EXHIBIT 10.42
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT dated December 27, 2002, between SILICON VALLEY
BANK ("Bank"), whose address is 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx 00000
and PROXIM CORPORATION, a Delaware corporation ("Borrower"), whose address is
000 Xxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxx 00000 provides the terms on which Bank
will lend to Borrower and Borrower will repay Bank. The parties agree as
follows:
1. ACCOUNTING AND OTHER TERMS.
Accounting terms not defined in this Agreement will be construed following
GAAP. Calculations and determinations must be made following GAAP. The term
"financial statements" includes the notes and schedules. The terms "including"
and "includes" always mean "including (or includes) without limitation," in this
or any Loan Document.
2. LOAN AND TERMS OF PAYMENT.
2.1. PROMISE TO PAY.
Borrower promises to pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1. REVOLVING ADVANCES.
(a) Bank will make Advances not exceeding the Credit Limit shown on
Schedule 1 to the Agreement (the "Schedule"). Amounts borrowed under this
Section may be repaid and reborrowed during the term of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 12:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to such reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.
(d) Borrower shall have the right to terminate the Committed Revolving
Line prior to the Revolving Maturity Date, effective three Business Days after
written notice of termination is given to Bank, in which event Borrower shall
pay in full all Obligations on the effective date of termination. In the event
Borrower terminates the Committed Revolving Line prior to the Revolving Maturity
Date, or if the Committed Revolving Line is terminated by Bank prior to the
Revolving Maturity Date upon an Event of Default, Borrower shall pay Bank the
Termination Fee set forth in the Schedule.
2.1.2. LETTERS OF CREDIT SUBLIMIT.
Bank will issue or have issued letters of credit (the "Letters of Credit")
for Borrower's account not exceeding the amount shown on the Schedule.
Borrower's reimbursement obligations with respect to all Letters of Credit
(including drawn but unreimbursed Letters of Credit) will be secured by
unrestricted cash on terms acceptable to Bank on or before the Revolving
Maturity Date if the term of this Agreement is not
extended by Bank. Borrower agrees to execute any further documentation in
connection with the Letters of Credit as Bank may reasonably request.
2.1.3. FOREIGN EXCHANGE SUBLIMIT.
Borrower may enter into foreign exchange forward contracts with the Bank
under which Borrower commits to purchase from or sell to Bank a set amount of
foreign currency more than one business day after the contract date (the "FX
Forward Contract") as set forth in the Schedule.
2.2. OVERADVANCES.
If Borrower's Obligations under Section 2.1.1, 2.1.2 and 2.1.3 exceed the
lesser of either (i) the Committed Revolving Line or (ii) the Borrowing Base,
Borrower must immediately pay Bank the excess.
2.3. INTEREST RATE, PAYMENTS.
(a) Interest Rate. Advances accrue interest on the outstanding principal
balance at the interest rate set forth in the Schedule. During the continuance
of an Event of Default, Obligations accrue interest at three percent above the
rate effective immediately before the Event of Default. The interest rate
increases or decreases when the Prime Rate changes. Interest is computed on a
360 day year for the actual number of days elapsed.
(b) Payments. Interest due on the Committed Revolving Line is payable on
the first day of each month. Bank may debit any of Borrower's deposit accounts
maintained with Bank, including the Accounts shown on the Disclosure Letter, for
principal and interest payments owing or any amounts Borrower owes Bank. Bank
will promptly notify Borrower when it debits Borrower's accounts. These debits
are not a set-off. Payments received after 12:00 noon Pacific time are
considered received at the opening of business on the next Business Day. When a
payment is due on a day that is not a Business Day, the payment is due the next
Business Day and additional fees or interest accrue.
2.4. FEES.
Borrower will pay:
(a) Facility Fee. A fully earned, non refundable Facility Fee in the
amount shown on the Schedule, which shall be due on the Closing Date; and
(b) Bank Expenses. All Bank Expenses (including reasonable attorneys'
fees and reasonable expenses) incurred through and after the date of this
Agreement, are payable when due.
3. CONDITIONS OF LOANS.
3.1. CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.
Bank's obligation to make the initial Credit Extension is subject to the
condition precedent that it receive the agreements, documents and fees it
requires. Without limiting the generality of the foregoing, Bank's obligation to
make the initial Credit Extension is subject to the following: (i) Bank shall
have received the opinion of Borrower's counsel in the form of Exhibit F hereto,
(ii) all filings have been completed that are necessary or advisable to perfect
the security interest of Bank in the Collateral and the collateral of the
Domestic Subsidiaries, (iii) Bank shall have received UCC and other searches
deemed necessary by Bank with respect to Borrower and the Domestic Subsidiaries,
and the results thereof are satisfactory to Bank, (iv) Bank shall have received
certified resolutions of the Board of Directors of the Borrower authorizing the
transactions contemplated by this Agreement, in form reasonably satisfactory to
Bank.
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3.2. CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.
Bank's obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
(a) Timely receipt of any Payment/Advance Form; and
(b) The representations and warranties in Section 5 must be true
(subject to the materiality provisions in Section 5) on the date of the
Payment/Advance Form and on the effective date of each Credit Extension and no
Event of Default may have occurred and be continuing, or result from the Credit
Extension (provided, however, that those representations and warranties
expressly referring to another date shall be true (subject to the materiality
provisions in Section 5) as of said date only). Each Credit Extension is
Borrower's representation and warranty on that date that the representations and
warranties of Section 5 remain true (provided, however, that those
representations and warranties expressly referring to another date shall be
true, subject to the materiality provisions in Section 5 as of said date only).
4. CREATION OF SECURITY INTEREST.
4.1. GRANT OF SECURITY INTEREST IN ASSETS OTHER THAN INTELLECTUAL PROPERTY.
Borrower grants Bank a presently effective, continuing security interest
in all presently existing and later acquired Collateral (other than Intellectual
Property) to secure all Obligations and performance of each of Borrower's duties
under the Loan Documents. Except for Permitted Liens, the Bank will, at all
times, have a first-priority security interest in all of the Collateral (other
than Intellectual Property). Bank's lien and security interest in the Collateral
(other than Intellectual Property) will continue until Borrower fully satisfies
its Obligations, and all obligations of the Bank to make Advances or otherwise
extend credit accommodations have terminated. The security interest granted
under this Section 4.1 excludes Intellectual Property, but it includes all
Accounts and other rights, claims, assets and property that constitute proceeds
of Intellectual Property. Notwithstanding the foregoing, if a judicial authority
(including a U.S. Bankruptcy Court) holds that a security interest in the
underlying Intellectual Property is necessary to have a security interest in
such accounts and other rights, claims, assets and property of Borrower that are
proceeds of the Intellectual Property, then the Collateral shall automatically,
and effective as of the date hereof, include the Intellectual Property solely to
the extent necessary to permit perfection of Bank's security interest in such
accounts and other rights, claims, assets and property of Borrower that are
proceeds of the Intellectual Property.
4.2. GRANT OF SECURITY INTEREST IN INTELLECTUAL PROPERTY.
Effective on the earlier of (i) the date the Asset Based Terms go into
effect, or (ii) the breach of any of the financial covenants set forth in
Section 5.1 of the Schedule, Borrower grants Bank a continuing security interest
in all presently existing and later acquired Intellectual Property to secure all
Obligations and performance of each of Borrower's duties under the Loan
Documents. Except for Permitted Liens, the Bank will, at all times thereafter,
have a first-priority security interest in all of the Intellectual Property.
