1998 to December 31, 1999; (ii) $2,020,700.00 during
the period from January 1, 1999 to January 31, 1999; (iii) $1,194,600.00
during the period from February 1, 1999 to February 28, 1999;
(iv) $1,314,500.00 during the period from March 1, 1999 to April 4, 1999;
(v) $585,200.00 during the period from April 5, 1999 to May 2, 1999; and
(vi) $603,900.00 during the period from May 3, 1999 to May 30, 1999.
Subject to the terms and conditions of this Agreement, amounts borrowed
pursuant to this Section 2.1 may be repaid and reborrowed at any time during
the term of this Agreement.
(b) Whenever Borrower desires a Revolving Loan,
Borrower will notify Bank by facsimile transmission or telephone no later
than 3:00 p.m. Pacific time, on the Business Day that such Revolving Loan is
to be made, and Borrower shall simultaneously deliver a copy of each such
notice to the Guarantor. Each such notification shall be promptly confirmed
by a Payment/Loan Form in substantially the form of Exhibit B hereto. Bank
is authorized to make Loans under this Agreement, based upon instructions
received from a Responsible Officer or a designee of a Responsible Officer,
or without instructions if in Bank's discretion such Loans are necessary to
meet Obligations which have become due and remain unpaid. Bank shall be
entitled to rely on any telephonic notice given by a person who Bank
reasonably believes to be a Responsible Officer or a designee thereof, and
Borrower shall indemnify and hold Bank harmless for any damages or loss
suffered by Bank as a result of such reliance. Bank will credit the amount
of Loans made under this Section 2.1 to Borrower's deposit account.
(c) Interest Rate. Except as set forth in Section
2.3(b), the outstanding principal amount of the Revolving Loans shall bear
interest, on the average daily balance thereof, at a per annum rate equal to
the Prime Rate.
(d) The Revolving Commitment shall terminate on the
Revolving Maturity Date, at which time all Revolving Loans and accrued
interest thereon shall be immediately due and payable.
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2.2. Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Section 2.1.1, of this
Agreement is greater than the Revolving Commitment, Borrower shall
immediately pay to Bank, in cash, the amount of such excess.
2.3. Default Rates, Payments, and Calculations.
(a) Default Rate. All Obligations shall bear
interest, from and after the occurrence of an Event of Default, at a rate
equal to five percentage points above the interest rate applicable
immediately prior to the occurrence of the Event of Default.
(b) Payments. Interest hereunder shall be due and
payable on each Payment Date. Borrower hereby authorizes Bank to debit any
accounts with Bank, including, without limitation, Account Number
for payments of principal and interest due on the Obligations and any other
amounts owing by Borrower to Bank. Bank will notify Borrower of all debits
which Bank has made 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.
(c) 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 360-day year for the actual number of days
elapsed.
2.4. Crediting Payments . Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After
the occurrence of an Event of Default, the receipt by Bank of any wire
transfer of funds, check, or other item of payment, whether directed to
Borrower's deposit account with Bank or to the Obligations or otherwise,
shall be immediately applied to conditionally reduce Obligations, but shall
not be considered a payment in respect of the Obligations 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, any wire transfer
or payment received by Bank after 12:00 noon Pacific time shall be deemed to
have been received by Bank as of the opening of business on the immediately
following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a
date that is not a Business Day, such payment shall instead be due on the
next Business Day, and additional fees or interest, as the case may be,
shall accrue and be payable for the period of such extension.
2.5. Fees. Borrower shall pay to Bank the following:
(a) Due Diligence Fee. A Due Diligence Fee equal to
$ 1,000.00, which fee shall be due on the Closing Date and shall be fully
earned and non-refundable (the prior receipt of which by Bank is hereby
acknowledged by Bank); and
Page 9
(b) Bank Expenses. Upon demand from Bank, including,
without limitation, upon the date hereof, all Bank Expenses incurred through
the date hereof, including reasonable attorneys' fees and expenses, and,
after the date hereof, all Bank Expenses, including reasonable attorneys.
fees and expenses, as and when they become due.
