1
EXHIBIT 10.38
--------------------------------------------------------------------------------
AG ASSOCIATES, INC.
LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
2
TABLE OF CONTENTS
Page
----
1. DEFINITIONS AND CONSTRUCTION........................................... 1
1.1 Definitions................................................... 1
1.2 Accounting Terms.............................................. 6
2. LOAN AND TERMS OF PAYMENT.............................................. 6
2.1 Advances...................................................... 6
2.2 Overadvances.................................................. 8
2.3 Interest Rates, Payments, and Calculations.................... 8
2.4 Crediting Payments............................................ 9
2.5 Fees.......................................................... 9
2.6 Additional Costs.............................................. 9
2.7 Term.......................................................... 10
3. CONDITIONS OF LOANS.................................................... 10
3.1 Conditions Precedent to Initial Advance....................... 10
3.2 Conditions Precedent to all Advances.......................... 10
4. CREATION OF SECURITY INTEREST.......................................... 10
4.1 Grant of Security Interest.................................... 10
4.2 Delivery of Additional Documentation Required................. 11
4.3 Right to Inspect.............................................. 11
5. REPRESENTATIONS AND WARRANTIES......................................... 11
5.1 Due Organization and Qualification............................ 11
5.2 Due Authorization; No Conflict................................ 11
5.3 No Prior Encumbrances......................................... 11
5.4 Bona Fide Eligible Accounts................................... 11
5.5 Merchantable Inventory........................................ 11
5.6 Name; Location of Chief Executive Office...................... 11
5.7 Litigation.................................................... 11
5.8 No Material Adverse Change in Financial Statements............ 12
5.9 Solvency...................................................... 12
5.10 Regulatory Compliance......................................... 12
5.11 Environmental Condition....................................... 12
5.12 Taxes......................................................... 12
5.13 Subsidiaries.................................................. 12
5.14 Government Consents........................................... 12
5.15 Full Disclosure............................................... 12
6. AFFIRMATIVE COVENANTS.................................................. 13
6.1 Good Standing................................................. 13
6.2 Government Compliance......................................... 13
6.3 Financial Statements, Reports, Certificates................... 13
6.4 Inventory; Returns............................................ 14
6.5 Taxes......................................................... 14
6.6 Insurance..................................................... 14
6.7 Principal Depository.......................................... 14
6.8 Quick Ratio................................................... 14
1
3
6.9 Debt-Net Worth Ratio.......................................... 14
6.10 Tangible Net Worth............................................ 14
6.11 Profitability................................................. 14
6.12 Further Assurances............................................ 15
7. NEGATIVE COVENANTS..................................................... 15
7.1 Dispositions.................................................. 15
7.2 Change in Business............................................ 15
7.3 Mergers or Acquisitions....................................... 15
7.4 Indebtedness.................................................. 15
7.5 Encumbrances.................................................. 15
7.6 Distributions................................................. 15
7.7 Investments................................................... 15
7.8 Transactions with Affiliates.................................. 15
7.9 Subordinated Debt............................................. 16
7.10 Inventory..................................................... 16
7.11 Compliance.................................................... 16
8. EVENTS OF DEFAULT...................................................... 16
8.1 Payment Default............................................... 16
8.2 Covenant Default.............................................. 16
8.3 Material Adverse Change....................................... 16
8.4 Attachment.................................................... 16
8.5 Insolvency.................................................... 17
8.6 Other Agreements.............................................. 17
8.7 Subordinated Debt............................................. 17
8.8 Judgments..................................................... 17
8.9 Misrepresentations............................................ 17
9. BANK'S RIGHTS AND REMEDIES............................................. 17
9.1 Rights and Remedies........................................... 17
9.2 Power of Attorney............................................. 18
9.3 Accounts Collection........................................... 18
9.4 Bank Expenses................................................. 19
9.5 Bank's Liability for Collateral............................... 19
9.6 Remedies Cumulative........................................... 19
9.7 Demand; Protest............................................... 19
10. NOTICES................................................................ 19
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER............................. 20
12. GENERAL PROVISIONS..................................................... 20
12.1 Successors and Assigns........................................ 20
12.2 Indemnification............................................... 20
12.3 Time of Essence............................................... 20
12.4 Severability of Provisions.................................... 20
12.5 Amendments in Writing, Integration............................ 20
12.6 Counterparts.................................................. 20
12.7 Survival...................................................... 21
12.8 Confidentiality............................................... 21
2
4
This LOAN AND SECURITY AGREEMENT is entered into as of August 2, 1996,
by and between SILICON VALLEY BANK ("Bank") and AG ASSOCIATES, INC.
("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
DEFINITIONS AND CONSTRUCTION
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.
"Advance" or "Advances" means an Advance under the
Revolving Facility.
"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, and partners.
"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), whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and
records including: ledgers; records concerning Borrower's assets or liabilities,
the Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" has the meaning set forth in Section
2.1 hereof.
"Business Day" means any day that is not a Saturday,
Sunday, or other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit
A attached hereto.
1
5
"Committed Line" means Five Million Dollars
($5,000,000).