Bank's lien and security interest in the Intellectual Property, once effective,
will continue until Borrower fully satisfies its Obligations, and all
obligations of the Bank to make Advances or otherwise extend credit
accommodations have terminated.
4.3. AUTHORIZATION TO FILE FINANCING STATEMENTS.
Borrower authorizes Bank to file financing statements without notice to
Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in
order to perfect or protect Bank's interest in the Collateral (other than the
Intellectual Property). At such time as the security interest granted by
Borrower to Bank in the Intellectual Property is effective, Borrower authorizes
Bank to file financing statements
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without notice to Borrower, with all appropriate jurisdictions, as Bank deems
appropriate, in order to perfect or protect Bank's interest in the Intellectual
Property.
4.4. NEGATIVE PLEDGE -- INTELLECTUAL PROPERTY.
Borrower shall not sell, transfer, assign, mortgage, pledge, lease, grant
a security interest in, or encumber any of Borrower's Intellectual Property,
except for non-exclusive licenses thereof in the ordinary course of business.
4.5. EQUIPMENT FINANCING.
In the event a leasing company or lender, which is financing the
acquisition by the Borrower of Equipment hereafter acquired by Borrower (other
than in a sale and leaseback transaction), requires, as a condition to the lease
or financing, that Bank provide a subordination in favor of the leasing company
or lender with respect to the Equipment being acquired and all proceeds and
insurance proceeds thereof, Bank agrees to execute and deliver the same on terms
reasonably acceptable to Bank.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that the following statements are true
and correct on the date hereof and Borrower covenants that the following
statements will continue to be true and correct throughout the term of this
Agreement and so long as any Obligations are outstanding:
5.1. DUE ORGANIZATION AND AUTHORIZATION.
Borrower and each of its Subsidiaries is duly existing and in good
standing in its state of formation and qualified and licensed to do business in,
and in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be qualified, except where the failure to
do so could not reasonably be expected to cause a Material Adverse Change.
Except as set forth in the Disclosure Letter, Borrower has not changed its state
of incorporation or any organizational number (if any) assigned by its
jurisdiction of incorporation.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which it is a party or
by which it is bound in which the default could reasonably be expected to cause
a Material Adverse Change. Borrower has disclosed to Bank that it has stopped
making rental payments on its real property lease for premises located at 000
Xxxxxx Xxx, Xxxxxxxxx, Xxxxxxxxxx., that Borrower is negotiating with the
landlord regarding the same, and that Borrower does not believe the same will
result in any Material Adverse Change.
5.2. COLLATERAL.
Borrower has good title to the Collateral, free of Liens except Permitted
Liens. Borrower has no other deposit account, other than the deposit accounts
described in the Representations or the Disclosure Letter. Each Account with
respect to which Advances are requested by Borrower shall, on the date each
Advance is requested and made, represent an undisputed bona fide existing
unconditional obligation of the account debtor created by the sale, delivery,
and acceptance of goods or the rendition of services in the ordinary course of
Borrower's business. Except as set forth in the Disclosure Letter, he Collateral
is not in the possession of any third party bailee (such as at a warehouse). In
the event that Borrower, after the date hereof, intends to store or otherwise
deliver the Collateral to such a bailee, then Borrower will receive the prior
written consent of Bank and such bailee must acknowledge in writing that the
bailee is holding such Collateral for the benefit of Bank. Borrower has no
notice of any actual or imminent Insolvency Proceeding of any account debtor
whose accounts are an Eligible Account in any Borrowing
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Base Certificate. All Inventory is in all material respects of good and
marketable quality, free from material defects. Borrower is the sole owner of
the Intellectual Property, except for non-exclusive licenses granted to its
customers in the ordinary course of business, and except as set forth in the
Disclosure Letter. Except as set forth in the Disclosure Letter, to the best of
Borrower's knowledge, each Patent is, valid and enforceable and no part of the
Intellectual Property has been judged invalid or unenforceable, in whole or in
part, and, to the best of Borrower's knowledge, no claim has been made that any
part of the Intellectual Property violates the rights of any third party, except
to the extent such claim could not reasonably be expected to cause a Material
Adverse Change.
5.3. LITIGATION.
Except as shown in the Disclosure Letter or in the future disclosed
pursuant to Section 6.2(a)(iii) below, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers and legal
counsel, threatened by or against Borrower or any Subsidiary, which could result
in damages or costs to Borrower or any Subsidiary of $500,000 or more, or in
which an adverse decision could reasonably be expected to cause a Material
Adverse Change.
5.4. NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5. REGULATORY COMPLIANCE.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
material tax returns and paid, or made adequate provision to pay, all material
taxes, except those being contested in good faith with adequate reserves under
GAAP and which do not result in any tax lien on any of the Collateral. Borrower
and each Subsidiary has obtained all consents, approvals and authorizations of,
made all declarations or filings with, and given all notices to, all government
authorities that are necessary to continue its business as currently conducted,
except where the failure to do so could not reasonably be expected to cause a
Material Adverse Change.
5.6. SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.7. REPRESENTATIONS; FULL DISCLOSURE.
The information in the Representations previously submitted to Bank
continues to be true and correct as of the date hereof (provided, however, that
those representations and warranties expressly referring to another date shall
be true (subject to the materiality provisions therein) as of said date only).
No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains
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any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained in the certificates or statements not
misleading (it being recognized by Bank that the projections and forecasts
provided by Borrower are not to be viewed as facts and that actual results
during the period or periods covered by any such projections and forecasts may
differ from the projected or forecasted results).
6. AFFIRMATIVE COVENANTS.
Borrower will do all of the following for so long as Bank has an
obligation to lend, or there are outstanding Obligations:
6.1. GOVERNMENT COMPLIANCE.
Borrower will maintain its and all Subsidiaries' legal existence and good
standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
cause a material adverse effect on Borrower's business or operations. Borrower
will comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could have a
material adverse effect on Borrower's business or operations or would reasonably
be expected to cause a Material Adverse Change.
6.2. FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) as soon as available, but no
later than 30 days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during the period certified by a Responsible Officer and in a form
acceptable to Bank; (ii) as soon as available, but no later than 90 days after
the last day of Borrower's fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm reasonably acceptable to Bank; (iii) a prompt report of
any legal actions pending or threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any Subsidiary of $500,000 or
more, or in which an adverse decision could reasonably be expected to cause a
Material Adverse Change; (iv) budgets, sales projections, operating plans or
other financial information Bank reasonably requests; and (v) while the Asset
Based Terms are in effect, prompt notice of any material change in the
composition of the Intellectual Property, including any subsequent ownership
right of Borrower in or to any copyright, patent or trademark not shown in any
intellectual property security agreement between Borrower and Bank or knowledge
of an event that materially adversely affects the value of the Intellectual
Property.
(b) Within 20 days after the last day of each month, Borrower will
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
the form of Exhibit C, with aged listings of accounts receivable and accounts
payable.
(c) Within 30 days after the last day of each month, Borrower will
deliver to Bank with the monthly financial statements a Compliance Certificate
signed by a Responsible Officer in the form of Exhibit D.
