SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Agreement") dated as of the Effective Date between SILICON VALLEY BANK, a
California corporation ("Bank"), and Vitesse Semiconductor Corporation, a
Delaware corporation ("Vitesse") and Vitesse International, Inc., a corporation
organized under the laws of Barbados ("International" and together with Vitesse
also referred to herein jointly and severally referred as "Borrower"), provides
the terms on which Bank shall lend to Borrower and Borrower shall repay Bank.
The parties agree as follows:
Reference is made to that certain Amended and Restated Loan Agreement
between Vitesse and Bank dated as of March 26, 2003, as amended from time to
time thereafter (such loan agreement as amended, modified or supplemented from
time to time being referred to herein as the "First Amended Loan Agreement").
Borrower and Bank desire to amend and restate the First Amended Loan Agreement
in its entirety to read as is set forth herein, effective as of the Effective
Date. The following agreements, documents and instruments shall nevertheless
continue in full force and effect: The Amended and Restated Master Asset
Purchase Agreement dated October 1, 2004, as amended from time to time (the
"Asset Purchase Agreement") and all documents and agreements relating thereto,
together with any and all guarantees relating to the First Amended Loan
Agreement (including without limitation the Cross Corporate Continuing Guaranty
dated March 26, 2003 by Borrowers in favor of Bank), the Asset Purchase
Agreement, all standard documents of Bank entered into by the Borrower in
connection with Letters of Credit and/or Foreign Exchange Contracts, all UCC-1
financing statements and other documents filed with governmental offices which
perfect liens or security interests in favor of Bank or otherwise relate to the
purchase of assets under the Asset Purchase Agreement.
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed
following GAAP. Calculations and determinations must be made following GAAP.
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in Section 13. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meaning provided by the Code to the
extent such terms are defined therein.
2 LOAN AND TERMS OF PAYMENT
2.1 Promise to Pay. Borrower hereby unconditionally promises to pay
Bank the outstanding principal amount of all Credit Extensions and accrued and
unpaid interest thereon as and when due in accordance with this Agreement.
2.1.1 Revolving Advances.
(a) Availability. Subject to the terms and conditions of this
Agreement, Bank shall make Advances not exceeding the Availability Amount.
Amounts borrowed under the Revolving Line may be repaid and, prior to the
Revolving Line Maturity Date, reborrowed, subject to the applicable terms and
conditions precedent herein.
(b) Termination; Repayment. The Revolving Line terminates on
the Revolving Line Maturity Date, when the principal amount of all Advances,
the unpaid interest thereon, and all other Obligations relating to the Revolving
Line shall be immediately due and payable.
2.1.2 Letters of Credit Sublimit.
(a) As part of the Revolving Line, Bank shall issue or have
issued Letters of Credit for Borrower's account. The face amount of outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit and any
Letter of Credit Reserve) may not exceed $10,000,000, subject to the Overall
Sublimit. Such aggregate amounts utilized hereunder shall at all times reduce
the amount otherwise available for Advances under the Revolving Line. If, on the
Revolving Maturity Date, there are any outstanding Letters of Credit, then on
such date Borrower shall provide to Bank cash collateral in an amount equal to
105% of the face amount of all such Letters of Credit plus all interest, fees,
and costs due or to become due in connection therewith (as estimated by Bank in
its good faith business judgment), to secure all of the Obligations relating to
said Letters of Credit. All 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 standard Application and Letter of Credit Agreement (the
"Letter of Credit Application"). Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may reasonably
request.
(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, such Letters of Credit, and the Letter of Credit Application.
(c) Borrower may request that Bank issue a Letter of Credit payable
in a Foreign Currency. 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 fees and charges in connection therewith such as
wire, cable, SWIFT or similar charges) in Dollars at the then-prevailing rate of
exchange in San Francisco, California, for sales of the Foreign Currency for
transfer to the country issuing such Foreign Currency.
(d) To guard against fluctuations in currency exchange rates, upon the
issuance of any Letter of Credit payable in a Foreign Currency, Bank shall
create a reserve (the "Letter of Credit Reserve") under the Revolving Line in an
amount equal to ten percent (10%) of the face amount of such Letter of Credit.
The amount of the Letter of Credit Reserve may be adjusted by Bank from time to
time to account for fluctuations in the exchange rate. The availability of funds
under the Revolving Line shall be reduced by the amount of such Letter of Credit
Reserve for as long as such Letter of Credit remains outstanding.
2.1.3 Foreign Exchange Sublimit. As part of the Revolving Line, Borrower
may enter into foreign exchange contracts with Bank under which Borrower commits
to purchase from or sell to Bank a specific amount of Foreign Currency (each, a
"FX Forward Contract") on a specified date (the "Settlement Date"). FX Forward
Contracts shall have a Settlement Date of at least one (1) FX Business Day after
the contract date and shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract in a maximum aggregate amount equal to
$10,000,000 (the "FX Reserve"), subject to the Overall Sublimit. The aggregate
amount of FX Forward Contracts at any one time may not exceed ten (10) times the
amount of the FX Reserve.
2.1.4 Cash Management Services Sublimit. Borrower may use up to $10,000,000
(the "Cash Management Services Sublimit") of the Revolving Line, subject to the
Overall Sublimit for Bank's cash management services which may include merchant
services, direct deposit of payroll, business credit card, and check cashing
services identified in Bank's various cash management services agreements
(collectively, the "Cash Management Services"). Any amounts Bank pays on behalf
of Borrower or any amounts that are not paid by Borrower for any Cash Management
Services will be treated as Advances under the Revolving Line and will accrue
interest at the interest rate applicable to Advances.
2.2 Overadvances. If, at any time, the Credit Extensions under Sections
2.1.1, 2.1.2, 2.1.3 and 2.1.4 exceed the lesser of either (a) the Revolving
Line or (b) the Borrowing Base, Borrower shall immediately pay to Bank in cash
such excess
2.3 General Provisions Relating to the Advances. Each Advance shall, at
Borrower's option in accordance with the terms of this Agreement, be either in
the form of a Prime Rate Advance or a LIBOR Advance; provided that in no event
shall Borrower maintain at any time LIBOR Advances having more than two (2)
different Interest Periods. Borrower shall pay interest accrued on the Advances
at the rates and in the manner set forth in Section 2.4.
2.4 Payment of Interest on the Credit Extensions.
(a) Computation of Interest. Interest on the Credit Extensions
and all fees payable hereunder shall be computed on the basis of a 360-day year
and the actual number of days elapsed in the period during which such interest
accrues. In computing interest on any Credit Extension, the date of the making
of such Credit Extension shall be included and the date of payment shall be
excluded; provided, however, that if any Credit Extension is repaid on the same
day on which it is made, such day shall be included in computing interest on
such Credit Extension.
(b) Advances. Each Advance shall bear interest on the
outstanding principal amount thereof from the date when made, continued or
converted until paid in full at a rate per annum equal to the Prime Rate plus
the Prime Rate Margin or the LIBOR Rate plus the LIBOR Rate Margin, as the case
may be. On and after the expiration of any Interest Period applicable to any
LIBOR Advance outstanding on the date of occurrence of an Event of Default or
acceleration of the Obligations, the Effective Amount of such LIBOR Advance
shall, during the continuance of such Event of Default or after acceleration,
bear interest at a rate per annum equal to the Prime Rate plus six percentage
points (6.00%). Pursuant to the terms hereof, interest on each Advance shall be
paid in arrears on each Interest Payment Date. Interest shall also be paid on
the date of any prepayment of any Advance pursuant to this Agreement for the
portion of any Advance so prepaid and upon payment (including prepayment) in
full thereof. All accrued but unpaid interest on the Advances shall be due and
payable on the Revolving Line Maturity Date.
(c) Default Interest. Except as otherwise provided in Section
2.4(b), after an Event of Default, Obligations shall bear interest five
percentage points (5.00%) above the rate effective immediately before the Event
of Default (the "Default Rate"). Payment or acceptance of the increased interest
provided in this Section 2.4(c) is not a permitted alternative to timely payment
and shall not constitute a waiver of any Event of Default or otherwise prejudice
or limit any rights or remedies of Bank.
(d) Prime Rate Advances. Each change in the interest rate of
the Prime Rate Advances based on changes in the Prime Rate shall be effective on
the effective date of such change and to the extent of such change. Bank shall
use its best efforts to give Borrower prompt notice of any such change in the
Prime Rate; provided, however, that any failure by Bank to provide Borrower with
notice hereunder shall not affect Bank's right to make changes in the interest
rate of the Prime Rate Advances based on changes in the Prime Rate.
(e) LIBOR Advances. The interest rate applicable to each LIBOR
Advance shall be determined in accordance with Section 3.6(a) hereunder. Subject
to Sections 3.6 and 3.7, such rate shall apply during the entire Interest Period
applicable to such LIBOR Advance, and interest calculated thereon shall be
payable on the Interest Payment Date applicable to such LIBOR Advance.
(f) Debit of Accounts. Bank may debit any of Borrower's
deposit accounts, including the Designated Deposit Account, for principal and
interest payments when due, or any other amounts Borrower owes Bank, when due.
Bank shall promptly notify Borrower after it debits Borrower's accounts. These
debits shall not constitute a set-off.
2.5 Fees. Borrower shall pay to Bank:
(a) Renewal and Amendment Fee. A fully earned, non-refundable
renewable and amendment fee of $70,000, on the Effective Date; and
(b) Letter of Credit Fee. Bank's customary fees and expenses for the
issuance or renewal of Letters of Credit upon the issuance, each anniversary of
the issuance, and the renewal of such Letter of Credit; and
(c) Bank Expenses. All Bank Expenses (including reasonable attorneys'
fees and expenses, plus expenses, for documentation and negotiation of this
Agreement) incurred through and after the Effective Date, when due.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. Bank's obligation to
make the initial Credit Extension is subject to the condition precedent that
Bank shall have received, in form and substance satisfactory to Bank, such
documents, and completion of such other matters, as Bank may reasonably deem
necessary or appropriate, including, without limitation:
(a) Borrower shall have delivered duly executed original signatures to
the Loan Documents to which it is a party;
(b) Each Borrower shall have delivered its Operating Documents and a
good standing certificate of Borrower certified by the appropriate governmental
authority as of a date no earlier than thirty (30) days prior to the Effective
Date;
(c) Borrower shall have delivered duly executed original signatures to
the completed Borrowing Resolutions for Borrower;
(d) Bank shall have received certified copies, dated as of a recent
date, of financing statement searches, as Bank shall request, accompanied by
written evidence (including any UCC termination statements) that the Liens
indicated in any such financing statements either constitute Permitted Liens or
have been or, in connection with the initial Credit Extension, will be
terminated or released;
(e) Borrower shall have delivered an update letter to the Perfection
Certificate(s) previously delivered to Bank;
(f) Borrower shall have delivered the insurance policies and/or
endorsements required pursuant to Section 6.5 hereof;
(g) Borrower shall have delivered to Bank an executed amendment to
the Asset Purchase Agreement in form and substance acceptable to Bank;
(h) Borrower shall have paid the fees and Bank Expenses then due as
specified herein; and
(i) Borrower shall have delivered such other documents and agreements,
and taken such other actions, as Bank shall have determined is necessary or
desirable in connection with the consummation of the transactions contemplated
hereunder and under the other Loan Documents.
3.2 Conditions Precedent to all Credit Extensions. Bank's obligations
to make each Credit Extension, including the initial Credit Extension, is
subject to the following:
(a) timely receipt of a Notice of Borrowing;
(b) the representations and warranties in Section 5 shall be
true in all material respects on the date of the Notice of Borrowing and on the
effective date of each Credit Extension; provided, however, that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date, and no Event of Default shall have
occurred and be continuing or result from the Credit Extension. Each Credit
Extension is Borrower's representation and warranty on that date that the
representations and warranties in Section 5 remain true in all material
respects; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date; and
(c) in Bank's sole discretion, there has not been a Material
Adverse Change.
3.3 Covenant to Deliver.
Borrower agrees to deliver to Bank each item required to be delivered
to Bank under this Agreement as a condition to any Credit Extension. Borrower
expressly agrees that the extension of a Credit Extension prior to the receipt
by Bank of any such item shall not constitute a waiver by Bank of Borrower's
obligation to deliver such item, and any such extension in the absence of a
required item shall be in Bank's sole discretion.