"Contingent Obligation" means, as applied to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to (i) any indebtedness, lease, dividend, letter of credit
or other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed, co-made or discounted or
sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable; (ii) any obligations with respect to
undrawn letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"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 Advances made under this Agreement, including all Indebtedness that
is payable upon demand or within one year from the date of determination thereof
unless such Indebtedness is renewable or extendable at the option of Borrower or
any Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Daily Balance" means the amount of the Obligations
owed at the end of a given day.
"Eligible Accounts" means those Accounts that arise
in the ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank's reasonable judgment and upon notification thereof to Borrower in
accordance with the provisions hereof. Unless otherwise agreed to by Bank,
Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed
to pay within ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor,
fifty percent (50%) of whose Accounts the account debtor has failed to pay
within ninety (90) days of invoice date;
(c) Accounts with respect to which the account
debtor is an officer, employee, or agent of Borrower;
(d) Accounts with respect to which goods are
placed on consignment, guaranteed sale, sale or return, sale on approval, xxxx
and hold, or other terms by reason of which the payment by the account debtor
may be conditional;
(e) Accounts with respect to which the account
debtor is an Affiliate of Borrower;
2
6
(f) Accounts with respect to which the account
debtor does not have its principal place of business in the United States,
except for Eligible Foreign Accounts;
(g) Accounts with respect to which the account
debtor is the United States or any department, agency, or instrumentality of the
United States;
(h) Accounts with respect to which Borrower is
liable to the account debtor for goods sold or services rendered by the account
debtor to Borrower, but only to the extent of any amounts owing to the account
debtor against amounts owed to Borrower;
(i) Accounts with respect to an account debtor,
including Subsidiaries and Affiliates, whose total obligations to Borrower
exceed twenty-five percent (25%) of all Accounts, to the extent such obligations
exceed the aforementioned percentage (except that the concentration limit for
each of IBM and Intel shall be 35%), except as approved in writing by Bank;
(j) Accounts with respect to which the account
debtor disputes liability or makes any claim with respect thereto as to which
Bank believes, in its sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(k) Accounts the collection of which Bank
reasonably determines to be doubtful.
"Eligible Foreign Accounts" means Accounts that are
not excluded by clauses (a) through (k) above, other than clause (f), with
respect to which the account debtor does not have its principal place of
business in the United States and that are: (1) covered by credit insurance in
form and amount, and by an insurer satisfactory to Bank less the amount of any
deductible(s) which may be or become owing thereon; or (2) supported by one or
more letters of credit in favor of Bank as beneficiary, in an amount and of a
tenor, and issued by a financial institution, acceptable to Bank; or (3) that
Bank approves on a case-by-case basis (Bank having previously approved Accounts
owing by Canon, Metron and TSMC, to the extent otherwise permitted hereunder);
"Equipment" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"ERISA" means the Employment Retirement Income
Security Act of 1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles
as in effect from time to time.
"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.
3
7
"Inventory" means all present and future inventory in
which Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.
"Investment" means any beneficial ownership of
(including stock, partnership interest or other 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.
"Loan Documents" means, collectively, this Agreement,
any note or notes executed by Borrower, and any other agreement entered into
between Borrower and Bank in connection with this Agreement, all as amended or
extended from time to time.
"Material Adverse Effect" means a material adverse
effect on (i) the business operations or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan
Documents.
"Maturity Date" means the day immediately prior to
the first anniversary of the date of this Agreement.
"Negotiable Collateral" means all of Borrower's
present and future letters of credit of which it is a beneficiary, notes,
drafts, instruments, securities, documents of title, and chattel paper, and
Borrower's Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest,
Bank Expenses and other amounts owed to Bank by Borrower pursuant to this
Agreement or any other 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.
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Bank pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"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;
4
8
(c) Indebtedness incurred to lease or purchase
equipment provided such Indebtedness does not exceed the lesser of the cost or
fair market value of such Equipment and provided in any case that the principal
amount of such Indebtedness does not exceed $3,000,000;
(d) Subordinated Debt; and
(e) Indebtedness to trade creditors incurred in
the ordinary course of business.
"Permitted Investment" means:
(a) Investments existing on the Closing Date
disclosed in the Schedule;
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or 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;
(c) Investments in Borrower's wholly-owned
Subsidiaries in an amount not to exceed Five Hundred Thousand Dollars ($500,000)
made in Borrower's fiscal year 1997.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and
disclosed in the Schedule or arising under this Agreement or the other Loan
Documents;
(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, provided the same have no priority over any of
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) 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.
"Quick Assets" means, at any date as of which the
amount thereof shall be determined, the consolidated cash, cash-equivalents,
accounts receivable and investments, with maturities not to exceed 90 days, of
Borrower determined in accordance with GAAP.
5
9
"Responsible Officer" means each of the President,
Chief Executive Officer, the Chief Financial Officer and the Controller of
Borrower.
"Revolving Facility" means the facility under which
Borrower may request Bank to issue cash advances, as specified in Section 2.1
hereof.