2.6. Additional Costs. In case 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):
(a) subjects Bank 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 Bank imposed by the United States of
America or any political subdivision thereof);
(b) 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, Bank; or
(c) imposes upon Bank 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 Bank, reduce the income receivable by
Bank or impose any expense upon Bank with respect to any loans, Bank shall
notify Borrower thereof. Borrower agrees to pay to Bank 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
Bank of a statement of the amount and setting forth Bank's calculation
thereof, all in reasonable detail, which statement shall be deemed true and
correct absent manifest error.
2.7. Term. Except as otherwise set forth herein, this Agreement
shall become effective on the Closing Date and, subject to Section 12.7,
shall continue in full force and effect until the Loans and all interest
thereon have been fully and finally paid. Notwithstanding the foregoing,
Bank shall have the right to terminate its obligation to make Loans under
this Agreement immediately and without notice upon the occurrence and during
the continuance of an Event of Default.
3. CONDITIONS OF LOANS
3.1. Conditions Precedent to Initial Credit Extension. The
obligation of Bank to make the initial Credit Extension is subject to the
condition precedent that Bank shall have received, in form and substance
satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with
respect to articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of this Agreement;
(c) a guaranty by the Guarantor;
(d) insurance certificate;
(e) payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof; and
(f) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
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3.2. Conditions Precedent to all Loans Credit Extensions. The
obligation of Bank to make each Credit Extension, including the initial Loan
Credit Extension, is further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Loan Form as
provided in Section 2.1; and
(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/Loan Form and on the effective date of each Credit
Extension as though made at and as of each such date, and no Default shall
have occurred and be continuing, or would result from such Credit Extension.
The making of each Credit Extension shall be deemed to be a representation
and warranty by Borrower on the date of such Credit Extension as to the
accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1. Grant of Security Interest. Borrower grants and pledges to Bank
a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt payment 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. Except as set
forth in the Schedule, 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. Notwithstanding termination of this Agreement,
Bank's Lien on the Collateral shall remain in effect for so long as any
Obligations are outstanding.
4.2. Delivery of Additional Documentation Required. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that
Bank may reasonably request, in form satisfactory to Bank, to perfect and
continue perfected Bank's security interests in the Collateral and in order
to fully consummate all of the transactions contemplated under the Loan
Documents.
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4.3. Right to Inspect. Bank (through any of its 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.
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 incorporation 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.
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/Certificate of Incorporation or
Bylaws, nor will they constitute an event of default under any material
agreement to which Borrower is a party or by which Borrower is bound, except
to the extent that certain intellectual property agreements prohibit the
assignment of the rights thereunder to a third party without Borrower's or
other party's consent and the Loan Documents constitute an assignment.
5.3. No Prior Encumbrances. Borrower has good and indefeasible title
to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4. Intellectual Property. Borrower is the sole owner of the
Intellectual Property Collateral, except for non-exclusive licenses granted
by Borrower to its customers in the ordinary course of business. Each of
the Patents is valid and enforceable, and no part of the Intellectual
Property Collateral has been judged invalid or unenforceable, in whole or in
part, and no claim has been made that any part of the Intellectual Property
Collateral violates the rights of any third party. Except for and upon the
filing with the United States Patent and Trademark Office with respect to
the Patents and Trademarks and the Register of Copyrights with respect to
the Copyrights and Mask Works necessary to perfect the security interests
created hereunder, and except as has been already made or obtained, no
authorization, approval or other action by, and no notice to or filing with,
any United States governmental authority or United States regulatory body is
required either (i) for the grant by Borrower of the security interest
granted hereby or for the execution, delivery or performance of Loan
Documents by Borrower in the United States or (ii) for the perfection in the
United States or the exercise by Bank of its rights and remedies hereunder.
Page 12
5.5. Name; Location of Chief Executive Office. Except as disclosed
in the Schedule, Borrower has not done business and will not without at
least 30 days prior written notice to Bank do 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.