(d) Within 20 days after the last day of each month, Borrower will
deliver to Bank a schedule of deferred revenue.
(e) Allow Bank to audit Borrower's Collateral at Borrower's expense.
Such audits will be conducted no more often than quarterly, unless an Event of
Default or an event which, with notice or passage of time or both would
constitute an Event of Default, has occurred and is continuing. Audit fees shall
not exceed $750 per day per person, plus out-of-pocket expenses.
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(f) Borrower will notify Bank, upon filing of its reports on Forms 10-K,
8-K and 10-Q with the Securities and Exchange Commission.
(g) During any period that the Asset Based Terms are in effect, the
reports under Sections 6.2 (b) shall be provided within seven days after the end
of each month and the reports under Sections 6.2 (d) shall be provided within 15
days after the end of each month.
6.3. INVENTORY; RETURNS.
Borrower will keep all Inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower and its account
debtors will follow Borrower's customary practices as they exist at execution of
this Agreement. Borrower must promptly notify Bank of all returns, recoveries,
disputes and claims, that involve more than $250,000.
6.4. TAXES.
Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state, and local taxes or assessments (except for taxes or
assessments being contested in good faith with adequate reserves under GAAP and
which do not result in any tax lien on any of the Collateral) and will deliver
to Bank, on demand, appropriate certificates attesting to the payment.
6.5. INSURANCE.
Borrower will keep its business and the Collateral insured for risks and
in amounts, as Bank may reasonably request. Insurance policies will be in a
form, with companies, and in amounts that are satisfactory to Bank in Bank's
reasonable discretion. All property policies will have a lender's loss payable
endorsement showing Bank as an additional loss payee with respect to the
Collateral and all liability policies will show the Bank as an additional
insured and provide that the insurer must give Bank at least 20 days notice
before canceling its policy. At Bank's request, Borrower will deliver certified
copies of policies and evidence of all premium payments. Proceeds payable under
any policy will, at Bank's option, be payable to Bank on account of the
Obligations, provided that if no Event of Default and no event which, with
notice or passage of time or both would constitute an Event of Default, has
occurred and is continuing, and if the Asset Based Terms are not in effect, then
such proceeds in the amount of less than $500,000 will be released by Bank to
Borrower, which proceeds Borrower shall use to replace any item of Collateral
the damage to which gave rise to such insurance proceeds.
6.6. PRIMARY ACCOUNTS.
Borrower will maintain its primary depository and operating accounts with
Bank.
6.7. FINANCIAL COVENANTS.
Borrower will comply with the financial covenants set forth on the
Schedule.
6.8. REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
Borrower represents and warrants that it has no present maskworks,
software, computer programs and other works of authorship registered with the
United States Copyright Office except as set forth in the Intellectual Property
Security Agreement being executed concurrently herewith, and Borrower shall
hereafter provide prompt written notice to Bank in the event Borrower registers
any other maskworks, software, computer programs or other works of authorship
subject to United States copyright protection with the United States Copyright
Office, and if the Asset Based Terms are in effect, Borrower shall execute and
file such other instruments, and taking such further actions as Bank may
reasonably
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request from time to time to perfect or continue the perfection of Bank's
interest in the Collateral, including without limitation filings with the United
States Copyright Office.
Borrower will (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in writing
of material infringements and (ii) not allow any material Intellectual Property
to be abandoned, forfeited or dedicated to the public without Bank's written
consent.
6.9. FURTHER ASSURANCES.
Borrower will execute any further instruments and take further action as
Bank reasonably requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS.
Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld, for so long as Bank has an
obligation to lend and there are any outstanding Obligations:
7.1. DISPOSITIONS.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property or any Collateral, except for (i) Transfers of
Inventory in the ordinary course of business; (ii) Transfers 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) Transfers of worn out or
obsolete Equipment; (iv) Transfers of cash in the ordinary course of business;
(v) Transfers otherwise permitted by this Section 7; and (vi) Transfers of the
King Indebtedness.
7.2. CHANGES IN BUSINESS, NON-ORDINARY COURSE TRANSACTIONS, OWNERSHIP,
MANAGEMENT OR LOCATIONS OF COLLATERAL.
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto, or enter into any transaction outside the ordinary course of business,
or permit there to be a Change in Control. Borrower will not, without at least
30 days prior written notice to the Bank, relocate its chief executive office,
change its state of formation (including reincorporation), change its
organizational number or name or add any new offices or business locations
(including warehouses) in which Borrower maintains or stores over $50,000 in
Collateral.
7.3. MERGERS OR ACQUISITIONS.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person (collectively, "Acquisitions"), except for Permitted
Acquisitions.
7.4. INDEBTEDNESS.
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5. ENCUMBRANCE.
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted
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Liens, or permit any Collateral not to be subject to the first priority security
interest granted here, subject to Permitted Liens.
7.6. DISTRIBUTIONS; INVESTMENTS.
Directly or indirectly acquire or own any Person, or make any Investment
in any Person, other than Permitted Investments or as permitted by Section 7.3,
or permit any of its Subsidiaries to do so. Except for Permitted Distributions,
pay any dividends (other than dividends payable solely in stock of the Borrower)
or make any distribution or payment or redeem, retire or purchase any capital
stock.
7.7. TRANSACTIONS WITH AFFILIATES.
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for (i) transactions that are
in the ordinary course of Borrower's business, upon fair and reasonable terms
that are no less favorable to Borrower than would be obtained in an arm's length
transaction with a nonaffiliated Person, (ii) transactions by and among Borrower
and its Subsidiaries in the ordinary course of business, provided that transfers
of cash and other assets by Borrower to its foreign Subsidiaries shall be
limited to amounts remitted in the ordinary course of business in an amount not
in excess of the amounts needed to fund operations of such Subsidiaries in the
ordinary course of business and consistent with past practices, (iii)
transactions consisting of acceptance of payments on, or restructuring or
compromising sums due under, the Reimbursement and Security Agreement dated
March 15, 2001 as amended from time to time between Xxxxx Xxxx and the Borrower,
provided that the principal amount thereof shall not increase (other than as a
result of accrued interest) and the sums due in connection therewith shall not
exceed $5,000,000 plus accrued interest.
7.8. SUBORDINATED DEBT.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.
7.9. COMPLIANCE.
Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonably be expected to have a material adverse effect on Borrower's
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.
8. EVENTS OF DEFAULT.
Any one of the following is an Event of Default:
8.1. PAYMENT DEFAULT.
If Borrower fails to pay any of the Obligations (other than Bank Expenses,
which shall be subject to Section 8.3 below) and such failure is not cured
within 3 days after the date payment was due.
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8.2. CERTAIN DEFAULTS.
If Borrower (I) fails to provide the financial statements called for by
Section 6.2 hereof or by any other provisions of this Agreement, within the time
therein provided; or (ii) Borrower breaches any of the financial covenants set
forth in Section 6.7 of this Agreement; or (iii) fails to perform or comply with
any other term, condition or covenant in any other agreement between Borrower
and Bank which is not cured within any cure period provided in such agreement
(or, if no cure period is provided in such agreement, which is not cured within
ten days after such failure).
8.3. OTHER DEFAULTS.
If Borrower fails to perform or comply with any other term, condition or
covenant in this Agreement (other than as set forth in Section 8.1 or 8.2
above), and such failure is not cured within 30 days after the date it occurs
8.4. MATERIAL ADVERSE CHANGE.
A Material Adverse Change occurs.
