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EXHIBIT 4.8
LOAN AND SECURITY AGREEMENT
$2,000,000 WORKING CAPITAL LINE OF CREDIT
$1,000,000 EQUIPMENT LINE OF CREDIT
PROVIDED BY
SILICON VALLEY BANK
TO
RF MICRO DEVICES, INC.
MARCH 29, 1995
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This LOAN AND SECURITY AGREEMENT is entered into as of March 29, 1995,
by and between SILICON VALLEY BANK, a California-chartered bank with its
principal place of business at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and with
a loan production office located at Wellesley Office Park, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, doing business under the name Silicon Valley
East ("Bank"), and RF MICRO DEVICES, a North Carolina corporation with its
principal place of business at ▇▇▇▇-▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following
terms shall have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means a Revolving Advance or Advances
and an Equipment Advance or Advances.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents, whether or not suit is
brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" has the meaning set forth in Section 2.1
hereof.
"Business Day" means any day that is not a Saturday, Sunday,
or other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the date of this Agreement.
"Code" means the Massachusetts Uniform Commercial Code.
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"Collateral" means the property described on Exhibit A
attached hereto, but specifically excludes any contract rights, general
intangibles, license agreement, franchise agreements or license rights of the
Borrower, or any other similar contracts or rights of the Borrower, now owned or
hereafter acquired, which, with Bank's written consent, prohibit the granting by
the Borrower of a security interest therein or the transfer, conveyance or
assignment by the Borrower of any right or interest therein. The Schedule sets
forth all rights presently or to be owned by Borrower, which rights prohibit the
granting by the Borrower of a security interest therein or the transfer,
conveyance or assignment by the Borrower of any right or interest therein, and
for which Bank has given its consent as of the date of this Agreement.
"Committed Revolving Line" means TWO MILLION AND NO/100THS
Dollars ($2,000,000).
"Committed Equipment Line" means ONE MILLION AND NO/100THS
Dollars ($1,000,000).
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"Current Assets" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Daily Balance" means, with respect to a line of credit, the
aggregate principal balance of Advances made under that line of credit that are
owed at the end of a given day.
"Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank's reasonable judgment and upon notification thereof to Borrower in
accordance with the provisions hereof. Unless otherwise agreed to by Bank,
Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
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(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within ninety (90)
days of invoice date;
(c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is an
Affiliate (other than by virtue of being directly or indirectly under common
ownership or control with Borrower) of Borrower;
(f) Accounts with respect to which the account debtor does not
have its principal place of business in the United States, except for Eligible
Foreign Accounts, and Accounts arising from products shipped to or services
provided to branches or offices located in the United States of any account
debtor that does not have its principal place of business in the United States;
(g) Accounts with respect to which the account debtor is a
federal, state, or local governmental entity or any department, agency, or
instrumentality thereof;
(h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of the amounts owing from Borrower bo the
account debtor;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed forty
percent (40%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; and
(k) Accounts the collection of which Bank reasonably
determines to be doubtful.
"Eligible Foreign Accounts" means Accounts with respect to
which the account debtor does not have its principal place of business in the
United States and that are: (1) covered by credit insurance in form and amount,
and by an insurer satisfactory to Bank less the amount of any deductible(s)
which may be or become owing thereon; or (2) supported by one or more letters of
credit in favor of Bank as beneficiary, in an amount and of a tenor, and issued
by a financial institution, acceptable to Bank; or (3) that Bank approves on a
case-by-case basis.
"Eligible Inventory" means that portion of Borrower's
Inventory that is located at Borrower's principal place of business or such
other locations as are permitted under Section 7.10 and that complies with the
representations and warranties set forth in Section 5.5.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"Equipment Advance" means an Advance under the Committed
Equipment Line.
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"ERISA" means the Employment Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money
or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as Is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.
"Investment" means any beneficial ownership (including stock,
partnership interest or other securities) of any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note
or notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on
(i) the business operations or condition (financial or otherwise) of Borrower
and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay
the Obligations or otherwise perform its obligations under the Loan Documents.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Payment Date" means the 29th calendar day of each month.
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"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Bank pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Subordinated Debt; and
(d) Indebtedness to trade creditors incurred in the ordinary
course of business.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poors Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank.
"Permitted Liens" means the following
(a) Any Liens existing on the Closing Date and disclosed in
the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank's
security interests;
(c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
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"Quick Assets" means, at any date as of which the amount
thereof shall be determined, the consolidated cash, cash-equivalents, accounts
receivable and investments, with maturities not to exceed 90 days, of Borrower
determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive
Officer, the Chief Financial Officer and the Controller of Borrower.
"Revolving Advance" means an Advance under the Committed
Revolving Line.
"Revolving Maturity Date" means MARCH 28, 1997.
"Schedule" means the schedule of exceptions attached hereto.
"Subordinated Debt" means any debt incurred by Borrower that
is subordinated to the debt owing by Borrower to Bank on terms acceptable to
Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i)
any general partnership interest or (ii) more than 50% of the stock of which by
the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.
"Tangible Net Worth" means at any date as of which the amount
thereof shall be determined, the consolidated total assets of Borrower and its
Subsidiaries minus, without duplication, (i) the sum of any amounts attributable
to (a) goodwill, (b) intangible items such as unamortized debt discount and
expense, patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) all reserves not already
deducted from assets, and (ii) Total Liabilities.
"Total Liabilities" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness, but specifically excluding Subordinated
Debt.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
2.1 Revolving Advances. Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Revolving Advances to Borrower
in an aggregate amount not to exceed the Committed Revolving Line or the
Borrowing Base, whichever is less. For purposes of this Agreement, "Borrowing
Base" shall mean an amount equal to SEVENTY FIVE percent (75%) of Eligible
Accounts. Subject to the terms and conditions of this Agreement, amounts
borrowed pursuant to this Section 2.1 may be repaid and reborrowed at any time
during the term of this Agreement.
Whenever Borrower desires a Revolving Advance, Borrower will
notify Bank by facsimile transmission or telephone no later than 3:00 p.m.
