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Exhibit 10.5
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SEEQ TECHNOLOGY, INCORPORATED
LOAN AND SECURITY AGREEMENT
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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........................................ 13
6.5 Taxes..................................................... 13
6.6 Insurance................................................. 14
6.7 Principal Depository...................................... 14
6.8 Quick Ratio............................................... 14
6.9 Debt-Net Worth Ratio...................................... 14
6.10 Tangible Net Worth........................................ 14
6.11 Profitability............................................. 14
6.12 Further Assurances........................................ 14
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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.......................................... 15
7.10 Inventory.................................................. 15
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.............................................. 18
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................................................... 20
12.8 Confidentiality............................................ 21
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This LOAN AND SECURITY AGREEMENT is entered into as of August 19, 1996
by and between SILICON VALLEY BANK ("Bank") and SEEQ TECHNOLOGY, INCORPORATED
("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:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the
following terms shall have the following definitions:
"Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books relating
to any of the foregoing.
"Advance" or "Advances" means a cash 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.
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"Collateral" means the property described in Exhibit
A attached hereto.
"Committed Line" means Seven Million Dollars
($7,000,000).
"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;
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(d) Accounts with respect to which goods are placed
on consignment, guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and
hold, or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor
is an Affiliate of Borrower;
(f) Accounts with respect to which the account debtor
does not have its principal place of business in the United States, 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 Hewlett Packard, Bay
Networks, Compaq, Cisco, or Selectron, including Subsidiaries and Affiliates,
whose total obligations to Borrower exceed thirty-five percent (35%) of all
Accounts, and Accounts with respect to any other 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 percentages, 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 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, it being acknowledged that Bank has
already approved of those accounts where the account debtor is Serial Systems or
Intel.
"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,
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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.
"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 August 18, 1997.
"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.
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"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising
under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and
disclosed in the Schedule;
(c) Subordinated Debt; and
(d) 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; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date 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.
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"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.
"Responsible Officer" means each of the 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.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
2.1 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 both the face amount of
all outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit) and the Foreign Exchange Reserve or (ii) the Borrowing Base minus both
the face amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) and 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 prior to the Maturity Date.
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
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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.
The Revolving Facility shall terminate on the Maturity Date, at which
time all Advances under this Section 2.1 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 both (ii) the then outstanding
principal balance of the Advances and (iii) the Foreign Exchange Reserve,
provided that the Foreign Exchange Reserve plus 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. 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.
2.1.3 Foreign Exchange Contract; Foreign Exchange
Settlements.
(a) Subject to the terms of this Agreement,
Borrower may utilize up to Four Million Dollars ($4,000,000) minus the face
value of all outstanding Letters of Credit for the purpose of obtaining 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
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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 Four Million
Dollars ($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 Four Million Dollars ($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.
2.2 Overadvances. If, at any time or for any reason, the
amount of Obligations owed by Borrower to Bank pursuant to Section 2.1 of this
Agreement is greater than the lesser of (i) the Committed Line minus the face
value of all outstanding Letters of Credit and the Foreign Exchange Reserve or
(ii) the Borrowing Base minus the face value of all outstanding Letters of
Credit and the Foreign Exchange Reserve, Borrower shall immediately pay to Bank,
in cash, the amount of such excess.
2.3 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 three-fourths of a percentage point (0.75%) 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 eighteenth 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.
(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
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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.
2.4 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment 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.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. A Facility Fee equal to Thirty Five
Thousand Dollars ($35,000), which fee shall be due on the Closing Date and shall
be fully earned and nonrefundable;
(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.
2.6 Additional Costs. In case any change in any law,
regulation, treaty or official directive or the interpretation or application
thereof by any court or any governmental authority charged with the
administration thereof or the compliance with any guideline or request of any
central bank or other governmental authority (whether or not having the force of
law), 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
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Bank of a statement of the amount and setting forth Bank's calculation thereof,
all in reasonable detail, which statement shall be deemed true and correct
absent manifest error.
2.7 Term. 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.
3. CONDITIONS OF LOANS
3.1 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) financing statements (Forms UCC-1);
(d) insurance certificate;
(e) a Collateral audit acceptable to Bank;
(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.
3.2 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).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower grants and pledges to
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt 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
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Collateral, and will constitute a valid, first priority security interest in
Collateral acquired after the date hereof.
4.2 Delivery of Additional Documentation Required. Borrower
shall from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws of
its state of incorporation and qualified and licensed to do business in, and is
in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery,
and performance of the Loan Documents are within Borrower's powers, have been
duly authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles 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.
5.3 No Prior Encumbrances. Borrower has good and indefeasible
title to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 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.
5.5 Merchantable Inventory. All Inventory is in all material
respects of good and marketable quality, free from all material defects.
5.6 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.
5.7 Litigation. Except as set forth in the Schedule, there are
no actions or proceedings pending by or against Borrower or any Subsidiary
before any court or administrative agency in which an adverse decision 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.
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5.8 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.