8.5. ATTACHMENT.
If any of Borrower's assets having a value in the aggregate of more than
$100,000 is attached, seized, levied on, or comes into possession of a trustee
or receiver and the attachment, seizure or levy is not removed in 10 days, or if
Borrower is enjoined, restrained, or prevented by court order from conducting a
material part of its business or if a judgment or other claim becomes a Lien on
a material portion of Borrower's assets, or if a notice of lien, levy, or
assessment is filed against Borrower's assets having an aggregate value in
excess of $100,000 by any government agency and not paid within 10 days after
Borrower receives notice. These are not Events of Default if stayed or if a bond
is posted pending contest by Borrower;
8.6. INSOLVENCY.
If Borrower fails to pay its debts generally as they mature, or if
Borrower begins an Insolvency Proceeding, or if an Insolvency Proceeding is
begun against Borrower and not dismissed or stayed within 45 days;
8.7. OTHER AGREEMENTS.
If there is a default in any agreement between Borrower and a third party
that results in the acceleration by such third party of any Indebtedness
exceeding $250,000 or that could cause a Material Adverse Change;
8.8. JUDGMENTS.
If a money judgment(s) in the aggregate of at least $100,000, which is not
fully covered by insurance, is rendered against Borrower and is unsatisfied and
unstayed for 10 days;
8.9. MISREPRESENTATIONS.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document; or
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8.10. GUARANTY.
Any guaranty of any Obligations ceases for any reason to be in full force
or any Guarantor does not perform any obligation under any guaranty of any of
the Obligations, or any material misrepresentation or material misstatement
exists now or later in any warranty or representation in any guaranty of the
Obligations or in any certificate delivered to Bank in connection with the
guaranty, or any circumstance described in Sections 8.5, 6 or 8 occurs to any
Guarantor.
No Credit Extensions will be made during any of the cure periods set forth
in Sections 8.1-8.10 above.
9. BANK'S RIGHTS AND REMEDIES.
9.1. RIGHTS AND REMEDIES.
When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an Event
of Default described in Section 8.6 occurs all Obligations are immediately due
and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and Bank and
terminate the Committed Revolving Line;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;
(e) Apply to the Obligations any (I) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Intellectual Property, and advertising matter, and any
similar property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank's
exercise of its rights under this Section, Borrower's rights under all licenses
and all franchise agreements inure to Bank's benefit; and
(g) Dispose of the Collateral according to the Code; and
(h) Bank may place a "hold" on any account maintained with Bank and
deliver a notice of exclusive control, any entitlement order, or other
directions or instructions pursuant to any control agreement or similar
agreements providing control of any Collateral, provided that bank agrees that
it will not deliver a notice of exclusive control, any entitlement order, or
other directions or instructions pursuant to any control agreement or similar
agreements providing control of any Collateral unless an Event of Default occurs
and continues.
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9.2. POWER OF ATTORNEY.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (I) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign Borrower's name
on any invoice or xxxx of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under Borrower's insurance
policies; (iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as the Code
permits. Bank may exercise the power of attorney to sign Borrower's name on any
documents necessary to perfect or continue the perfection of any security
interest regardless of whether an Event of Default has occurred. Bank's
appointment as Borrower's attorney in fact, and all of Bank's rights and powers,
are coupled with an interest, are irrevocable until all Obligations have been
fully repaid and performed and Bank's obligation to provide Credit Extensions
terminates.
9.3. ACCOUNTS COLLECTION.
When an Event of Default occurs and continues, Bank may notify any Person
owing Borrower money of Bank's security interest in the funds and demand payment
of, and collect any Accounts, general intangibles and other Collateral, and, in
connection therewith, Borrower irrevocably authorizes Bank to endorse or sign
Borrower's name on all collections, receipts, instruments and other documents,
and, in Bank's good faith business judgment, to grant extensions of time to pay,
compromise claims and settle Accounts and general intangibles for less than face
value. When an Event of Default occurs and continues, Borrower shall collect all
payments in trust for Bank and, if requested by Bank, immediately deliver the
payments to Bank in the form received from the account debtor, with proper
endorsements for deposit.
9.4. BANK EXPENSES.
If Borrower fails to obtain the insurance called for by Section 6.5 or
fails to pay any premium thereon or fails to pay any other amount, which
Borrower is obligated to pay under this Agreement or any other Loan Document,
Bank may obtain such insurance or make such payment, and all amounts so paid by
Bank are Bank Expenses and immediately due and payable, bearing interest at the
then applicable rate and secured by the Collateral. No payments by Bank shall be
deemed an agreement to make similar payments in the future or Bank's waiver of
any Event of Default.
9.5. BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices and Section 9207 of the
Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any loss
or damage to the Collateral; (c) any diminution in the value of the Collateral;
or (d) any act or default of any carrier, warehouseman, bailee, or other person.
Borrower bears all risk of loss, damage or destruction of the Collateral.
9.6. REMEDIES CUMULATIVE.
Bank's rights and remedies under this Agreement, the Loan Documents, and
all other agreements are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank's exercise of one right or remedy is
not an election, and Bank's waiver of any Event of Default is not a continuing
waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver is
effective unless signed by Bank and then is only effective for the specific
instance and purpose for which it was given.
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9.7. DEMAND WAIVER.
Borrower waives demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
10. NOTICES.
All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by fax to the addresses set forth at the beginning of this
Agreement and, in the case of notices by fax, to the latest fax number a party
as for the other party. A party may change its notice address by giving the
other party written notice.
11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER.
California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Santa Xxxxx County, California.
BORROWER AND BANK EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS
AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN BANK
AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF BANK OR BORROWER OR ANY OF
THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS
AFFILIATED WITH BANK OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE. THIS WAIVER IS A MATERIAL INDUCEMENT
FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS
WAIVER WITH ITS COUNSEL.
12. GENERAL PROVISIONS
12.1. SUCCESSORS AND ASSIGNS.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.
12.2. INDEMNIFICATION.
Except for obligations, demands, claims, liabilities, losses and Bank
Expenses caused by Bank's gross negligence or willful misconduct, Borrower will
indemnify, defend and hold harmless Bank and its officers, employees, and agents
against: (a) all obligations, demands, claims, and liabilities asserted by any
other Person in connection with the transactions contemplated by the Loan
Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from,
following, or consequential to transactions between Bank and Borrower (including
reasonable attorneys fees and expenses).
12.3. TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in this
Agreement.
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12.4. SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other provision
in determining the enforceability of any provision.
12.5. AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Agreement must be in writing and signed by Borrower
and Bank. This Agreement represents the entire agreement about this subject
matter, and supersedes prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement merge into this Agreement and
the Loan Documents.
12.6. COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7. SURVIVAL.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8. CONFIDENTIALITY.
In handling any Confidential Information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans (provided, however, Bank shall use
commercially reasonable efforts in obtaining such prospective transferee or
purchasers agreement of the terms of this provision), (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with Bank's
examination or audit and (v) as Bank considers appropriate exercising remedies
under this Agreement. For purposes hereof, "Confidential Information" is
proprietary, confidential or trade secret information concerning Borrower or its
business and any other information concerning Borrower or its business which is
clearly marked as "confidential" by Borrower, provided that Confidential
Information does not include information that either: (a) is in the public
domain or in Bank's possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (b) is disclosed to Bank by a third
party, if Bank does not know that the third party is prohibited from disclosing
the information.