3.4 Procedure for the Borrowing of Advances.
(a) Subject to the prior satisfaction of all other applicable
conditions to the making of an Advance set forth in this Agreement, each Advance
shall be made upon Borrower's irrevocable written notice delivered to Bank in
the form of a Notice of Borrowing, each executed by a Responsible Officer of
Borrower or his or her designee or without instructions if the Advances are
necessary to meet Obligations which have become due. Bank may rely on any
telephone notice given by a person whom Bank believes is a Responsible Officer
or designee. Borrower will indemnify Bank for any loss Bank suffers due to such
reliance. Such Notice of Borrowing must be received by Bank prior to 11:00 a.m.
Pacific time, (i) at least three (3) Business Days prior to the requested
Funding Date, in the case of LIBOR Advances, and (ii) at least one (1) Business
Day prior to the requested Funding Date, in the case of Prime Rate Advances,
specifying:
(1) the amount of the Advance, which, if a LIBOR Advance is
requested, shall be in an aggregate minimum principal amount of $1,000,000 or
in any integral multiple of $1,000,000 in excess thereof;
(2) the requested Funding Date;
(3) whether the Advance is to be comprised of LIBOR
Advances or Prime Rate Advances; and
(4) the duration of the Interest Period applicable to any such
LIBOR Advances included in such notice; provided that if the Notice of Borrowing
shall fail to specify the duration of the Interest Period for any Advance
comprised of LIBOR Advances, such Interest Period shall be one (1) month.
(b) The proceeds of all such Advances will then be made
available to Borrower on the Funding Date by Bank by transfer to the Designated
Deposit Account and, subsequently, by wire transfer to such other account as
Borrower may instruct in the Notice of Borrowing. No Advances shall be deemed
made to Borrower, and no interest shall accrue on any such Advance, until the
related funds have been deposited in the Designated Deposit Account.
3.5 Conversion and Continuation Elections.
(a) So long as (i) no Event of Default or Default exists; (ii)
Borrower shall not have sent any notice of termination of this Agreement; and
(iii) Borrower shall have complied with such customary procedures as Bank has
established from time to time for Borrower's requests for LIBOR Advances,
Borrower may, upon irrevocable written notice to Bank:
(1) elect to convert on any Business Day, Prime Rate Advances in
an amount equal to $1,000,000 or any integral multiple of $1,000,000 in excess
thereof into LIBOR Advances;
(2) elect to continue on any Interest Payment Date any LIBOR
Advances maturing on such Interest Payment Date (or any part thereof in an
amount equal to $1,000,000 or any integral multiple of $1,000,000 in excess
thereof); provided, that if the aggregate amount of LIBOR Advances shall have
been reduced, by payment, prepayment, or conversion of part thereof, to be less
than $1,000,000, such LIBOR Advances shall automatically convert into Prime Rate
Advances, and on and after such date the right of Borrower to continue such
Advances as, and convert such Advances into, LIBOR Advances shall terminate; or
(3) elect to convert on any Interest Payment Date any LIBOR
Advances maturing on such Interest Payment Date (or any part thereof in an
amount equal to $1,000,000 or any integral multiple of $1,000,000 in excess
thereof) into Prime Rate Advances.
(b) Borrower shall deliver a Notice of Conversion/Continuation
in accordance with Section 10 to be received by Bank prior to 11:00 a.m. Pacific
time at least (i) three (3) Business Days in advance of the Conversion Date or
Continuation Date, if any Advances are to be converted into or continued as
LIBOR Advances; and (ii) one (1) Business Day in advance of the Conversion Date,
if any Advances are to be converted into Prime Rate Advances, in each case
specifying the:
(1) proposed Conversion Date or Continuation Date;
(2) aggregate amount of the Advances to be converted or
continued which, if any Advances are to be converted into or continued as LIBOR
Advances, shall be in an aggregate minimum principal amount of $1,000,000 or in
any integral multiple of $1,000,000 in excess thereof;
(3) nature of the proposed conversion or continuation; and
(4) duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable
to any LIBOR Advances, Borrower shall have timely failed to select a new
Interest Period to be applicable to such LIBOR Advances, Borrower shall be
deemed to have elected to convert such LIBOR Advances into Prime Rate Advances.
(d) Any LIBOR Advances shall, at Bank's option, convert into
Prime Rate Advances in the event that (i) an Event of Default or Default shall
exist, or (ii) the aggregate principal amount of the Prime Rate Advances which
have been previously converted to LIBOR Advances, or the aggregate principal
amount of existing LIBOR Advances continued, as the case may be, at the
beginning of an Interest Period shall at any time during such Interest Period
exceed the Revolving Line. Borrower agrees to pay Bank, upon demand by Bank (or
Bank may, at its option, charge the Designated Deposit Account or any other
account Borrower maintains with Bank) any amounts required to compensate Bank
for any loss (including loss of anticipated profits), cost, or expense incurred
by Bank, as a result of the conversion of LIBOR Advances to Prime Rate Advances
pursuant to any of the foregoing.
(e) Notwithstanding anything to the contrary contained herein,
Bank shall not be required to purchase United States Dollar deposits in the
London interbank market or other applicable LIBOR market to fund any LIBOR
Advances, but the provisions hereof shall be deemed to apply as if Bank had
purchased such deposits to fund the LIBOR Advances.
3.6 Special Provisions Governing LIBOR Advances.
Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to LIBOR Advances as to the
matters covered:
(a) Determination of Applicable Interest Rate. As soon as practicable
on each Interest Rate Determination Date, Bank shall determine (which
determination shall, absent manifest error in calculation, be final, conclusive
and binding upon all parties) the interest rate that shall apply to the LIBOR
Advances for which an interest rate is then being determined for the applicable
Interest Period and shall promptly give notice thereof (in writing or by
telephone confirmed in writing) to Borrower.
(b) Inability to Determine Applicable Interest Rate. In the event that
Bank shall have determined (which determination shall be final and conclusive
and binding upon all parties hereto), on any Interest Rate Determination Date
with respect to any LIBOR Advance, that by reason of circumstances affecting the
London interbank market adequate and fair means do not exist for ascertaining
the interest rate applicable to such Advance on the basis provided for in the
definition of LIBOR, Bank shall on such date give notice (by facsimile or by
telephone confirmed in writing) to Borrower of such determination, whereupon (i)
no Advances may be made as, or converted to, LIBOR Advances until such time as
Bank notifies Borrower that the circumstances giving rise to such notice no
longer exist, and (ii) any Notice of Borrowing or Notice of
Conversion/Continuation given by Borrower with respect to Advances in respect of
which such determination was made shall be deemed to be rescinded by Borrower.
(c) Compensation for Breakage or Non-Commencement of Interest Periods
Borrower shall compensate Bank, upon written request by Bank (which request
shall set forth the manner and method of computing such compensation), for all
reasonable losses, expenses and liabilities, if any (including any interest
paid by Bank to lenders of funds borrowed by it to make or carry its LIBOR
Advances and any loss, expense or liability incurred by Bank in connection with
the liquidation or re-employment of such funds) such that Bank may incur: (i) if
for any reason (other than a default by Bank or due to any failure of Bank to
fund LIBOR Advances due to impracticability or illegality hereunder) a borrowing
or a conversion to or continuation of any LIBOR Advance does not occur on a date
specified in a Notice of Borrowing or a Notice of Conversion/Continuation, as
the case may be, or (ii) if any principal payment or any conversion of any of
its LIBOR Advances occurs on a date prior to the last day of an Interest Period
applicable to that Advance.
(d) Assumptions Concerning Funding of LIBOR Advances. Calculation of
all amounts payable to Bank hereunder shall be made as though Bank had actually
funded each of its relevant LIBOR Advances through the purchase of a Eurodollar
deposit bearing interest at the rate obtained pursuant to the definition of
LIBOR Rate in an amount equal to the amount of such LIBOR Advance and having a
maturity comparable to the relevant Interest Period; provided, however, that
Bank may fund each of its LIBOR Advances in any manner it sees fit and the
foregoing assumptions shall be utilized only for the purposes of calculating
amounts payable hereunder.
(e) LIBOR Advances After Default. After the occurrence and during the
continuance of an Event of Default, (i) Borrower may not elect to have an
Advance be made or continued as, or converted to, a LIBOR Advance after the
expiration of any Interest Period then in effect for such Advance and (ii)
subject to the provisions hereof, any Notice of Conversion/Continuation given by
Borrower with respect to a requested conversion/continuation that has not yet
occurred shall be deemed to be rescinded by Borrower and be deemed a request to
convert or continue Advances referred to therein as Prime Rate Advances.
3.7 Additional Requirements/Provisions Regarding LIBOR Advances.
(a) If for any reason (including voluntary or mandatory
prepayment or acceleration), Bank receives all or part of the principal amount
of a LIBOR Advance prior to the last day of the Interest Period for such
Advance, Borrower shall immediately notify Borrower's account officer at Bank
and, on demand by Bank, pay Bank the amount (if any) by which (i) the additional
interest which would have been payable on the amount so received had it not been
received until the last day of such Interest Period exceeds (ii) the interest
which would have been recoverable by Bank by placing the amount so received on
deposit in the certificate of deposit markets, the offshore currency markets, or
United States Treasury investment products, as the case may be, for a period
starting on the date on which it was so received and ending on the last day of
such Interest Period at the interest rate determined by Bank in its reasonable
discretion. Bank's determination as to such amount shall be conclusive absent
manifest error.
(b) Borrower shall pay Bank, upon demand by Bank, from time to
time such amounts as Bank may determine to be necessary to compensate it for any
costs incurred by Bank that Bank determines are attributable to its making or
maintaining of any amount receivable by Bank hereunder in respect of any
Advances relating thereto (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), in each case resulting from
any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to Bank
under this Agreement in respect of any Advances (other than changes which
affect taxes measured by or imposed on the overall net income of Bank by the
jurisdiction in which Bank has its principal office);
(ii) imposes or modifies any reserve, special deposit
or similar requirements
relating to any extensions of credit or other assets of, or any deposits with,
or other liabilities of Bank (including any Advances or any deposits referred to
in the definition of LIBOR); or
(iii) imposes any other condition affecting this Agreement (or
any of such extensions of credit or liabilities).
Bank will notify Borrower of any event occurring after the Closing Date
which will entitle Bank to compensation pursuant to this Section as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation. Bank will furnish Borrower with a statement setting forth the
basis and amount of each request by Bank for compensation under this Section.
Determinations and allocations by Bank for purposes of this Section of the
effect of any Regulatory Change on its costs of maintaining its obligations to
make Advances, of making or maintaining Advances, or on amounts receivable by it
in respect of Advances, and of the additional amounts required to compensate
Bank in respect of any Additional Costs, shall be conclusive absent manifest
error.
(c) If Bank shall determine that the adoption or implementation of any
applicable law, rule, regulation, or treaty regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank (or its
applicable lending office) with any respect or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank, or comparable agency, has or would have the effect of reducing the rate of
return on capital of Bank or any person or entity controlling Bank (a "Parent")
as a consequence of its obligations hereunder to a level below that which Bank
(or its Parent) could have achieved but for such adoption, change, or compliance
(taking into consideration policies with respect to capital adequacy) by an
amount deemed by Bank to be material, then from time to time, within fifteen
(15) days after demand by Bank, Borrower shall pay to Bank such additional
amount or amounts as will compensate Bank for such reduction. A statement of
Bank claiming compensation under this Section and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive absent manifest
error.
(d) If, at any time, Bank, in its sole and absolute discretion,
determines that (i) the amount of LIBOR Advances for periods equal to the
corresponding Interest Periods are not available to Bank in the offshore
currency interbank markets, or (ii) LIBOR does not accurately reflect the cost
to Bank of lending the LIBOR Advances, then Bank shall promptly give notice
thereof to Borrower. Upon the giving of such notice, Bank's obligation to make
the LIBOR Advances shall terminate; provided, however, Advances shall not
terminate if Bank and Borrower agree in writing to a different interest rate
applicable to LIBOR Advances.
