EXHIBIT 10.20
SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
BORROWER: HARMONIC, INC.
ADDRESS: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
DATE: MARCH 28, 2003
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK ("Silicon"), whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and the borrower(s) named above (jointly and severally,
the "Borrower"), whose chief executive office is located at the above address
("Borrower's Address"). The Schedule to this Agreement (the "Schedule") shall
for all purposes be deemed to be a part of this Agreement, and the same is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 8 below.)
As set forth in the Amendment to Loan Documents of even date between Silicon and
the Borrower, this Loan Agreement amends and restates in its entirety the Second
Amended and Restated Loan and Security Agreement dated March 5, 1999 between
Silicon and Borrower (as previously amended, the "Prior Agreement").
1. LOANS.
1.1 LOANS. Silicon will make loans to Borrower (the "Loans") consisting of
Equipment Loans and Revolving Loans as set forth in the Schedule, in amounts
determined by Silicon in its good faith business judgment, up to the amounts
(the "Credit Limit") shown on the Schedule, provided no Default or Event of
Default has occurred and is continuing, and subject to deduction of Reserves for
accrued interest and such other Reserves as Silicon deems proper from time to
time in its good faith business judgment.
1.2 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Silicon's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans. Silicon may, in its discretion, charge interest to
Borrower's Deposit Accounts maintained with Silicon.
1.3 OVERADVANCES. If at any time or for any reason the total of all
outstanding Loans and all other monetary Obligations exceeds the Credit Limit
(an "Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon the amount of any Overadvance, Borrower agrees to pay Silicon
interest on the outstanding amount of any Overadvance, on demand, at the Default
Rate.
1.4 FEES. Borrower shall pay Silicon the fees shown on the Schedule, which
are in addition to all interest and other sums payable to Silicon and are not
refundable.
1.5 LOAN REQUESTS. To obtain a Loan, Borrower shall make a request to Silicon
by facsimile or telephone. Loan requests received after 12:00 Noon will not be
considered by Silicon until the next Business Day. Silicon may rely on any
telephone request for a Loan given by a person whom Silicon believes is an
authorized representative of Borrower, and Borrower will indemnify Silicon for
any loss Silicon suffers as a result of that reliance.
1.6 LETTERS OF CREDIT. At the request of Borrower, Silicon may, in its good
faith business judgment, issue or arrange for the issuance of letters of credit
for the account of Borrower, in each case in form and substance satisfactory to
Silicon in its sole discretion (collectively, "Letters of Credit"). The
aggregate face amount of all Letters of Credit from time to time outstanding
shall not exceed the amount shown on the Schedule (the "Letter of Credit
Sublimit"), and shall be reserved against Loans which would otherwise be
available hereunder, and in the event at any time there are insufficient Loans
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
available to Borrower for such reserve, Borrower shall deposit and maintain with
Silicon cash collateral in an amount at all times equal to such deficiency,
which shall be held as Collateral for all purposes of this Agreement. Borrower
shall pay all bank charges (including charges of Silicon) for the issuance of
Letters of Credit, together with such additional fee as Silicon's letter of
credit department shall charge in connection with the issuance of the Letters of
Credit. Any payment by Silicon under or in connection with a Letter of Credit
shall constitute a Loan hereunder on the date such payment is made. Each Letter
of Credit shall have an expiry date no later than thirty days prior to the
Maturity Date; provided, that a Letter of Credit may have an expiry date after
said date if 30 days prior to the Maturity Date, Borrower shall deposit and
maintain with Silicon cash collateral in an amount equal to 105% of the face
amount of such Letter of Credit. Borrower hereby agrees to indemnify and hold
Silicon harmless from any loss, cost, expense, or liability, including payments
made by Silicon, expenses, and reasonable attorneys' fees incurred by Silicon
arising out of or in connection with any Letters of Credit, except any loss,
cost, expense or liability arising from the gross negligence or wilful
misconduct of Silicon. Borrower agrees to be bound by the regulations and
interpretations of the issuer of any Letters of Credit guarantied by Silicon and
opened for Borrower's account or by Silicon's interpretations of any Letter of
Credit issued by Silicon for Borrower's account, and Borrower understands and
agrees that Silicon shall not be liable for any error, negligence, or mistake,
whether of omission or commission, in following Borrower's instructions or those
contained in the Letters of Credit or any modifications, amendments, or
supplements thereto, except if the same arises from the gross negligence or
wilful misconduct of Silicon. Borrower understands that Letters of Credit may
require Silicon to indemnify the issuing bank for certain costs or liabilities
arising out of claims by Borrower against such issuing bank. Borrower hereby
agrees to indemnify and hold Silicon harmless with respect to any loss, cost,
expense, or liability incurred by Silicon under any Letter of Credit as a result
of Silicon's indemnification of any such issuing bank except any loss, cost,
expense or liability arising from the gross negligence or wilful misconduct of
Silicon. The provisions of this Loan Agreement, as it pertains to Letters of
Credit, and any other Loan Documents relating to Letters of Credit are
cumulative.
2. SECURITY INTEREST. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Silicon a security interest in
all of the following (collectively, the "Collateral"): all right, title and
interest of Borrower in and to all of the following, whether now owned or
hereafter arising or acquired and wherever located: all Accounts; all Inventory;
all Equipment; all Deposit Accounts; all General Intangibles (including without
limitation all Intellectual Property); all Investment Property; all Other
Property; and any and all claims, rights and interests in any of the above, and
all guaranties and security for any of the above, and all substitutions and
replacements for, additions, accessions, attachments, accessories, and
improvements to, and proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties) of, any and all of the
above, and all Borrower's books relating to any and all of the above. Anything
herein to the contrary notwithstanding, with respect to any subsidiary of
Borrower that is organized under the laws of any jurisdiction outside the United
States (a "Foreign Subsidiary), the "Collateral" shall not include that portion
(if any) of the capital stock (or other equity interests) of such Foreign
Subsidiary owned by Borrower that is in excess of 65% of the aggregate issued
and outstanding capital stock (or other equity interests) of such Foreign
Subsidiary.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.
In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants, throughout the
term of this Agreement and until all Obligations have been paid and performed in
full:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower is and will continue to be,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Borrower is and will continue to be qualified
and licensed to do business in all jurisdictions in which any failure to do so
would result in a Material Adverse Change. The execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby (i) have been duly and validly authorized, (ii) are enforceable against
Borrower in accordance with their terms (except as enforcement may be limited by
equitable principles and by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to creditors' rights generally), and (iii) do not
violate Borrower's articles or certificate of incorporation, or Borrower's
by-laws, or any law or any material agreement or instrument which is binding
upon Borrower or its property, and (iv) do not constitute grounds for
acceleration of any material indebtedness or obligation under any agreement or
instrument which is binding upon Borrower or its property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed in the Representations, or
provided to Silicon under the next sentence, are all prior names of Borrower and
all of Borrower's present and prior trade names. Borrower shall give Silicon 30
days' prior written notice before changing its name or doing business under any
other name. Borrower has complied, and will in the future comply, in all
material respects, with all laws relating to the conduct of business under a
fictitious business name, except where the failure to so comply would not
reasonably be expected to result in a Material Adverse Change.
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the
heading to this Agreement is Borrower's chief executive office unless notice has
been given to Silicon pursuant to this Section 3.3. In addition, Borrower has
places of business and Collateral is located only at the locations set forth in
the Representations unless notice has been given to Silicon pursuant to this
Section 3.3. Borrower will give Silicon at least 30 days prior written notice
before opening any additional place of business, changing its chief executive
office, or moving any of the Collateral to a location other than Borrower's
Address or one of the locations set forth in the Representations, except that
Borrower may maintain sales offices in the ordinary course of business at which
not more than a total of $10,000 fair market value of Equipment is located.
3.4 TITLE TO COLLATERAL; PERFECTION; PERMITTED LIENS.
(a) Borrower is now, and will at all times in the future be, the sole owner
of all the Collateral, except for items of Equipment which are leased to
Borrower. The Collateral now is and will remain free and clear of any and all
liens, charges, security interests, encumbrances and adverse claims, except for
Permitted Liens. Silicon now has, and will continue to have, a first-priority
perfected and enforceable security interest in all of the Collateral, subject
only to the Permitted Liens, and Borrower will at all times defend Silicon and
the Collateral against all claims of others.