5.6. Financial Statements. All consolidated financial statements
related to Borrower and any Subsidiary that have been delivered by Borrower
to Bank 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.
5.7. 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 its important
activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations 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.
5.8. 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
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 release, or other disposition of
hazardous waste or hazardous substances into the environment.
5.9. Taxes. Borrower and each Subsidiary has filed or caused to be
filed all tax returns required to be filed on a timely basis, and has paid,
or has made adequate provision for the payment of, all taxes reflected
therein, except those being contested in good faith by proper proceedings
with adequate reserves under GAAP.
5.10. Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
Page 13
5.11. 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 that
are necessary for the continued operation of Borrower's business as
currently conducted.
5.12. Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
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.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to
make a Credit Extension 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 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.
6.3. Financial Statements, Reports, Certificates. Borrower shall
deliver to Bank: (a) within five 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
Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission;
(b) promptly upon receipt of notice thereof, a report of any legal actions
pending or threatened against Borrower or any Subsidiary that could result
in damages or costs to Borrower or any Subsidiary of $100,000.00 or more;
(c) prompt notice of any material change in the composition of the
Intellectual Property Collateral, including, but not limited to, any
subsequent ownership right of Borrower in or to any Copyright, Patent or
Trademark not specified in any intellectual property security agreement
between Borrower and Bank or knowledge of an event that materially adversely
effects the value of the Intellectual Property Collateral; and (d) such
budgets, sales projections, operating plans or other financial information
as Bank may reasonably request from time to time.
Bank shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such audits will be
conducted no more often than every six months unless an Event of Default has
occurred and is continuing.
Page 14
6.4. Taxes. Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting
to the payment or deposit thereof; and Borrower will make, and will cause
each Subsidiary to make, timely payment or deposit of all material tax
payments and withholding taxes required of it by applicable laws, including,
but not limited to, those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon
request, furnish Bank with proof satisfactory to Bank indicating that
Borrower or a Subsidiary has made such payments or deposits; provided that
Borrower or a Subsidiary need not make any payment if the amount or validity
of such payment is (I) contested in good faith by appropriate proceedings ,
(ii) is reserved against (to the extent required by GAAP) by Borrower and
(iii) no lien other than a Permitted Lien results.
6.5. Insurance.
(a) 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
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 of a type that are customary to
businesses similar to Borrower's.
(b) All such policies of insurance shall be in such
form, with such companies, and in such amounts as are reasonably
satisfactory to Bank. All such policies of property insurance shall contain
a lender's loss payable endorsement, in a form satisfactory to Bank, showing
Bank as an additional loss payee thereof and all liability insurance
policies shall show the Bank as an additional insured, and shall specify
that the insurer must give at least 20 days notice to Bank before canceling
its policy for any reason. At Bank's request, Borrower shall deliver to
Bank certified copies of such policies of insurance and evidence of the
payments of all premiums therefor. All proceeds payable under any such
policy shall, at the option of Bank, be payable to Bank to be applied on
account of the Obligations.
6.6. Principal Depository. Borrower shall maintain its principal
depository and operating accounts with Bank.
6.7. Registration of Intellectual Property Rights.
(a) 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, all
intellectual property owned by Borrower within 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 any intellectual
property now owned by Borrower.
Page 15
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request
to perfect Bank's security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain
the validity and enforceability of the Trademarks, Patents, Copyrights, and
Mask Works, (ii) use its best efforts to detect infringements of the
Trademarks, Patents, Copyrights and Mask Works and promptly advise Bank in
writing of material infringements detected and (iii) not allow any
Trademarks, Patents, Copyrights, or Mask Works to be abandoned, forfeited or
dedicated to the public without the written consent of Bank, which shall not
be unreasonably withheld, unless Bank determines that reasonable business
practices suggest that abandon-ment is appropriate.