"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 any corporation or partnership in
which (i) any general partnership interest or (ii) more than 50% of the stock of
which by the terms thereof ordinary voting power to elect the Board of
Directors, managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.
"Tangible Net Worth" means at any date as of which
the amount thereof shall be determined, the consolidated total assets of
Borrower and its Subsidiaries minus, without duplication, (i) the sum of 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) all reserves not already deducted from assets, and (ii) Total Liabilities.
"Total Liabilities" means at any date as of which the
amount thereof shall be determined, all obligations that should, in accordance
with GAAP be classified as liabilities on the consolidated balance sheet of
Borrower, including in any event all Indebtedness, but specifically excluding
Subordinated Debt.
Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP and all
calculations made hereunder shall be made in accordance with GAAP. When used
herein, the terms "financial statements" shall include the notes and schedules
thereto.
LOAN AND TERMS OF PAYMENT
Advances. Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Advances to Borrower in an
aggregate amount not to exceed the lesser of (i) the Committed Line minus the
face amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) minus the Foreign Exchange Reserve or (ii) the
Borrowing Base minus the face amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit minus the Foreign Exchange
Reserve. For purposes of this Agreement, "Borrowing Base" shall mean an amount
equal to eighty percent (80%) of Eligible Accounts. 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.
Whenever Borrower desires an Advance, Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. California time, on
the Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer, or without
instructions if in Bank's discretion such Advances 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, 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 Advances made under this Section 2.1 to Borrower's deposit
account.
6
10
The Revolving Facility shall terminate on the Maturity Date, at which
time all Advances under this Section 2.1 and other amounts due under this
Agreement shall be immediately due and payable.
2.1.1 Letters of Credit.
(a) Subject to the terms and conditions
of this Agreement, Bank agrees to issue or cause to be issued letters of credit
for the account of Borrower in an aggregate face amount not to exceed (i) the
lesser of the Committed Line or the Borrowing Base minus (ii) the then
outstanding principal balance of the Advances provided that the face amount of
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit) shall not in any case exceed Four Million Dollars ($4,000,000). Each
such letter of credit shall have an expiry date no later than the Maturity Date;
provided that Borrower may request Bank to issue a letter of credit that expires
up to six months after the Maturity Date for so long as Borrower's letter of
credit reimbursement obligation shall be secured by cash on terms acceptable to
Bank at any time after the Maturity Date if the term of this Agreement is not
extended by Bank. All such letters of credit shall be, in form and substance,
acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions of Bank's form of application and letter of credit agreement. All
amounts actually paid by Bank in respect of a letter of credit shall, when paid,
constitute an Advance under this Agreement.
(b) The obligation of Borrower to
immediately reimburse Bank for drawings made under Letters of Credit shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement and such Letters of Credit, under
all circumstances whatsoever. Borrower shall indemnify, defend and hold Bank
harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys' fees, arising out of or in connection with any
letters of credit.
2.1.2 Letter of Credit Reimbursement; Reserve.
(a) Borrower may request that Bank
issue a letter of credit payable in a currency other than United States Dollars.
If a demand for payment is made under any such letter of credit, Bank shall
treat such demand as an advance to Borrower of the equivalent of the amount
thereof (plus cable charges) in United States currency at the then prevailing
rate of exchange in San Francisco, California, for sales of that other currency
for cable transfer to the country of which it is the currency.
(b) Upon the issuance of any letter of
credit payable in a currency other than United States Dollars, Bank shall create
a reserve under the Committed Line for letters of credit against fluctuations in
currency exchange rates, in an amount equal to twenty percent (20%) of the face
amount of such letter of credit. The amount of such reserve may be amended by
Bank from time to time to account for fluctuations in the exchange rate. The
availability of funds under the Committed Line shall be reduced by the amount of
such reserve for so long as such letter of credit remains outstanding.
7
11
2.1.3 Foreign Exchange Contract; Foreign Exchange
Settlements.
(a) Subject to the terms of this
Agreement, Borrower may utilize up to $4,000,000 for foreign exchange contracts
(the "Exchange Contracts"), pursuant to which Bank shall sell to or purchase
from Borrower foreign currency on a spot or future basis. All Exchange Contracts
must provide for delivery of settlement on or before the Maturity Date. The
limit available at any time shall be reduced by the following amounts (the
"Foreign Exchange Reserve") on each day (the "Determination Date"): (on all
outstanding Exchange Contracts on which delivery is to be effected or settlement
allowed more than two business days from the Determination Date, 10% of the
gross amount of the Exchange Contracts; plus (ii) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement allowed within two
business days after the Determination Date, 100% of the gross amount of the
Exchange Contracts. In lieu of the Foreign Exchange Reserve for 100% of the
gross amount of any Exchange Contract, Borrower may request that Bank treat such
amount as an Advance under the Committed Line.
(b) Bank may, in its discretion,
terminate the Exchange Contracts at any time (a) that an Event of Default occurs
or (b) that there is no sufficient availability under the Committed Line and
Borrower does not have available funds in its bank account to satisfy the
Foreign Exchange Reserve. If Bank terminates the Exchange Contracts, and without
limitation of any applicable indemnities, Borrower agrees to reimburse Bank for
any and all fees, costs and expenses relating thereto or arising in connection
therewith.