(b) Borrower has set forth in the Representations, or in notices to Silicon
given pursuant to this Section 3.4(b), all of Borrower's Deposit Accounts, and
Borrower will give Silicon five Business Days advance written notice before
establishing any new Deposit Accounts and will cause the institution where any
such new Deposit Account is maintained to execute and deliver to Silicon a
control agreement in form sufficient to perfect Silicon's security interest in
the Deposit Account and otherwise satisfactory to Silicon in its good faith
business judgment. Nothing herein limits any requirements which may be set forth
in the Schedule as to where Deposit Accounts will be maintained.
(c) In the event that Borrower shall at any time after the date hereof have
any commercial tort claims against others, which it is asserting or intends to
assert, and in which the potential recovery exceeds $100,000, Borrower shall
promptly notify Silicon thereof in writing and provide Silicon with such
information regarding the same as Silicon shall request (unless providing such
information would waive the Borrower's attorney-client privilege). Such
notification to Silicon shall constitute a grant of a security interest in the
commercial tort claim and all proceeds thereof to Silicon, and Borrower shall
execute and deliver all such documents and take all such actions as Silicon
shall request in connection therewith.
(d) None of the Equipment financed by Silicon now is or will be affixed to
any real property in such a manner, or with such intent, as to become a fixture.
Borrower is not and will not become a lessee under any real property lease
pursuant to which the lessor may obtain any rights in any of the Collateral with
priority over the security interest of Silicon. Whenever any Collateral is
located upon premises in which any third party has an interest, Borrower shall,
whenever requested by Silicon, use its commercially reasonable efforts to cause
such third party to execute and deliver to Silicon, in form acceptable to
Silicon, such waivers and subordinations as Silicon shall specify in its good
faith business judgment. Borrower will keep in full force and effect, and will
comply with all material terms of, any lease of real property where any of the
Collateral now or in the future may be located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in good
working condition (ordinary wear and tear excepted), and Borrower will not use
the Collateral for any unlawful purpose. Borrower will immediately advise
Silicon in writing of any material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements now
or in the future delivered to Silicon have been, and will be, prepared in
conformity with GAAP and now and in the future will fairly present in all
material respects the results of operations and financial condition of Borrower,
in accordance with GAAP, at the times and for the periods therein stated.
Between the last date covered by any such statement provided to Silicon and the
date hereof, there has been no Material Adverse Change.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Except to the extent
contested pursuant to the next sentence, Borrower has timely filed, and will
timely file, all required tax returns and reports (other than such returns and
reports that, individually or in the aggregate, are immaterial), and Borrower
has timely paid, and will timely pay, all foreign, federal, state and local
taxes, assessments, deposits and contributions now or in the future owed by
Borrower (other than such taxes, assessments, deposits and contributions that,
individually or in the aggregate, are immaterial). Borrower may, however, defer
payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Silicon in
writing of the commencement of, and any material development in, any such
proceedings involving more than $50,000, and (iii) posts bonds or takes any
other steps required to keep the contested taxes from becoming a lien upon any
of the Collateral. As of the date of this Agreement and except as set forth on
Schedule 2 to this Agreement, Borrower is unaware of any claims or
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
adjustments proposed for any of Borrower's prior tax years which could result in
additional taxes becoming due and payable by Borrower. Borrower has paid, and
shall continue to pay all amounts necessary to fund all present and future
pension, profit sharing and deferred compensation plans in accordance with their
terms, and Borrower has not and will not withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any such plan which could reasonably be expected to result in
any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
3.9 COMPLIANCE WITH LAW. Except to the extent that the failure to do so could
not reasonably be expected to cause a Material Adverse Change, Borrower has, to
the best of its knowledge, complied, and will comply, in all material respects,
with all provisions of all foreign, federal, state and local laws and
regulations applicable to Borrower, including, but not limited to, those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, and all environmental matters.
3.10 LITIGATION. There is no claim, suit, litigation, proceeding or
investigation pending or (to best of Borrower's knowledge) threatened against or
affecting Borrower in any court or before any governmental agency (or any basis
therefor known to Borrower) which could reasonably be expected to result, either
separately or in the aggregate, in any Material Adverse Change. Borrower will
promptly inform Silicon in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted against Borrower involving
any single claim of $250,000 or more, or involving $500,000 or more in the
aggregate, exclusive of litigation the potential liability in connection with
which is fully insured against.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
4. ACCOUNTS.
4.1 REPRESENTATIONS RELATING TO ACCOUNTS. Borrower represents and warrants to
Silicon as follows: Each Account included in reports of Eligible Accounts by
Borrower to Silicon or shown on Borrower's records as Eligible Accounts, shall,
on the date each Loan is requested and made, (i) represent an undisputed bona
fide existing unconditional obligation of the Account Debtor created by the
sale, delivery, and acceptance of goods or the rendition of services, or the
non-exclusive licensing of Intellectual Property, in the ordinary course of
Borrower's business, and (ii) meet the Minimum Eligibility Requirements set
forth in Section 8 below.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Accounts are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower's books and records are and
shall be genuine and in all respects what they purport to be. All sales and
other transactions underlying or giving rise to each Account shall comply in all
material respects with all applicable laws and governmental rules and
regulations. To the best of Borrower's knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all
Accounts are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO ACCOUNTS. Borrower shall deliver to
Silicon transaction reports and schedules of collections, as provided in the
Schedule, on Silicon's standard forms; provided, however, that Borrower's
failure to execute and deliver the same shall not affect or limit Silicon's
security interest and other rights in all of Borrower's Accounts, nor shall
Silicon's failure to advance or lend against a specific Account affect or limit
Silicon's security interest and other rights therein. If requested by Silicon,
Borrower shall furnish Silicon with copies (or, at Silicon's request, originals)
of all contracts, orders, invoices, and other similar documents, and all
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Accounts, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to Silicon an aged accounts receivable trial balance
as provided in the Schedule. In addition, Borrower shall deliver to Silicon, on
its request, the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Accounts, in the same form as received, with all necessary indorsements, and
copies of all credit memos.
4.4 COLLECTION OF ACCOUNTS. Whether or not an Event of Default has occurred,
Borrower shall direct all Account Debtors to remit all proceeds of Accounts and
General Intangibles to a lockbox account, as Silicon may specify, pursuant to a
lockbox agreement in such form as Silicon may specify. Within one Business Day
after receipt by Silicon of such proceeds in the lockbox account in immediately
available funds, Silicon shall deposit the same into Borrower's operating
account at Silicon, if (i) no Default or an Event of Default has occurred and is
continuing, and (ii) the Streamline Provisions are in effect (as provided in the
Schedule). If the Streamline Provisions are not in effect, any funds received in
the lockbox shall be applied to
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
the Revolving Loans, and Borrower shall hold all payments on, and proceeds of,
Accounts and General Intangibles in trust for Silicon, and Borrower shall
immediately deliver all such payments and proceeds, which are received by
Borrower, to Silicon in their original form, duly endorsed, to be applied to the
Revolving Loans, and any excess shall be remitted to the Borrower. If an Event
of Default has occurred and is continuing, any funds received in the lockbox
shall be applied to the Obligations in such order as Silicon shall determine,
and Borrower shall hold all payments on, and proceeds of, Accounts and General
Intangibles in trust for Silicon, and Borrower shall immediately deliver all
such payments and proceeds, which are received by Borrower, to Silicon in their
original form, duly endorsed, to be applied to the Obligations in such order as
Silicon shall determine.
4.5. REMITTANCE OF PROCEEDS. All proceeds arising from the disposition of any
Collateral shall be delivered, in kind, by Borrower to Silicon in the original
form in which received by Borrower not later than the following Business Day
after receipt by Borrower, to be applied to the Obligations in such order as
Silicon shall determine; provided that, if no Default or Event of Default has
occurred and is continuing, Borrower shall not be obligated to remit to Silicon
the proceeds of the sale of worn out or obsolete Equipment disposed of by
Borrower in good faith in an arm's length transaction for an aggregate purchase
price of $25,000 or less (for all such transactions in any fiscal year).
Borrower agrees that it will not commingle proceeds of Collateral with any of
Borrower's other funds or property, but will hold such proceeds separate and
apart from such other funds and property and in an express trust for Silicon.
Nothing in this Section limits the restrictions on disposition of Collateral set
forth elsewhere in this Agreement.