(d) Bank shall have the right, but not the
obligation, to take, at Borrower's sole expense, any actions that Borrower
is required under this Section 6.8 to take but which Borrower fails to take,
after 15 days' notice to Borrower. Borrower shall reimburse and indemnify
Bank for all reasonable costs and reasonable expenses incurred in the
reasonable exercise of its rights under this Section 6.7.
6.8. 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 Bank to effect the purposes of this
Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any Credit Extension
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any
Loans, Borrower will not do any of the following:
7.1. Dispositions. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries
to Transfer, all or any part of its business or property, other than
Transfers: (i) of inventory in the ordinary course of business, (ii) of
non-exclusive licenses and similar arrangements for the use of the property
of Borrower or its Subsidiaries in the ordinary course of business; (iii)
that constitute payment of normal and usual operating expenses in the
ordinary course of business;; or (iii) of worn-out or obsolete Equipment.
7.2. Changes in Business, Ownership, or Management, Business
Locations. Engage in any business, or permit any of its Subsidiaries to
engage in any business, other than the businesses currently engaged in by
Borrower and any business substantially similar or related thereto (or
incidental thereto), or suffer a material change in Borrower's ownership or
management. Borrower will not, without at least 30 days prior written
notification to Bank, relocate its chief executive office or add any new
offices or business locations.
7.3. Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with 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.
Page 16
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. Distributions. Pay any dividends or make any other distribution
or payment on account of or in redemption, retirement or purchase of any
capital stock.
7.6. 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.
7.7. Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's
business, upon fair and reasonable terms that are no less favorable to
Borrower than would be obtained in an arm's length transaction with a
non-affiliated Person.
7.8. Intellectual Property Agreements. Borrower shall not permit the
inclusion in any material contract to which it becomes a party of any
provisions that could or might in any way prevent the creation of a security
interest in Borrower's rights and interests in any property included within
the definition of the Intellectual Property Collateral acquired under such
contracts, except to the extent that such provisions are necessary in
Borrower's exercise of its reasonable business judgement.
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, or
amend any provision contained in any documentation relating to the
Subordinated Debt without Bank's prior written consent.
7.10. Compliance. Become an "investment company" or a company
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
Loan for such purpose; fail to meet the minimum funding requirements of
ERISA; permit a Reportable Event or Prohibited Transaction, as defined in
ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or
violate any other law or regulation, which violation could have a Material
Adverse Effect; or permit any of its Subsidiaries to do any of the
foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an "Event of
Default" by Borrower under this Agreement:
Page 17
8.1. Payment Default. If Borrower fails to pay, when due, any of the
Obligations, and such default is not cured within five days after receipt by
Borrower of notice of such default.
8.2. Covenant Default.
(a) If Borrower fails to perform any obligation under
Sections 6.3, 6.5, 6.6, or 6.7 or violates any of the covenants contained in
Article 7 of this Agreement, and such default is not cured within ten days
after receipt by Borrower of notice of such default, or
(b) If Borrower fails or neglects to perform, keep, or
observe any other material term, provision, condition, covenant, or
agreement contained in this Agreement or in any of the Loan Documents and
as to any default under such other term, provision, condition, covenant or
agreement that can be cured, has failed to cure such default within ten days
after receipt by Borrower of notice of such default; provided that if the
default cannot by its nature be cured within the ten day period or cannot
after diligent attempts by Borrower be cured within such 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 30 days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an
Event of Default (provided that no Loans will be required to be made during
such cure period);
8.3. Insolvency. If an Insolvency Proceeding is commenced by
Borrower, or if an Insolvency Proceeding is commenced against Borrower and
is not dismissed or stayed within 30 days (provided that no Loans will be
made prior to the dismissal of such Insolvency Proceeding);
8.4. Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or
representation set forth herein or in any certificate or writing delivered
to Bank by Borrower or any Person acting on Borrower's behalf pursuant to
this Agreement or to induce Bank to enter into this Agreement or any other
Loan Document.