(c) Borrower shall not permit the total
gross amount of all Exchange Contracts on which delivery is to be effected and
settlement allowed in any two business day period to be more than $4,000,000 nor
shall Borrower permit the total gross amount of all Exchange Contracts to which
Borrower is a party, outstanding at any one time, to exceed $4,000,000.
(d) Borrower shall execute all standard
form applications and agreements of Bank in connection with the Exchange
Contracts and, without limiting any of the terms of such applications and
agreements, Borrower will pay all standard fees and charges of Bank in
connection with the Exchange Contracts.
Overadvances. If, at any time or for any reason, the
amount of Obligations owed by Borrower to Bank pursuant to Sections 2.1, 2.1.1
and 2.1.2 of this Agreement is greater than the lesser of (i) the Committed Line
or (ii) the Borrowing Base, Borrower shall immediately pay to Bank, in cash, the
amount of such excess.
Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth
in Section 2.3(b), any Advances shall bear interest, on the average Daily
Balance, at a rate equal to one and one quarter percent (1.25%) above the Prime
Rate.
(b) Default Rate. All Obligations shall
bear interest, from and after the occurrence of an Event of Default, at a rate
equal to five (5) percentage points above the interest rate applicable
immediately prior to the occurrence of the Event of Default.
(c) Payments. Interest hereunder shall
be due and payable on the first calendar day of each month during the term
hereof. Bank shall, at its option, charge such interest, all Bank Expenses, and
all Periodic Payments against any of Borrower's deposit accounts or against the
Committed Line, in which case those amounts shall thereafter accrue interest at
the rate then applicable hereunder. 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.
8
12
(d) Computation. In the event the Prime
Rate is changed from time to time hereafter, the applicable rate of interest
hereunder shall be increased or decreased effective as of 12:01 a.m. on the day
the Prime Rate is changed, by an amount equal to such change in the Prime Rate.
All interest chargeable under the Loan Documents shall be computed on the basis
of a three hundred sixty (360) day year for the actual number of days elapsed.
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 shall be immediately applied
to conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon California 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.
Fees. Borrower shall pay to Bank the following:
Facility Fee. An annual Facility Fee equal
to Thirty Thousand Dollars ($30,000), which fee shall be payable and fully
earned and nonrefundable on the Closing Date;
(b) Financial Examination and Appraisal
Fees. Bank's customary fees and out-of-pocket expenses for Bank's audits of
Borrower's Accounts, and for each appraisal of Collateral and financial analysis
and examination of Borrower performed from time to time by Bank or its agents;
(c) Bank Expenses. Upon the date
hereof, all Bank Expenses incurred through the Closing Date, 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.
Additional Costs. In case any change in any law,
regulation, treaty or official directive or the interpretation or application
thereof by any court or any governmental authority charged with the
administration thereof or the compliance with any guideline or request of any
central bank or other governmental authority (whether or not having the force of
law), in each case after the date of this Agreement:
(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
9
13
setting forth Bank's calculation thereof, all in reasonable detail, which
statement shall be deemed true and correct absent manifest error.
Term. This Agreement shall become effective on the
Closing Date and, subject to Section 12.7, shall continue in full force and
effect for a term ending on the Maturity Date. Notwithstanding the foregoing,
Bank shall have the right to terminate its obligation to make Advances under
this Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank's Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding.
CONDITIONS OF LOANS
Conditions Precedent to Initial Advance. The
obligation of Bank to make the initial Advance 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 incumbency and resolutions authorizing the execution
and delivery of this Agreement;
(c) an audit of Borrower's Accounts;
(d) financing statement (Forms UCC-1);
(e) insurance certificate;
(f) payment of the fees and Bank
Expenses then due specified in Section 2.5 hereof; and
(g) such other documents, and
completion of such other matters, as Bank may reasonably deem necessary or
appropriate.
Conditions Precedent to all Advances. The obligation
of Bank to make each Advance, including the initial Advance, is further subject
to the following conditions:
(a) timely receipt by Bank of the
Payment/Advance 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/Advance Form and on the effective date of each
Advance as though made at and as of each such date, and no Event of Default
shall have occurred and be continuing, or would result from such Advance. The
making of each Advance shall be deemed to be a representation and warranty by
Borrower on the date of such Advance as to the accuracy of the facts referred to
in this Section 3.2(b).
10
14
CREATION OF SECURITY INTEREST
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 repayment of
any and all Obligations and in order to secure prompt performance by Borrower of
each of its covenants and duties under the Loan Documents. 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.
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.
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.
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
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.
Due Authorization; No Conflict. The execution,
delivery, and performance of the Loan Documents are within Borrower's powers,
have been duly authorized, and are not in conflict with nor constitute a breach
of any provision contained in Borrower's Articles of Incorporation or Bylaws,
nor will they constitute an event of default under any material agreement to
which Borrower is a party or by which Borrower is bound. Borrower is not in
default under any agreement to which it is a party or by which it is bound,
which default could have a Material Adverse Effect.