Pacific time, on the Business Day that the Revolving Advance is to be made. Each
such notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of Exhibit B hereto. Bank is authorized to make Revolving
Advances under this Agreement, based upon instructions received from a
Responsible Officer, or without instructions if in Bank's discretion such
Revolving Advances are necessary to meet Obligations which have become due and
remain unpaid. Bank shall be entitled to rely on any telephonic notice given by
a person who Bank reasonably believes to be a Responsible Officer, and Borrower
shall indemnify and hold Bank harmless for any damages or loss suffered by Bank
as a result of such
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reliance. Bank will credit the amount of Revolving Advances made under this
Section 2.1 to Borrower's deposit account.
The Committed Revolving Line shall terminate on the Revolving
Maturity Date, at which time all Revolving Advances under this Section 2.1 and
other amounts due under this Agreement (except as otherwise expressly specified
herein) shall be immediately due and payable.
2.1.1 Equipment Advances.
(a) At any time from the date hereof through MARCH
28, 1997 (the "Equipment Availability End Date"), Borrower may from time to time
request advances (each an "Equipment Advance" and collectively, the "Equipment
Advances") from Bank in an aggregate amount not to exceed the Committed
Equipment Line. To evidence the Equipment Advance or Equipment Advances,
Borrower shall deliver to Bank, at the time of each Equipment Advance request, a
Payment/Advance Form in substantially the form of Exhibit B hereto accompanied
by an invoice for the Equipment to be financed. The Equipment Advances shall be
used only to finance Equipment purchased after OCTOBER 31, 1995 and shall not
exceed SEVENTY-FIVE Percent (75%) of the invoice amount of such equipment
approved from time to time by Bank, excluding taxes, shipping, warranty charges,
freight discounts and installation expense.
(b) Interest an Equipment Advances made prior to
SEPTEMBER 29, 1996 shall accrue from the date of each Equipment Advance at the
rate specified in Section 2.3(a), and shall be payable monthly for each month
through SEPTEMBER 1996. Any Equipment Advances that are outstanding on SEPTEMBER
29, 1996 will be payable in THIRTY (30) equal monthly installments of principal,
plus all accrued and unpaid interest, beginning on the Payment Date of each
month following SEPTEMBER 1996.
(c) Interest on Equipment Advances made after
SEPTEMBER 29, 1996 shall accrue from the date of each Equipment Advance at the
rate specified in Section 2.3(a), and shall be payable monthly for each month
through the Equipment Availability End Date. Any Equipment Advances made after
SEPTEMBER 29, 1996 that are outstanding on the month in which the Equipment
Availability End Date falls will be payable in THIRTY (30) equal monthly
installments of principal, plus all accrued and unpaid interest, beginning on
the Payment Date of each month following the Equipment Availability End Date.
(d) When Borrower desires to obtain an Equipment
Advance, Borrower shall notify Bank (which notice shall be irrevocable) by
facsimile transmission to be received no later than 3:00 p.m. Pacific time one
(1) Business Day before the day on which the Equipment Advance is to be made.
Such notice shall be substantially in the form of Exhibit B. The notice shall be
signed by a Responsible Officer and include a copy of the invoice for the
Equipment to be financed.
2.2 Overadvances. If, at any time or for any reason, the
amount of Obligations owed by Borrower to Bank pursuant to Section 2.1 of this
Agreement is greater than the lesser of (i) the Committed Revolving Line or (ii)
the Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount
of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section
2.3(b), any Revolving Advances shall bear interest on the average Daily Balance
at a rate equal to ONE (1.0) percentage point above the Prime Rate, and any
Equipment Advances shall bear interest on the average Daily Balance at a rate
equal to ONE AND SEVENTY FIVE ONE HUNDREDTHS (1.75) percentage points above the
Prime Rate.
(b) Default Rate. All Obligations shall bear
interest, from and after the occurrence of an Event of Default, at a rate equal
to five (5) percentage points above the interest rate applicable under Section
2.3(a).
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(c) Payments. Interest hereunder shall be due and
payable on the Payment Date of each month during the term hereof. Borrower
hereby authorizes Bank to debit any accounts with Bank, including, without
limitation, Account Number 700696970 for payments of principal and interest due
on the Obligations and any other amounts owing by Borrower to Bank. Bank will
notify Borrower of all debits which Bank makes against Borrower's accounts. Any
such debits against Borrower's accounts in no way shall be deemed a set-off. Any
interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then
applicable hereunder.
(d) Computation. In the event the Prime Rate is
changed from time to time hereafter, the applicable rate of interest hereunder
shall be increased or decreased effective as of 12:01 a.m. on the day the Prime
Rate is changed, by an amount equal to such change in the Prime Rate. All
interest chargeable under the Loan Documents shall be computed on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon Pacific time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. A Facility Fee equal to TEN
THOUSAND Dollars ($10,000.00), which fee shall be due on or before the Closing
Date and shall be fully earned and non-refundable;
(b) Financial Examination and Appraisal Fees. Bank's
customary fees and out-of-pocket expenses for Bank's audits of Borrowees
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents;
(c) Bank Expenses. Upon demand from Bank, including,
without limitation, upon the date hereof, all Bank Expenses incurred through the
date hereof, including reasonable attorneys' fees and expenses, and, after the
date hereof, all Bank Expenses, including reasonable attorneys' fees and
expenses, as and when they become due.
2.6 Additional Costs. In case any change in any law,
regulation, treaty or official directive or the interpretation or application
thereof by any court or any governmental authority charged with the
administration thereof or the compliance with any guideline or request of any
central bank or other governmental authority (whether or not having the force of
law), in each case after the date of this Agreement:
(a) subjects Bank to any tax with respect to payments
of principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or
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(c) imposes upon Bank any other condition with
respect to its performance under this Agreement,
and the result of any of the foregoing is to increase the cost
to Bank, reduce the income receivable by Bank or impose any expense upon Bank
with respect to any loans, Bank shall notify Borrower thereof. Borrower agrees
to pay to Bank the amount of such increase in cost, reduction in income or
additional expense as and when such cost, reduction or expense is incurred or
determined, upon presentation by Bank of a statement of the amount and setting
forth Bank's calculation thereof, all in reasonable detail, which statement
shall be deemed true and correct absent manifest error. Bank agrees that it will
allocate all such increased costs among its customers similarly affected in good
faith and in a manner consistent with Sank's customary practices.
2.7 Term. Except as otherwise set forth herein, this Agreement
shall become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the Revolving Maturity
Date. Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Advances under this Agreement immediately and without notice
upon the occurrence, and during the continuance, of an Event of Default.