8.5. Guaranty. Any guaranty of all or a portion of the Obligations
ceases for any reason to be in full force and effect, or any Guarantor fails
to perform any obligation under any guaranty of all or a portion of the
Obligations, or any material misrepresentation or material misstatement
exists now or hereafter in any warranty or representation set forth in any
guaranty of all or a portion of the Obligations or in any certificate
delivered to Bank in connection with such guaranty, or any of the
circumstances described in Section 8.3 occurs with respect to any Guarantor.
9. BANK'S RIGHTS AND REMEDIES
9.1. Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without
notice of its election and without demand, do any one or more of the
following, all of which are authorized by Borrower:
(a) 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 Bank);
Page 18
(b) Cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement or under any other
agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with
account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(d) Without notice to or demand upon Borrower, make
such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to
assemble the Collateral if Bank so requires, and to make the Collateral
available to Bank as Bank may designate. Borrower authorizes Bank 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 Bank's
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 premises, Borrower hereby grants Bank a license to enter such
premises and to occupy the same, without charge in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or other-wise;
(e) Without notice to Borrower set off and apply to
the Obligations any and all (i) balances and deposits of Borrower held by
Bank, or (ii) indebtedness at any time owing to or for the credit or the
account of Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Bank is hereby granted a non-
exclusive, royalty-free license or other right, solely pursuant to the
provisions of this Section 9.1, to use, without charge, Borrower's labels,
patents, copyrights, mask works, rights of use of any name, trade secrets,
trade names, trademarks, service marks, and advertising matter, or any
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 Bank's exercise of its rights under this Section
9.1, Borrower's rights under all licenses and all franchise agreements shall
inure to Bank's benefit;
(g) 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 Bank determines is commercially reasonable, and apply the proceeds
thereof to the Obligations in whatever manner or order it deems appropriate;
(h) Bank may credit bid and purchase at any public
sale, or at any private sale as permitted by law;
(i) Any deficiency that exists after disposition of
the Collateral as provided above will be paid immediately by Borrower; and
Page 19
(j) Bank shall have a non-exclusive, royalty-free
license to use the Intellectual Property Collateral to the extent reasonably
necessary to permit Bank to exercise its rights and remedies upon the
occurrence of an Event of Default.
9.2. Power of Attorney. Effective only upon the occurrence and
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification
of Accounts or notify account debtors of Bank's security interest in the
Accounts; (b) endorse Borrower's name on any checks or other forms of
payment or security that may come into Bank's possession; (c) sign
Borrower's name on any invoice or xxxx 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 Bank determines to be reasonable; (f) to modify, in its sole
discretion, any intellectual property security agreement entered into
between Borrower and Bank without first obtaining Borrower's approval of or
signature to such modification by amending Exhibit A, Exhibit B, Exhibit C,
and Exhibit D, thereof, as appropriate, to include reference to any right,
title or interest in any Copyrights, Patents, Trademarks, Mask Works
acquired by Borrower after the execution hereof or to delete any reference
to any right, title or interest in any Copyrights, Patents, Trademarks, or
Mask Works in which Borrower no longer has or claims any right, title or
interest; (g) to file, in its sole discretion, one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of Borrower where permitted by law; and (h)
to transfer the Intellectual Property Collateral into the name of Bank or a
third party to the extent permitted under the UCC provided Bank 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 Bank as Borrower's attorney in fact, and each
and every one of Bank's rights and powers, being coupled with an interest,
is irrevocable until all of the Obligations have been fully repaid and
performed and Bank's obligation to provide Loans hereunder is terminated.
9.3. Accounts Collection. Upon the occurrence and during the
continuance of an Event of Default, Bank may notify any Person owing funds
to Borrower of Bank's security interest in such funds and verify the amount
of such Account. Borrower shall collect all amounts owing to Borrower for
Bank, receive in trust all payments as Bank's trustee, and if requested or
required by Bank, immediately deliver such payments to Bank in their
original form as received from the account debtor, with proper endorsements
for deposit.