No Prior Encumbrances. Borrower has good and
indefeasible title to the Collateral, free and clear of Liens, except for
Permitted Liens.
Bona Fide Eligible Accounts. The Eligible Accounts
are bona fide existing obligations. The property giving rise to such Eligible
Accounts has been delivered to the account debtor or to the account debtor's
agent for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has not received notice of actual or imminent Insolvency
Proceeding of any account debtor that is included in any Borrowing Base
Certificate as an Eligible Account.
Merchantable Inventory. All Inventory is in all
material respects of good and marketable quality, free from all material
defects.
Name; Location of Chief Executive Office. Except as
disclosed in the Schedule, Borrower has not done business under any name other
than that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.
11
15
Litigation. Except as set forth in the Schedule,
there are no actions or proceedings pending by or against Borrower or any
Subsidiary before any court or administrative agency in which an adverse
decision could have a Material Adverse Effect or a material adverse effect on
Borrower's interest or Bank's security interest in the Collateral. Borrower does
not have knowledge of any such pending or threatened actions or proceedings.
No Material Adverse Change in 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. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
Solvency. Borrower is solvent and able to pay its
debts (including trade debts) as they mature.
Regulatory Compliance. Borrower and each Subsidiary
has met the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. No event has occurred resulting from Borrower's
failure to comply with ERISA that is reasonably likely to result in Borrower's
incurring any liability that could have a Material Adverse Effect. Borrower is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of the important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
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 releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
Taxes. Borrower and each Subsidiary has filed or
caused to be filed all tax returns required to be filed, and has paid, or has
made adequate provision for the payment of, all taxes reflected therein.
Subsidiaries. Borrower does not own any stock,
partnership interest or other equity securities of any Person, except for
Permitted Investments.
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.
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
12
16
state a material fact necessary in order to make the statements contained in
such certificates or statements not misleading.
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 an Advance hereunder, Borrower shall do all of the following:
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.
Government Compliance. Borrower shall meet, and shall
cause each Subsidiary to meet, the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA. Borrower shall comply,
and shall cause each Subsidiary to comply, with all statutes, laws, ordinances
and government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
Financial Statements, Reports, Certificates. Borrower
shall deliver to Bank: (a) as soon as available, but in any event within twenty
(20) days after the end of each month, a company prepared consolidated balance
sheet and income statement covering Borrower's consolidated operations during
such period, together with a backlog and a book-to-xxxx report, each certified
by a Responsible Officer; (b) as soon as available, but in any event within
ninety (90) days after the end of Borrower's fiscal year, audited consolidated
financial statements of Borrower prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank; (c)
within five (5) days upon becoming available, 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 and 10-Q
filed with the Securities and Exchange Commission; (d) promptly upon receipt of
notice thereof, a report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of One Hundred Thousand Dollars ($100,000) or more; and (e) such
budgets, sales projections, operating plans or other financial information as
Bank may reasonably request from time to time.
Within twenty (20) days after the last day of each month in which there
are outstanding Advances, including Letter of Credit and Exchange Contracts (and
within twenty (20) days of the last day of each fiscal quarter in which no
Advances are outstanding), Borrower shall deliver to Bank a Borrowing Base
Certificate signed by a Responsible Officer in substantially the form of Exhibit
C hereto, together with aged listings of accounts receivable and accounts
payable.
Within forty-five (45) days after the last day of each fiscal quarter,
Borrower shall deliver to Bank a Compliance Certificate signed by a Responsible
Officer in substantially the form of Exhibit D hereto.
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 twelve (12) months unless an Event of Default has occurred
and is continuing.
Inventory; Returns. Borrower shall keep all Inventory
in good and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on the
same basis and in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns
13
17
and recoveries and of all disputes and claims, where the return, recovery,
dispute or claim involves more than Fifty Thousand Dollars ($50,000).
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 contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
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 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 twenty (20) days notice to Bank before canceling its policy for
any reason. Upon 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.
Principal Depository. Borrower shall maintain its
principal depository and operating accounts with Bank.
Quick Ratio. Borrower shall maintain, as of the last
day of each fiscal quarter, a ratio of Quick Assets to Current Liabilities of at
least 1.25 to 1.0.
Debt-Net Worth Ratio. Borrower shall maintain, as of
the last day of each fiscal quarter, a ratio of Total Liabilities less
Subordinated Debt to Tangible Net Worth plus Subordinated Debt of not more than
1.0 to 1.0.
Tangible Net Worth. Borrower shall maintain, as of
the last day of each fiscal quarter, a Tangible Net Worth of not less than
Thirty Two Million Dollars ($32,000,000).