Notwithstanding termination, Bank's Lien on the Collateral shall remain in
effect for so long as any Obligations are outstanding.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Advance. The obligation of
Bank to make the initial Advance is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement, the Working Capital Promissory
Note and the Equipment Line Promissory Note each duly executed by Borrower;
(b) a certificate of the Secretary of Borrower with
respect to incumbency and resolutions authorizing the execution and delivery of
this Agreement;
(c) financing statements (Forms UCC-l);
(d) insurance certificate(s);
(e) payment of the fees and Bank Expenses then due
specified in Section 2.5 hereof;
(f) and such other documents, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of
Bank to make each Advance, including the initial Advance, is further subject to
the following conditions:
(a) timely receipt by Bank of the Payment/Advance
Form as provided in Section 2.1; and
(b) the representations and warranties contained in
Section 5 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Advance as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Advance. The making of
each Advance shall be deemed to be a representation and warranty by Borrower on
the date of such Advance as to the accuracy of the facts referred to in this
Section 3.2(b).
4. CREATION OF SECURITY INTEREST
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4.1 Grant of Security Interest. Borrower grants and pledges to
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
Borrower acknowledges that Bank may place a "hold" on any Deposit Account
pledged as Collateral to secure the Obligations.
4.2 Delivery of Additional Documentation Required. Borrower
shall from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws of
its state of incorporation and qualified and licensed to do business in, and is
in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery,
and performance of the Loan Documents are within Borrower's powers, have been
duly authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible
title to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are
bona fide existing obligations. The property giving rise to such Eligible
Accounts has been delivered to the account debtor or to the account debtor's
agent for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has not received notice of actual or imminent Insolvency
Proceeding of any account debtor that is included in any Borrowing Base
Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material
respects of good and marketable quality, free from all material defects.
5.6 Name; Location of Chief Executive Office. Except as
disclosed in the Schedule, Borrower has not done business under any name other
than that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.
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5.7 Litigation. Except as set forth in the Schedule, there are
no actions or proceedings pending by or against Borrower or any Subsidiary
before any court or administrative agency in which an adverse decision could
have a Material Adverse Effect or a material adverse effect on Borrower's
interest or Bank's security interest in the Collateral. Borrower does not have
knowledge of any such pending or threatened actions or proceedings.
5.8 No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.9 Solvency. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has
met the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. No event has occurred resulting from Borrower's
failure to comply with ERISA that is reasonably likely to result in Borrower's
incurring any liability that could have a Material Adverse Effect. Borrower is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of the important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.11 Environmental Condition. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or caused
to be filed all tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein.
5.13 Subsidiaries. Borrower does not own any stock,
partnership interest or other equity securities of any Person, except for
Permitted Investments.
5.14 Government Consents. Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower's business as currently
conducted.
5.15 Full Disclosure. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
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6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of
all outstanding Obligations, and for so long as Bank may have any commitment to
make an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain in force, and shall cause each of its Subsidiaries to maintain in
force, to the extent consistent with prudent management of Borrower's business,
all licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall
cause each Subsidiary to meet, the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA. Borrower shall comply,
and shall cause each Subsidiary to comply, with all statutes, laws, ordinances
and government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower
shall deliver to Bank:
(a) as soon as available, but in any event within
thirty (30) days after the end of each month, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during such period, certified by an officer of Borrower reasonably acceptable to
Bank;
(b) as soon as available, but in any event within
ninety (90) days after the end of Borrower's fiscal year, audited consolidated
financial statements of Borrower prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank;
(c) within five (5) days of filing, copies of all
statements, reports and notices sent or made available generally by Borrower to
its security holders or to any holders of Subordinated Debt and all reports on
Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission;
(d) promptly upon receipt of notice thereof, a report
of any legal actions pending or threatened against Borrower or any Subsidiary
that could result in damages or costs to Borrower or any Subsidiary of One
Hundred Thousand Dollars ($100,000) or more; and
(e) such budgets, sales projections, operating plans
or other financial information as Bank may reasonably request from time to time.
Within fifteen (15) days after the last day of each month,
Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in substantially the form of Exhibit C hereto, together with
aged listings of accounts receivable and accounts payable.
Within thirty (30) days after the last day of each month,
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such audits will be
conducted no more often than every TWELVE (12) months unless an Event of Default
has occurred and is continuing.
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6.4 Inventory; Returns. Borrower shall keep all Inventory in
good and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on the
same basis and in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 Taxes. Borrower shall make, and shall cause each
Subsidiary to make, due and timely payment or deposit of all material federal,
state, and local taxes, assessments, or contributions required of it by law, and
will execute and deliver to Bank, on demand, appropriate certificates attesting
to the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the
Collateral insured against loss or damage by fire, theft, explosion, sprinklers,
and all other hazards and risks, and in such amounts, as ordinarily insured
against by other owners in similar businesses conducted in the locations where
Borrower's business is conducted on the date hereof. Borrower shall also
maintain insurance relating to Borrower's ownership and use of the Collateral in
amounts and of a type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such
form, with such companies, and in such amounts as reasonably satisfactory to
Bank. All such policies of property insurance shall contain a lender's loss
payable endorsement, in a form satisfactory to Bank, showing Bank as an
additional loss payee thereof and all liability insurance policies shall show
the Bank as an additional insured, and shall specify that the insurer must give
at least twenty (20) days notice to Bank before canceling its policy for any
reason. Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its
principal depository and operating accounts with Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last day
of each calendar month, a ratio of Quick Assets to Current Liabilities of at
least 1.5 to 1.0.
6.9 Tangible Net Worth. Borrower shall maintain, as of the
last day of each calendar month, a Tangible Net Worth of not less than FIVE
MILLION Dollars ($5,000,000).
6.10 Profitability. Borrower shall not incur net losses
greater than ONE MILLION NINE HUNDRED THOUSAND Dollars ($1,900,000) for the
fiscal quarter ending MARCH 31, 1996, and shall not incur net losses greater
than EIGHT HUNDRED THOUSAND Dollars ($800,000) for the fiscal quarter ending
JUNE 30, 1996, and shall not incur net losses greater than THREE HUNDRED
THOUSAND Dollars ($300,000) for the fiscal quarter ending SEPTEMBER 30, 1996.