4.6 DISPUTES. Borrower shall notify Silicon all disputes or claims relating
to Accounts on the regular reports of Eligible Accounts provided to Silicon, and
promptly upon becoming aware of any disputes or claims with respect to Accounts
totaling more than $250,000, Borrower shall notify Silicon of the same. Borrower
shall not forgive (completely or partially), compromise or settle any Account
for less than payment in full, or agree to do any of the foregoing, except that
Borrower may do so, provided that: (i) Borrower does so in good faith, in a
commercially reasonable manner, in the ordinary course of business, and in arm's
length transactions, which are reported to Silicon on the regular reports
provided to Silicon; (ii) no Default or Event of Default has occurred and is
continuing; and (iii) taking into account all such discounts, settlements and
forgiveness, the total outstanding Loans will not exceed the Credit Limit.
4.7 RETURNS. Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower, Borrower shall promptly
determine the reason for such return and promptly issue a credit memorandum to
the Account Debtor in the appropriate amount. In the event any attempted return
occurs after the occurrence and during the continuance of any Event of Default,
Borrower shall hold the returned Inventory in trust for Silicon, and immediately
notify Silicon of the return of the Inventory.
4.8 VERIFICATION. Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Accounts, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.
4.9 NO LIABILITY. Silicon shall not be responsible or liable for any shortage
or discrepancy in, damage to, or loss or destruction of, any goods, the sale or
other disposition of which gives rise to an Account, or for any error, act,
omission, or delay of any kind occurring in the settlement, failure to settle,
collection or failure to collect any Account, or for settling any Account in
good faith for less than the full amount thereof, nor shall Silicon be deemed to
be responsible for any of Borrower's obligations under any contract or agreement
giving rise to an Account. Nothing herein shall, however, relieve Silicon from
liability for its own gross negligence or willful misconduct.
5. ADDITIONAL DUTIES OF BORROWER.
5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.
5.2 INSURANCE. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require and that are customary and in accordance with standard
practices for Borrower's industry and locations, and Borrower shall provide
evidence of such insurance to Silicon. All such property insurance policies
shall name Silicon as a loss payee, and shall contain a lenders loss payee
endorsement in form reasonably acceptable to Silicon. Upon receipt of the
proceeds of any such insurance, Silicon shall apply such proceeds in reduction
of the Obligations as Silicon shall determine in its good faith business
judgment, except that, provided no Default or Event of Default has occurred and
is continuing, Silicon shall release to Borrower insurance proceeds with respect
to Equipment totaling less than $100,000, which shall be utilized by Borrower
for the replacement of the Equipment with respect to which the insurance
proceeds were paid. Silicon may require reasonable assurance that the insurance
proceeds so released will be so used. If Borrower fails to provide or pay
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
for any insurance, Silicon may, but is not obligated to, obtain the same at
Borrower's expense. Borrower shall promptly deliver to Silicon copies of all
material reports made to insurance companies.
5.3 REPORTS. Borrower, at its expense, shall provide Silicon with the written
reports set forth in the Schedule, and such other written reports with respect
to Borrower (including budgets, sales projections, operating plans and other
financial documentation), as Silicon shall from time to time specify in its good
faith business judgment.
5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on one
Business Day's notice, Silicon, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy Borrower's books and records.
Silicon shall take reasonable steps to keep confidential all information
obtained in any such inspection or audit, but Silicon shall have the right to
disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $750 per person per day (or such higher amount as shall represent
Silicon's then current standard charge for the same), plus reasonable
out-of-pocket expenses. In the event Borrower and Silicon schedule an audit more
than 10 days in advance, and Borrower seeks to reschedules the audit with less
than 10 days written notice to Silicon, then (without limiting any of Silicon's
rights or remedies), Borrower shall pay Silicon a cancellation fee of $1,000
plus any out-of-pocket expenses incurred by Silicon, to compensate Silicon for
the anticipated costs and expenses of the cancellation.
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule, Borrower
shall not, without Silicon's prior written consent (which shall be a matter of
its good faith business judgment), do any of the following:
(i) merge or consolidate with another corporation or entity, except that any
wholly-owned subsidiary of Borrower may merge with and into Borrower;
(ii) acquire any assets, except for (A) acquisitions in the ordinary course
of business, and (B) acquisitions of assets (other than equity interests in
other Persons) for an aggregate consideration of not more than $1,000,000 during
the term of this Agreement;
(iii) engage in any business activities substantially different from
Borrower's present business activities;
(iv) sell or transfer any Collateral, except for (A) the sale of finished
Inventory in the ordinary course of Borrower's business, (B) the non-exclusive
licensing of Intellectual Property in the ordinary course of Borrower's
business, (C) the sale of obsolete or unneeded Equipment in the ordinary course
of business, and (D) the sale of Borrower's Accounts to Silicon pursuant to that
certain Restated Non-Recourse Receivables Purchase and Modification Agreement,
dated December 14, 2001 (as amended, restated, supplemented, or otherwise
modified from time to time), between Borrower and Silicon;
(v) store any Inventory or other Collateral with any warehouseman or other
third party, except as disclosed in the Representations or as otherwise
disclosed in writing to Silicon;
(vi) sell any Inventory on a sale-or-return, guaranteed sale, consignment, or
other contingent basis (unless such sales are not reported or classified, in any
reporting delivered by Borrower to Silicon, as generating Eligible Accounts);
(vii) make any loans of any money or other assets, except for Permitted
Investments;
(viii) create, incur, assume, or be liable for any Indebtedness, other than
Permitted Indebtedness;
(ix) guarantee or otherwise become liable with respect to the obligations of
another party or entity (unless such guarantee or other liability of Borrower
constitutes Permitted Indebtedness);
(x) [reserved];
(xi) pay or declare any dividends on Borrower's stock (except for
dividends payable solely in stock of Borrower);
(xii) redeem, retire, purchase or otherwise acquire, directly or indirectly,
any of Borrower's stock;
(xiii) engage, directly or indirectly, in any business other than the
businesses currently engaged in by Borrower or reasonably related thereto; or
(xiv) dissolve or elect to dissolve; or
(xvi) make any Investment other than a Permitted Investment.
Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default would occur as a result of such
transaction. Notwithstanding the foregoing, the Borrower may make loans to
and/or Investments in its wholly-owned subsidiaries, provided that the total of
all such loans and Investments and all other transfers of every kind to such
subsidiaries shall not exceed a total of $4,000,000 in any calendar month in the
aggregate, or a total of more than $25,000,000 in any fiscal year in the
aggregate, and provided that Borrower and its subsidiaries at all times shall
not maintain
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
more than $6,000,000, in the aggregate, of cash and cash equivalents in deposit
and investment accounts of Borrower or any such subsidiary outside the United
States.
5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Silicon, make available Borrower
and its officers, employees and agents and Borrower's books and records, to the
extent that Silicon may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.
5.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may, in its
good faith business judgment, deem necessary or useful in order to perfect and
maintain Silicon's perfected first-priority security interest in the Collateral
(subject to Permitted Liens), and in order to fully consummate the transactions
contemplated by this Agreement.
6. TERM OF REVOLVING LOAN FACILITY AND TERM OF AGREEMENT.
6.1 TERM OF REVOLVING LOAN FACILITY. The period during which Revolving
Loans (as defined in the Schedule) will be made (the "Revolving Loan Period")
shall be from the date of this Agreement to the Revolving Loan Maturity Date set
forth in the Schedule, unless sooner terminated in accordance with the terms of
this Agreement. On and after the Revolving Loan Maturity Date or any earlier
termination of this Agreement, no further Revolving Loans will be made. On the
Revolving Loan Maturity Date or on any earlier termination of this Agreement,
Borrower shall pay in full all outstanding Revolving Loans and any accrued and
unpaid interest thereon.
6.2 EARLY TERMINATION OF REVOLVING LOAN FACILITY AT BORROWER'S OPTION. The
Revolving Loan Period may be terminated prior to the Revolving Loan Maturity
Date by Borrower, effective three business days after written notice of
termination is given by Borrower to Silicon.
6.3 TERM OF AGREEMENT. The term of this Agreement shall be from the date of
this Agreement to the later of the following (the "Maturity Date"): (i) the
termination of the Revolving Loan Period, or (ii) the date the last installment
of principal on the Equipment Loans is due. On the Maturity Date or on any
earlier termination of this Agreement Borrower shall pay in full all Loans and
all other outstanding Obligations, and notwithstanding any termination of this
Agreement all of Silicon's security interests and all of Silicon's other rights
and remedies shall continue in full force and effect until payment and
performance in full of all Obligations.
6.4 EARLY TERMINATION OF AGREEMENT. This Agreement may be terminated prior
to the Maturity Date as follows: (i) by Borrower, effective three business days
after written notice of termination is given to Silicon; or (ii) by Silicon at
any time after the occurrence of an Event of Default, without notice, effective
immediately.