Profitability. Borrower shall not suffer a loss of
more than $2,050,000 for the fiscal quarter ending September 30, 1996; a loss of
more than $1,750,000 for the fiscal quarter ending December 31, 1996; a loss for
the fiscal quarter ending $1,550,000 for the fiscal quarter ending March 31,
1997; or a loss of more than $650,000 for the fiscal quarter ending June 30,
1997. Borrower shall not suffer a cumulative loss for the four quarters ending
September 30, 1997 of more than $5,000,000. If Borrower suffers a loss in two
consecutive fiscal quarters, then Borrower shall maintain a Book to Xxxx ration
of not less than 0.9 to 1.0 "Book to Xxxx Ratio" means a ratio of the (i) dollar
value of purchase orders received in a given quarter to (ii) dollar value of
Accounts created in such quarter.
14
18
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.
NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
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: (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; or (iii) Transfers of worn-out or
obsolete Equipment.
Change in Business. 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. Borrower will not, without thirty (30) days prior written
notification to Bank, relocate its chief executive office.
Mergers or Acquisitions. Merge or consolidate, or
permit any of its Subsidiaries to merge or consolidate, with or into any other
business organization, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person,
except mergers, consolidations and acquisitions are permitted provided (i)
Borrower is the surviving entity, (ii) the aggregate cash payment in such
transactions does not exceed $2,000,000 in any fiscal year and (iii) an Event of
Default does not exist before such transaction and would not exist after giving
effect to such transaction.
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.
Encumbrances. Create, incur, assume or suffer to
exist any Lien with respect to any of its property, or assign or otherwise
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries so to do, except for Permitted Liens.
Distributions. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock.
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.
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 nonaffiliated
Person.
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.
15
19
Inventory. Store the Inventory with a bailee,
warehouseman, or similar party unless Bank has received a pledge of the
warehouse receipt covering such Inventory. Except for Inventory sold in the
ordinary course of business and except for such other locations as Bank may
approve in writing, Borrower shall keep the Inventory only at the location set
forth in Section 10 hereof and such other locations of which Borrower gives Bank
prior written notice and as to which Borrower signs and files a financing
statement where needed to perfect Bank's security interest.
Compliance. Become an "investment 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 Advance 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 law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.
EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
Payment Default. If Borrower fails to pay the
principal of, or any interest on, any Advances when due and payable; or fails to
pay any portion of any other Obligations not constituting such principal or
interest, including without limitation Bank Expenses, within thirty (30) days of
receipt by Borrower of an invoice for such other Obligations;
Covenant Default. If Borrower fails to perform any
obligation under Sections 6.7, 6.8, 6.9, 6.10, or 6.11 or violates any of the
covenants contained in Article 7 of this Agreement, or fails or neglects to
perform, keep, or observe any other material term, provision, condition,
covenant, or agreement contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between Borrower and Bank
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 (10)
days after Borrower receives notice thereof or any officer of Borrower becomes
aware thereof; provided, however, that if the default cannot by its nature be
cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed thirty (30) days) to
attempt to cure such default, and within such reasonable time period the failure
to have cured such default shall not be deemed an Event of Default (provided
that no Advances will be required to be made during such cure period);
Material Adverse Change. If there occurs a material
adverse change in Borrower's business or financial condition, or if there is a
material impairment of the prospect of repayment of any portion of the
Obligations or a material impairment of the value or priority of Bank's security
interests in the Collateral;
Attachment. If any material portion of Borrower's
assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any trustee, receiver or person
acting in a similar capacity and such attachment, seizure, writ or distress
warrant or levy has not been removed, discharged or rescinded within ten (10)
days, or if Borrower is enjoined, restrained, or in any way prevented by court
order from continuing to conduct all or any material part of its business
affairs, or if a judgment or other claim becomes a lien or encumbrance upon any
material portion of Borrower's assets, or if a notice of lien, levy, or
assessment is filed of record with respect to any of Borrower's assets by the
United States Government, or any department, agency, or instrumentality thereof,
or by any state, county, municipal, or governmental agency, and the same is not
paid within ten (10) days after Borrower receives notice thereof, provided that
none of the foregoing shall
16
20
constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure period);
Insolvency. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
is commenced against Borrower and is not dismissed or stayed within ten (10)
days (provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
Other Agreements. If there is a default in any
agreement to which Borrower is a party with a third party or parties resulting
in a right by such third party or parties, whether or not exercised, to
accelerate the maturity of any Indebtedness in an amount in excess of One
Hundred Thousand Dollars ($100,000) or that could have a Material Adverse
Effect;
Subordinated Debt. If Borrower makes any payment on
account of Subordinated Debt, except to the extent such payment is allowed under
any subordination agreement entered into with Bank;
Judgments. If a judgment or judgments for the payment
of money in an amount, individually or in the aggregate, of at least Fifty
Thousand Dollars ($50,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or
Misrepresentations. If any material misrepresentation
or material misstatement exists now or hereafter in any warranty or
representation set forth herein or in any certificate delivered to Bank by any
Responsible Officer pursuant to this Agreement or to induce Bank to enter into
this Agreement or any other Loan Document.
BANK'S RIGHTS AND REMEDIES
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);
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 owned premises, Borrower
hereby grants Bank a license to enter into possession of 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 otherwise;
17
21
(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 license or
other right, solely pursuant to the provisions of this Section 9.1, to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral
and, in connection with 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
any proceeds to the Obligations in whatever manner or order Bank deems
appropriate;
(h) Bank may credit bid and purchase at
any public sale; and
(i) Any deficiency that exists after
disposition of the Collateral as provided above will be paid immediately by
Borrower.