(e) If it shall become unlawful for Bank to continue to fund or
maintain any LIBOR Advances, or to perform its obligations hereunder, upon
demand by Bank, Borrower shall prepay the Advances in full with accrued interest
thereon and all other amounts payable by Borrower hereunder (including, without
limitation, any amount payable in connection with such prepayment pursuant to
Section 3.7(a)). Notwithstanding the foregoing, to the extent a determination by
Bank as described above relates to a LIBOR Advance then being requested by
Borrower pursuant to a Notice of Borrowing or a Notice of Conversion/
Continuation, Borrower shall have the option, subject to the provisions of
Section 3.6(c), to (i) rescind such Notice of Borrowing or Notice of Conversion/
Continuation by giving notice (by facsimile or by telephone confirmed in
writing) to Bank of such rescission on the date on which Bank gives notice of
its determination as described above, or (ii) modify such Notice of Borrowing
or Notice of Conversion/Continuation to obtain a Prime Rate Advance or to have
outstanding Advances converted into or continued as Prime Rate Advances by
giving notice (by facsimile or by telephone confirmed in writing) to Bank of
such modification on the date on which Bank gives notice of its determination
as described above.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the
payment and performance in full of all of the Obligations, a continuing security
interest in, and pledges to Bank, the Collateral, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and products thereof.
Borrower represents, warrants, and covenants that the security interest granted
herein is and shall at all times continue to be a first priority perfected
security interest in the Collateral (subject only to Permitted Liens that may
have superior priority to Bank's Lien under this Agreement). If Borrower shall
acquire a commercial tort claim, Borrower shall promptly notify Bank in a
writing signed by Borrower of the general details thereof and grant to Bank in
such writing a security interest therein and in the proceeds thereof, all upon
the terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to Bank.
If this Agreement is terminated, Bank's Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations) are
repaid in full in cash. Upon payment in full in cash of the Obligations and at
such time as Bank's obligation to make Credit Extensions has terminated, Bank
shall, at Borrower's sole cost and expense, release its Liens in the Collateral
and all rights therein shall revert to Borrower.
4.2 Authorization to File Financing Statements. Borrower hereby authorizes
Bank to file financing statements, without notice to Borrower, with all
appropriate jurisdictions to perfect or protect Bank's interest or rights
hereunder, including a notice that any disposition of the Collateral, by either
Borrower or any other Person, shall be deemed to violate the rights of Bank
under the Code.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Authorization. Borrower and each of its
Subsidiaries are duly existing and in good standing in their respective
jurisdictions of formation and are qualified and licensed to do business and
are in good standing in any jurisdiction in which the conduct of their business
or their ownership of property requires that they be qualified except where the
failure to do so could not reasonably be expected to have a material adverse
effect on Borrower's business. In connection with this Agreement, Borrower has
delivered to Bank Representations and Warranties form dated July 23, 2004 that
has been updated by Borrower in accordance with a letter from Borrower to Bank
letter dated February 14, 2006 (collectively, the "Perfection Certificate").
Borrower represents and warrants to Bank that (a) Borrower's exact legal name is
that indicated on the Perfection Certificate and on the signature page hereof;
(b) Borrower is an organization of the type and is organized in the jurisdiction
set forth in the Perfection Certificate; (c) the Perfection Certificate
accurately sets forth Borrower's organizational identification number or
accurately states that Borrower has none; (d) the Perfection Certificate
accurately sets forth Borrower's place of business, or, if more than one, its
chief executive office as well as Borrower's mailing address (if different than
its chief executive office); (e) Borrower (and each of its predecessors) has
not, in the past five (5) years, changed its jurisdiction of formation,
organizational structure or type, or any organizational number assigned by its
jurisdiction; and (f) all other information set forth on the Perfection
Certificate pertaining to Borrower and each of its Subsidiaries is accurate and
complete. If Borrower is not now a Registered Organization but later becomes
one, Borrower shall promptly notify Bank of such occurrence and provide Bank
with Borrower's organizational identification number.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's organizational documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which it is
a party or by which it is bound in which the default could reasonably be
expected to have a material adverse effect on Borrower's business.
5.2 Collateral; Other Property. Borrower has good title to, has rights in,
and the power to transfer each item of the Collateral upon which it purports to
▇▇▇▇▇ ▇ ▇▇▇▇ hereunder, free and clear of any and all Liens except Permitted
Liens. Borrower has no deposit accounts other than the deposit accounts with
Bank, the deposit accounts, if any, described in the Perfection Certificate
delivered to Bank in connection herewith, or of which Borrower has given Bank
notice and taken such actions as are necessary to give Bank a perfected security
interest therein. The Accounts are bona fide, existing obligations of the
Account Debtors.
The Collateral is not in the possession of any third party bailee (such
as a warehouse) except as otherwise provided in the Perfection Certificate. None
of the components of the Collateral shall be maintained at locations other than
as provided in the Perfection Certificate or as Borrower has given Bank notice
pursuant to Section 7.2. In the event that Borrower, after the date hereof,
intends to store or otherwise deliver any portion of the Collateral to a bailee,
then Borrower will first receive the written consent of Bank and such bailee
must execute and deliver a bailee agreement in form and substance satisfactory
to Bank in its sole discretion.
Borrower is the sole owner of its intellectual property, except for
non-exclusive licenses granted to its customers in the ordinary course of
business. Each patent is valid and enforceable, and no part of the intellectual
property has been judged invalid or unenforceable, in whole or in part, and to
the best of Borrower's knowledge, no claim has been made that any part of the
intellectual property violates the rights of any third party except to the
extent such claim could not reasonably be expected to have a material adverse
effect on Borrower's business.
5.3 Accounts Receivable. For any Eligible Account in any Borrowing Base
Certificate, all statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing such Eligible Accounts are
and shall be true and correct and all such invoices, instruments and other
documents, and all of Borrower's Books are genuine and in all respects what they
purport to be. All sales and other transactions underlying or giving rise to
each Eligible Account shall comply in all material respects with all applicable
laws and governmental rules and regulations. Borrower has no knowledge of any
actual or imminent Insolvency Proceeding of any Account Debtor whose accounts
are an Eligible Account in any Borrowing Base Certificate. To the best of
Borrower's knowledge, all signatures and endorsements on all documents,
instruments, and agreements relating to all Eligible Accounts are genuine, and
all such documents, instruments and agreements are legally enforceable in
accordance with their terms.
5.4 Litigation. There are no actions or proceedings pending or, to the
knowledge of the Responsible Officers, threatened in writing by or against
Borrower or any of its Subsidiaries involving more than $250,000.
5.5 No Material Deviation in Financial Statements. All consolidated
financial statements for Borrower and any of its Subsidiaries delivered to Bank
fairly present in all material respects Borrower's consolidated financial
condition and Borrower's consolidated results of operations. There has not been
any material deterioration in Borrower's consolidated financial condition since
the date of the most recent financial statements submitted to Bank.
5.6 Solvency. The fair salable value of Borrower's assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities;
Borrower is not left with unreasonably small capital after the transactions in
this Agreement; and Borrower is able to pay its debts (including trade debts)
as they mature.
5.7 Regulatory Compliance. Borrower is not an "investment company" or a
company "controlled" by an "investment company" under the Investment Company
Act. Borrower is not engaged as one of its important activities in extending
credit for margin stock (under Regulations T and U of the Federal Reserve Board
of Governors). Borrower has complied in all material respects with the Federal
Fair Labor Standards Act. Borrower has not violated any laws, ordinances or
rules, the violation of which could reasonably be expected to have a material
adverse effect on its business. None of Borrower's or any of its Subsidiaries'
properties or assets has been used by Borrower or any Subsidiary or, to the best
of Borrower's knowledge, by previous Persons, in disposing, producing, storing,
treating, or transporting any hazardous substance other than legally. Borrower
and each of its Subsidiaries have obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted.
5.8 Subsidiaries; Investments. Borrower does not own any stock,
partnership interest or other equity securities except for Permitted
Investments.
5.9 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed all required tax returns and reports, and Borrower has timely paid all
foreign, federal, state and local taxes, assessments, deposits and contributions
owed by Borrower. Borrower may defer payment of any contested taxes, provided
that Borrower (a) in good faith contests its obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted, (b)
notifies Bank in writing of the commencement of, and any material development
in, the proceedings, (c) posts bonds or takes any other steps required to
prevent the governmental authority levying such contested taxes from obtaining a
Lien upon any of the Collateral that is other than a "Permitted Lien". Borrower
is unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid all amounts necessary to fund all present pension,
profit sharing and deferred compensation plans in accordance with their terms,
and Borrower has not withdrawn from participation in, and has not permitted
partial or complete termination of, or permitted the occurrence of any other
event with respect to, any such plan which could reasonably be expected to
result in any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other governmental agency.
5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit
Extensions solely as working capital and to fund its general business
requirements and not for personal, family, household or agricultural purposes.
5.11 Bank Indebtedness as Senior Debt Per Indenture.
All principal of, interest (including all interest accruing after the
commencement of any bankruptcy or similar proceeding, whether or not a claim for
post-petition interest is allowable as a claim in any such proceeding), and all
fees, costs, expenses and other amounts accrued or due under this Agreement
shall constitute "Senior Debt" under the terms of the Indenture.
5.12 Full Disclosure. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank, as
of the date such representations, warranties, or other statements were made,
taken together with all such written certificates and written statements given
to Bank, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results).
6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 Government Compliance. Borrower shall, and shall cause each of its
Subsidiaries to, maintain its legal existence and good standing in its
jurisdiction of formation and each jurisdiction in which the nature of its
business requires them to be so qualified, except where the failure to take such
action would not reasonably be expected to have a material adverse effect on
Borrower's and its Subsidiaries' business or operations, taken as a whole;
provided, that (a) the legal existence of any Subsidiary that is not a Guarantor
may be terminated or permitted to lapse, and any qualification of such
Subsidiary to do business may be terminated or permitted to lapse, if, in the
good faith judgment of Borrower, such termination or lapse is in the best
interests of Borrower and its Subsidiaries, taken as a whole, and (b) Borrower
may not permit its qualification to do business in the jurisdiction of its chief
executive office to terminate or lapse; and provided, further, that this Section
6.2 shall not be construed to prohibit any other transaction that is otherwise
permitted in Section 7 of this Agreement.
Borrower shall comply, and shall have each Subsidiary comply, with all
laws, ordinances and regulations to which it is subject, noncompliance with
which could have a material adverse effect on Borrower's business.
6.2 Financial Statements, Reports, Certificates.
(a) Deliver to Bank: (i) as soon as available, but no later
than the earlier to occur of three (3) days after filing with the Securities
Exchange Commission or 45 days after each quarter end period, the Borrower's
10K, 10Q, and 8K reports, as applicable; (ii) a Compliance Certificate together
with delivery of the 10K and 10Q reports; (iii) within 45 days after the end of
each fiscal year, annual financial projections for the following fiscal year (on
a quarterly basis) as approved by Borrower's board of directors, together with
any related business forecasts used in the preparation of such annual financial
projections; (iv) a prompt report of any legal actions pending or threatened
against Borrower or any Subsidiary that could result in damages or costs to
Borrower or any Subsidiary of $500,000 or more; and (v) budgets, sales
projections, operating plans or other financial information Bank reasonably
requests.
Borrower's 10K, 10Q, and 8K reports required to be delivered
pursuant to Section 6.2(a)(i) shall be deemed to have been delivered on the date
on which Borrower posts such report or provides a link thereto on Borrower's or
another website on the Internet; provided, that Borrower shall provide paper
copies to Bank of the Compliance Certificates required by Section 6.2(a)(ii).
(b) Within twenty (20) days after the last day of each month
when the Borrowing Base Formula regarding Advance is applicable, deliver to Bank
a duly completed Borrowing Base Certificate signed by a Responsible Officer,
with (i) aged listings of accounts receivable and accounts payable (by invoice
date).
(c) Allow Bank to audit Borrower's Collateral at Borrower's
expense, with the first of such audits to be completed no later than March 2,
2006, and with results acceptable to Bank. Such audits shall be conducted at a
frequency that Bank shall determine in its reasonable discretion, provided that
if a Default or an Event of Default has occurred and is continuing Bank may
conduct such audits at such frequency as Bank in its sole discretion may
determine from time to time.
6.3 Inventory; Returns. Keep all Inventory in good and marketable
condition, free from material defects. Returns and allowances between
Borrower and its Account Debtors shall follow Borrower's customary
practices as they exist at the Effective Date.
6.4 Taxes; Pensions. Make, and cause each of its Subsidiaries to make,
timely payment of all foreign, federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting pursuant to the
terms hereof) and shall deliver to Bank, on demand, appropriate certificates
attesting to such payments, and pay all amounts necessary to fund all present
pension, profit sharing and deferred compensation plans in accordance with their
terms.