6.5 TERMINATION FEE. If the Revolving Loan Period is terminated by Borrower
under Section 6.2, or if this Agreement is terminated by Borrower or by Silicon
under Section 6.4, then Borrower shall pay to Silicon a termination fee Borrower
shall pay to Silicon a termination fee in an amount equal to three quarters of
one percent (0.75%) of the Maximum Revolving Line (as defined in the Schedule),
provided that such fee shall not be payable if the outstanding Obligations are
repaid with the proceeds of new financing from Silicon. The termination fee
shall be due and payable on the effective date of termination and thereafter
shall bear interest at a rate equal to the highest rate applicable to any of the
Obligations..
6.6 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
outstanding Loans and other Obligations, whether evidenced by installment notes
or otherwise, and whether or not all or any part of such Obligations are
otherwise then due and payable. Without limiting the generality of the
foregoing, if on the Maturity Date, or on any earlier effective date of
termination, there are any outstanding Letters of Credit issued by Silicon or
issued by another institution based upon an application, guarantee, indemnity or
similar agreement on the part of Silicon, then on such date Borrower shall
provide to Silicon cash collateral in an amount equal to 105% of the face amount
of all such Letters of Credit plus all interest, fees and cost due or to become
due in connection therewith (as estimated by Silicon in its good faith business
judgment), to secure all of the Obligations relating to said Letters of Credit,
pursuant to Silicon's then standard form cash pledge agreement. Notwithstanding
any termination of this Agreement, all of Silicon's security interests in all of
the Collateral and all of the terms and provisions of this Agreement shall
continue in full force and effect until all Obligations have been paid and
performed in full; provided that Silicon may, in its sole discretion, refuse to
make any further Loans after termination. No termination shall in any way affect
or impair any right or remedy of Silicon, nor shall any such termination relieve
Borrower of any Obligation to Silicon, until all of the Obligations have been
paid and performed in full. Upon payment and performance in full of all the
Obligations and termination of this Agreement, Silicon shall promptly terminate
its financing statements with respect to the Borrower and deliver to Borrower
such other documents as may be required to fully terminate Silicon's security
interests.
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect when made or deemed to be made; or
(b) Borrower shall fail to pay when due any Loan or any interest thereon or any
other monetary Obligation; or (c) the total Loans and other Obligations
outstanding at any time shall exceed the Credit Limit; or (d) Borrower shall
fail to comply with any of the financial covenants set forth in the Schedule, or
shall fail to perform any other non-monetary Obligation which by its nature
cannot be cured, or shall fail to permit Silicon to conduct an inspection or
audit as specified in Section 5.4 hereof; or (e) Borrower shall fail to perform
any other non-monetary Obligation, which failure is not cured within five
Business Days after the date due; or (f) any levy, assessment, attachment,
seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any
part of the Collateral which is not cured within 10 days after the occurrence of
the same; or (g) any default or event of default occurs under any obligation
secured by a Permitted Lien, which is not cured within any applicable cure
period or waived in writing by the holder of the Permitted Lien; or (h) Borrower
breaches any material contract or obligation, which has resulted or may
reasonably be expected to result in a Material Adverse Change; or (i)
Dissolution, termination of existence, insolvency or business failure of
Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; or (j) the
commencement of any proceeding against Borrower or any guarantor of any of the
Obligations under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 30 days after the date commenced; or (k) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing, or commencement of
proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (l) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or (m) Borrower makes any payment on account of any indebtedness
or obligation which has been subordinated to the Obligations other than as
permitted in the applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way limits
his subordination agreement; or (n) any "person" or "group" (within the meaning
of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934), becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934), directly or indirectly, of a sufficient number of shares of all
classes of stock then outstanding of Borrower ordinarily entitled to vote in the
election of directors, empowering such "person" or "group" (who theretofore did
not have the power to elect a majority of the board of directors of Borrower) to
elect a majority of the board of directors of Borrower; or (o) Borrower shall
generally not pay its debts as they become due, or Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or (p) a Material Adverse Change shall occur. Silicon may cease making any
Loans hereunder during any of the above cure periods, and thereafter if an Event
of Default has occurred and is continuing.
7.2 REMEDIES. Upon the occurrence and during the continuance of any Event of
Default, and at any time thereafter, Silicon, at its option, and without notice
or demand of any kind (all of which are hereby expressly waived by Borrower),
may do any one or more of the following: (a) Cease making Loans or otherwise
extending credit to Borrower under this Agreement or any other Loan Document;
(b) Accelerate and declare all or any part of the Obligations to be immediately
due, payable, and performable, notwithstanding any deferred or installment
payments allowed by any instrument evidencing or relating to any Obligation; (c)
Take possession of any or all of the Collateral wherever it may be found, and
for that purpose Borrower hereby authorizes Silicon without judicial process to
enter onto any of Borrower's
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
premises without interference to search for, take possession of, keep, store, or
remove any of the Collateral, and remain on the premises or cause a custodian to
remain on the premises in exclusive control thereof, without charge for so long
as Silicon deems it necessary, in its good faith business judgment, in order to
complete the enforcement of its rights under this Agreement or any other
agreement; provided, however, that should Silicon seek to take possession of any
of the Collateral by court process, Borrower hereby irrevocably waives: (i) any
bond and any surety or security relating thereto required by any statute, court
rule or otherwise as an incident to such possession; (ii) any demand for
possession prior to the commencement of any suit or action to recover possession
thereof; and (iii) any requirement that Silicon retain possession of, and not
dispose of, any such Collateral until after trial or final judgment; (d) Require
Borrower to assemble any or all of the Collateral and make it available to
Silicon at places designated by Silicon which are reasonably convenient to
Silicon and Borrower, and to remove the Collateral to such locations as Silicon
may deem advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Silicon shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, and other Equipment and all other property
without charge; (f) Sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Silicon shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Silicon deems reasonable, or on Silicon's premises, or elsewhere and
the Collateral need not be located at the place of disposition. Silicon may
directly or through any affiliated company purchase or lease any Collateral at
any such public disposition, and if permissible under applicable law, at any
private disposition. Any sale or other disposition of Collateral shall not
relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Accounts and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes Silicon to endorse or sign Borrower's name on all collections,
receipts, instruments and other documents, to take possession of and open mail
addressed to Borrower and remove therefrom payments made with respect to any
item of the Collateral or proceeds thereof, and, in Silicon's good faith
business judgment, to grant extensions of time to pay, compromise claims and
settle Accounts and the like for less than face value; (h) Offset against any
sums in any of Borrower's general, special or other Deposit Accounts with
Silicon against any or all of the Obligations; and (i) Demand and receive
possession of any of Borrower's federal and state income tax returns and the
books and records utilized in the preparation thereof or referring thereto. All
reasonable attorneys' fees, expenses, costs, liabilities and obligations
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.
Without limiting any of Silicon's rights and remedies, from and after the
occurrence and during the continuance of any Event of Default, the interest rate
applicable to the Obligations shall be increased by an additional four percent
per annum (the "Default Rate").
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and Silicon
agree that a sale or other disposition (collectively, "sale") of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable: (i) Notice of the sale is given to Borrower at least
ten days prior to the sale, and, in the case of a public sale, notice of the
sale is published at least five days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted; (ii) Notice of the
sale describes the collateral in general, non-specific terms; (iii) The sale is
conducted at a place designated by Silicon, with or without the Collateral being
present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m; (v)
Payment of the purchase price in cash or by cashier's check or wire transfer is
required; (vi) With respect to any sale of any of the Collateral, Silicon may
(but is not obligated to) direct any prospective purchaser to ascertain directly
from Borrower any and all information concerning the same. Silicon shall be free
to employ other methods of noticing and selling the Collateral, in its
discretion, if they are commercially reasonable.