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; 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 advances hereunder is terminated.
Accounts Collection. At any time from the date of
this Agreement, 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 immediately deliver such payments to Bank in
their original form as received from the account debtor, with proper
endorsements for deposit.
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 Facility 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
18
22
agreement by Bank to make similar payments in the future or a waiver by Bank of
any Event of Default under this Agreement.
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.
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 inconsistent
herewith as provided under the Code, 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.
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.
NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
If to Borrower: AG Associates, Inc.
0000 Xxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Arnon Gat
FAX: (000) 000-0000
If to Bank: Silicon Valley Bank
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
FAX: (000) 000-0000
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.
19
23
CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of California, without regard to
principles of conflicts of law. Each of Borrower 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.
GENERAL PROVISIONS
Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of each
of the parties; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by Borrower without 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.
Indemnification. Borrower shall defend, indemnify 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 this Agreement; 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 this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
Time of Essence. Time is of the essence for the
performance of all obligations set forth in this Agreement.
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.
Amendments in Writing, Integration. This Agreement
cannot be amended or terminated orally. 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.
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.
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
20
24
survive until all applicable statute of limitations periods with respect to
actions that may be brought against Bank have run.
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 determine in connection with the enforcement 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
AG ASSOCIATES, INC.
By:
----------------------------------
Title:
----------------------------------
SILICON VALLEY BANK
By:
----------------------------------
Title:
----------------------------------
21
25
EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
13. All goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles (including
motor vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;
14. All inventory, now owned or hereafter acquired, including,
without limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
15. All now existing and hereafter arising accounts, and all other
forms of obligations owing to Borrower arising out of the sale or lease of
goods, the licensing of technology or the rendering of services by Borrower,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower and Borrower's Books relating to any of the foregoing;
16. All documents, cash, deposit accounts, securities, letters of
credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Borrower's Books relating to the foregoing;
17. Any and all claims, rights and interests in any of the above
and all substitutions for, additions and accessions to and proceeds thereof.
22
26
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
FAX#: (000) 000-0000 TIME:
FROM:
----------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
--------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
------------------------------------------------------
PHONE NUMBER:
--------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
-------------- ---------------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE)
PRINCIPAL PAYMENT (ONLY)
INTEREST PAYMENT (ONLY)
PRINCIPAL AND INTEREST (PAYMENT) $
-----------------------------
OTHER INSTRUCTIONS:
--------------------------------------------------------
---------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Loan
Agreement are true, correct and complete in all material respects as of the date
of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
27
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
-----------------------------------
Authorized Requester Phone #
-----------------------------------
Received By (Bank) Phone #
-----------------------------------
Authorized Signature (Bank)
28
EXHIBIT C
BORROWING BASE CERTIFICATE
--------------------------------------------------------------------------------
Borrower: AG Associates, Inc. Lender: Silicon Valley Bank
Commitment Amount: $5,000,000
--------------------------------------------------------------------------------
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. Concentration Limits $
-----
7. Foreign Accounts $
-----
8. Governmental Accounts $
-----
9. Contra Accounts $
-----
10. Promotion or Demo Accounts $
-----
11. Intercompany/Employee Accounts $
-----
12. Other (please explain on reverse) $
-----
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
-----
14. Eligible Accounts (#3 minus #13) $
-----
15. LOAN VALUE OF ACCOUNTS (80% of #14) $
-----
BALANCES
16. Maximum Loan Amount $
-----
17. Total Funds Available [Lesser of #15 or #16] $
-----
18. Present balance owing on Line of Credit $
-----
19. Outstanding under Sublimits ( ) $
-----
20. RESERVE POSITION (#17 minus #18 and #19) $
-----
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS:
BANK USE ONLY
Rec'd By:
------------
Auth. Signer
AG Associates, Inc. Date:
----------------
Verified:
------------
By: Auth. Signer
Authorized Signer Date:
----------------
----------------------
25
29
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: AG ASSOCIATES, INC.
The undersigned authorized officer of AG Associates, Inc. hereby
certifies that in accordance with 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 of Borrower
stated in the Agreement are true and correct in all material respects as of the
date hereof. Attached herewith are the required documents supporting the above
certification. The Officer further certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financials, reports Monthly within 20 days Yes No
10-Q Quarterly within 5 days Yes No
10-K and annual statement FYE within 5 days Yes No
A/R & A/P Agings Monthly within 20 days* Yes No
A/R Audit Initial and Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Minimum Quick Ratio 1.25:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $32,000,000 $________ Yes No
Maximum Debt/Tangible Net Worth 1.0:1.0 _____:1.0 Yes No
Profitability: Quarterly See Agreement $________ Yes No
* When outstandings exceed $0, quarterly otherwise
COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
Received by:
Sincerely, ---------------------
AUTHORIZED SIGNER
-----------------------------------
Date:
SIGNATURE ----------------------------
----------------------------------- Verified:
------------------------
TITLE AUTHORIZED SIGNER
----------------------------------- Date:
----------------------------
DATE
Compliance Status: Yes No
26
30
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: AG Associates, Inc. Bank: Silicon Valley Bank
--------------------------------------------------------------------------------
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $5,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working
Capital.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will
be disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line
--------------
Amount paid to Borrower directly: $
---------
Undisbursed Funds $
---------
Principal $5,000,000
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Charges Paid in Cash:
$30,000 Loan Fee
$ Accounts Receivables Audit
------
$ 100 UCC Search Fees
$ 100 UCC Filing Fees
$ Outside Counsel Fees and Expenses (Estimate)
------
Total Charges Paid in Cash $
------
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct
from Borrower's account numbered the amount of any loan payment. If
the funds in the account are insufficient to cover any payment, Bank shall
not be obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT
AND THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF , 19 .