12.9. ATTORNEYS' FEES, COSTS AND EXPENSES.
In any action or proceeding between Borrower and Bank arising out of the
Loan Documents, the prevailing party will be entitled to recover its reasonable
attorneys' fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.
13. DEFINITIONS.
13.1. DEFINITIONS.
In this Agreement:
"ACCOUNTS" is defined on Exhibit A hereto.
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"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.
"AFFILIATE" means (I) any of Borrower's officers or directors, and if
Borrower is a limited liability company, Borrower's managers and members, and if
Borrower is a partnership, Borrower's general and limited partners; (ii) a
Person that, directly or indirectly, owns or controls, is controlled by or is
under common control with Borrower, and any of such person's officers or
directors, and if such person is a limited liability company, such person's
managers and members, and if such person is a partnership, such person's general
and limited partners.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings), or otherwise relating to Borrower
or the Loan Documents, including, but not limited to, any reasonable attorneys'
fees and costs Bank incurs in order to do the following: obtain legal advice in
connection with this Agreement or Borrower; enforce, or seek to enforce, any of
Bank's rights; prosecute actions against, or defend actions by, account debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any bankruptcy claim, third-party claim, or other claim; protect, obtain
possession of, lease, dispose of, or otherwise enforce Bank's security interest
in, the Collateral; and otherwise represent Bank in any litigation relating to
Borrower.
"BORROWER'S BOOKS" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.
"BORROWING BASE" is as set forth in the Schedule.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
"CASH" is all cash, money, currency, liquid funds, and Investments
included in paragraph (b) of the definition of "Permitted Investments".
"CHANGE IN CONTROL" is an event of series of events by which either (a)
any person or group of persons (within the meaning of Section 13 or 14 of the
Securities Exchange Act of 1934) shall have acquired beneficial ownership
(within the meaning of Rule 13d-3) promulgated by the Securities and Exchange
Commission under said Act), directly or indirectly, of 40% or more of the total
outstanding shares of capital stock of the Borrower or total outstanding shares
of capital stock of the Borrower entitled to vote for the election of directors;
"CLOSING DATE" is the date of this Agreement.
"CODE" is the California Uniform Commercial Code, in effect from time to
time.
"COLLATERAL" is the property described on Exhibit A.
"COMMITTED REVOLVING LINE" is defined in the Schedule.
"CONFIDENTIAL INFORMATION" is defined in Section 12.8 above.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement
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designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; but "Contingent Obligation" does not include
endorsements in the ordinary course of business. The amount of a Contingent
Obligation is the stated or determined amount of the primary obligation for
which the Contingent Obligation is made or, if not determinable, the maximum
reasonably anticipated liability for it determined by the Person in good faith;
but the amount may not exceed the maximum of the obligations under the guarantee
or other support arrangement.
"CREDIT EXTENSION" is each Advance, Letter of Credit, Exchange Contract,
or any other extension of credit by Bank for Borrower's benefit.
"CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year.
"DISCLOSURE LETTER" is the disclosure letter, dated December 27, 2002,
provided by Borrower to Bank in connection with this Agreement.
"Distributor" is defined in Section 1 of Schedule 1 to this Agreement.
"ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5;
but Bank may change eligibility standards by giving Borrower 10 days prior
written notice thereof (except that, while the Asset Based Terms are in effect
such notice will be give concurrently with such change). Unless Bank agrees
otherwise in writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has not paid within within the
following periods (the "Eligibility Period"): (i) 90 days of invoice date (in
the case of Accounts owing from account debtors who are not Distributors and
(ii) 60 days of invoice date (in the case of Accounts owing from account debtors
who are Distributors).
(b) Accounts for an account debtor, 50% or more of whose Accounts have
not been paid within the Eligibility Period;
(c) Credit balances;
(d) Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, for the amounts that exceed
that percentage;
(e) Accounts for which the account debtor does not have its principal
place of business in the United States (unless supported by letters of credit
advised through and acceptable to Bank in its discretion or covered by a foreign
credit insurance policy acceptable in all respects to Bank and naming Bank as
the beneficiary thereunder (reduced by the amount of any deductible thereunder);
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality, unless, there
is compliance with the federal Assignment of Claims Act satisfactory to Bank;
(g) Accounts for which Borrower owes the account debtor, but only up to
the amount owed (sometimes called "contra" accounts, accounts payable, customer
deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on approval, xxxx
and hold, or other terms if account debtor's payment may be conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
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(j) Accounts in which the account debtor disputes liability or makes any
claim or Bank believes there may be a basis for dispute (but only up to the
disputed or claimed amount), or if the Account Debtor is subject to an
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(k) Accounts owing from an account debtor with respect to which there is
deferred revenue which is a potential offset to such Account;
(l) Accounts for which the credit risk is not acceptable to Bank in its
good faith business judgment.
"EQUIPMENT" is defined on Exhibit A hereto.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"FINANCIAL COVENANT BREACH" means a breach by Borrower of any of the
covenants set forth in Section 5.1 of Schedule 1 to this Agreement.
"FX FORWARD CONTRACT" is defined in Section 2.1.3.
"FX RESERVE" is defined in Section 2.1.3.
"GAAP" is generally accepted accounting principles.
"GOOD FAITH BUSINESS JUDGMENT" means honesty in fact and good faith (as
defined in Section 1201 of the Code) in the exercise of Bank's business
judgment.
"GUARANTOR" is any present or future guarantor of any of the Obligations.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INTELLECTUAL PROPERTY" is defined on Exhibit A hereto
"INVENTORY" is defined on Exhibit A hereto.
"INVESTMENT" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"KING INDEBTEDNESS" is the indebtedness in an amount not to exceed
$5,000,000 in aggregate principal amount plus accrued interest owed to Borrower
pursuant to the Reimbursement and Security Agreement dated March 15, 2001 as
amended from time to time between Xxxxx Xxxx and the Borrower
"LETTER OF CREDIT" is defined in Section 2.1.2.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
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"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
"MATERIAL ADVERSE CHANGE" is any of the following: (i) a material adverse
change in the business, operations, or condition (financial or otherwise) of the
Borrower, or (ii) a material impairment of the prospect of repayment of any
portion of the Obligations; or (iii) a material impairment of the value or
priority of Bank's security interests in the Collateral.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"PATENTS" are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations in part of the same.
"PERMITTED ACQUISITIONS" are Acquisitions by Borrower where no Event of
Default has occurred and is continuing or would result from such Acquisition,
and where the following conditions are met:
(a) if the Asset Based Terms are not in effect at the date of the
Acquisition, the following conditions are met: (i) the total consideration paid
in such Acquisition does not exceed 25% of the Borrower's Tangible Net Worth as
of the end of the month preceding the month in which the Acquisition is to be
consummated, and (ii) the total cash consideration paid by Borrower is less than
$1,000,000, and (iii) the stockholders of Borrower immediately prior to such
Acquisition own more than 50% of the voting stock of the Borrower immediately
after giving effect to such Acquisition.