7.4 POWER OF ATTORNEY. Upon the occurrence and during the continuance of any
Event of Default, without limiting Silicon's other rights and remedies, Borrower
grants to Silicon an irrevocable power of attorney coupled with an interest,
authorizing and permitting Silicon (acting through any of its employees,
attorneys or agents) at any time, at its option, but without obligation, with or
without notice to Borrower, and at Borrower's expense, to do any or all of the
following, in Borrower's name or otherwise, but Silicon agrees that if it
exercises any right hereunder, it will do so in good faith and in a commercially
reasonable manner: (a) Execute on behalf of Borrower any documents that Silicon
may, in its good faith business judgment, deem advisable in order to perfect and
maintain Silicon's security interest in the Collateral, or in order to exercise
a right of Borrower or Silicon, or in order to fully consummate all the
transactions contemplated under this Agreement, and all other Loan Documents;
(b) Execute on behalf of Borrower, any invoices relating to any Account, any
draft against any Account Debtor and any notice to any Account Debtor, any proof
of claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's
or other lien, or assignment or satisfaction of mechanic's, materialman's or
other lien; (c) Take control in any manner of any cash or non-cash items of
payment or proceeds of Collateral; endorse the name of Borrower upon any
instruments, or documents, evidence of payment or Collateral that may come into
Silicon's possession; (d) Endorse all checks and other forms of remittances
received by Silicon; (e) Pay, contest or settle any lien, charge, encumbrance,
security interest and adverse claim in or to any of the Collateral, or any
judgment based thereon, or otherwise take any action to terminate or discharge
the same; (f) Grant extensions of time to pay, compromise claims and settle
Accounts and General Intangibles for less than face value and execute all
releases and other documents in connection therewith; (g) Pay any sums required
on account of Borrower's taxes or to secure the release of any liens therefor,
or both; (h) Settle and adjust, and give releases of, any insurance claim that
relates to any of the Collateral and obtain payment therefor; (i) Instruct any
third party having custody or control of any books or records belonging to, or
relating to, Borrower to give Silicon the same rights of access and other rights
with respect thereto as Silicon has under this Agreement; and (j) Take any
action or pay any sum required of Borrower pursuant to this Agreement and any
other Loan Documents. Any and all reasonable sums paid and any and all
reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations. In no event shall Silicon's rights under the foregoing
power of attorney or any of Silicon's other rights under this Agreement be
deemed to indicate that Silicon is in control of the business, management or
properties of Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any sale
of the Collateral shall be applied by Silicon first to the reasonable costs,
expenses, liabilities, obligations and attorneys' fees incurred by Silicon in
the exercise of its rights under this Agreement, second to the interest due upon
any of the Obligations, and third to the principal of the Obligations, in such
order as Silicon shall determine in its sole discretion. Any surplus shall be
paid to Borrower or other persons legally entitled thereto; Borrower shall
remain liable to Silicon for any deficiency. If, Silicon, in its good faith
business judgment, directly or indirectly enters into a deferred payment or
other credit transaction with any purchaser at any sale of Collateral, Silicon
shall have the option, exercisable at any time, in its good faith business
judgment, of either reducing the Obligations by the principal amount of purchase
price or deferring the reduction of the Obligations until the actual receipt by
Silicon of the cash therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth in
this Agreement, Silicon shall have all the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on an Account.
"Accounts" means all present and future "accounts" as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all accounts receivable and other sums owing to Borrower.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Business Day" means a day on which Silicon is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.
"Collateral" has the meaning set forth in Section 2 above.
"Contingent Obligation" is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (i) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (ii) any
obligations for undrawn letters of credit for the account of that Person; and
(iii) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; but "Contingent Obligation"
does not include endorsements in the ordinary course of business. The amount of
a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
the guarantee or other support arrangement.
"continuing" and "during the continuance of" when used with reference to a
Default or Event of Default means that the Default or Event of Default has
occurred and has not been either waived in writing by Silicon or cured within
any applicable cure period.
"Default" means any event which with notice or passage of time or both, would
constitute an Event of Default.
"Default Rate" has the meaning set forth in Section 7.2 above.
"Deposit Accounts" means all present and future "deposit accounts" as defined
in the California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all general and special bank accounts, demand accounts, checking accounts,
savings accounts and certificates of deposit.
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
"Eligible Accounts" means Accounts and General Intangibles arising in the
ordinary course of Borrower's business from the sale of goods or the rendition
of services, or the non-exclusive licensing of Intellectual Property, which
Silicon, in its good faith business judgment, shall deem eligible for borrowing.
Without limiting the fact that the determination of which Accounts are eligible
for borrowing is a matter of Silicon's good faith business judgment, the
following (the "Minimum Eligibility Requirements") are the minimum requirements
for a Account to be an Eligible Account: (i) the Account must not be outstanding
for more than 90 days from its invoice date (the "Eligibility Period"), (ii) the
Account must not represent progress ▇▇▇▇▇▇▇▇, or be due under a fulfillment or
requirements contract with the Account Debtor, (iii) the Account must not be
subject to any contingencies (including Accounts arising from sales on
consignment, guaranteed sale or other terms pursuant to which payment by the
Account Debtor may be conditional), (iv) the Account must not be owing from an
Account Debtor with whom Borrower has any dispute (whether or not relating to
the particular Account), (v) the Account must not be owing from an Affiliate of
Borrower, (vi) the Account must not be owing from an Account Debtor which is
subject to any insolvency or bankruptcy proceeding, or whose financial condition
is not acceptable to Silicon, or which, fails or goes out of a material portion
of its business, (vii) the Account must not be owing from the United States or
any department, agency or instrumentality thereof (unless there has been
compliance, to Silicon's satisfaction, with the United States Assignment of
Claims Act), (viii) the Account must not be owing from an Account Debtor located
outside the United States or Canada (except for Accounts owing from Siemans or
from Sumitomo Electric, and except for Accounts pre-approved by Silicon in its
discretion in writing, or backed by a letter of credit satisfactory to Silicon,
or FCIA insured satisfactory to Silicon), (ix) the Account must not be owing
from an Account Debtor to whom Borrower is or may be liable, whether for goods
purchased from such Account Debtor or in connection with deferred revenue or
otherwise (but, in such case, the Account will be deemed not eligible only to
the extent of any amounts owed or potentially owing by Borrower to such Account
Debtor). Accounts owing from one Account Debtor will not be deemed Eligible
Accounts to the extent they exceed 25% of the total Accounts outstanding (except
that said percentage shall be 35% in the case of Eligible Accounts owing from
Comcast Corporation. In addition, if more than 50% of the Accounts owing from an
Account Debtor are outstanding for a period longer than their Eligibility Period
(without regard to unapplied credits) or are otherwise not eligible Accounts,
then all Accounts owing from that Account Debtor will be deemed ineligible for
borrowing. Silicon may, from time to time, in its good faith business judgment,
revise the Minimum Eligibility Requirements, upon written notice to Borrower.
Eligible Accounts will not include Accounts purchased by Silicon from Borrower
pursuant to that certain Restated Non-Recourse Receivables Purchase Agreement
dated September 25, 2001 which shall continue in effect (as amended from time to
time, and with all extensions and renewals thereof, the "Purchase Agreement").
"Equipment" means all present and future "equipment" as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all machinery, fixtures, goods, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing.
"Event of Default" means any of the events set forth in Section 7.1 of this
Agreement.
"GAAP" means generally accepted accounting principles consistently applied.
"General Intangibles" means all present and future "general intangibles" as
defined in the California Uniform Commercial Code in effect on the date hereof
with such additions to such term as may hereafter be made, and includes without
limitation all Intellectual Property, payment intangibles, royalties, contract
rights, goodwill, franchise agreements, purchase orders, customer lists, route
lists, telephone numbers, domain names, claims, income tax refunds, security and
other deposits, options to purchase or sell real or personal property, rights in
all litigation presently or hereafter pending (whether in contract, tort or
otherwise), insurance policies (including without limitation key man, property
damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.
"good faith business judgment" means honesty in fact and good faith (as
defined in Section 1201 of the Code) in the exercise of Silicon's business
judgment.
"including" means including (but not limited to).
"Indebtedness" is (a) indebtedness for borrowed money or the deferred price
of property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"Intellectual Property" means all present and future (a) copyrights,
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, (b) trade secret rights, including all rights to
unpatented inventions and know-how, and confidential information; (c) mask work
or similar rights available for the protection of semiconductor chips; (d)
patents, patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same; (e) trademarks, servicemarks, trade styles,
and trade names, whether or not any of the foregoing are registered,
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
and all applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by any such trademarks; (f) computer software and computer
software products; (g) designs and design rights; (h) technology; (i) all claims
for damages by way of past, present and future infringement of any of the rights
included above; (j) all licenses or other rights to use any property or rights
of a type described above.
"Inventory" means all present and future "inventory" as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products, including without limitation such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returned goods and any documents of title representing
any of the above.
"Investment" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"Investment Property" means all present and future investment property,
securities, stocks, bonds, debentures, debt securities, partnership interests,
limited liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts, and all financial assets held
in any securities account or otherwise, and all options and warrants to purchase
any of the foregoing, wherever located, and all other securities of every kind,
whether certificated or uncertificated.