BORROWER:
AG Associates, Inc.
-----------------------------------------------------
Authorized Officer
--------------------------------------------------------------------------------
31
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: AG Associates, Inc. BANK: Silicon Valley Bank
--------------------------------------------------------------------------------
INSURANCE REQUIREMENTS. AG Associates, Inc. ("Grantor") understands
that insurance coverage is required in connection with the extending of a
loan or the providing of other financial accommodations to Grantor by Bank.
These requirements are set forth in the Loan Documents. The following
minimum insurance coverages must be provided on the following described
collateral (the "Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be cancelled or diminished
without a minimum of twenty (20) days' prior
written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with
an effective date of August 2, 1996, or earlier. Grantor acknowledges and
agrees that if Grantor fails to provide any required insurance or fails to
continue such insurance in force, Bank may do so at Grantor's expense as
provided in the Loan and Security Agreement. The cost of such insurance, at
the option of Bank, shall be payable on demand or shall be added to the
indebtedness as provided in the security document. GRANTOR ACKNOWLEDGES
THAT IF BANK SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE
LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE
BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE
INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR
PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY
FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance
agent or company) all information Bank deems appropriate, whether regarding
the Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
AUGUST 2, 1996.
GRANTOR:
AG Associates, Inc.
x
Authorized Officer
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:
32
CORPORATE RESOLUTIONS TO BORROW
--------------------------------------------------------------------------------
Borrower: AG Associates, Inc.
--------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of AG Associates,
Inc. (the "Corporation"), HEREBY CERTIFY that the Corporation is organized
and existing under and by virtue of the laws of the State of .
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Certificate of Incorporation and Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the
Corporation, duly called and held, at which a quorum was present and voting
(or by other duly authorized corporate action in lieu of a meeting), the
following resolutions were adopted.
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
----------------------- ------------------------- -------------------------------
----------------------- ------------------------- -------------------------------
----------------------- ------------------------- -------------------------------
----------------------- ------------------------- -------------------------------
----------------------- ------------------------- -------------------------------
acting for an on behalf of this Corporation and as its act and deed be, and
they hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers,
employees, or agents and Bank, such sum or sums of money as in their
judgment should be borrowed, without limitation, including such sums as are
specified in that certain Loan and Security Agreement dated as of August 2,
1996 (the "Loan Agreement").
EXECUTE NOTES. To execute and deliver to Bank the promissory note or
notes of the Corporation, on Lender's forms, at such rates of interest and
on such terms as may be agreed upon, evidencing the sums of money so
borrowed or any indebtedness of the Corporation to Bank, and also to
execute and deliver to Lender one or more renewals, extensions,
modifications, refinancings, consolidations, or substitutions for one or
more of the notes, or any portion of the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all
of the Corporation's Obligations, as described in the Loan Agreement.
33
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness
payable to or belonging to the Corporation or in which the Corporation may
have an interest, and either to receive cash for the same or to cause such
proceeds to be credited to the account of the Corporation with Bank, or to
cause such other disposition of the proceeds derived therefrom as they may
deem advisable.
LETTERS OF CREDIT; FOREIGN EXCHANGE. To execute letters of credit
applications, foreign exchange agreements and other related documents
pertaining to Bank's issuance of letters of credit and foreign exchange
contracts.
FURTHER ACTS. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances
thereunder, and in all cases, to do and perform such other acts and things,
to pay any and all fees and costs, and to execute and deliver such other
documents and agreements as they may in their discretion deem reasonably
necessary or proper in order to carry into effect the provisions of these
Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions
are hereby ratified and approved, that these Resolutions shall remain in
full force and effect and Bank may rely on these Resolutions until written
notice of their revocation shall have been delivered to and received by
Bank. Any such notice shall not affect any of the Corporation's agreements
or commitments in effect at the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the
case may be, and occupy the positions set forth opposite their respective
names; that the foregoing Resolutions now stand of record on the books of
the Corporation; and that the Resolutions are in full force and effect and
have not been modified or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on _______________,
19___ and attest that the signatures set opposite the names listed above
are their genuine signatures.
CERTIFIED TO AND ATTESTED BY:
X
--------------------------------------------------------------------------------
2