Borrower agrees that its allowable net losses for the fiscal quarters ending
DECEMBER 31, 1996 and thereafter shall be subject to determination by Bank after
completion of Borrower's management projections.
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6.11 Liquidity. Borrower shall maintain, as of the last
calendar day of each month, liquidity of at least TWO MILLION FIVE HUNDRED
THOUSAND dollars ($2,500,000). Liquidity is defined as cash on hand (and cash
equivalents) plus the Borrowing Base less outstanding Revolving Advances.
6.12 Leverage. Borrower shall maintain, as of the last
calendar day of each month, a ratio of Total Liabilities to Tangible Net Worth
of not more than 0.75 to 1.0.
6.13 Further Assurances. At any time and from time to time
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than: (i) Transfers
of Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any
of its Subsidiaries to engage in any business, other than the businesses
currently engaged in by Borrower and any business substantially similar or
related thereto (or incidental thereto), or undergo a material change in
Borrower's ownership, management or directors. Borrower will not, without thirty
(30) days prior written notification to Bank, relocate its chief executive
office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit
any of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable
with respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any
Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock.
7.7 Investments. Directly or indirectly acquire or own, or
make any Investment in or to any Person, or permit any of its Subsidiaries so to
do, other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a non-affiliated Person.
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7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee,
warehouseman, or similar party unless Bank has received a pledge of the
warehouse receipt covering such Inventory. Except for Inventory sold in the
ordinary course of business and except for such other locations as Bank may
approve in writing, Borrower shall keep the Inventory only at the location set
forth in Section 10 hereof and such other locations of which Borrower gives Bank
prior written notice and as to which Borrower signs and files a financing
statement where needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" controlled by
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the
Federal Fair Labor Standards Act or violate any law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.
7.12 Negative Pledge. Without Bank's prior written consent,
which consent shall not be unreasonably withheld, sell, transfer, assign,
mortgage, pledge, lease, grant a security interest in, or encumber any of
Borrower's intellectual property, including, without limitation, the following:
(a) Any and all trade secrets, and any and all
intellectual property rights in computer software and computer software products
now or hereafter existing, created, acquired or held;
(b) Any and all design rights which may be available
to Borrower now or hereafter existing, created, acquired or held;
(c) All patents, patent applications and like
protections including, without limitation, improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the
same, including without limitation the patents and patent applications;
(d) Any trademark and service ▇▇▇▇ rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire good will of the business of Borrower connected
with and symbolized by such trademarks;
(e) Any and all claims for damages by way of past,
present and future infringements of any of the intellectual property rights
identified above, with the right, but not the obligation, to ▇▇▇ for and collect
such damages for said use or infringement of such intellectual property rights;
(f) All licenses or other right to use any of the
Copyrights, Patents or Trademarks, and all license fees and royalties arising
from such use to the extent permitted by such licenses or rights;
(g) All amendments, extensions, renewals and
extensions of any of the Copyrights, Trademarks or Patents; and
(h) All proceeds and products of the foregoing,
including without limitation all payments under insurance or any indemnity or
warranty payable in respect of any of the foregoing.
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8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement.
8.1 Payment Default. If Borrower fails to pay, when due, any
of the Obligations.
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under
Sections 6.3, 6.7, 6.8, 6.9, 6.10, 6.11 or 6.12 or violates any of the covenants
contained in Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep,
or observe any other material term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Bank and as to any default
under such other term, provision, condition, covenant or agreement that can be
cured, has failed to cure such default within ten (10) days after Borrower
receives notice thereof or any officer of Borrower becomes aware thereof;
provided, however, that if the default cannot by its nature be cured within the
ten (10) day period or cannot after diligent attempts by Borrower be cured
within such ten (10) day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed thirty (30) days) to attempt to cure such default,
and within such reasonable time period the failure to have cured such default
shall not be deemed an Event of Default (provided that no Advances will be
required to be made during such cure period);
8.3 Material Adverse Change. If there (i) occurs a material
adverse change in the business, operations, or condition (financial or
otherwise) of the Borrower, or (ii) is a material impairment of the prospect of
repayment of any portion of the Obligations or (iii) is a material impairment of
the value or priority of Bank's security interests in the Collateral;
8.4 Attachment. If any material portion of Borrower's assets
is attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any trustee, receiver or person acting in a
similar capacity and such attachment, seizure, writ or distress warrant or levy
has not been removed, discharged or rescinded within ten (10) days, or if
Borrower is enjoined, restrained, or in any way prevented by court order from
continuing to conduct all or any material part of its business affairs, or if a
judgment or other claim becomes a lien or encumbrance upon any material portion
of Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action er event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure periods);
8.5 Insolvency. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
is commenced against Borrower and is not dismissed or stayed within ten (10)
days (provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement
to which Borrower is a party with a third party or parties resulting in a right
by such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on
account of Subordinated Debt, except to the extent such payment is allowed under
any subordination agreement entered into with Bank;
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8.8 Judgments. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least Fifty Thousand
Dollars ($50,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default
described in Section 8.5 all Obligations shall become immediately due and
payable without any action by Bank);
(b) Cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(c) Settle or adjust disputes and claims directly
with account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(d) Without notice to or demand upon Borrower, make
such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's owned premises, Borrower hereby grants Bank a
license to enter into possession of such premises and to occupy the same,
without charge, for up to one hundred twenty (120) days in order to exercise any
of Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(e) Without notice to Borrower set off and apply to
the Obligations any and all (i) balances and deposits of Borrower held by Bank,
or (ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank:
(f) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Bank is hereby granted a license or other right,
solely pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1. To the
extent not in violation of any license or franchise agreement to which Borrower
is a party, now or hereafter existing, Borrower's rights under all licenses and
all franchise agreements shall inure to Bank's benefit;
(g) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable;
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(h) Bank may credit bid and purchase at any public
sale; and
(i) Any deficiency that exists after disposition of
the Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
▇▇▇▇ of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle, and adjust all claims under and decisions
with respect to Borrower's policies of insurance; and (e) settle and adjust
disputes and claims respecting the accounts directly with account debtors, for
amounts and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. At any time from the date of this
Agreement, Bank may notify any Person owing funds to Borrower of Bank's security
interest in such funds and verify the amount of such Account. Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Committed Revolving Line as Bank deems necessary to protect
Bank from the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type discussed in Section 6.6 of this Agreement, and
take any action with respect to such policies as Bank deems prudent. Any amounts
so paid or deposited by Bank shall constitute Bank Expenses, shall be
immediately due and payable, and shall bear interest at the then applicable rate
hereinabove provided, and shall be secured by the Collateral. Any payments made
by Bank shall not constitute an agreement by Bank to make similar payments in
the future or a waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies
with reasonable banking practices, Bank shall not in any way or manner be liable
or responsible for: (a) the safekeeping of the Collateral; (b) any loss or
damage thereto occurring or arising in any manner or fashion from any cause; (c)
any diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
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9.7 Demand; Protest. Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, Compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
If to Borrower RF Micro Devices, Inc.