"Loan Documents" means, collectively, this Agreement, the Representations,
and all other present and future documents, instruments and agreements between
Silicon and Borrower, including, but not limited to those relating to this
Agreement, and all amendments and modifications thereto and replacements
therefor.
"Material Adverse Change" means any of the following: (i) a material adverse
change in the business, operations, or financial or other condition of the
Borrower, or (ii) a material impairment of the prospect of repayment of any
portion of the Obligations; or (iii) a material impairment of the value or
priority of Silicon's security interests in the Collateral.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, or otherwise (including without limitation
those arising under or in connection with the Purchase Agreement and the Acom
Amendment, as defined in the Schedule), whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Silicon in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, termination fees, minimum interest
charges and any other sums chargeable to Borrower under this Agreement or under
any other Loan Documents
"Other Property" means the following as defined in the California Uniform
Commercial Code in effect on the date hereof with such additions to such term as
may hereafter be made, and all rights relating thereto: all present and future
"commercial tort claims" (including without limitation any commercial tort
claims identified in the Representations), "documents", "instruments",
"promissory notes", "chattel paper", "letters of credit", "letter-of-credit
rights", "fixtures", "farm products" and "money"; and all other goods and
personal property of every kind, tangible and intangible, whether or not
governed by the California Uniform Commercial Code.
"Permitted Indebtedness" is: (a) Borrower's indebtedness to Silicon under
this Agreement or any other Loan Document; (b) Indebtedness existing on the
Closing Date and shown on Schedule 2; (c) Indebtedness subordinated to the
Obligations pursuant to a subordination agreement on Silicon's standard form or
otherwise acceptable to Silicon in its good faith business judgment; (d)
Indebtedness secured by Permitted Liens; (e) Indebtedness of Borrower to any
subsidiary of Borrower; and (f) other Indebtedness in an amount not exceeding
$500,000 at any time outstanding.
"Permitted Investments" are: (a) Investments shown on Schedule 2 and existing
on the Closing Date; and (b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States or its agency or any State
maturing within 1 year from its acquisition, (ii) commercial paper maturing no
more than 1 year after its creation and having the highest rating from either
Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., and (iii)
Silicon's certificates of deposit issued maturing no more than 1 year after
issue, and (iv) other Investments provided for in Borrower's investment policy
as approved by Silicon from time to time; (c) Investments accepted in connection
with sales or transfers permitted by Section 5.5; (d) Investments consisting of
(i) travel advances and employee relocation loans and other employee loans and
advances in the ordinary course of business, and (ii) loans to employees,
officers or directors relating to employee stock purchase plans or agreements
approved by Borrower's Board of Directors, the proceeds of which are
concurrently paid to Borrower in consideration for its stock; (e) Investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent
obligations of, and other disputes
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
with, customers or suppliers arising in the ordinary course of business; (f)
Investments consisting of notes receivable of, or prepaid royalties and other
credit extensions, to customers and suppliers in the ordinary course of
business.
"Permitted Liens" means the following: (i) purchase money security interests
in specific items of Equipment; (ii) leases of specific items of Equipment, the
proceeds thereof, accessions thereto and replacements thereof; (iii) liens for
taxes not yet payable; (iv) additional security interests and liens consented to
in writing by Silicon, which consent may be withheld in its good faith business
judgment; (v) security interests being terminated substantially concurrently
with this Agreement; (vi) liens of materialmen, mechanics, warehousemen,
carriers, or other similar liens arising in the ordinary course of business and
securing obligations which are not delinquent; (vii) liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods (ix) Liens in favor
of other financial institutions arising in connection with Borrower's deposit
accounts or securities accounts held at such institutions, provided that Silicon
has a first-priority perfected security interest in such accounts and the
amounts and securities held therein; (x) Leases or subleases of real property
and non-exclusive licenses or sublicenses granted in the ordinary course of
Borrower's business, (xi) Liens arising from judgments, decrees or attachments
in circumstances not constituting an Event of Default; and (xii) Liens in
connection with surety or appeals bonds or letters of credit securing such bonds
or reimbursement obligations in connections with statutory obligations, bids,
tenders or otherwise in the ordinary course of business in an aggregate amount
not exceeding $100,000 for all of the foregoing at any time outstanding. Silicon
will have the right to require, as a condition to its consent under subparagraph
(iv) above, that the holder of the additional security interest or lien sign an
intercreditor agreement on Silicon's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Representations" means the written Representations and Warranties provided
by Borrower to Silicon referred to in the Schedule.
"Reserves" means, as of any date of determination, such amounts as Silicon
may from time to time establish and revise in its good faith business judgment,
reducing the amount of Loans, Letters of Credit and other financial
accommodations which would otherwise be available to Borrower under the lending
formula(s) provided in the Schedule: (a) to reflect events, conditions,
contingencies or risks which, as determined by Silicon in its good faith
business judgment, do or may adversely affect (i) the Collateral or any other
property which is security for the Obligations or its value (including without
limitation any increase in delinquencies of Accounts), (ii) the assets, business
or prospects of Borrower or any Guarantor, or (iii) the security interests and
other rights of Silicon in the Collateral (including the enforceability,
perfection and priority thereof); or (b) to reflect Silicon's good faith belief
that any collateral report or financial information furnished by or on behalf of
Borrower or any Guarantor to Silicon is or may have been incomplete, inaccurate
or misleading in any material respect; or (c) in respect of any state of facts
which Silicon determines in good faith constitutes an Event of Default or may,
with notice or passage of time or both, constitute an Event of Default.
Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with GAAP,
consistently applied. All other terms contained in this Agreement, unless
otherwise indicated, shall have the meanings provided by the Code, to the extent
such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Silicon (including
proceeds of Accounts and payment of the Obligations in full) shall be deemed
applied by Silicon on account of the Obligations two (2) Business Days after
receipt by Silicon of immediately available funds, and, for purposes of the
foregoing, any such funds received after 12:00 Noon on any day shall be deemed
received on the next Business Day. Silicon shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to Silicon in its good faith business judgment, and Silicon may
charge Borrower's loan account for the amount of any item of payment which is
returned to Silicon unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the Obligations may
be applied, and in Silicon's good faith business judgment reversed and
re-applied, to the Obligations, in such order and manner as Silicon shall
determine in its good faith business judgment.
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
9.3 CHARGES TO ACCOUNTS. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable to the Loans. Silicon may also, in its discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.
9.4 MONTHLY ACCOUNTINGS. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within 60 days after such account is
rendered, describing the nature of any alleged errors or omissions.
9.5 NOTICES. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or
by regular first-class mail, or certified mail return receipt requested,
addressed to Silicon or Borrower at the addresses shown in the heading to this
Agreement, or at any other address designated in writing by one party to the
other party. Notices to Silicon shall be directed to the Commercial Finance
Division, to the attention of the Division Manager or the Division Credit
Manager. All notices shall be deemed to have been given upon delivery in the
case of notices personally delivered, or at the expiration of one Business Day
following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.
9.6 SEVERABILITY. Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.
9.7 INTEGRATION. This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between Borrower and Silicon and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.
9.8 WAIVERS; INDEMNITY. The failure of Silicon at any time or times to
require Borrower to strictly comply with any of the provisions of this Agreement
or any other Loan Document shall not waive or diminish any right of Silicon
later to demand and receive strict compliance therewith. Any waiver of any
default shall not waive or affect any other default, whether prior or
subsequent, and whether or not similar. None of the provisions of this Agreement
or any other Loan Document shall be deemed to have been waived by any act or
knowledge of Silicon or its agents or employees, but only by a specific written
waiver signed by an authorized officer of Silicon and delivered to Borrower.
Borrower waives the benefit of all statutes of limitations relating to any of
the Obligations or this Agreement or any other Loan Document, and Borrower
waives demand, protest, notice of protest and notice of default or dishonor,
notice of payment and nonpayment, release, compromise, settlement, extension or
renewal of any commercial paper, instrument, account, General Intangible,
document or guaranty at any time held by Silicon on which Borrower is or may in
any way be liable, and notice of any action taken by Silicon, unless expressly
required by this Agreement. Borrower hereby agrees to indemnify Silicon and its
affiliates, subsidiaries, parent, directors, officers, employees, agents, and
attorneys, and to hold them harmless from and against any and all claims, debts,
liabilities, demands, obligations, actions, causes of action, penalties, costs
and expenses (including reasonable attorneys' fees), of every kind, which they
may sustain or incur based upon or arising out of any of the Obligations, or any
relationship or agreement between Silicon and Borrower, or any other matter,
relating to Borrower or the Obligations; provided that this indemnity shall not
extend to damages proximately caused by the indemnitee's own gross negligence or
willful misconduct. Notwithstanding any provision in this Agreement to the
contrary, the indemnity agreement set forth in this Section shall survive any
termination of this Agreement and shall for all purposes continue in full force
and effect.