5.9 Solvency. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has
met the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. No event has occurred resulting from Borrower's
failure to comply with ERISA that is reasonably likely to result in Borrower's
incurring any liability that could have a Material Adverse Effect. Borrower is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of the important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.11 Environmental Condition. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with 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.
5.12 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.
5.13 Subsidiaries. Borrower does not own any stock,
partnership interest or other equity securities of any Person, except for
Permitted Investments.
5.14 Government Consents. Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower's business as currently
conducted.
5.15 Full Disclosure. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
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6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of
all outstanding Obligations, and for so long as Bank may have any commitment to
make an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall
cause each Subsidiary to meet, the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA. Borrower shall comply,
and shall cause each Subsidiary to comply, with all statutes, laws, ordinances
and government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower
shall deliver to Bank: (a) 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;
(b) promptly upon receipt of notice thereof, a report of any legal actions
pending or threatened against Borrower or any Subsidiary that could result in
damages or costs to Borrower or any Subsidiary of One Hundred Thousand Dollars
($100,000) or more; and (c) 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 any
Obligations remain 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 and a backlog report. Borrower shall deliver the same to Bank within
twenty (20) days after the last day of each fiscal quarter in periods in which
no Obligations remain outstanding.
Within forty-five (45) days after the last day of each fiscal quarter,
Borrower shall deliver to Bank with the quarterly financial statements 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 six (6) months unless an Event of Default has occurred and
is continuing.
6.4 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 and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 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
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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.
6.6 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.
6.7 Principal Depository. Borrower shall maintain its
principal depository and operating accounts with Bank.
6.8 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.
6.9 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.
6.10 Tangible Net Worth. Borrower shall maintain, as of the
last day of each fiscal quarter, a Tangible Net Worth of not less than Eleven
Million, Four Hundred Eighty-eight Thousand Dollars ($11,488,000) as of June 30,
1996, plus one hundred percent (100%) of the proceeds received from the sale of
Borrower's equity securities during each fiscal quarter, plus seventy five
percent (75%) of Borrower's profits from such quarter, with no deduction for
losses.
6.11 Profitability. Borrower shall have a minimum net profit
of One Dollar ($1) for each fiscal year. Borrower shall be profitable for each
fiscal quarter, except Borrower may suffer a loss for one fiscal quarter in any
fiscal year.
6.12 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.
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7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than: (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.
7.2 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.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit
any of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain
liable with respect to any Indebtedness, or permit any Subsidiary so to do,
other than Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any
Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock.
7.7 Investments. Directly or indirectly acquire or own, or
make any Investment in or to any Person, or permit any of its Subsidiaries so to
do, other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 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.
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7.11 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.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
8.1 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;
8.2 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);
8.3 Material Adverse Change. If there occurs a material
adverse change in Borrower's business or financial condition, or if there is a
material impairment of the prospect of repayment of any portion of the
Obligations or a material impairment of the value or priority of Bank's security
interests in the Collateral;
8.4 Attachment. If any material portion of Borrower's assets
is attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any trustee, receiver or person acting in a
similar capacity and such attachment, seizure, writ or distress warrant or levy
has not been removed, discharged or rescinded within 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 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);
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8.5 Insolvency. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
is commenced against Borrower and is not dismissed or stayed within ten (10)
days (provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement
to which Borrower is a party with a third party or parties resulting in a right
by such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could have a Material Adverse Effect;
8.7 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;
8.8 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
8.9 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.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default
described in Section 8.5 all Obligations shall become immediately due and
payable without any action by Bank);
(b) Cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(c) Demand that Borrower (i) deposit cash with Bank
in an amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii)
pay in advance all Letters of Credit fees scheduled to be paid or payable over
the remaining term of the Letters of Credit;
(d) Settle or adjust disputes and claims directly
with account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(e) 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
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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;
(f) 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;
(g) 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;
(h) 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;
(i) Bank may credit bid and purchase at any public
sale; and
(j) Any deficiency that exists after disposition of
the Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints 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
▇▇▇▇ 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.
9.3 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.
9.4 Bank Expenses. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Revolving 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
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Section 6.6 of this Agreement, and take any action with respect to such policies
as Bank deems prudent. Any amounts so paid or deposited by Bank shall constitute
Bank Expenses, shall be immediately due and payable, and shall bear interest at
the then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies
with reasonable banking practices, Bank shall not in any way or manner be liable
or responsible for: (a) the safekeeping of the Collateral; (b) any loss or
damage thereto occurring or arising in any manner or fashion from any cause; (c)
any diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not 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.
9.7 Demand; Protest. Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, 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: SEEQ Technology, Incorporated
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
If to Bank: Silicon Valley Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
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.
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11. 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 ▇▇▇▇▇, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of each
of the parties; provided, 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.
12.2 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.
12.3 Time of Essence. Time is of the essence for the
performance of all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot
be amended or terminated 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.
12.6 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.