▇▇▇▇-▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, VP - Finance
FAX: 910 ________
If to Bank Silicon Valley Bank
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, AVP
FAX: ▇▇▇-▇▇▇-▇▇▇▇
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
The laws of the Commonwealth of Massachusetts shall apply to
this Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN
ANY ACTION, SUIT, OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY
REASON OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT
AVAIL ITSELF OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER
ACCEPTS JURISDICTION OF THE COURTS AND VENUE IN SANTA ▇▇▇▇▇ COUNTY, CALIFORNIA.
BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of each
of the parties; provided, however, that neither this Agreement nor any rights
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hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and
hold harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the
performance of all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot
be amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.
12.7 Survival. All covenants, representations and warranties
made in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run,
provided that so long as the obligations set forth in the first sentence of this
Section 12.7 have been satisfied, and Bank has no commitment to make any
Advances or to make any other loans to Borrower, Bank shall release all security
interests granted hereunder and redeliver all Collateral held by it in
accordance with applicable law.
12.8 Confidentiality. In handling any confidential information
Bank shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower, (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order and (iv) as may be required
in connection with the examination, audit or similar investigation of Bank.
Confidential information hereunder shall not include information that either:
(a) is in the public domain or in the knowledge or possession of Bank when
disclosed to Bank, or becomes part of the public domain after disclosure to Bank
through no fault of Bank; or (b) is disclosed to Bank by a third party, provided
Bank does not have actual knowledge that such third party is prohibited from
disclosing such information.
12.9 Effectiveness. This Agreement shall become effective only
when it shall have been executed by Borrower and Bank (provided, however, in no
event shall this Agreement become effective until signed by an officer of Bank
in California).
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as a sealed instrument as of the date first set forth
above.
"Borrower" "Bank"
RF MICRO DEVICES, INC. SILICON VALLEY BANK, doing business
as SILICON VALLEY EAST
By: By:
---------------------------- -----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, VP ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, AVP
SILICON VALLEY BANK
By:
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
By:
------------------------------
Title:
---------------------------
(Signed in Santa ▇▇▇▇▇ County,
California)
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LOAN MODIFICATION AGREEMENT
This LOAN MODIFICATION AGREEMENT is entered into as of December 20,
1996, by and between SILICON VALLEY BANK, a California-chartered bank with its
principal place of business at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and with
a loan production office located at Wellesley Office Park, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, doing business under the name Silicon Valley
East ("Bank"), and RF MICRO DEVICES, INC., a North Carolina corporation with its
principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
("Borrower").
RECITALS
Borrower has borrowed money from Bank pursuant to certain Existing Loan
Documents, as defined below. In consideration of certain financial
accommodations from Bank, and Borrower's continuing obligations under the
Existing Loan Documents, Borrower and Bank agree as follows;
AGREEMENT
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which
may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to,
among other documents, a Working Capital Promissory Note dated March 29, 1996 in
the original principal amount of TWO MILLION AND NO/100THS DOLLARS ($2,000,000)
(the "Working Capital Note"), and an Equipment Line Promissory Note dated March
29, 1996 in the original principal amount of ONE MILLION AND NO/100THS DOLLARS
($1,000,000) (the "Equipment Note"). The Working Capital Note and the Equipment
Note are governed by the terms of a Loan and Security Agreement dated March 29,
1996 between Borrower and Bank, as such loan and Security Agreement may be
amended from time to time (the "Loan Agreement").
Hereinafter, all indebtedness owing by Borrower to Bank shall be
referred to as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured
pursuant to the Loan Agreement. Hereinafter, the Loan Agreement, the Working
Capital Note and the Equipment Note, together with all other documents securing
payment of the indebtedness, shall be referred to as the "Existing Loan
Documents."
3. DESCRIPTION OF CHANGES IN TERMS.
3.1 Modifications to Working Capital Note. The Working Capital Note is
hereby amended as follows:
(a) The maximum principal amount of the Note is increased to
SEVEN MILLION AND NO/100THS DOLLARS ($7,000,000).
(b) The entire principal amount and all accrued interest shall
be due and payable on DECEMBER 19, 1997.
3.2 Modifications to Definitions. Section 1.1 of the Loan Agreement is
hereby amended by substituting the following definitions for those set forth
therein for the same terms, and in the case of new definitions, by adding the
following new definitions to that Section 1.1:
"Advance" of "Advances" means a loan advance under the
Committed Revolving Line.
"Committed Revolving Line" means SEVEN MILLION AND NO/100THS
DOLLARS ($7,000,000).
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The definition of "Eligible Accounts" is amended by deleting
in its entirety subsection (f) of that definition.
"Eligible Foreign Accounts" means Eligible Accounts (i) with
respect to which the account debtor does not have its
principal place of business in the United States and (ii)
arising from products shipped to or services provided to
branches or offices located in the United States of any
account debtor that does not have its principal place of
business in the United States.
"Payment Date" means the 19th calendar day of each month.
"Revolving Maturity Date" means DECEMBER 19, 1997.
"Second Committed Equipment Line" means TWO MILLION AND
NO/100THS DOLLARS ($2,000,000).
"Second Equipment Advance" means an advance under the Second
Committed Equipment Line.