6.5 Insurance. Keep its business and the Collateral insured for risks and
in amounts standard for companies in Borrower's industry and location and as
Bank may reasonably request. Insurance policies shall be in a form, with
companies, and in amounts that are satisfactory to Bank. All property policies
shall have a lender's loss payable endorsement showing Bank as the sole lender
loss payee and waive subrogation against Bank, and all liability policies shall
show, or have endorsements showing, Bank as an additional insured. All policies
(or the loss payable and additional insured endorsements) shall provide that the
insurer must give Bank at least twenty (20) days notice before canceling,
amending, or declining to renew its policy. At Bank's request, Borrower shall
deliver certified copies of policies and evidence of all premium payments.
Proceeds payable under any policy shall, at Bank's option, be payable to Bank on
account of the Obligations. Notwithstanding the foregoing, (a)(x) so long as no
Event of Default has occurred and is continuing, Borrower shall have the option
of applying the proceeds of any casualty policy up to $100,000, in the
aggregate, toward the replacement or repair of destroyed or damaged property;
provided that any such replaced or repaired property (i) shall be of equal or
like value as the replaced or repaired Collateral and (ii) shall be deemed
Collateral in which Bank has been granted a first priority security interest,
and (b)(y) after the occurrence and during the continuance of an Event of
Default, all proceeds payable under such casualty policy shall, at the option
of Bank, be payable to Bank on account of the Obligations. If Borrower fails to
obtain insurance as required under this Section 6.5 or to pay any amount or
furnish any required proof of payment to third persons and Bank, Bank may make
all or part of such payment or obtain such insurance policies required in this
Section 6.5, and take any action under the policies Bank deems prudent.
6.6 Deposit and Other Accounts.
(a) Maintain its and its Subsidiaries' primary depository and
operating accounts and securities accounts with Bank and Bank's affiliates.
(b) Borrower shall have 90 days from the Effective Date in order to
provide to Bank account control agreements, in form and substance acceptable to
Bank, for those depository and operating accounts and securities accounts not at
or through Bank or Bank's affiliates and which are in existence as of the date
hereof. Further, other than with respect to those accounts now in existence and
otherwise previously or concurrently herewith disclosed to Bank, Borrower shall
provide Bank five (5) days prior written notice before establishing any
Collateral Account at or with any bank or financial institution other than Bank
or its Affiliates. Subject to the first sentence hereof, in addition, for each
Collateral Account that Borrower at any time maintains, Borrower shall cause the
applicable bank or financial institution (other than Bank) at or with which any
Collateral Account is maintained to execute and deliver a Control Agreement or
other appropriate instrument with respect to such Collateral Account to perfect
Bank's Lien in such Collateral Account in accordance with the terms hereunder.
The provisions of the previous sentence shall not apply to deposit accounts
exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of Borrower's employees and identified to Bank by
Borrower as such.
6.7 Financial Covenants.
The following covenants shall be determined on a consolidated
basis with respect to Vitesse:
(i) Liquidity. Vitesse shall, at all times (and tested
quarterly), maintain unrestricted cash and Cash Equivalents (less the aggregate
amount of Credit Extensions hereunder), plus current accounts receivable of
Vitesse in an aggregate amount of not less than $50,000,000. As used herein,
"current accounts receivable" shall be defined as the amount reflected on the
balance sheet of Vitesse of accounts receivable minus the corresponding account
receivable balance over 90 days from invoice date.
(ii) Minimum Adjusted Net Profit. Vitesse shall achieve a
quarterly Adjusted Net Profit of at least (a) $1.00 for the quarter end period
of ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) $3,000,000 for the quarter end period of June 30, 2006
and (c) $6,000,000 for each quarter end period thereafter . As used herein the
term "Adjusted Net Profit" shall mean net profit in any quarter plus the
aggregate amount of non-cash charges in such quarter.
6.8 Protection of Intellectual Property; Security Agreement Pertaining to
Collateral. Borrower shall: (a) protect, defend and maintain the validity and
enforceability of its intellectual property; (b) promptly advise Bank in writing
of material infringements of its intellectual property; and (c) not allow any
intellectual property material to Borrower's business to be abandoned, forfeited
or dedicated to the public without Bank's written consent. If Borrower decides
to register any copyrights or mask works in the United States Copyright Office
that result in or the proceeds of which result in Collateral hereunder (with it
being acknowledged and agreed that Bank does not have a lien in intellectual
property of Borrower as original collateral), Borrower shall: (x) provide Bank
with at least fifteen (15) days prior written notice of its intent to register
such copyrights or mask works together with a copy of the application it intends
to file with the United States Copyright Office (excluding exhibits thereto);
(y) execute a security agreement as to such items of Collateral or such other
documents as Bank may reasonably request to maintain the perfection and priority
of Bank's security interest in the copyrights or mask works intended to be
registered with the United States Copyright Office; and (z) record such security
agreement with the United States Copyright Office contemporaneously with filing
the copyright or mask work application(s) with the United States Copyright
Office relating to which Collateral shall arise as proceeds or otherwise with
respect thereto. Borrower shall promptly provide to Bank a copy of the
application(s) filed with the United States Copyright Office together with
evidence of the recording of the applicable security agreement necessary for
Bank to maintain the perfection and priority of its security interest in the
Collateral. Borrower shall provide written notice to Bank of any application
filed by Borrower in the United States Patent and Trademark Office for a patent
or to register a trademark or service ▇▇▇▇ within 30 days after any such filing.
6.9 Litigation Cooperation. From the date hereof and continuing through the
termination of this Agreement, make available to Bank, without expense to Bank,
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Bank may deem them reasonably necessary to prosecute
or defend any third-party suit or proceeding instituted by or against Bank with
respect to any Collateral or relating to Borrower.
6.10 Designated Senior Indebtedness. Borrower shall designate all principal
of, interest (including all interest accruing after the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding), and all fees, costs,
expenses and other amounts accrued or due under this Agreement as "Senior Debt",
or such similar term, in any future Subordinated Debt incurred by Borrower after
the date hereof, if such Subordinated Debt contains such term or similar term
and if the effect of such designation is to grant to Bank the same or similar
rights as granted to Bank as a holder of "Senior Debt" under the Indenture.
6.11 Further Assurances. Borrower shall execute any further instruments
and take further action as Bank reasonably requests to perfect or continue
Bank's Lien in the Collateral or to effect the purposes of this Agreement.
6.12 Post Close Delivery of Barbados Legal Opinion. Within 30 days of
the Effective Date, Bank shall have obtained an legal opinion from counsel in
Barbados with respect to Vitesse International, Inc., which opinion shall be in
form and substance acceptable to Bank.
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without Bank's prior written
consent:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively "Transfer"), or permit any of its Subsidiaries to Transfer, all or
any part of its business or property, except for Transfers (i) of inventory in
the ordinary course of business; (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; or (iii) of worn-out or obsolete equipment.
7.2 Changes in Business; Change in Control; Jurisdiction of Formation.
Engage in any material line of business other than those lines of
business conducted by Borrower and its Subsidiaries on the date hereof and any
businesses reasonably related, complementary or incidental thereto or reasonable
extensions thereof; permit or suffer any Change in Control. Borrower will not,
without prior written notice, change its jurisdiction of formation.
7.3 Mergers or Acquisitions.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any Person other than with Borrower or any Subsidiary, or
acquire, or permit any of its Subsidiaries to acquire, all or substantially all
of the capital stock or property of a Person other than Borrower or any
Subsidiary, except where no Event of Default has occurred and is continuing or
would result from such action during the term of this Agreement, and Borrower is
the surviving entity.
7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness,
or permit any Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance. Create, incur, or allow any Lien on any of its property,
or assign or convey any right to receive income, including the sale of any
Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, permit any Collateral not to be subject to the first priority security
interest granted herein, or enter into any agreement, document, instrument or
other arrangement (except with or in favor of Bank) with any Person which
directly or indirectly prohibits or has the effect of prohibiting Borrower or
any Subsidiary from assigning, mortgaging, pledging, granting a security
interest in or upon, or encumbering any of Borrower's or any Subsidiary's
intellectual property, except as is otherwise permitted in Section 7.1 hereof
and the definition of "Permitted Lien" herein.
7.6 Maintenance of Collateral Accounts. Maintain any Collateral
Account except pursuant to the terms of Section 6.6.(b) hereof.
7.7 Distributions; Investments. (a) Directly or indirectly acquire or own
any Person, or make any Investment in any Person, other than Permitted
Investments, or permit any of its Subsidiaries to do so; or (b) pay any
dividends or make any distribution or payment or redeem, retire or purchase
any capital stock other than Permitted Distributions.
7.8 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for (a) transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms (when viewed in the context of any series of
transactions of which it may be a part, if applicable) that are no less
favorable to Borrower than would be obtained in an arm's length transaction
with a non-affiliated Person.
7.9 Subordinated Debt. Make or permit any payment on any Subordinated Debt,
except under the terms of the Subordinated Debt, or amend any provision in any
document relating to the Subordinated Debt without Bank's prior written consent.
7.10 Compliance. Become an "investment company" or a company controlled by
an "investment company", under the Investment Company Act of 1940 or undertake
as one of its important activities extending credit to purchase or carry margin
stock (as defined in Regulation U of the Board of Governors of the Federal
Reserve System), or use the proceeds of any Credit Extension for that purpose;
fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply
with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a material
adverse effect on Borrower's business, or permit any of its Subsidiaries to do
so; withdraw or permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any present pension, profit sharing and deferred compensation
plan which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.
8 EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an
"Event of Default") under this Agreement:
8.1 Payment Default. Borrower fails to (a) make any payment of principal or
interest on any Credit Extension on its due date, or (b) pay any other
Obligations within three (3) Business Days after such Obligations are due and
payable. During the cure period, the failure to cure the payment default is not
an Event of Default (but no Credit Extension will be made during the cure
period);
8.2 Covenant Default.
(a) Borrower fails or neglects to perform any obligation in
Sections 6.2, 6.6, 6.7, 6.10, 6.11 or violates any covenant in Section 7; or
(b) Borrower fails or neglects to perform, keep, or observe
any other term, provision, condition, covenant or agreement contained in this
Agreement, any Loan Documents, and as to any default (other than those specified
in this Section 8) under such other term, provision, condition, covenant or
agreement that can be cured, has failed to cure the default within ten (10) days
after the occurrence 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 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 cure the default shall not be deemed an Event of Default (but no Credit
Extensions shall be made during such cure period). Grace periods provided under
this section shall not apply, among other things, to financial covenants or any
other covenants set forth in subsection (a) above;
8.3 Material Adverse Change. A Material Adverse Change occurs;
8.4 Attachment. (a) Any material portion of Borrower's assets is attached,
seized, levied on, or comes into possession of a trustee or receiver and the
attachment, seizure or levy is not removed in ten (10) days; (b) the service of
process upon Bank seeking to attach, by trustee or similar process, any funds of
Borrower or of any entity under control of Borrower (including a Subsidiary) on
deposit with Bank ; (c) Borrower is enjoined, restrained, or prevented by court
order from conducting a material part of its business; (d) a judgment or other
claim in excess of $100,000 becomes a Lien on any of Borrower's assets; or (e) a
notice of lien, levy, or assessment is filed against any of Borrower's assets by
any government agency and not paid within ten (10) days after Borrower receives
notice. These are not Events of Default if stayed or if a bond is posted pending
contest by Borrower (but no Credit Extensions shall be made during the cure
period);
8.5 Insolvency. Borrower is unable to pay its debts (including trade debts)
as they become due or otherwise becomes insolvent; (b) Borrower begins an
Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower
and not dismissed or stayed within thirty (30) days (but no Credit Extensions
shall be made while of any of the conditions described in clause (a) exist
and/or until any Insolvency Proceeding is dismissed);
8.6 Other Agreements. If Borrower fails to (a) make any payment that is due
and payable with respect to any Material Indebtedness and such failure continues
after the applicable grace or notice period, if any, specified in the agreement
or instrument relating thereto; (b) perform or observe any other condition or
covenant, or any other event shall occur or condition exist under any agreement
or instrument relating to any Material Indebtedness, and such failure continues
after the applicable grace or notice period, if any, specified in the agreement
or instrument relating thereto and the effect of such failure, event or
condition is to cause the holder or holders of such Material Indebtedness to
accelerate the maturity of such Material Indebtedness or cause the mandatory
repurchase of any Material Indebtedness; or (c) a default or an event of default
under the Asset Purchase Agreement.