(b) if the Asset Based Terms are in effect at the date of the
Acquisition, the following conditions are met: Bank consents to the Acquisition
(which shall be a matter of Bank's good faith business judgment).
(c) Whether or not the Asset Based Terms are in effect, the Acquisition
is a merger or consolidation of (i) a Subsidiary into another Subsidiary or (ii)
a Subsidiary into Borrower, if Borrower is the surviving corporation in the
merger.
"PERMITTED DISTRIBUTIONS" ARE:
(a) repurchases of stock from former employees or directors of Borrower
under the terms of applicable repurchase agreements in an aggregate amount not
to exceed Two Hundred and Fifty Thousand Dollars ($250,000) in the aggregate for
all such repurchases in any fiscal year, provided that no Event of Default has
occurred, is continuing or would exist after giving effect to the repurchases;
(b) the distribution of non-cash rights in connection with any
stockholders' rights plan;
(c) the conversion by Borrower of any of its convertible securities into
other securities pursuant to the terms of such convertible securities or
otherwise in exchange therefore, and payments in cash for any fractional shares
of such convertible securities; and
(d) payments in cash for any fractional shares in connection with a
reverse stock-split of the Borrower's outstanding stock.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or any other
Loan Document;
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(b) Indebtedness existing on the Closing Date and shown on the
Disclosure Letter;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(e) Indebtedness secured by Permitted Liens.
(f) Indebtedness of Borrower to any Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of Borrower (provided
that the primary obligations are not prohibited hereby), and Indebtedness of any
Subsidiary to Borrower or to any other Subsidiary and Contingent Obligations of
any Subsidiary with respect to obligations of any other Subsidiary (provided
that the primary obligations are not prohibited hereby);
(g) obligations (contingent or otherwise) of Borrower or any Subsidiary
existing or arising under any Swap Contract; provided that such obligations are
(or were) entered into by such Person in the ordinary course of business for the
purpose of directly mitigating risks associated with liabilities, commitments,
investments, assets, or property held or reasonably anticipated by such Person,
or changes in the value of securities issued by such Person and not for the
purposes of speculation, and provided that the "notional" or face amount of all
Swap Contracts for Borrower and all Subsidiaries outstanding at any time shall
not exceed a total of $1,000,000;
(h) Indebtedness consisting of letters of credit issued for the benefit
of any landlord or other Person to secure rental payments on any real estate
lease;
(i) other unsecured Indebtedness of Borrower or any Subsidiary incurred
in the ordinary course of business in an aggregate amount not to exceed $500,000
at any time;
(j) Indebtedness of any Person existing at the time such Person is
merged with or into Borrower or becomes a Subsidiary as permitted hereby,
provided that such Indebtedness does not exceed, in the aggregate, $500,000 for
all Persons merged into Borrower or becoming a Subsidiary in any fiscal year,
and provided such Indebtedness is not incurred in connection with, or in
contemplation of, such Person merging with and into the Borrower or becoming a
Subsidiary of the Borrower; and
(k) Indebtedness with respect to surety, appeal, indemnity, performance
or other similar bonds incurred in the ordinary course of business, consistent
with past practices;
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Disclosure Letter and existing on the
Closing Date;
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within 1
year from its acquisition, (ii) commercial paper maturing no more than 1 year
after its creation and having the highest rating from either Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc., and (iii) Bank's certificates of
deposit issued maturing no more than 1 year after issue.
(c) Investments of Subsidiaries in or to wholly-owned Subsidiaries of
Borrower and Investments by Borrower in or to its wholly-owned Subsidiaries,
provided that Investments by Borrower or any Subsidiary in foreign Subsidiaries
shall be limited to Investments in the ordinary course of business in an amount
not in excess of the amounts needed to fund operations of such Subsidiaries in
the ordinary course of business and consistent with past practices;
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(d) Investments consisting of (i) travel advances, (ii) employee
relocation loans and other employee loans and advances in the ordinary course of
business, in a total amount at any time outstanding under this clause (ii) not
to exceed $500,000, (iii) loans to employees relating to the purchase of equity
securities of Borrower or its Subsidiaries pursuant to employee stock purchase
plan agreements approved by Borrower's Board of Directors, provided that all of
the proceeds of such loans are concurrently paid to the Borrower by the employee
in consideration for the stock being purchased, and (iv) the King Indebtedness;
(e) Investments (including debt obligations) received in connection with
the bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of Borrower's business;
(f) Investments consisting of notes receivable of, or prepaid royalties
and other credit extensions, to customers and suppliers who are not Affiliates,
in the ordinary course of business, provided that this subparagraph (f) shall
not apply to Investments of Borrower in any Subsidiary;
(g) joint ventures or strategic alliances in the ordinary course of
Borrower's business consisting of the non-exclusive licensing of technology, the
development of technology or the providing of technical support, provided that
any cash Investments by Borrower do not exceed Five Hundred Thousand Dollars
($500,000) in the aggregate in any fiscal year;
(h) Investments pursuant to the Investment Policy Guidelines of the
Borrower previously provided by Borrower to Bank; and
(h) other Investments not in excess of Five Hundred Thousand Dollars
($500,000) in the aggregate in any fiscal year.
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the Disclosure
Letter or arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the Equipment (and
any of the following relating to such Equipment: accessions, parts,
replacements, fixtures, improvements, and attachments, and proceeds of the
foregoing), or (ii) existing on equipment when acquired, if the Lien is confined
to the Equipment (and any of the following relating to such Equipment:
accessions, parts, replacements, fixtures, improvements, and attachments, and
proceeds of the foregoing);
(d) Nonexclusive licenses and non-exclusive sublicenses granted by
Borrower in the ordinary course of its business;
(e) Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;
(f) carriers', warehousemen's, mechanics', materialmen's or other like
Liens arising in the ordinary course of business which are not overdue for a
period of more than 30 days or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the books of the applicable Person;
20
(g) Liens to secure payment of workers' compensation, employment
insurance, old age pensions, social security or other like obligations incurred
in the ordinary course of business;
(h) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), contracts for the purchase of property, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case, incurred in the ordinary course of
business and not representing an obligation for borrowed money, provided the
total amount of all such outstanding deposits under the clause (h) does not
exceed $250,000 at any time outstanding;
(i) easements, rights-of-way, restrictions and other similar
encumbrances affecting real property which, in the aggregate, are not
substantial in amount, 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 business of the applicable Person;
(j) Liens arising by virtue of any contractual, 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;
(k) Liens consisting of pledges of cash collateral or government
securities to secure Swap Contracts on a xxxx-to-market basis only, provided the
total amount of all such Liens under the clause (k) does not exceed $200,000 at
any time outstanding;;
(l) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(m) Liens on insurance proceeds securing the payment of financed
insurance premiums;
(n) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default hereunder; and
(o) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"PRIME RATE" is defined in the Schedule.
"REPRESENTATIONS" are the written Representations and Warranties of
Borrower dated November 26, 2002.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"REVOLVING MATURITY DATE" is set forth on Schedule 1 to this Agreement.
"SCHEDULE" is Schedule 1 to this Agreement.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.
21
"SUBSIDIARY" is for any Person, or any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.