9.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Silicon, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon, but nothing herein shall relieve Silicon from
liability for its own gross negligence or willful misconduct.
9.10 AMENDMENT. The terms and provisions of this Agreement may not be waived
or amended, except in a writing executed by Borrower and a duly authorized
officer of Silicon.
9.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.12 ATTORNEYS FEES AND COSTS. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
attorneys' fees and costs Silicon incurs in order to do the following: prepare
and negotiate this Agreement and all present and future documents relating to
this Agreement; obtain legal advice in connection with this Agreement or
Borrower; enforce, or seek to enforce, any of its rights; prosecute actions
against, or defend actions by, Account Debtors; commence, intervene in, or
defend any action or proceeding; initiate any complaint to be relieved of the
automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy
claim, third-party claim, or other claim; examine, audit, copy, and inspect any
of the Collateral or any of Borrower's books and records; protect, obtain
possession of, lease, dispose of, or otherwise enforce Silicon's security
interest in, the Collateral; and otherwise represent Silicon in any litigation
relating to Borrower. In satisfying Borrower's obligation hereunder to reimburse
Silicon for attorneys fees, Borrower may, for convenience, issue checks directly
to Silicon's attorneys, Levy, Small & ▇▇▇▇▇▇, but Borrower acknowledges and
agrees that Levy, Small & ▇▇▇▇▇▇ is representing only Silicon and not Borrower
in connection with this Agreement. If either Silicon or Borrower files any
lawsuit against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys' fees, including (but not limited to) reasonable attorneys'
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment. All attorneys' fees and costs to which Silicon
may be entitled pursuant to this Paragraph shall immediately become part of
Borrower's Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.
9.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and Silicon; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Silicon, and any prohibited assignment
shall be void. No consent by Silicon to any assignment shall release Borrower
from its liability for the Obligations.
9.14 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.15 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower against
Silicon, its directors, officers, employees, agents, accountants or attorneys,
based upon, arising from, or relating to this Loan Agreement, or any other Loan
Document, or any other transaction contemplated hereby or thereby or relating
hereto or thereto, or any other matter, cause or thing whatsoever, occurred,
done, omitted or suffered to be done by Silicon, its directors, officers,
employees, agents, accountants or attorneys, shall be barred unless asserted by
Borrower by the commencement of an action or proceeding in a court of competent
jurisdiction by the filing of a complaint within one year after the first act,
occurrence or omission upon which such claim or cause of action, or any part
thereof, is based, and the service of a summons and complaint on an officer of
Silicon, or on any other person authorized to accept service on behalf of
Silicon, within thirty (30) days thereafter. Borrower agrees that such one-year
period is a reasonable and sufficient time for Borrower to investigate and act
upon any such claim or cause of action. The one-year period provided herein
shall not be waived, tolled, or extended except by the written consent of
Silicon in its sole discretion. This provision shall survive any termination of
this Loan Agreement or any other Loan Document.
9.16 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used in
this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. This Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed strictly
against Silicon or Borrower under any rule of construction or otherwise.
9.17 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Santa ▇▇▇▇▇ County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.18 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND SILICON EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS,
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN ALL OF
THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER: SILICON:
HARMONIC, INC. SILICON VALLEY BANK
BY /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ BY /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------------ ---------------
President or Vice President Title Vice President
BY /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Secretary or Ass't Secretary
Form: -3 (3/7/02)
Version -5
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SILICON VALLEY BANK
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: HARMONIC, INC.
ADDRESS: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
DATE: MARCH 28, 2003
This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.
1. CREDIT LIMIT
(Section 1.1): (a) Revolving Loans. Loans (the "Revolving
Loans") in an amount not to exceed the
lesser of:
(i) $10,000,000 (the "Maximum
Revolving Line") at any one time
outstanding; or
(ii) 70% (the "Advance Rate") of
the amount of Borrower's Eligible
Accounts (as defined in Section 8
above).
Silicon may, from time to time,
modify the Advance Rate, in its
good faith business judgment, upon
notice to the Borrower, based on
changes in collection experience
with respect to Accounts or other
issues or factors relating to the
Accounts or other Collateral.
(b) Equipment Loans. Loans (the "Equipment
Loans") in a total amount not to exceed the
lesser of:
(i) a total of $3,500,000 or
(ii) 100% (the "Equipment Advance
Rate") of the net purchase price of
new Equipment purchased by
Borrower, located in the United
States, acceptable to Silicon in
its good faith business judgment,
and in which Silicon has a
first-priority perfected security
interest; provided that
(A) the first Equipment
Loan may be based, in
whole or in part, on
used Equipment, if it
was purchased within
six months prior to
the date of the first
Equipment Loan; and
(B) the Equipment Advance
Rate with respect to
used Equipment shall
be 75%.
(c) Equipment Loans--Terms. Equipment Loans
shall be subject to the following terms:
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
(1) Equipment loans previously made
under the Prior Agreement, which
are presently outstanding, shall,
for all purposes hereof be
"Equipment Loans" hereunder and be
governed by all the terms and
conditions of this Agreement,
except that the principal of said
Equipment Loans shall continue to
be payable in accordance with the
payment schedule in effect under
the Prior Agreement. Without
limiting the generality of the
foregoing, Equipment Loans
previously made under the Prior
Agreement, which are presently
outstanding, shall (i) be taken
into account in determining the
maximum amount of Equipment Loans
under Section 1(b)(i) above, and
(ii) bear interest at the rate set
forth in this Schedule, effective
on the date hereof.
(2) The "net purchase price" of
Equipment means the purchase price
thereof, as shown on the applicable
invoice, net of all charges for
taxes, freight, delivery,
insurance, set-up, training,
manuals, fees, service charges and
other similar items; provided that
a maximum of 30% of each Equipment
Loan may be used for the purchase
of transferable software licenses,
leasehold improvements and other
soft costs, including sales tax,
freight and installation expenses.
(3) Equipment Loans shall be made in
disbursements of not less than
$50,000 each.
(4) The initial disbursement of
Equipment Loans may be based on
Equipment purchased by Borrower on
or after September 28, 2002. Other
disbursements of Equipment Loans
shall be based on Equipment
purchased by Borrower within 90
days prior to the date of
disbursement of the Equipment Loan.
(5) Following December 31, 2003, no
further Equipment Loans shall be
made.
(6) Each Equipment Loan shall be repaid
by the Borrower to Silicon in 30
equal monthly payments of
principal, commencing on the first
day of the first month following
the date the Equipment Loan is
disbursed and continuing until the
earlier of the following dates (the
"Equipment Loan Maturity Date"):
(i) the date the Equipment Loans
have been paid in full or (ii) the
date this Agreement terminates by
its terms or is terminated, as
provided in this Agreement. On the
Equipment Loan Maturity Date, the
entire unpaid principal balance of
the Equipment Loans, plus all
accrued and unpaid interest
thereon, shall be due and payable.
Equipment Loans may not be repaid
and reborrowed.
(7) Without limiting any of the other
provisions of this Agreement
relating to Reserves, in the event
the
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
Borrower fails to have Available
Cash (as defined below in Section
2(d)) of at least $20,000,000 as of
the end of any month, then, at all
times thereafter during the term of
this Agreement, there shall be
reserved, from Revolving Loans
otherwise available to Borrower, an
amount equal to the unpaid
principal balance of the Equipment
Loans from time to time
outstanding, and if, for any
reason, there are not sufficient
Revolving Loans otherwise available
to Borrower for such reserve,
Borrower shall repay the
outstanding Revolving Loans in an
amount sufficient so that there can
be reserved from Revolving Loans
otherwise available to Borrower an
amount equal to the unpaid
principal balance of the Equipment
Loans. If for any reason, even
after paying in full all
outstanding Revolving Loans, there
are not sufficient Revolving Loans
otherwise available to Borrower to
reserve therefrom an amount equal
to the unpaid principal balance of
the Equipment Loans, then Borrower
shall provide cash collateral to
Silicon in an amount equal to the
unpaid principal balance of the
Equipment Loans from time to time
outstanding.
Acom Reserve: As provided in Section 8(5) below.
Letter of Credit
Sublimit
(Section 1.6): $2,500,000, provided that the total Letter of Credit
Sublimit and Foreign Exchange Contract Sublimit shall
not, at any time, exceed $2,500,000.