9.4. Bank 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 Bank 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 Revolving Commitment as Bank deems necessary to
protect Bank 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 Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
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 Bank shall not constitute an agreement by
Bank to make similar payments in the future or a waiver by Bank of any Event
of Default under this Agreement.
Page 20
9.5. Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not 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.
9.6. Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not expressly set forth
herein as provided under the UCC, by law, or in equity. No exercise by
Bank of one right or remedy shall be deemed an election, and no waiver by
Bank of any Event of Default on Borrower's part shall be deemed a continuing
waiver. No delay by Bank shall constitute a waiver, election, or
acquiescence by it. No waiver by Bank shall be effective unless made in a
written document signed on behalf of Bank and then shall be effective only
in the specific instance and for the specific purpose for which it was
given.
9.7. Demand; Protest. 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 guarantees at any time held by Bank on which Borrower may
in any way be liable.
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, by certified mail, postage prepaid, return
receipt requested, or by telefacsimile to Borrower or to Bank, as the case
may be, at its addresses set forth below for such party on the signature
pages hereof. 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.
Page 21
11. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL
The Loan Documents 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 and Bank hereby submits to
the exclusive jurisdiction of the state and Federal courts located in the
County of Santa Xxxxx, State of California. BORROWER AND BANK EACH HEREBY
WAIVE THEIR RESPECTIVE 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.
12. GENERAL PROVISIONS
12.1. 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 that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which
consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrower to sell,
transfer, negotiate, or grant participation in all or any part of, or any
interest in, Bank's obligations, rights and benefits hereunder.
12.2. Indemnification. Borrower shall , indemnify ,defend, protect
and hold harmless Bank and its officers, employees, and agents against: (a)
all obligations, demands, claims, and liabilities claimed or asserted by any
other party in connection with the transactions contemplated by the Loan
Documents; and (b) all losses or Bank Expenses in any way suffered,
incurred, or paid by Bank as a result of or in any way arising out of,
following, or consequential to transactions between Bank and Borrower
whether under the Loan Documents, or otherwise (including without limitation
reasonable attorneys fees and expenses), except for losses caused by Bank's
gross negligence or willful misconduct.
12.3. Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.
12.4. 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.
12.5. Amendments in Writing, Integration. This Agreement cannot be
amended or terminated except by a writing signed by Borrower and Bank. 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.
Page 22
12.6. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.
12.7. Survival. All covenants, representations and warranties made
in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify
Bank with respect to the expenses, damages, losses, costs and liabilities
described in Section 12.2 shall survive until all applicable statute of
limitations periods with respect to actions that may be brought against Bank
have run; provided that so long as the obligations referred to in the first
sentence of this Section 12.7 have been satisfied, and Bank has no
commitment to make any Credit Extensions or to make any other loans to
Borrower, Bank shall release all security interests granted hereunder and
redeliver all Collateral held by it in accordance with applicable law.
12.8. Confidentiality. In handling any confidential information Bank
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 Bank in connection with their
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,
(iv) as may be required in connection with the examination, audit or similar
investigation of Bank, and (v) as Bank may deem appropriate in connection
with the exercise of any remedies hereunder. Confidential information
hereunder shall not include information that either: (a) is in the public
domain or in the knowledge or possession of Bank when disclosed to Bank, or
becomes part of the public domain after disclosure to Bank through no fault
of Bank; or (b) is disclosed to Bank by a third party, provided Bank does
not have actual knowledge that such third party is prohibited from
disclosing such information.