"SWAP CONTRACT" means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swap,
bond or bond price or bond index swaps or options or forward bond or forward
bond price or forward bond index transactions, interest rate options, forward
foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap transactions,
spot contracts, or any other similar transactions or any combination of any of
the foregoing, whether or not any such transaction is governed by or subject to
any master agreement; and (b) any and all transactions of any kind, and the
related confirmations, which are subject to the terms and conditions of, or
governed by, any master agreement published by the International Swaps and
Derivatives Association, Inc., any International Foreign Exchange Master
Agreement, or any other master agreement (any such master agreement, together
with any related schedules, a "Master Agreement"), including any such
obligations or liabilities under any Master Agreement.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.
BORROWER:
PROXIM CORPORATION
By /s/ Xxxxx X. Xxxxxx
------------------------------------------
Name Xxxxx X. Xxxxxx
----------------------------------------
Title Executive Vice President
---------------------------------------
And Chief Financial Officer
---------------------------------------
BANK:
SILICON VALLEY BANK
By /s/ Xxxxxxxx Xxxxx
------------------------------------------
Title Vice President
---------------------------------------
22
EXHIBIT A
COLLATERAL
"COLLATERAL" means of all of Borrower's right, title and interest in and
to the following whether owned now or hereafter acquired or arising, and
wherever located: all Accounts; all Inventory; all Equipment; all Deposit
Accounts; all General Intangibles (excluding, however, all Intellectual
Property, except as set forth in Section 4.2 of this Loan and Security
Agreement); all Investment Property; all Other Property; and any and all claims,
rights and interests in any of the foregoing, and all guaranties and security
for any of the foregoing, and all substitutions and replacements for, additions,
accessions, attachments, accessories, and improvements to, and proceeds
(including proceeds of any insurance policies, proceeds of proceeds and claims
against third parties) of, all of the foregoing, and all Borrower's books
relating to any of the foregoing.
As used in this Agreement and in this Exhibit, the following terms have the
following meanings:
"ACCOUNTS" means all present and future "accounts" as defined in the Code
in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all accounts receivable
and other sums owing to Borrower.
"DEPOSIT ACCOUNTS" means all present and future "deposit accounts" as
defined in the Code in effect on the date hereof with such additions to
such term as may hereafter be made, and includes without limitation all
general and special bank accounts, demand accounts, checking accounts,
savings accounts and certificates of deposit, whether maintained with Bank
or other institutions
"EQUIPMENT" means all present and future "equipment" as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all machinery,
fixtures, goods, vehicles (including motor vehicles and trailers), and any
interest in any of the foregoing.
"GENERAL INTANGIBLES" means all present and future "general intangibles"
as defined in the Code in effect on the date hereof with such additions to
such term as may hereafter be made, and includes without limitation all
payment intangibles, royalties, contract rights, goodwill, franchise
agreements, purchase orders, customer lists, route lists, telephone
numbers, domain names, claims, income tax refunds, security and other
deposits, options to purchase or sell real or personal property, rights in
all litigation presently or hereafter pending (whether in contract, tort
or otherwise), insurance policies (including without limitation key man,
property damage, and business interruption insurance), payments of
insurance and rights to payment of any kind.
"INTELLECTUAL PROPERTY" means all present and future (a) copyrights,
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof,
whether published or unpublished, (b) trade secret rights, including all
rights to unpatented inventions and know how, and confidential
information; (c) mask work or similar rights available for the protection
of semiconductor chips; (d) patents, patent applications and like
protections including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of
the same; (e) trademarks, servicemarks, trade styles, and trade names,
whether or not any of the foregoing are registered, and all 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 any such trademarks; (f) computer software and computer software
products; (g) designs and design rights; (h) technology; (i) all claims
for damages by way of past, present and future infringement of any of the
rights included above; (j) all licenses or other rights to use any
property or rights of a type described above; and (k) all other related or
similar intellectual property rights.
23
"INVENTORY" means all present and future "inventory" as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all merchandise, raw
materials, parts, supplies, packing and shipping materials, work in
process and finished products, including without limitation such inventory
as is out of Borrower's custody or possession or in transit and including
any returned goods and any documents of title representing any of the
above.
"INVESTMENT PROPERTY" means all present and future investment property,
securities, stocks, bonds, debentures, debt securities, partnership
interests, limited liability company interests, options, security
entitlements, securities accounts, commodity contracts, commodity
accounts, and all financial assets held in any securities account or
otherwise, wherever located, and all other securities of every kind,
whether certificated or uncertificated,
"OTHER PROPERTY" means (i) the following as defined in the Code in effect
on the date hereof with such additions to such term as may hereafter be
made, and all rights relating thereto: all present and future "commercial
tort claims", "documents", "instruments", "promissory notes", "chattel
paper", "letters of credit", "letter-of-credit rights", "fixtures", "farm
products" and "money"; and (ii) all other goods and personal property of
every kind, tangible and intangible, whether or not governed by the Code
(other than Intellectual Property).
24
EXHIBIT B
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T.
Fax To: Date:
-------------------- ---------------------
LOAN PAYMENT:
Client Name (Borrower)
----------------------
From Account # To Account #
---------------------- ----------------------
(Deposit Account #) (Loan Account #)
Principal $ and/or Interest $
---------------- --------------------------
All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects to on the date of the
telephone transfer request for and advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date:
Authorized Signature:
-----------------------------------------
Phone Number:
----------------------
LOAN ADVANCE:
COMPLETE OUTGOING WIRE REQUEST SECTION BELOW IF ALL OR A PORTION OF THE FUNDS
FROM THIS LOAN ADVANCE ARE FOR AN OUTGOING WIRE.
From Account # To Account #
---------------------- ----------------------
(Loan Account #) (Deposit Account #)
Amount of Advance $
-------------------------
All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects to on the date of the
telephone transfer request for and advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date:
Authorized Signature:
-----------------------------------------
Phone Number:
----------------------
25
OUTGOING WIRE REQUEST
COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO BE
WIRED.
Deadline for same day processing is 12:00 p.m., P.S.T.
Beneficiary Name: Amount of Wire: $
--------------------------- -----------------
Beneficiary Bank: Account Number:
--------------------------- -------------------
City and Sate:
---------------------------------------
Beneficiary Bank Transit (ABA) #:
--------------------
Beneficiary Bank Code (Swift, Sort, Chip, etc.):
-----------------------
(For International Wire Only)
Intermediary Bank:
-----------------------------------
Transit (ABA) #:
-------------------
For Further Credit to:
----------------------------------------------------------
Special Instruction:
------------------------------------------------------------
By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).
Authorized Signature:
--------------------------------
2nd Signature (If Required):
-------------------------
Print Name/Title:
---------------------------
Print Name/Title:
---------------------------
Telephone #
------------------------------------------
Telephone #
------------------------------------------
26
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: Proxim Corporation Bank: Silicon Valley Bank
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Commitment Amount: $20,000,000
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of $
---------------
2. Additions (please explain on reverse) $
---------------
3. TOTAL ACCOUNTS RECEIVABLE $
---------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $
---------------
5. Balance of 50% over 90 day accounts $
---------------
6. Credit balances over 90 days $
---------------
7. Concentration Limits* $
---------------
8. Foreign Accounts $
---------------
9. Governmental Accounts $
---------------
10. Contra Accounts $
---------------
11. Promotion or Demo Accounts $
---------------
12. Intercompany/Employee Accounts $
---------------
13. Other (please explain on reverse) $
---------------
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
---------------
15. Eligible Accounts (#3 minus #14) $
--------------
16. LOAN VALUE OF ACCOUNTS (Advance Rate x #15) $
--------------
(Note: Advance rate is 80% for non-Distributors, and 50% for Distributors)
17. Maximum Loan Amount $20,000,000
----------
18. Total Funds Available [Lesser of #17 or #16] $
---------------
19. Present balance owing on Line of Credit $
---------------
20. Outstanding under Sublimits (LC, FX, Cash Man) $
---------------
21. RESERVE POSITION (#18 minus #19 and #20) $
--------------
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.