8.7 Judgments. A judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least One-Hundred Thousand
Dollars ($100,000) (not covered by independent third-party insurance) shall be
rendered against Borrower and shall remain unsatisfied and unstayed for a period
of ten (10) days after the entry thereof (provided that no Credit Extensions
will be made prior to the satisfaction or stay of such judgment);
8.8 Misrepresentations. Borrower or any Person acting for Borrower makes
any representation, warranty, or other statement now or later in this Agreement,
any Loan Document or in any writing delivered to Bank or to induce Bank to enter
this Agreement or any Loan Document, and such representation, warranty, or other
statement is incorrect in any material respect when made;
8.9 Subordinated Debt. A default or breach occurs under any agreement
between Borrower and any creditor of Borrower that signed a subordination,
intercreditor, or other similar agreement with Bank, or any creditor that has
signed such an agreement with Bank breaches any terms of such agreement; or
8.10 Guaranty. (a) Any guaranty of any Obligations terminates or ceases for
any reason to be in full force and effect; (b) any Guarantor does not perform
any obligation or covenant under any guaranty of the Obligations; (c) any
circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8. occurs with
respect to any Guarantor; (d) the liquidation, winding up, or termination of
existence of any Guarantor; or (e) (i) a material impairment in the perfection
or priority of Bank's Lien in the collateral provided by Guarantor or in the
value of such collateral or (ii) a material adverse change in the general
affairs, management, results of operation, condition (financial or otherwise) or
the prospect of repayment of the Obligations occurs with respect to any
Guarantor.
9 BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. While an Event of Default occurs and continues
Bank may, without notice or demand, do any or all of the following:
(a) declare all Obligations immediately due and payable (but if a
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);
(b) stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and Bank;
(c) demand that Borrower (i) deposits cash with Bank in an amount
equal to the aggregate 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 Letter of Credit fees scheduled to be paid or payable over
the remaining term of any Letters of Credit;
(d) terminate any FX Contracts;
(e) settle or adjust disputes and claims directly with Account Debtors
for amounts on terms and in any order that Bank considers advisable, notify any
Person owing Borrower money of Bank's security interest in such funds, and
verify the amount of such account;
(f) make any payments and do any acts it considers necessary or
reasonable to protect the Collateral and/or its security interest in the
Collateral. Borrower shall assemble the Collateral if Bank requests and make it
available as Bank designates. Bank may enter premises where the Collateral is
located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior
to its security interest and pay all expenses incurred. Borrower grants Bank a
license to enter and occupy any of its premises, without charge, to exercise any
of Bank's rights or remedies;
(g) apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(h) ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral. Bank is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, patents, copyrights, mask works, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
(i) place a "hold" on any account maintained with Bank and/or deliver
a notice of exclusive control, any entitlement order, or other directions or
instructions pursuant to any Control Agreement or similar agreements providing
control of any Collateral;
(j) demand and receive possession of Borrower's Books; and
(k) exercise all rights and remedies available to Bank under the Loan
Documents or at law or equity, including all remedies provided under the Code
(including disposal of the Collateral pursuant to the terms thereof).
9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower's name on any
checks or other forms of payment or security; (b) sign Borrower's name on any
invoice or ▇▇▇▇ of lading for any Account or drafts against Account Debtors; (c)
settle and adjust disputes and claims about the Accounts directly with Account
Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle,
and adjust all claims under Borrower's insurance policies; (e) pay, contest or
settle any Lien, charge, encumbrance, security interest, and adverse claim in or
to the Collateral, or any judgment based thereon, or otherwise take any action
to terminate or discharge the same; and (f) transfer the Collateral into the
name of Bank or a third party as the Code permits. Borrower hereby appoints Bank
as its lawful attorney-in-fact to sign Borrower's name on any documents
necessary to perfect or continue the perfection of any security interest
regardless of whether an Event of Default has occurred until all Obligations
have been satisfied in full and Bank is under no further obligation to make
Credit Extensions hereunder. Bank's foregoing appointment as Borrower's
attorney in fact, and all of Bank's rights and powers, coupled with an interest,
are irrevocable until all Obligations have been fully repaid and performed and
Bank's obligation to provide Credit Extensions terminates.
9.3 Accounts Verification; Collection. Whether or not an Event of Default
has occurred and is continuing, Bank may notify any Person owing Borrower money
of Bank's security interest in such funds and verify the amount of such account.
After the occurrence of an Event of Default, any amounts received by Borrower
shall be held in trust by Borrower for Bank, and, if requested by Bank, Borrower
shall immediately deliver such receipts to Bank in the form received from the
Account Debtor, with proper endorsements for deposit.
9.4 Protective Payments. If Borrower fails to obtain the insurance called
for by Section 6.5 or fails to pay any premium thereon or fails to pay any other
amount which Borrower is obligated to pay under this Agreement or any other Loan
Document, Bank may obtain such insurance or make such payment, and all amounts
so paid by Bank are Bank Expenses and immediately due and payable, bearing
interest at the then highest applicable rate, and secured by the Collateral.
Bank will make reasonable efforts to provide Borrower with notice of Bank
obtaining such insurance at the time it is obtained or within a reasonable time
thereafter. No payments by Bank are deemed an agreement to make similar payments
in the future or Bank's waiver of any Event of Default.
9.5 Application of Payments and Proceeds. Unless an Event of Default has
occurred and is continuing, Bank shall apply any funds in its possession,
whether from Borrower account balances, payments, or proceeds realized as the
result of any collection of Accounts or other disposition of the Collateral,
first, to Bank Expenses, including without limitation, the reasonable costs,
expenses, liabilities, obligations and attorneys' fees incurred by Bank in the
exercise of its rights under this Agreement; second, to the interest due upon
any of the Obligations; and third, to the principal of the Obligations and any
applicable fees and other charges, in such order as Bank shall determine in its
sole discretion. Any surplus shall be paid to Borrower or other Persons legally
entitled thereto; Borrower shall remain liable to Bank for any deficiency. If an
Event of Default has occurred and is continuing, Bank may apply any funds in its
possession, whether from Borrower account balances, payments, proceeds realized
as the result of any collection of Accounts or other disposition of the
Collateral, or otherwise, to the Obligations in such order as Bank shall
determine in its sole discretion. Any surplus shall be paid to Borrower or other
Persons legally entitled thereto; Borrower shall remain liable to Bank for any
deficiency. If Bank, in its good faith business judgment, directly or indirectly
enters into a deferred payment or other credit transaction with any purchaser at
any sale of Collateral, Bank shall have the option, exercisable at any time, of
either reducing the Obligations by the principal amount of the purchase price or
deferring the reduction of the Obligations until the actual receipt by Bank of
cash therefor.
9.6 Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices regarding the safekeeping of the Collateral in the
possession or under the control of Bank, Bank shall not be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act
or default of any carrier, warehouseman, bailee, or other Person. Borrower bears
all risk of loss, damage or destruction of the Collateral.
9.7 No Waiver; Remedies Cumulative. Bank's failure, at any time or times,
to require strict performance by Borrower of any provision of this Agreement or
any other Loan Document shall not waive, affect, or diminish any right of Bank
thereafter to demand strict performance and compliance herewith or therewith. No
waiver hereunder shall be effective unless signed by Bank and then is only
effective for the specific instance and purpose for which it is given. Bank's
rights and remedies under this Agreement and the other Loan Documents are
cumulative. Bank has all rights and remedies provided under the Code, by law, or
in equity. Bank's exercise of one right or remedy is not an election, and Bank's
waiver of any Event of Default is not a continuing waiver. Bank's delay in
exercising any remedy is not a waiver, election, or acquiescence.
9.8 Demand Waiver. Borrower waives demand, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
10 NOTICES
All notices, consents, requests, approvals, demands, or other communication
(collectively, "Communication") by any party to this Agreement or any other
Loan Document must be in writing and shall be deemed to have been validly
served, given, or delivered: (a) upon the earlier of actual receipt and
three (3) Business Days after deposit in the U.S. mail, first class, registered
or certified mail return receipt requested, with proper postage prepaid; (b)
upon confirmation by recipient of transmission, when sent by electronic mail or
facsimile transmission; (c) one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address, facsimile number, or email address indicated
below. Bank or Borrower may change its address or facsimile number by giving the
other party written notice thereof in accordance with the terms of this Section
10.
If to Borrower: c/o Vitesse Semiconductor Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇_
Attn: Ms. ▇▇▇▇ ▇▇▇▇▇▇▇▇, Controller
Fax: _▇▇▇-▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
--------------------
If to Bank: Silicon Valley Bank
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇ ▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
------------------
11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE
California law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Los Angeles County, California; provided,
however, that nothing in this Agreement shall be deemed to operate to preclude
Bank from bringing suit or taking other legal action in any other jurisdiction
to realize on the Collateral or any other security for the Obligations, or to
enforce a judgment or other court order in favor of Bank. Borrower expressly
submits and consents in advance to such jurisdiction in any action or suit
commenced in any such court, and Borrower hereby waives any objection that it
may have based upon lack of personal jurisdiction, improper venue, or forum non
conveniens and hereby consents to the granting of such legal or equitable relief
as is deemed appropriate by such court. Borrower hereby waives personal service
of the summons, complaints, and other process issued in such action or suit and
agrees that service of such summons, complaints, and other process may be made
by registered or certified mail addressed to Borrower at the address set forth
in Section 10 of this Agreement and that service so made shall be deemed
completed upon the earlier to occur of Borrower's actual receipt thereof or
three (3) days after deposit in the U.S. mails, proper postage prepaid.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK
EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING
OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES' AGREEMENT TO WAIVE
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a
trial by jury is not enforceable, the parties hereto agree that any and all
disputes or controversies of any nature between them arising at any time shall
be decided by a reference to a private judge, mutually selected by the parties
(or, if they cannot agree, by the Presiding Judge of the Santa ▇▇▇▇▇ County,
California Superior Court) appointed in accordance with California Code of Civil
Procedure Section 638 (or pursuant to comparable provisions of federal law if
the dispute falls within the exclusive jurisdiction of the federal courts),
sitting without a jury, in Santa ▇▇▇▇▇ County, California; and the parties
hereby submit to the jurisdiction of such court. The reference proceedings shall
be conducted pursuant to and in accordance with the provisions of California
Code of Civil Procedure ▇▇.▇▇. 638 through 645.1, inclusive. The private judge
shall have the power, among others, to grant provisional relief, including
without limitation, entering temporary restraining orders, issuing preliminary
and permanent injunctions and appointing receivers. All such proceedings shall
be closed to the public and confidential and all records relating thereto shall
be permanently sealed. If during the course of any dispute, a party desires to
seek provisional relief, but a judge has not been appointed at that point
pursuant to the judicial reference procedures, then such party may apply to the
Santa ▇▇▇▇▇ County, California Superior Court for such relief. The proceeding
before the private judge shall be conducted in the same manner as it would be
before a court under the rules of evidence applicable to judicial proceedings.
The parties shall be entitled to discovery which shall be conducted in the same
manner as it would be before a court under the rules of discovery applicable to
judicial proceedings. The private judge shall oversee discovery and may enforce
all discovery rules and order applicable to judicial proceedings in the same
manner as a trial court judge. The parties agree that the selected or appointed
private judge shall have the power to decide all issues in the action or
proceeding, whether of fact or of law, and shall report a statement of decision
thereon pursuant to the California Code of Civil Procedure ss. 644(a). Nothing
in this paragraph shall limit the right of any party at any time to exercise
self-help remedies, foreclose against collateral, or obtain provisional
remedies. The private judge shall also determine all issues relating to the
applicability, interpretation, and enforceability of this paragraph
12 GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement binds and is for the benefit of
the successors and permitted assigns of each party. Borrower may not assign this
Agreement or any rights or obligations under it without Bank's prior written
consent (which may be granted or withheld in Bank's discretion). Bank has the
right, without the consent of or notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights, and benefits under this Agreement and the other Loan
Documents.
12.2 Indemnification. Borrower agrees to indemnify, defend and hold Bank
and its directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Bank harmless against: (a) all obligations,
demands, claims, and liabilities (collectively, "Claims") asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses incurred, or paid by Bank from, following,
or arising from transactions between Bank and Borrower (including reasonable
attorneys' fees and expenses), except for Claims and/or losses directly caused
by Bank's gross negligence or willful misconduct.