3.3 Modifications to Revolving Advance Provisions. The first paragraph
of Section 2.1 of the Loan Agreement is hereby replaced in its entirety with the
following:
2.1 Revolving Advances. Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Advances to
Borrower in an aggregate amount not to exceed (i) the
Committed Revolving Line or the Borrowing Base, whichever is
less, minus (ii) the face amount of all outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit)
and minus (iii) the Foreign Exchange Reserve. For purposes of
this Agreement, "Borrowing Base" shall mean an amount equal to
EIGHTY percent (80%) of Eligible Accounts; provided, however,
that total Advances outstanding at any time based on Eligible
Foreign Accounts shall not exceed FIVE MILLION DOLLARS
($5,000,000); provided further, however, that this limitation
on total Advances based on Eligible Foreign Accounts may be
decreased by Bank if any issues deemed material by the Bank,
in its sole discretion, are raised by Bank's audit of
Borrower's Accounts. Subject to the terms and conditions of
this Agreement, amounts borrowed pursuant to this Section 2.1
may be repaid and reborrowed at any time during the term of
this Agreement.
3.4 Modifications to Equipment Advance Provisions. Section 2.1.1(a) of
the Loan Agreement is hereby replaced in its entirety with the following:
(a) At any time from the date hereof through
SEPTEMBER 29, 1996 (the "Equipment Availability End Date"),
Borrower may from time to time request advances (each an
"Equipment Advance" and collectively, the "Equipment
Advances") from Bank in an aggregate amount not to exceed the
Committed Equipment Line. To evidence the Equipment Advance or
Equipment Advances, Borrower shall deliver to Bank, at the
time of each Equipment Advance request, a Payment/Advance Form
in substantially the form of Exhibit B hereto accompanied by
an invoice for the Equipment to be financed. The Equipment
Advances shall be used only to finance Equipment purchased aft
October 31, 1995 and shall not exceed SEVENTY-FIVE Percent
(75%) of the invoice amount of such equipment approved from
time to time by Bank, excluding taxes, shipping, warranty
charges, freight discounts and installation expense.
3.5 Provisions for Letters of Credit and Foreign Exchange Transactions.
Sections 2.1.2 and 2.1.3 are hereby added to the Loan Agreement as follows:
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2.1.2 Letters of Credit.
(a) Subject to the terms and conditions of this
Agreement, Bank agrees to issue or cause to be issued Letters
of Credit for the account of Borrower in an aggregate
outstanding face amount not to exceed (i) the lesser of the
Committed Revolving Line or the Borrowing Base, whichever is
less, minus (ii) the then outstanding principal balance of the
Advances; provided that the aggregate face amount of
outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit
Reserve) shall not in any case exceed ONE MILLION Dollars
($1,000,000). Each Letter of Credit shall have an expiry date
no later than three hundred sixty (360) days after the
Revolving Maturity Date provided that Borrower's Letter of
Credit reimbursement obligation shall be secured by cash on
terms acceptable to Bank at any time after the Revolving
Maturity Date if the term of this Agreement is not extended by
Bank. 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 form of standard
Application and Letter of Credit Agreement. 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.
(b) The obligation of Borrower to immediately
reimburse Bank for drawings made under Letters of Credit shall
be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this
Agreement and such Letters of Credit, under all circumstances
whatsoever. Borrower shall indemnify, defend, protect and hold
Bank harmless from any loss, cost, expense or liability,
including without limitation, reasonable attorneys' fees,
arising out of or in connection with any Letters of Credit,
other than loss, cost, expense or liability arising out of the
gross negligence or willful misconduct of Bank.
(c) Borrower may request that Bank issue a Letter of
Credit payable in a currency other than United States Dollars.
If a demand for payment is made under any such Letter of
Credit, Bank shall treat such demand as an Advance to Borrower
of the equivalent of the amount thereof (plus cable charges)
in United States currency at the then prevailing rate of
exchange in San Francisco, California, for sales of that other
currency for cable transfer to the country of which it is the
currency.
(d) Upon the issuance of any letter of credit payable
in a currency other than United States Dollars, Bank shall
create a reserve under the Committed Revolving Line for
letters of credit against fluctuations in currency exchange
rages, in an amount equal to ten percent (10%) of the face
amount of such letter of credit. The amount of such reserve
may be amended by Bank from time to time to account for
fluctuations in the exchange rate. The availability of funds
under the Committed Revolving Line shall be reduced by the
amount of such reserve for so long as such letter of credit
remains outstanding.
2.1.3 Foreign Exchange Contract: Foreign Exchange Settlements.
(a) Subject to the terms of this Agreement, Borrower
may enter into foreign exchange contracts (the "Exchange
Contracts") not to exceed an aggregate amount of FIVE HUNDRED
THOUSAND DOLLARS ($500,000) (the "Contract Limit"), pursuant
to which Bank shall sell to or purchase from Borrower foreign
currency on a spot or future basis. Borrower shall not request
any Exchange Contracts at any time it is out of compliance
with any of the provisions of this Agreement. All Exchange
Contracts must provide for delivery of settlement on or before
the Revolving Maturity Date. The amount available under the
Committed Revolving Line at any time shall be reduced by the
following amounts (the "Foreign Exchange Reserve") on any
given day (the "Determination Date"): (i) on all
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outstanding Exchange Contracts on which delivery is to be
effected or settlement allowed more than two business days
after the Determination Date, 10% of the gross amount of the
Exchange Contracts; plus (ii) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement
allowed within two business days after the Determination Date,
100% of the gross amount of the Exchange Contracts.
(b) Bank May, in its discretion, terminate any
existing Exchange Contracts at any time (a) that an Event of
Default occurs and is continuing or (b) that there is no
sufficient availability under the Committed Revolving Line and
Borrower does not have available funds in its bank account to
satisfy the Foreign Exchange Reserve. If Bank terminates the
Exchange Contracts, and without limitation of any applicable
indemnities, Borrower agrees to reimburse Bank for any and all
reasonable fees, costs and expenses relating thereto or
arising in connection therewith.
(c) Borrower shall not permit the total gross amount
of all Exchange Contracts on which delivery is to be effected
and settlement allowed in any two business day period to be
more than FIFTY THOUSAND DOLLARS ($50,000) (the "Settlement
Limit") nor shall Borrower permit the total gross amount of
all Exchange Contracts to which Borrower is a party,
outstanding at any one time, to exceed the Contract Limit.