COMMENTS: BANK USE ONLY
-------------
Rec'd By:
---------------------
Auth. Signer
--------------------------------------------
Date:
-------------------------
Verified:
---------------------
By: Auth. Signer
-----------------------------------------
Authorized Signer Date:
-------------------------
27
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
FROM: Proxim Corporation
The undersigned authorized officer of PROXIM CORPORATION ("Borrower")
certifies that under the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the "Agreement"), (i) Borrower is in complete
compliance for the period ending _______ with all required covenants except as
noted below and (ii) all representations and warranties in the Agreement are
true and correct in all material respects on this date. Attached are the
required documents supporting the certification. The Officer certifies that
these are prepared in accordance with Generally Accepted Accounting Principles
(GAAP) consistently applied from one period to the next except as explained in
an accompanying letter or footnotes. The Officer acknowledges that no borrowings
may be requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
+ Compliance Certificate
Annual (Audited) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 20 days (7 days if Asset Based Terms are Yes No
in effect)
Schedule of Deferred Revenue Monthly within 20 days (15 days if Asset Based Terms Yes No
are in effect)
A/R Audit Initial and Semi-Annual Yes No
Borrowing Base Certificate Monthly within 20 days Yes No
28
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
(ASSET BASED TERMS
NOT IN EFFECT)
------------------
Maximum Adjusted Net Loss
-------------------------
Quarter Ended Maximum Adjusted Net Loss
------------- -------------------------
December 31, 2002 ($10,700,000) Yes No
March 31, 2003 ($6,800,000) Yes No
June 30, 2003 ($6,150,000) Yes No
September 30, 2003 ($4,000,000) Yes No
Minimum Cash Balance on To January 1, 2003: Yes No
Deposit with Silicon: $6,500,000.
$7,500,000 thereafter.
FINANCIAL COVENANT REQUIRED COMPLIES
------------------ -------- --------
(ASSET BASED TERMS
IN EFFECT)
------------------
Minimum Tangible Net
Worth $18,000,000 Yes No
Have there been updates to Borrower's intellectual property? Yes /No
Borrower only has deposit accounts located at the following institutions:
-------
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely, BANK USE ONLY
Proxim Corporation Rec'd By:
---------------------
Auth. Signer
Date:
-------------------------
----------------------------------------
Signature Verified:
---------------------
---------------------------------------- Auth. Signer
Title Date:
-------------------------
----------------------------------------
Date
Compliance Status: Yes No
29
EXHIBIT E
ASSET BASED TERMS
The following are the "Asset Based Terms":
(1) SCHEDULES AND DOCUMENTS RELATING TO ACCOUNTS. Borrower shall deliver
to Bank weekly transaction reports, Advance requests, schedules of Accounts, and
schedules of collections, all on Bank's standard forms; provided, however, that
Borrower's failure to execute and deliver the same shall not affect or limit
Bank's security interest and other rights in all of Borrower's Accounts. If
requested by Bank, Borrower shall furnish Bank with copies (or, at Bank's
request, originals) of all contracts, orders, invoices, and other similar
documents, and all shipping instructions, delivery receipts, bills of lading,
and other evidence of delivery, for any goods the sale or disposition of which
gave rise to such Accounts, and Borrower warrants the genuineness of all of the
foregoing. Borrower shall also furnish to Bank an aged accounts receivable trial
balance in such form and at such intervals as Bank shall request. In addition,
if requested by Bank, Borrower shall deliver to Bank the originals of all
instruments, chattel paper, security agreements, guarantees and other documents
and property evidencing or securing any Accounts, immediately upon receipt
thereof and in the same form as received, with all necessary endorsements, all
of which shall be with recourse. Borrower shall also provide Bank with copies of
all credit memos from time to time on request by Bank.
(2) COLLECTION OF ACCOUNTS. Borrower shall hold all payments on, and
proceeds of, Accounts and all other Collateral in trust for Bank, and Borrower
shall immediately deliver all such payments and proceeds to Bank in their
original form, duly endorsed, to be applied to the Obligations in such order as
Bank shall determine. Borrower agrees that it will not commingle such payments
and proceeds with any of Borrower's other funds or property, but will hold such
payments and proceeds separate and apart from such other funds and property and
in an express trust for Bank. Bank may, in its discretion, require that all
proceeds of Collateral be deposited by Borrower into a lockbox account, or such
other "blocked account" as Bank may specify, pursuant to a blocked account
agreement in such form as Bank may specify in its good faith business judgment.
Upon the occurrence and during the continuance of an Event of Default, Bank or
its designee may, at any time, notify Account Debtors that the Bank has a
security interest in the Accounts. Nothing in this Exhibit limits the
restrictions on Transfers of Collateral set forth elsewhere in this Agreement.
(3) INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Bank (including
proceeds of Accounts shall be deemed applied by Bank on account of the
Obligations three Business Days after receipt by Bank of immediately available
funds, and, for purposes of the foregoing, any such funds received after 12:00
Noon on any day shall be deemed received on the next Business Day. Bank shall
not, however, be required to credit Borrower's account for the amount of any
item of payment which is unsatisfactory to Bank in its good faith business
judgment, and Bank may charge Borrower's loan account for the amount of any item
of payment which is returned to Bank unpaid.
(4) LOAN REQUESTS. Without limiting the right of Bank to cease making
Advances on an Event of Default, requests for Advances shall be in writing and
shall be accompanied by a current Transaction Report on Bank's standard form.
(5) RESERVES. Without limiting the right of Bank to cease making
Advances on an Event of Default, Bank shall have the right, from time to time,
in its good faith business judgment, to establish and deduct the following
reserves from the amount of Advances, Letters of Credit and other financial
accommodations under the lending formula(s) provided in the Schedule: (a)
reserves to reflect events, conditions, contingencies or risks which, as
determined by Bank in good faith, do or may affect adversely (i) the Collateral
or any other property which is security for the Obligations or its value
(including without
30
limitation any increase in delinquencies of Accounts), (ii) the assets, business
or prospects of Borrower, or (iii) the security interests and other rights of
Bank in the Collateral (including the enforceability, perfection and priority
thereof); and (b) reserves to reflect Bank's good faith belief that any
collateral report or financial information furnished by or on behalf of Borrower
to Bank is or may have been incomplete, inaccurate or misleading in any material
respect. Bank shall give Borrower prompt notice of the establishments of such
Reserves.
(6) CURE PERIODS. The cure periods set forth in the Loan Agreement shall
be modified as follows: the cure period in Section 8.3 of the Loan Agreement
shall be five Business Days rather than 30 days and there shall be no cure
period in Section 8.1 of the Loan Agreement.
31
EXHIBIT F
FORM OF OPINION OF COUNSEL
32