12.3 Limitation of Actions. Any claim or cause of action by Borrower
against Bank, its directors, officers, employees, agents, accountants,
attorneys, or any other Person affiliated with or representing Bank based upon,
arising from, or relating to this Loan Agreement or any other Loan Document, or
any other transaction contemplated hereby or thereby or relating hereto or
thereto, or any other matter, cause or thing whatsoever, occurred, done, omitted
or suffered to be done by Bank, its directors, officers, employees, agents,
accountants or attorneys, shall be barred unless asserted by Borrower by the
commencement of an action or proceeding in a court of competent jurisdiction by
(a) the filing of a complaint within one year from the earlier of (i) the date
any of Borrower's officers or directors had knowledge of the first act, the
occurrence or omission upon which such claim or cause of action, or any part
thereof, is based, or (ii) the date this Agreement is terminated, and (b) the
service of a summons and complaint on an officer of Bank, or on any other person
authorized to accept service on behalf of Bank, within thirty (30) days
thereafter. Borrower agrees that such one-year period is a reasonable and
sufficient time for Borrower to investigate and act upon any such claim or cause
of action. The one-year period provided herein shall not be waived, tolled, or
extended except by the written consent of Bank in its sole discretion. This
provision shall survive any termination of this Loan Agreement or any other
Loan Document.
12.4 Time of Essence. Time is of the essence for the performance of
all Obligations in this Agreement.
12.5 Severability of Provisions. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
12.6 Amendments in Writing; Integration. All amendments to this Agreement
must be in writing signed by both Bank and Borrower. This Agreement and the Loan
Documents represent the entire agreement about this subject matter and supersede
prior negotiations or agreements. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter of this Agreement and the Loan Documents merge into this
Agreement and the Loan Documents.
12.7 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, constitute
one Agreement.
12.8 Survival. All covenants, representations and warranties made in this
Agreement continue in full force until this Agreement has terminated pursuant to
its terms and all Obligations (other than inchoate indemnity obligations and any
other obligations which, by their terms, are to survive the termination of this
Agreement) have been satisfied. The obligation of Borrower in Section 12.2 to
indemnify Bank shall survive until the statute of limitations with respect to
such claim or cause of action shall have run.
12.9 Confidentiality. In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank's
Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Bank shall use
commercially reasonable efforts to obtain such prospective transferee's or
purchaser's agreement to the terms of this provision); (c) as required by law,
regulation, subpoena, or other order; (d) to Bank's regulators or as otherwise
required in connection with Bank's examination or audit; and (e) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (i) is in the public
domain or in Bank's possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (ii) is disclosed to Bank by a third
party, if Bank does not know that the third party is prohibited from disclosing
the information.
12.10 Attorneys' Fees, Costs and Expenses. In any action or proceeding
between Borrower and Bank arising out of or relating to the Loan Documents, the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
other costs and expenses incurred, in addition to any other relief to which it
may be entitled.
13 DEFINITIONS
13.1 Definitions. As used in this Agreement, the following terms have the
following meanings:
"Account" is any "account" as defined in the Code with such additions
to such term as may hereafter be made, and includes, without limitation, all
accounts receivable and other sums owing to Borrower.
"Account Debtor" is any "account debtor" as defined in the Code with
such additions to such term as may hereafter be made.
"Advance" or "Advances" means an advance (or advances) under the
Revolving Line.
"Affiliate" of any Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"Agreement" is defined in the preamble hereof.
"Asset Purchase Agreement" shall have the meaning set forth in the
preamble and shall constitute a Loan Document for purposes of such defined term.
"Availability Amount" is the lesser of (i) the Revolving Line or (ii)
the Borrowing Base, minus the sum of the following: (a) the amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit) plus an amount equal to the Letter of Credit Reserves; (b) the FX
Reserve, and (c) the outstanding principal balance of any Advances (including
any amounts used for Cash Management Services) (the foregoing being the
"Borrowing Base Formula"); PROVIDED, HOWEVER, if (A) if the aggregate the
aggregate amount of Credit Extensions hereunder (as to an FX Forward Contract
such amount is the FX Reserve) is less than $7,500,000 and (B) any and all
Credit Extensions are outstanding for less than any 30 days during any quarter,
the the Availability Amount is $7,500,000 minus the sum of the following: (x)
the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) plus an amount equal to the Letter of Credit
Reserves; (y) the FX Reserve, and (z) the outstanding principal balance of any
Advances (including any amounts used for Cash Management Services).
"Bank" is defined in the preamble hereof.
"Bank Expenses" are all audit fees and expenses, costs, and expenses
(including reasonable attorneys' fees and expenses) for preparing, negotiating,
administering, defending and enforcing the Loan Documents (including, without
limitation, those incurred in connection with appeals or Insolvency Proceedings)
or otherwise incurred with respect to Borrower.
"Borrower" is defined in the preamble hereof.
"Borrower's Books" are all Borrower's books and records including
ledgers, federal and state tax returns, records regarding Borrower's assets or
liabilities, the Collateral, business operations or financial condition, and all
computer programs or storage or any equipment containing such information.
"Borrowing Base" is 65% of Eligible Accounts (other than Eligible
Foreign Accounts), as determined by Bank from Borrower's most recent Borrowing
Base Certificate plus 50% of Eligible Foreign Accounts; provided, however, that
Bank may decrease the foregoing percentages in its good faith business judgment
based on events, conditions, contingencies, or risks which, as determined by
Bank, may adversely affect Collateral and such changes may also be made based on
Bank's assessment of the Collateral arising from result of audits of the
Collateral that the Bank conducts from time to time pursuant to this Agreement,
provided, however, under no circumstance may Eligible Foreign Accounts comprise
more than 50% of all Eligible Accounts at any time.
"Borrowing Base Certificate" is that certain certificate in the form
attached hereto as Exhibit C.
"Borrowing Base Formula" shall have the meaning set forth in the
definition of Availability Amount.
"Borrowing Resolutions" are, with respect to any Person, those
resolutions substantially in the form attached hereto as Exhibit E.
"Business Day" is any day other than a Saturday, Sunday or other day on
which banking institutions in the State of California are authorized or required
by law or other governmental action to close, except that if any determination
of a "Business Day" shall relate to a LIBOR Advance, the term "Business Day"
shall also mean a day on which dealings are carried on in the London interbank
market, and if any determination of a "Business Day" shall relate to an FX
Forward Contract, the term "Business Day" shall mean a day on which dealings are
carried on in the country of settlement of the foreign (i.e., non-Dollar)
currency.
"Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor's Ratings
Group or ▇▇▇▇▇'▇ Investors Service, Inc., (c) Bank's certificates of deposit
issued maturing no more than one (1) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this
definition.
"Cash Management Services" is defined in Section 2.1.4.
"Cash Management Services Sublimit" is defined in Section 2.1.4.
"Change in Control" means any event, transaction, or occurrence as a
result of which (a) any "person" (as such term is defined in Sections 3(a)(9)
and 13(d)(3) of the Securities Exchange Act of 1934, as an amended (the
"Exchange Act")), other than a trustee or other fiduciary holding securities
under an employee benefit plan of Borrower, is or becomes a beneficial owner
(within the meaning Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of Borrower, representing twenty-five percent (25%) or
more of the combined voting power of Borrower's then outstanding securities; or
(b) during any period of twelve consecutive calendar months, individuals who at
the beginning of such period constituted the Board of Directors of Borrower
(together with any new directors whose election by the Board of Directors of
Borrower was approved by a vote of at least two-thirds of the directors then
still in office who either were directions at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason other than death or disability to constitute a majority of the
directors then in office.
"Code" is the Uniform Commercial Code, as the same may, from time to
time, be enacted and in effect in the State of California; provided, that, to
the extent that the Code is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles or Divisions
of the Code, the definition of such term contained in Article or Division 9
shall govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection, or priority of, or
remedies with respect to, Bank's Lien on any Collateral is governed by the
Uniform Commercial Code in effect in a jurisdiction other than the State of
California, the term "Code" shall mean the Uniform Commercial Code as enacted
and in effect in such other jurisdiction solely for purposes on the provisions
thereof relating to such attachment, perfection, priority, or remedies and for
purposes of definitions relating to such provisions.
"Collateral" is any and all properties, rights and assets of Borrower
described on Exhibit A.
"Collateral Account" is any Deposit Account, Securities Account, or
Commodity Account.
"Committed Availability" means, as the date of determination, an amount
equal to the sum of the Revolving Line minus all outstanding Credit Extensions.
"Commodity Account" is any "commodity account" as defined in the Code
with such additions to such term as may hereafter be made.
"Communication" is defined in Section 10.
"Compliance Certificate" is that certain certificate in the form
attached hereto as Exhibit D.
"Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (a) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.
"Continuation Date" means any date on which Borrower elects to continue
a LIBOR Advance into another Interest Period.
"Control Agreement" is any control agreement entered into among the
depository institution at which Borrower maintains a Deposit Account or the
securities intermediary or commodity intermediary at which Borrower maintains a
Securities Account or a Commodity account, Borrower, and Bank pursuant to which
Bank obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.
"Conversion Date" means any date on which Borrower elects to convert a
Prime Rate Advance to a LIBOR Advance or a LIBOR Advance to a Prime Rate
Advance.
"Credit Extension" is any Advance, Letter of Credit, FX Forward
Contract, amount utilized for Cash Management Services, and each other extension
of credit by Bank for Borrower's benefit.
"Current Assets" are amounts that under GAAP should be included on that
date as current assets on Borrower's consolidated balance sheet.
"Current Liabilities" are all obligations and liabilities of Borrower
to Bank, plus, without duplication, the aggregate amount of Borrower's Total
Liabilities that mature within one (1) year.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Default Rate" is defined in Section 2.4(c).
"Deferred Revenue" is all amounts received or invoiced in advance of
performance under contracts and not yet recognized as revenue.
"Deposit Account" is any "deposit account" as defined in the Code with
such additions to such term as may hereafter be made.
"Designated Deposit Account" is Borrower's deposit account, account
number 3300046690, maintained with Bank.
"Dollars," "dollars" and "$" each mean lawful money of the United
States.
"Domestic Subsidiary" means a Subsidiary organized under the laws of
the United States or any state or territory thereof or the District of Columbia.
"Effective Amount" means with respect to any Advances on any date, the
aggregate outstanding principal amount thereof after giving effect to any
borrowing and prepayments or repayments thereof occurring on such date.
"Effective Date" is the date Bank executes this Agreement and as
indicated on the signature page hereof.
"Eligible Accounts" are Accounts which arise in the ordinary course of
Borrower's business that meet all Borrower's representations and warranties in
Section 5.3. Bank reserves the right at any time and from time to time after the
Effective Date, to adjust any of the criteria set forth below and to establish
new criteria in its good faith business judgment. Unless Bank agrees otherwise
in writing, Eligible Accounts shall not include:
(a) Accounts for which the Account Debtor has not been invoiced;
(b) Accounts that the Account Debtor has not paid within ninety (90)
days of invoice date;
(c) Accounts owing from an Account Debtor, fifty percent (50%) or more
of whose Accounts have not been paid within ninety (90) days of invoice date;
(d) Credit balances over ninety (90) days from invoice date;
(e) Accounts owing from an Account Debtor, including Affiliates, whose
total obligations to Borrower exceed twenty-five (25%) of all Accounts, for the
amounts that exceed that percentage, unless Bank approves in writing, provided
that with respect to Account Debtors consisting of Nu Horizons Electronics and
all Subsidiaries of such entity (including, without limitation Titan Supply
Chain Services), there shall be no percentage limitation shall applicable to
such parties for purposes of this clause (e);
(f) [Reserved];
(g) Accounts owing from an Account Debtor which is a federal, state or
local government entity or any department, agency, or instrumentality thereof
except for Accounts of the United States if Borrower has assigned its payment
rights to Bank and the assignment has been acknowledged under the Federal
Assignment of Claims Act of 1940, as amended;
(h) Accounts owing from an Account Debtor to the extent that Borrower
is indebted or obligated in any manner to the Account Debtor (as creditor,
lessor, supplier or otherwise - sometimes called "contra" accounts, accounts
payable, customer deposits or credit accounts), with the exception of customary
credits, adjustments and/or discounts given to an Account Debtor by Borrower in
the ordinary course of its business;
(i) Accounts for demonstration or promotional equipment, or in which
goods are consigned, or sold on a "sale guaranteed", "sale or return", "sale on
approval", "▇▇▇▇ and hold", or other terms if Account Debtor's payment may be
conditional;
(j) Accounts for which the Account Debtor is Borrower's Affiliate,
officer, employee, or agent;
(k) Accounts in which the Account Debtor disputes liability or makes
any claim (but only up to the disputed or claimed amount), or if the Account
Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out
of business;
(l) [Reserved];
(m) Accounts for which Bank in its good faith business judgment
determines collection to be doubtful; and
(n) other Accounts Bank deems ineligible in the exercise of its good faith
business judgment;
PROVIDED, THAT, Accounts owing from an Account Debtor which does not have its
principal place of business in the United States that otherwise comply with all
Eligible Accounts criteria are referred to herein as "Eligible Foreign
Accounts."