12.7 Survival. All covenants, representations and warranties
made in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and
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liabilities described in Section 12.2 shall survive until all applicable statute
of limitations periods with respect to actions that may be brought against Bank
have run.
12.8 Confidentiality. In handling any confidential information
Bank shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower, (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order, (iv) as may be required in
connection with the examination, audit or similar investigation of Bank and (v)
as Bank may 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.
SEEQ Technology, Incorporated
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------
Title: Vice President, Finance
SILICON VALLEY BANK
By:
---------------------------
Title:
------------------------
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EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of
credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and
(g) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.
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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#: (▇▇▇) ▇▇▇-▇▇▇▇ TIME:____________
FROM: SEEQ Technology, Incorporated, a California corporation
---------------------------------------------------------------------------
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.
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)
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EXHIBIT C
BORROWING BASE CERTIFICATE
------------------------------------------------------------------------------------------------------------------------------------
Borrower: SEEQ Technology, Incorporated Lender: Silicon Valley Bank
Commitment Amount: $7,000,000
------------------------------------------------------------------------------------------------------------------------------------
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 #16 or #15] $_______________
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
Date:________________
Verified:____________
Auth. Signer
Date:________________
SEEQ Technology, Incorporated,
a California corporation
By:____________________________________
Authorized Signer
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EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: SEEQ TECHNOLOGY, INCORPORATED
The undersigned authorized officer of SEEQ Technology, Incorporated, a
California corporation, 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
------------------ -------- --------
10Q Quarterly within 5 days Yes No
10K Annually within 5 days Yes No
A/R & A/P Agings Monthly within 20 days* Yes No
A/R Audit Initial and Semi-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 $11,488,000** $________ Yes No
Maximum Debt/Tangible Net Worth 1.0:1.0 _____:1.0 Yes No
Profitability: Quarterly $1.00*** $________ Yes No
Annually $1.00 $________ Yes No
* Only quarterly reporting is required where no Obligations are
outstanding.
** (i) $11,000,488 as of 6/30/96 plus (ii) one hundred percent
(100%) of net new equity plus (iii) seventy five percent (75%)
of quarterly profitability, with no deduction made in the case
of a losing quarter.
*** One losing quarter per fiscal year is allowed.
COMMENTS REGARDING EXCEPTIONS: BANK USE ONLY
See Attached.
Received by:_______________________
AUTHORIZED SIGNER
Sincerely,
Date:______________________________
________________________________________ Verified:__________________________
SIGNATURE AUTHORIZED SIGNER
Date:______________________________
________________________________________
TITLE Compliance Status: Yes No
________________________________________
DATE
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DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: SEEQ Technology, Incorporated Bank: Silicon Valley Bank
===================================================================================================================================
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal amount up to $7,000,000.
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 $________
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the following charges:
Prepaid Finance Charges Paid in Cash: $________
$35,000 Loan Fee
$______ Accounts Receivables Audit
Other Charges Paid in Cash: $________
$______ UCC Search Fees
$______ UCC Filing Fees
$______ Patent Filing Fees
$______ Trademark Filing Fees
$______ Copyright Filing Fees
$______ Outside Counsel Fees and Expenses (Estimate)
Total Charges Paid in Cash $_________
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered ▇▇▇▇▇▇▇.602 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:
SEEQ Technology, Incorporated,
a California corporation
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------
Authorized Officer
================================================================================
30
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: SEEQ Technology, Incorporated BANK: Silicon Valley Bank
================================================================================
INSURANCE REQUIREMENTS. SEEQ Technology, Incorporated, a California
corporation ("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 canceled 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 19, 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 19,
1996.
GRANTOR:
SEEQ Technology, Incorporated,
a California corporation
x________________________________
Authorized Officer
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE:___________________ PHONE:________________
AGENT'S NAME:__________________________________________________________________
INSURANCE COMPANY:_____________________________________________________________
POLICY NUMBER:_________________________________________________________________
EFFECTIVE DATES:_______________________________________________________________
COMMENTS:______________________________________________________________________
31
CORPORATE RESOLUTIONS TO BORROW
================================================================================
BORROWER: SEEQ TECHNOLOGY, INCORPORATED, A CALIFORNIA CORPORATION
================================================================================
I, the undersigned Secretary or Assistant Secretary of SEEQ Technology,
Incorporated, a California corporation (the "Corporation"), HEREBY CERTIFY that
the Corporation is organized and existing under and by virtue of the laws of the
State of California.
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
-------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Vice President, CFO /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
______________________ ______________________ _________________________
▇▇▇▇ ▇. ▇▇▇▇ Corporate Controller /s/ ▇▇▇▇ ▇. ▇▇▇▇
______________________ ______________________ _________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Director of Planning,IS /s/ PM ▇▇▇▇▇▇
______________________ ______________________ _________________________
▇▇▇▇▇ ▇▇▇▇▇ Accounting Manager /s/ ▇. ▇▇▇▇▇
______________________ ______________________ _________________________
______________________ ______________________ _________________________
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 19, 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.
1
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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 August 27, 1996 and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------
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