Notwithstanding the above, however, the amount which may be
settled in any two (2) business day period may be increased
above the Settlement Limit up to, but in no event to exceed,
the amount of the Contract Limit under either of the following
circumstances:
(i) if there is sufficient availability
under the Committed Revolving Line in the amount of the
Foreign Exchange Reserve as of each Determination Date,
provided that Bank in advance shall reserve the full amount of
the Foreign Exchange Reserve against the Committed Revolving
Line; or
(ii) if there is insufficient availability
under the Committed Revolving Line, as to settlements within
any two (2) business day period, provided that Bank, in its
sole discretion, may: (A) verify good funds overseas prior to
crediting Borrower's deposit account with Bank (in the case of
Borrower's sale of foreign currency); or (B) debit Borrower's
deposit account with Bank prior to delivering foreign currency
overseas (in the case of Borrower's purchase of foreign
currency).
(d) In the case of Borrower's purchase of foreign
currency, Borrower in advance shall instruct Bank upon
settlement either to treat the settlement amount as an advance
under the Committed Revolving line, or to debit Borrower's
account for the amount settled.
(e) Borrower shall execute all standard form
applications and agreements of Bank in connection with the
Exchange Contracts and, without limiting any of the terms of
such applications and agreements, Borrower will pay all
standard fees and charges of Bank in connection with the
Exchange Contracts.
(f) Without limiting any of the other terms of this
Agreement or any such standard form applications and agreement
of Bank, Borrower agrees to indemnify Bank and hold it
harmless, from and against any and all claims, debts,
liabilities, demands, obligations, actions, costs and expenses
(including, without limitation, reasonable attorneys' fees of
counsel of Bank's choice), of every nature and description
which it may sustain or incur, based upon, arising out of, or
in any way relating to any of the Exchange Contracts or any
transactions relating thereto or contemplated thereby, other
than claims, debts, liabilities,
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demands, obligations, actions, costs and expenses arising out
of the gross negligence or willful misconduct of Bank.
3.6 Addition of Second Committed Equipment Line. Section 2.1.4 is
hereby added to the Loan Agreement as follows:
2.1.4 Second Equipment Advances.
(a) At any time from the date hereof through DECEMBER
19, 1997 (the "Second Equipment Availability End Date"),
Borrower may from time to time request advances (each a
"Second Equipment Advance" and collectively, the "Second
Equipment Advances") from Bank in an aggregate amount not to
exceed the Second Committed Equipment Line. To evidence the
Second Equipment Advance or Second Equipment Advances,
Borrower shall deliver to Bank, at the time of each Second
Equipment Advance request, a Payment/Advance Form in
substantially the form of Exhibit B hereto accompanied by an
invoice for the Equipment to be financed. The Second Equipment
Advances shall be used only to finance Equipment purchased
after September 30, 1996 and shall not exceed SEVENTY-FIVE
PERCENT (75%) of the invoice amount of such equipment approved
from time to time by Bank, excluding taxes, shipping, warranty
charges, freight discounts and installation expense.
(b) Interest on Second Equipment Advances shall
accrue from the date of each Equipment Advance at the rate
specified in Section 2.3(a), and shall be payable on the
Payment Date of each month through NOVEMBER, 1997. Any Second
Equipment Advances that are outstanding on DECEMBER 20, 1997
will be payable in THIRTY SIX (36) equal monthly installments
of principal, plus all accrued and unpaid interest, beginning
on the Payment Date of each month starting with JANUARY 1997.
(c) When Borrower desires to obtain a Second
Equipment Advance, Borrower shall notify Bank (which notice
shall be irrevocable) by facsimile transmission to be received
no later than 3:00 p.m. Pacific time one (1) Business Day
before the day on which the Second Equipment Advance is to be
made. Such notice shall be substantially in the form of
Exhibit B. The notice shall be signed by a Responsible Officer
and include a copy of the invoice for the Equipment to be
financed.
3.7 Modifications to Interest Rate Provisions. Section 2.3(a) of the
Loan Agreement is hereby replaced in its entirety with the following:
(a) Interest Rate. Except as set forth in Section
2.3(b), any Revolving Advances shall bear interest on the
average Daily Balance at an annual rate equal to SEVENTY FIVE
ONE-HUNDREDTHS (0.75) percentage points above the Prime Rate,
any Equipment Advances shall bear interest on the average
Daily Balance at a rate equal to ONE AND SEVENTY FIVE
ONE-HUNDREDTHS (1.75) percentage points above the Prime Rate,
and any Second Equipment Advances shall bear interest on the
average Daily Balance at a rate equal to ONE AND FIFTY
ONE-HUNDREDTHS (1.50) percentage points above the Prime Rate.
3.8 Modifications to Financial Reporting Covenants. The seventh
paragraph of Section 6.3 of the Loan Agreement is hereby replaced in its
entirety with the following:
Within TWENTY (20) days after the last day of each month,
Borrower shall deliver to Bank a Borrowing Base Certificate
signed by a Responsible Officer in substantially the form of
Exhibit C hereto, together with aged listings of accounts
receivable and accounts payable.
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3.9 Deletion of Quick Ratio Covenant. Section 6.8 of the Loan Agreement
is hereby deleted in its entirety.
3.10 Modifications to Tangible Net Worth Covenant. Section 6.9 of the
Loan Agreement is hereby replaced in its entirety with the following:
6.9 Tangible Net Worth. Borrower shall maintain, as of the
last day of each calendar month, a Tangible Net Worth of not
less than EIGHTEEN MILLION DOLLARS ($18,000,000).
3.11 Deletion of Profitability Covenant.Section 6.10 of the Loan
Agreement is hereby deleted in its entirety.
3.12 Modifications to Liquidity Covenant. Section 6.11 of the Loan
Agreement is hereby replaced in its entirety with the following:
6.11 Liquidity. Borrower shall maintain, as of the last
calendar day of each month, liquidity of at least 1.50 to 1.0.
Liquidity is defined as the ratio of cash on hand (and cash
equivalents) plus the RESERVE POSITIVE as shown on Borrower's
most recently submitted Borrowing Base Certificate to total
outstanding Equipment Advances and Second Equipment Advances.
3.13 Modifications to Leverage Covenant. Section 6.12 of the Loan
Agreement is hereby replaced in its entirety with the following:
6.12 Leverage. Borrower shall maintain, as of the last
calendar day of each month, a ratio of Total Liabilities to
Tangible Net Worth of not more than 1.0 to 1.0.