"Eligible Foreign Accounts" shall have the meaning ascribed to such
term as is set forth in the definition of Eligible Accounts.
"Equipment" is all "equipment" as defined in the Code with such
additions to such term as may hereafter be made, and includes without limitation
all machinery, fixtures, goods, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing.
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"Event of Default" is defined in Section 8.
"Foreign Currency" means lawful money of a country other than the
United States.
"Foreign Subsidiary" means any Subsidiary which is not a Domestic
Subsidiary.
"Funding Date" is any date on which a Credit Extension is made to or on
account of Borrower which shall be a Business Day.
"FX Business Day" is any day when (a) Bank's Foreign Exchange
Department is conducting its normal business and (b) the Foreign Currency being
purchased or sold by Borrower is available to Bank from the entity from which
Bank shall buy or sell such Foreign Currency.
"FX Forward Contract" is defined in Section 2.1.3.
"FX Reserve" is defined in Section 2.1.3.
"GAAP" is generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"General Intangibles" is all "general intangibles" as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation, all copyright rights,
copyright applications, copyright registrations and like protections in each
work of authorship and derivative work, whether published or unpublished, any
patents, trademarks, service marks and, to the extent permitted under applicable
law, any applications therefor, whether registered or not, any trade secret
rights, including any rights to unpatented inventions, payment intangibles,
royalties, contract rights, goodwill, franchise agreements, purchase orders,
customer lists, route lists, telephone numbers, domain names, claims, income and
other tax refunds, security and other deposits, options to purchase or sell real
or personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.
"Guarantor" is any present or future guarantor of the Obligations.
"Indebtedness" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and (d)
Contingent Obligations.
"Indenture" is that certain Indenture dated as of September 22, 2004,
executed by and between Vitesse and U.S. Bank National Association, as trustee,
relating to 1.50% Convertible Subordinated Debentures due 2024, as supplemented
from time to time.
"Insolvency Proceeding" is any proceeding by or against any Person
under the United States Bankruptcy Code, or any other bankruptcy or insolvency
law, including assignments for the benefit of creditors, compositions,
extensions generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Interest Expense" means for any fiscal period, interest expense
(whether cash or non-cash) determined in accordance with GAAP for the relevant
period ending on such date, including, in any event, interest expense with
respect to any Credit Extension and other Indebtedness of Borrower and its
Subsidiaries, including, without limitation or duplication, all commissions,
discounts, or related amortization and other fees and charges with respect to
letters of credit and bankers' acceptance financing and the net costs associated
with interest rate swap, cap, and similar arrangements, and the interest portion
of any deferred payment obligation (including leases of all types).
"Interest Payment Date" means, with respect to any LIBOR Advance, the
last day of each Interest Period applicable to such LIBOR Advance and, with
respect to Prime Rate Advances, the first (1st) day of each month (or, if such
day of the month does not fall on a Business Day, then on the first Business Day
following such date), and each date a Prime Rate Advance is converted into a
LIBOR Advance to the extent of the amount converted to a LIBOR Advance.
"Interest Period" means, as to any LIBOR Advance, the period commencing
on the date of such LIBOR Advance, or on the conversion/continuation date on
which the LIBOR Advance is converted into or continued as a LIBOR Advance, and
ending on the date that is one (1), two (2) or three (3) months thereafter, in
each case as Borrower may elect in the applicable Notice of Borrowing or Notice
of Conversion/Continuation; provided, however, that (a) no Interest Period with
respect to any LIBOR Advance shall end later than the Revolving Maturity Date,
(b) the last day of an Interest Period shall be determined in accordance with
the practices of the LIBOR interbank market as from time to time in effect, (c)
if any Interest Period would otherwise end on a day that is not a Business Day,
that Interest Period shall be extended to the following Business Day unless, in
the case of a LIBOR Advance, the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest Period
shall end on the preceding Business Day, (d) any Interest Period pertaining to a
LIBOR Advance that begins on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period, and (e) interest shall accrue
from and include the first Business Day of an Interest Period but exclude the
last Business Day of such Interest Period.
"Interest Rate Determination Date" means each date for calculating the
LIBOR for purposes of determining the interest rate in respect of an Interest
Period. The Interest Rate Determination Date shall be the second Business Day
prior to the first day of the related Interest Period for a LIBOR Advance.
"Inventory" is all "inventory" as defined in the Code in effect on the
date hereof with such additions to such term as may hereafter be made, and
includes without limitation all merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products, including
without limitation such inventory as is temporarily out of Borrower's custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.
"Investment" is any beneficial ownership interest in any Person
(including stock, partnership interest or other securities), and any loan,
advance or capital contribution to any Person.
"Key Person" is any of Borrower's Chief Executive Officer, Chief
Operating Officer, [list others] as of the Effective Date.
"Letter of Credit" means a standby letter of credit issued by Bank or
another institution based upon an application, guarantee, indemnity or similar
agreement on the part of Bank as set forth in Section 2.1.2.
"Letter of Credit Application" is defined in Section 2.1.2(a).
"Letter of Credit Reserve" has the meaning set forth in Section
2.1.2(d).
"LIBOR" means, for any Interest Rate Determination Date with respect to
an Interest Period for any Advance to be made, continued as or converted into a
LIBOR Advance, the rate of interest per annum determined by Bank to be the per
annum rate of interest at which deposits in United States Dollars are offered to
Bank in the London interbank market (rounded upward, if necessary, to the
nearest 1/100th of one percent (0.01%)) in which Bank customarily participates
at 11:00 a.m. (local time in such interbank market) two (2) Business Days prior
to the first day of such Interest Period for a period approximately equal to
such Interest Period and in an amount approximately equal to the amount of such
Advance.
"LIBOR Advance" means an Advance that bears interest based at the LIBOR
Rate.
"LIBOR Rate" means, for each Interest Period in respect of LIBOR
Advances comprising part of the same Advances, an interest rate per annum
(rounded upward to the nearest 1/16th of one percent (0.0625%)) equal to LIBOR
for such Interest Period divided by one (1) minus the Reserve Requirement for
such Interest Period.
"LIBOR Rate Margin" is three hundred fifty (350) basis points.
"Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Amount" in respect of each Equipment Advance is the original
principal amount of such Equipment Advance.
"Loan Documents" are, collectively, this Agreement, the Perfection
Certificate, any note, or notes or guaranties executed by Borrower or any
Guarantor, and any other present or future agreement between Borrower any
Guarantor and/or for the benefit of Bank in connection with this Agreement, all
as amended, restated, or otherwise modified.
"Material Adverse Change" is (a) a material impairment in the
perfection or priority of Bank's Lien in the Collateral or in the value of such
Collateral; (b) a material adverse change in the business, operations, or
condition (financial or otherwise) of Borrower; (c) a material impairment of the
prospect of repayment of any portion of the Obligations or (d) Bank determines,
based upon information available to it and in its reasonable judgment, that
there is a reasonable likelihood that Borrower shall fail to comply with one or
more of the financial covenants in Section 6 during the next succeeding
financial reporting period.
"Material Indebtedness" is any Indebtedness the principal amount of
which is equal to or greater than $100,000, and in any event, includes the
Indebtedness evidenced by the Indenture.
"Notice of Borrowing" means a notice given by Borrower to Bank in
accordance with Section 3.2(a), substantially in the form of Exhibit B-1, with
appropriate insertions.
"Notice of Conversion/Continuation" means a notice given by Borrower to
Bank in accordance with Section 3.5, substantially in the form of Exhibit B-2,
with appropriate insertions.
"Obligations" are Borrower's obligation to pay when due any debts,
principal, interest, Bank Expenses and other amounts Borrower owes Bank now or
later, whether under this Agreement, the Loan Documents, or otherwise,
including, without limitation, all obligations relating to letters of credit,
cash management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and the performance of Borrower's
duties under the Loan Documents.
"Operating Documents" are, for any Person, such Person's formation
documents, as certified with the Secretary of State of such Person's state of
formation on a date that is no earlier than 30 days prior to the Effective Date,
and, (a) if such Person is a corporation, its bylaws in current form, (b) if
such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its
partnership agreement (or similar agreement), each of the foregoing with all
current amendments or modifications thereto.
"Overall Sublimit" shall mean that the total of the Letter of Credit
Sublimit, the aggregate Foreign Exchange Reserve and the Cash Management
Sublimit (collectively, the "Sublimits") shall not exceed $10,000,000 at any
time and such combined overall limitations shall supersede and control the
aggregate amount of Credit Extensions pertaining to Letters of Credit, FX
Forward Contracts and Cash Management Services utilizations.
"Perfection Certificate" is defined in Section 5.1.
"Permitted Distributions" means:
(a) purchases of capital stock from former employees, consultants and
directors pursuant to repurchase agreements or other similar agreements in an
aggregate amount not to exceed $100,000 in any fiscal year provided that at the
time of such purchase no Default or Event of Default has occurred and is
continuing;
(b) distributions or dividends consisting solely of Borrower's capital
stock; and
(c) purchases of fractional shares of capital stock arising out of
stock dividends, splits or combinations or business combinations;
"Permitted Indebtedness" is:
(a) Borrower's Indebtedness to Bank under this Agreement or any other
Loan Document;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investments" are:
(a) Investments existing on the Effective Date; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agencies or any State maturing within 1
year from its acquisition, (ii) commercial paper maturing no more than 2 years
after its creation and having the highest rating from either Standard & Poor's
Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., and (iii) Bank's certificates of
deposit maturing no more than 2 years after issue;
"Permitted Liens" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank's security interests;
(c) Purchase money Liens (i) on equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;
(d) Non-exclusive licenses or sublicenses granted in the ordinary
course of Borrower's business and, with respect to any licenses where Borrower
is the licensee, any interest or title of a licensor or under any such license
or sublicense, if the licenses and sublicenses permit granting Bank a security
interest;
(e) Leases or subleases entered into in the ordinary course of
Borrower's business, including in connection with Borrower's leased premises or
leased property;
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
"Person" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
"Prime Rate" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.
"Prime Rate Advance" means an Advance that bears interest based at the
Prime Rate. "Prime Rate Margin" is one percentage point (1.00%).
"Quick Assets" is, on any date, Borrower's consolidated, unrestricted
cash, Cash Equivalents, net billed accounts receivable and investments with
maturities of fewer than 12 months determined according to GAAP.
"Registered Organization" is any "registered organization" as defined
in the Code with such additions to such term as may hereafter be made
"Regulatory Change" means, with respect to Bank, any change on or after
the date of this Agreement in United States federal, state, or foreign laws or
regulations, including Regulation D, or the adoption or making on or after such
date of any interpretations, directives, or requests applying to a class of
lenders including Bank, of or under any United States federal or state, or any
foreign laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Reserve Requirement" means, for any Interest Period, the average
maximum rate at which reserves (including any marginal, supplemental, or
emergency reserves) are required to be maintained during such Interest Period
under Regulation D against "Eurocurrency liabilities" (as such term is used in
Regulation D) by member banks of the Federal Reserve System. Without limiting
the effect of the foregoing, the Reserve Requirement shall reflect any other
reserves required to be maintained by Bank by reason of any Regulatory Change
against (a) any category of liabilities which includes deposits by reference to
which the LIBOR Rate is to be determined as provided in the definition of LIBOR
or (b) any category of extensions of credit or other assets which include
Advances.
"Responsible Officer" is any of the Chief Executive Officer, President,
Chief Financial Officer and Controller of Borrower.
"Revolving Line" is an Advance or Advances in an aggregate amount of up
to Twenty-Five Million Dollars ($25,000,000) outstanding at any time.
"Revolving Line Maturity Date" is March 1, 2007.
"Securities Account" is any "securities account" as defined in the Code
with such additions to such term as may hereafter be made.
"Settlement Date" is defined in Section 2.1.3.