Page 23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
INTEGRATED PACKAGING ASSEMBLY CORPORATION,
a Delaware corporation
By
------------------------------------------
Title
---------------------------------------
Address for Notices:
0000 Xxx Xxxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
SILICON VALLEY FINANCIAL SERVICES
A division of Silicon Valley Bank
By
-----------------------------------------
Title
--------------------------------------
Address for Notices:
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx
Page 24
EXHIBIT A
---------
The Collateral shall consist of all right, title and interest of
Borrower, whether now existing or hereafter acquired or created and wherever
located, in and to the following:
(a) All goods, equipment, 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;
(b) All inventory, 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;
(c) All contract rights, general intangibles, 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 accounts, contract rights, royalties, license rights and all
other forms of obligations owing to Borrower, whether or not arising out of
the sale or lease of goods, the licensing of technology or the rendering of
services by Borrower, and 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;
(e) All documents, cash, deposit accounts, securities, investment
property, letters of credit, certificates of deposit, instruments and
chattel paper 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; all trade secret rights,
including all rights to unpatented inventions, know-how, operating manuals,
license rights and agreements and confidential information; all mask work or
similar rights available for the protection of semiconductor chips; all
claims for damages by way of any past, present and future infringement of
any of the foregoing; and
(g) All Borrower's Books relating to the foregoing and any and all
claims, rights and interests in any of the above and all substitutions for,
additions and accessions to and proceeds thereof.
Page 25
EXHIBIT B
---------
LOAN PAYMENT/LOAN ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
FAX#: (408) TIME:
----------------
FROM:
BORROWER'S NAME
FROM:
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE
PHONE:
----------------------
FROM: ACCOUNT #
------------------------------
TO: ACCOUNT #
------------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
PRINCIPAL INCREASE (Loan) $
PRINCIPAL PAYMENT (ONLY) $
INTEREST PAYMENT (ONLY) $
PRINCIPAL AND INTEREST (PAYMENT) $
OTHER INSTRUCTIONS:
All representations and warranties of Borrower stated in the Loan and
Security Agreement are true, correct and complete in all material respects
as of the date of the telephone request for and Loan confirmed by this Loan
Request; provided that those representations and warranties expressly
referring to another date shall be true, correct and complete in all
material respects as of such date.
BANK USE ONLY:
TELEPHONE REQUEST:
-----------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
Authorized Requester:
Authorized Signature (Bank)
Phone #
DISBURSEMENT REQUEST AND AUTHORIZATION
TO: SILICON VALLEY BANK
FROM: ("Borrower")
------------------------------
Page 26
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: .
----------------
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will
be disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
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 $
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, DO NOT LEAVE BLANK]
Total Charges Paid in Cash $
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct
from Borrower's account numbered ______ the amount of any loan payment. If
the funds in the account are insufficient to cover any payment, Bank shall
not be obligated to advance funds to cover the payment.
Page 27
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF ________________,19____.
BORROWER:
By:
----------------------------------------
Authorized Officer
AGREEMENT TO PROVIDE INSURANCE
TO: SILICON VALLEY BANK
FROM: INTEGRATED PACKAGING ASSEMBLY CORPORATION ("Borrower")
INSURANCE REQUIREMENTS. Borrower understands that insurance coverage is
required in connection with the extending of a loan or the providing of
other financial accommodations to Borrower by Bank. These requirements are
set forth in the Loan Documents. The following minimum insurance coverages
must be provided on the following described collateral (the "Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be cancelled or diminished without a minimum of 20 days
prior written notice to Bank.
INSURANCE COMPANY. Borrower may obtain insurance from any insurance
company Borrower may choose that is reasonably acceptable to Bank. Borrower
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Borrower agrees to deliver to Bank, on
or before closing, evidence of the required insurance as provided above,
with an effective date of_________________,19____, or earlier. Borrower
acknowledges and agrees that if Borrower fails to provide any required
insurance or fails to continue such insurance in force, Bank may do so at
Borrower's expense as provided in the Loan and Security Agreement. The cost
of such insurance, at the option of Bank, shall be payable on demand or
shall be added to the indebtedness as provided in the security document.
BORROWER ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH INSURANCE, THE
INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE
COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, BORROWER'S EQUITY IN THE
COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
Page 28
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Borrower authorizes Bank to provide to any person (including any insurance
agent or company) all information Bank deems appropriate, whether regarding
the Collateral, the loan or other financial accommodations, or both.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
____________________,19____.
BORROWER:
By:
-------------------------------
Authorized Officer
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:
Page 29