3.14 Modifications to Borrowing Base Certificate. Exhibit C of the Loan
Agreement is hereby replaced in its entirety with Exhibit C to this Loan
Modification Agreement.
3.16 Modification to Borrower's Address. Section 10 of the Loan
Agreement is amended by substituting the following address and fax number for
purposes of giving notices to Borrower:
RF Micro Devices, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, VP-Finance
FAX: ▇▇▇-▇▇▇-▇▇▇▇
4. FACILITY FEE. Borrower shall pay to Bank a facility fee of FORTY
FIVE THOUSAND DOLLARS ($45,000), which fee shall be automatically deducted from
any of Borrower's accounts with Bank, including without limitation Account
Number ▇▇▇▇▇▇▇▇, in 12 equal monthly installments, each of $3,750, commencing
with December, 1996, and which fee shall be fully earned and non-refundable, as
well as any reasonable out-of-pocket expenses incurred by the Bank through the
date hereof, including reasonable attorneys' fees and expenses, and after the
date hereof, all Bank Expenses, including reasonable attorneys' fees and
expenses, as and when they become due.
5. CONDITIONS PRECEDENT TO FURTHER ADVANCES. The obligation of Bank to
make further advances to Borrower under these lines is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:
(a) this Loan Modification Agreement and the Second Equipment
Line Promissory Note each duly executed by Borrower;
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(b) payment of the fees and Bank Expenses then due specified
in Section 4 hereof; and
(c) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
6. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described in this Loan Modification
Agreement.
7. NO DEFENSES OF BORROWER. Borrower agrees that as of this date, it
has no defenses against any of the obligations to pay any amounts under the
Indebtedness.
8. CONTINUING VALIDITY. Borrower understands and agrees that (i) in
modifying the Existing Loan Documents, Bank is relying upon Borrower's
representations, warranties and agreements, as set forth in the Existing Loan
Documents, (ii) except as expressly modified pursuant to this Loan Modification
Agreement (including the effects of Section 6 hereof), the Existing Loan
Documents remain unchanged and in full force and effect, (iii) Bank's agreement
to modify the Existing Loan Documents pursuant to this Loan Modification
Agreement shall in no way obligate Bank to make any future modifications to the
Existing Loan Documents, (iv) it is the intention of Bank and Borrower to retain
as liable parties all makers and endorsers of the Existing Loan Documents,
unless a party is expressly released by Bank in writing, (v) no maker, endorser
or guarantor will be released by virtue of this Loan Modification Agreement, and
(vi) the terms of this Section 8 apply not only to this Loan Modification
Agreement but also to all subsequent loan modification agreements, if any.
9. EFFECTIVENESS. This Agreement shall become effective only when it
shall have been executed by Borrower and Bank (provided, however, in no event
shall this Agreement become effective until signed by an officer of Bank in
California).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument as of the date first set forth above.
"Borrower" "Bank"
RF MICRO DEVICES, INC. SILICON VALLEY BANK, doing business
as SILICON VALLEY EAST
By: By:
---------------------------- -----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, VP-Finance ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, VP
SILICON VALLEY BANK
By:
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President, CEO
By:
---------------------------------
Title:
------------------------------
(Signed in Santa ▇▇▇▇▇ County,
California)
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Second Equipment Line Promissory Note
$2,000,000 Greensboro, North Carolina
December 20, 1996
FOR VALUE RECEIVED, the undersigned, RF Micro Devices, Inc., a North
Carolina corporation (the "Borrower"), promises to pay to the order of Silicon
Valley Bank, a California-chartered bank ("Bank"), at such place as the holder
hereof may designate, in lawful money of the United States of America, the
aggregate unpaid principal amount of all advances ("Advances") made by Bank to
Borrower in accordance with the terms of the Loan and Security Agreement between
Borrower and Bank dated March 29, 1996, as amended from time to time (the "Loan
Agreement"), up to a maximum principal amount of TWO MILLION Dollars
($2,000,000), until paid in full. Borrower shall also pay interest on the
aggregate unpaid principal amount of such Advances at the rates and in
accordance with the terms of the Loan Agreement. The entire amount of unpaid
principal under this Note and all accrued but unpaid interest shall be due and
payable in accordance with the terms of the Loan Agreement, but no later than
December 19, 2000.
Borrower irrevocably waives the right to direct the application of any
and all payments at any time hereafter received by Bank from or on behalf of
Borrower, and Borrower irrevocably agrees that Bank shall have the continuing
exclusive right to apply any and all such payments against the then due and
owing obligations of Borrower as Bank may deem advisable. In the absence of a
specific determination by Bank with respect thereto, all payments shall be
applied in the following order: (a) then due and payable fees and expenses; (b)
then due and payable interest payments and mandatory prepayments; and (c) then
due and payable principal payments and optional prepayments.
Bank is hereby authorized by Borrower to endorse on Bank's books and
records each Advance made by Bank under this Note and the amount of each payment
or prepayment of principal of each such Advance received by Bank; it being
understood, however, that failure to make any such endorsement (or any error in
notation) shall not affect the obligations of Borrower with respect to Advances
made hereunder, and payments of principal by Borrower shall be credited to
Borrower notwithstanding the failure to make a notation (or any errors in
notation) thereof on such books and records.
Borrower promises to pay Bank all costs and expenses of collection of
this Note and to pay all reasonable attorneys' fees incurred in such collection,
whether or not there is a suit or action, or in any suit or action to collect
this Note or in any appeal thereof. Borrower waives presentment, demand,
protest, notice of protest, notice of dishonor, notice of nonpayment, and any
and all other notices and demands in connection with the delivery, acceptance,
performance, default or enforcement of this Note, as well as any applicable
statutes of limitations. No delay by Bank in exercising any power or right
hereunder shall operate as a waiver of any power or right. Time is of the
essence as to all obligations hereunder.
This Note is issued pursuant to the Loan Agreement, which shall govern
the rights and obligations of Borrower with respect to all obligations
hereunder.
This Note shall be deemed to be made under, and shall be construed in
accordance with and governed by, the laws of the Commonwealth of Massachusetts,
excluding conflicts of laws and principles.
Executed as an instrument under seal.
RF Micro Devices, Inc.
--------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, VP-Finance
ATTEST:
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President, CEO
8