"Subordinated Debt" is (a) Indebtedness incurred by Borrower
subordinated to Borrower's Indebtedness owed to Bank and which is reflected in a
written agreement in a manner and form reasonably acceptable to Bank and
approved by Bank in writing, (b) all Indebtedness under the [Indenture], and (c)
to the extent the terms of subordination do not change adversely to Bank,
refinancings, refundings, renewals, amendments or extensions of any of the
foregoing.
"Subsidiary" means, with respect to any Person, any Person of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by such Person or one or more Affiliates of
such Person.
"Total Liabilities" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion of Subordinated Debt permitted by Bank to
be paid by Borrower, but excluding all other Subordinated Debt.
"Transfer" is defined in Section 7.1.
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the Effective Date.
BORROWER:
VITESSE SEMICONDUCTOR CORPORATION
By /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
BORROWER:
VITESSE INTERNATIONAL, INC.
By /s/ ▇▇▇ ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
BANK:
SILICON VALLEY BANK
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Relationship Manager
Effective Date: 3/2/06
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest in and to
the following personal property:
All goods, Accounts (including health-care receivables), Equipment,
Inventory, contract rights or rights to payment of money, leases, license
agreements, franchise agreements, General Intangibles (except as provided
below), commercial tort claims, documents, instruments (including any promissory
notes), chattel paper (whether tangible or electronic), cash, deposit accounts,
fixtures, letters of credit rights (whether or not the letter of credit is
evidenced by a writing), securities, and all other investment property,
supporting obligations, and financial assets, whether now owned or hereafter
acquired, wherever located; and
All Borrower's Books relating to the foregoing, and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral does not include any of
the following, whether now owned or hereafter acquired any copyright rights,
copyright applications, copyright registrations and like protections in each
work of authorship and derivative work, whether published or unpublished, any
patents, patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions, and
continuations-in-part of the same, trademarks, service marks and, to the extent
permitted under applicable law, any applications therefor, whether registered or
not, and the goodwill of the business of Borrower connected with and symbolized
thereby, know-how, operating manuals, trade secret rights, rights to unpatented
inventions, and any claims for damage by way of any past, present, or future
infringement of any of the foregoing; provided, however, the Collateral shall
include all Accounts, license and royalty fees and other revenues, proceeds, or
income arising out of or relating to any of the foregoing.
Pursuant to the terms of a certain negative pledge arrangement with
Bank, Borrower has agreed not to encumber any of its copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
patent applications and like protections, including improvements, divisions,
continuations, renewals, reissues, extensions, and continuations-in-part of the
same, trademarks, service marks and, to the extent permitted under applicable
law, any applications therefor, whether registered or not, and the goodwill of
the business of Borrower connected with and symbolized thereby, know-how,
operating manuals, trade secret rights, rights to unpatented inventions, and any
claims for damage by way of any past, present, or future infringement of any of
the foregoing, without Bank's prior written consent.
EXHIBIT B-1
FORM OF NOTICE OF BORROWING
Date: ______________
TO: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Services Department
RE: Loan and Security Agreement dated as of February __, 2006 (as
amended, modified, supplemented or restated from time to time, the
"Loan Agreement"), by and between VITESSE SEMICONDUCTOR CORPORATION
AND VITESSE INTERNATIONAL, INC. (jointly and severally, the
"Borrower"), and Silicon Valley Bank (the "Bank")
Ladies and Gentlemen:
The undersigned refers to the Loan Agreement, the terms defined therein
and used herein as so defined, and hereby gives you notice irrevocably, pursuant
to Section 3.4(a) of the Loan Agreement, of the borrowing of an Advance.
1. The Funding Date, which shall be a Business Day, of the requested
borrowing is _______________.
2. The aggregate amount of the requested borrowing is $_____________.
3. The requested Advance shall consist of $___________ of Prime Rate
Advances and $______ of LIBOR Advances.
4. The duration of the Interest Period for the LIBOR Advances included in
the requested Advance shall be __________ months.
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the proposed Advance before
and after giving effect thereto, and to the application of the proceeds
therefrom, as applicable:
(a) all representations and warranties of Borrower contained
in the Loan Agreement are true, accurate and complete in all material
respects as of the date hereof;
(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed Advance; and
(c) the requested Advance will not cause the aggregate
principal amount of the outstanding Advances to exceed the limitations
set forth in the Loan Agreement..
BORROWER VITESSE SEMICONDUCTOR CORPORATION
VITESSE INTERNATIONAL, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
For internal Bank use only
-------------------- --------------- ------------------ -----------------------
LIBOR Pricing Date LIBOR LIBOR Variance Maturity Date
-------------------- --------------- ------------------ -----------------------
----%
EXHIBIT B-2
FORM OF NOTICE OF CONVERSION/CONTINUATION
Date:
-----------------------
TO: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
RE: Loan and Security Agreement dated as of February __, 2006 (as amended,
modified, supplemented or restated from time to time, the "Loan
Agreement"), by and between VITESSE SEMICONDUCTOR CORPORATION AND
VITESSE INTERNATIONAL, INC. (jointly and severally, the "Borrower"),
and Silicon Valley Bank (the "Bank")
Ladies and Gentlemen:
The undersigned refers to the Loan Agreement, the terms defined therein
being used herein as therein defined, and hereby gives you notice irrevocably,
pursuant to Section 3.5 of the Loan Agreement, of the [conversion]
[continuation] of the Advances specified herein, that:
1. The date of the [conversion] [continuation] is , 20___.
2. The aggregate amount of the proposed Advances to be [converted] is $
or [continued] is $ .
3. The Advances are to be [converted into] [continued as] [LIBOR]
[Prime Rate] Advances.
4. The duration of the Interest Period for the LIBOR Advances included
in the [conversion] [continuation] shall be months.
The undersigned, on behalf of Borrower, hereby certifies that the
following statements are true on the date hereof, and will be true on the date
of the proposed [conversion] [continuation], before and after giving effect
thereto and to the application of the proceeds therefrom:
(a) all representations and warranties of Borrower stated in
the Loan Agreement are true, accurate and complete in all material
respects as of the date hereof; and
(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed [conversion]
[continuation].
BORROWER VITESSE SEMICONDUCTOR CORPORATION
VITESSE INTERNATIONAL, INC.
By:
---------------------------------
Name:
--------------------------------
Title:
--------------------------------
For internal Bank use only
------------------ ----------------- ----------------- ---------------------
LIBOR Pricing Date LIBOR LIBOR Variance Maturity Date
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EXHIBIT C
BORROWING BASE CERTIFICATE
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Borrower: VITESSE SEMICONDUCTOR CORPORATION / VITESSE INTERNATIONAL, INC.
Lender: Silicon Valley Bank
Commitment Amount: $25,000,000
Column A Column B
ACCOUNTS RECEIVABLE Domestic Foreign
Accounts Accounts
1. Accounts Receivable Book Value as of ____________________ $ $
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2. Additions (please explain on reverse) $ $
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3. TOTAL ACCOUNTS RECEIVABLE $ $
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ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Un-invoiced Accounts $ $
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5. Amounts over 90 days due $ $
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6. Balance of 50% over 90 day accounts $ $
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7. Credit balances over 90 days $ $
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8. Concentration Limits $ $
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9. [Reserved] $ $
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10. Governmental Accounts $ $
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11. Contra Accounts $ $
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12. Promotion or Demo Accounts $ $
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13. Intercompany/Employee Accounts $ $
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14. Disputed Accounts $ $
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15. Other (please explain on reverse) $ $
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16. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $ $
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17. Eligible Accounts (#3-Column A minus #16-Column A) $
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18. Eligible Foreign Accounts (#3-Column B minus #16-Column B) $
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19. 50% of (#17-column A plus #18-Column B) $
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20. ELIGIBLE AMOUNT OF ACCOUNTS (65% of #17-column A) $
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21. ELIGIBLE AMOUNT OF FOREIGN ACCOUNTS (50% of the lesser $ of (i)
#18-Column B or (ii) #19-Column B)
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BALANCES
22. Maximum Loan Amount $25,000,000
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23. Total Funds Available [Lesser of #22 or (#20 plus #21)] $
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24. Present balance owing on Line of Credit $
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25. Outstanding under Sublimits $
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26. RESERVE POSITION (#23 minus #24 and #25) $
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The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.
COMMENTS: BANK USE ONLY
Received by: _____________________
AUTHORIZED SIGNER
Date: __________________________
By: __________________________ Verified: ________________________
Authorized Signer AUTHORIZED SIGNER
Date: Date: ___________________________
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Compliance Status: Yes No
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FROM: VITESSE SEMICONDUCTOR CORPORATION AND VITESSE INTERNATIONAL, INC.
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The undersigned authorized officer of each of VITESSE SEMICONDUCTOR
CORPORATION AND VITESSE INTERNATIONAL, INC. (jointly and severally, "Borrower")
certifies that under the terms and conditions of the Second Amended and Restated
Loan and Security Agreement between Borrower and Bank (the "Agreement"), (1)
Borrower is in complete compliance for the period ending
_________________________ with all required covenants except as noted below, (2)
there are no Events of Default, (3) all representations and warranties in the
Agreement are true and correct in all material respects on this date except as
noted below; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, (4)
Borrower, and each of its Subsidiaries, has timely filed all required tax
returns and reports, and Borrower has timely paid all foreign, federal, state
and local taxes, assessments, deposits and contributions owed by Borrower except
as otherwise permitted pursuant to the terms of the Agreement, and (5) no Liens
have been levied or claims made against Borrower or any of its Subsidiaries
relating to unpaid employee payroll or benefits of which Borrower has not
previously provided written notification to Bank. Attached are the required
documents supporting the certification. The undersigned certifies that these are
prepared in accordance with generally GAAP consistently applied from one period
to the next except as explained in an accompanying letter or footnotes. The
undersigned acknowledges that no borrowings may be requested at any time or date
of determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered. Capitalized terms used but not otherwise defined
herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No
under "Complies" column.
Reporting Covenant Required Complies
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10-Q and 10-K Filings The earlier to occur of 3 days Yes No
with Compliance Certificate after filing with SEC or 45 days
after quarter end
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A/R & A/P Agings with Monthly within 20 days when Yes No
Borrowing Base Certificate Borrowing Formula is in effect
Financial Covenant Required Actual Complies
Maintain on a Quarterly Basis:
Minimum Liquidity $50,000,000 $______________ Yes No
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Minimum Adjusted Net Profit |X| $1 for QE 3/31/06 $___________ Yes No
|X| $3,000,000 for QE 6/30/06 $___________ Yes No
|X| $6,000,000 for each
quarter thereafter: $___________ Yes No
o Quarter ending
__________
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The following financial covenant analyses and information set forth in
Schedule 1 attached hereto are true and accurate as of the date of this
Certificate.
The following are the exceptions with respect to the certification
above: (If no exceptions exist, state "No exceptions to note.")
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VITESSE SEMICONDUCTOR CORPORATION BANK USE ONLY
Received by: __________________________
By: ______________________________ AUTHORIZED SIGNER
Date: ________________________________
Name: ___________________________
Verified: _____________________________
Title: __________________________ AUTHORIZED SIGNER
Date: ________________________________
VITESSE INTERNATIONAL, INC. Compliance Status: Yes No
By: _____________________________
Name: ___________________________
Title: __________________________
Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
Dated: ____________________
I. Liquidity (Section 6.7(i))
Required: $50,000,000
Actual:
A. Unrestricted cash and Cash Equivalents $____________
B. Current accounts receivable $____________
C. Credit Extensions on Revolving Line $____________
D. Liquidity (line A plus line B minus line C) $____________
Is line D equal to or greater than $50,000,000?
No, not in compliance Yes, in compliance
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II. Minimum Adjusted Net Profit (Section 6.7(ii))
Required: See chart below
Period Adjusted Net Profit
Fiscal quarter ending March 31, 2006 $1
Fiscal quarter ending June 30, 2006 $3,000,000
Each fiscal quarter thereafter $6,000,000
Actual:
A. Net Profit $____________
Add back non-cash charges:
1. Depreciation and amortization $____________
2. Amortization of debt issuance costs $____________
3. Amortization of deferred compensation $____________
4. Stock based compensation $____________
5. Other ___________________________ $____________
6. Other ___________________________ $____________
7. Other ___________________________ $____________
8. Other ___________________________ $____________
9. Other ___________________________ $____________
10. Other ___________________________ $____________
B. Sum of all non-cash charges (sum of lines 1-10) $____________
C. Adjusted Net Profit (line A plus line B) $____________
Is line C equal to or greater than the requirement shown above?
No, not in compliance Yes, in compliance
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