Foreign Exchange
Contract Sublimit: $2,500,000, provided that the total Letter of Credit
Sublimit and the Foreign Exchange Contract Sublimit
shall not, at any time, exceed $2,500,000.
Borrower may enter into foreign exchange forward
contracts with Silicon, on its standard forms, under
which Borrower commits to purchase from or sell to
Silicon a set amount of foreign currency more than
one business day after the contract date (the "FX
Forward Contracts"); provided that (1) at the time
the FX Forward Contract is entered into Borrower has
Loans available to it under this Agreement in an
amount at least equal to 10% of the amount of the FX
Forward Contract; (2) the total FX Forward Contracts
at any one time outstanding may not exceed 10 times
the amount of the Foreign Exchange Contract Sublimit
set forth above. Silicon shall have the right to
withhold, from the Loans otherwise available to
Borrower under this Agreement, a reserve (which shall
be in addition to all other reserves) in an amount
equal to 10% of the total FX Forward Contracts from
time to time outstanding, and in the event at any
time there are insufficient Loans available to
Borrower for such reserve, Borrower
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
shall deposit and maintain with Silicon cash
collateral in an amount at all times equal to such
deficiency, which shall be held as Collateral for all
purposes of this Agreement. Silicon may, in its
discretion, terminate the FX Forward Contracts at any
time that an Event of Default occurs and is
continuing. Borrower shall execute all standard form
applications and agreements of Silicon in connection
with the FX Forward Contracts, and without limiting
any of the terms of such applications and agreements,
Borrower shall pay all standard fees and charges of
Silicon in connection with the FX Forward Contracts.
Cash Management
Services and Reserves: Borrower may use up to $1,500,000 of Revolving Loans
available hereunder for Silicon's Cash Management
Services (as defined below), including, merchant
services, business credit card, ACH and other
services identified in the cash management services
agreement related to such service (the "Cash
Management Services"). Silicon may, in its sole
discretion, reserve against Revolving Loans which
would otherwise be available hereunder such sums as
Silicon shall determine in its good faith business
judgment in connection with the Cash Management
Services, and Silicon may charge to Borrower's Loan
account, any amounts that may become due or owing to
Silicon in connection with the Cash Management
Services. Borrower agrees to execute and deliver to
Silicon all standard form applications and agreements
of Silicon in connection with the Cash Management
Services, and, without limiting any of the terms of
such applications and agreements, Borrower will pay
all standard fees and charges of Silicon in
connection with the Cash Management Services. The
Cash Management Services shall terminate on the
Maturity Date.
2. INTEREST.
INTEREST RATE (Section 1.2):
(a) Revolving Loans. The Revolving Loans shall bear
interest at a rate equal to the "Prime Rate" in
effect from time to time, plus 0.75% per annum,
provided that:
(i) If, as of the end of a month,
Borrower has Available Cash (as
defined below) of not less than
$30,000,000, or for the three
months ended as of the end of a
month, Borrower has net profits of
$1 or more, then, the interest rate
in effect during the following
month shall be a rate equal to the
Prime Rate in effect from time to
time, plus 0.25% per annum; and
(ii) if, as of the end of a month,
Borrower has Available Cash (as
defined below) of less than
$20,000,000, then the interest rate
in effect during the following
month
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
shall be a rate equal to the Prime
Rate in effect from time to time,
plus 1.75% per annum.
(b) Equipment Loans. The Equipment Loans shall bear
interest at a rate equal to the Prime Rate in effect
from time to time, plus 2% per annum, provided that:
if as of the end of a month, Borrower has Available
Cash of not less than $30,000,000, or for the three
months ended as of the end of a month, Borrower has
net profits of $1 or more, then, the interest rate in
effect during the following month shall be a rate
equal to the Prime Rate in effect from time to time,
plus 1.75% per annum.
(c) Calculation; "Prime Rate". All interest shall be
calculated on the basis of a 360-day year for the
actual number of days elapsed. "Prime Rate" means the
rate announced from time to time by Silicon as its
"prime rate", provided that in no event shall the
Prime Rate in effect on any day be less than 4.25%
per annum. Borrower acknowledges that the Prime Rate
is a base rate upon which other rates charged by
Silicon are based, and it is not necessarily the best
rate available at Silicon. The interest rate
applicable to the Obligations shall change on each
date there is a change in the Prime Rate.
(d) "Available Cash" as used herein means as of the
date of calculation, an amount equal to Borrower's
unrestricted cash and cash equivalents minus the
total outstanding Revolving Loans as of such date and
minus the amount of the Divicom Tax Liability as of
such date.
(e) "Divicom Tax Liability" as used herein means the
tax liabilities assumed by Borrower in connection
with its acquisition of DiviCom, a division of C-Cube
Microsystems and any sums which the Borrower is
required to refund to LSI Logic relating to the same.
The amount of the Dividcom Tax Liability at the date
hereof is $20,800,000.
3. FEES (Section 1.4):
Loan Fee: $100,000, payable $75,000 concurrently herewith and
$25,000 on the date of the first disbursement of a
Revolving Loan.
Collateral Monitoring
Fee: $1,250, per month, payable in arrears (prorated for
any partial month at the beginning and at termination
of this Agreement), provided that if the Streamline
Provisions (as defined below) are in effect
throughout a month no Collateral Monitoring Fee shall
be charged for such month.
Unused Line Fee: No Unused Line Fee shall be charged, provided that
if, as of the end of any month, Borrower does not
have Available Cash of at least $20,000,000, then, at
all times thereafter during the term of this
Agreement, Borrower shall pay Silicon an Unused Line
Fee in an
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
amount equal to 0.25% per annum on the difference
between the amount of the Maximum Revolving Line and
the average daily principal balance of the Revolving
Loans outstanding during such period, computed on the
basis of a 360-day year, which Unused Line Fee shall
be computed and paid quarterly, in arrears, on the
first day of the following calendar quarter.
4. REVOVLING LOAN
MATURITY DATE
(Section 6.1): 364 days from the date hereof.
5. FINANCIAL COVENANTS
(Section 5.1): (a) Borrower shall comply with each of the following
covenants. Compliance shall be determined as of the
end of each month:
MAXIMUM NET LOSS: Borrower shall not incur a net loss
(determined in accordance with GAAP) for any three
month period ending as of the end of any fiscal
month, in excess of the following amounts:
-----------------------------------------------------------------------
Three months ending as of the end
of each of the following fiscal Maximum Net Loss for such
months: three-month period
-----------------------------------------------------------------------
Fiscal month ending March 28, 2003 $16,000,000
-----------------------------------------------------------------------
Fiscal months ending April 25, 2003, May $13,000,000
23, 2003 and June 27, 2003
-----------------------------------------------------------------------
Fiscal months ending July 25, 2003 and $ 8,000,000
thereafter
-----------------------------------------------------------------------
(b) LIQUIDITY: solely at such times that Borrower has
less than $10,000,000 of unrestricted cash on deposit
at Silicon, Borrower shall maintain a Liquidity Ratio
of at least 4.00. As used herein, the term "Liquidity
Ratio" means the quotient obtained by dividing (1)
the sum of (y) Borrower's unrestricted cash on
deposit at Silicon, plus (z) the amount of Borrower's
excess availability in respect of Revolving Loans
pursuant to Section 1.1 of the Agreement and Section
1(a) of this Schedule, by (2) the aggregate
outstanding amount of Obligations owing to SVB
(including without limitation amounts Reserved in
respect of Cash Management Services, Letters of
Credit, F/X Forward
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
Contracts, and the Acom Balance). Anything in this
Agreement (including without limitation Section 8(1)
of the Schedule) to the contrary notwithstanding,
Borrower's failure to maintain at least $10,000,000
of unrestricted cash on deposit at Silicon shall not,
in and of itself, constitute an Event of Default
unless Borrower also is not in compliance with this
Section 5(b) of the Schedule.
6. REPORTING.
(Section 5.3):
Borrower shall provide Silicon with the following:
1. Weekly transaction reports and schedules of
collections, on Silicon's standard form.
2. Within 10 days after the end of each month
account statements showing Borrower's cash
as of the end of such month.
3. Monthly accounts receivable agings, aged by
invoice date, within fifteen days after the
end of each month.
4. Monthly accounts payable agings, aged by
invoice date, and outstanding or held check
registers, if any, within fifteen days after
the end of each month.
5. Monthly reconciliations of accounts
receivable agings (aged by invoice date),
transaction reports, deferred revenue
schedules, and general ledger, within
fifteen days after the end of each month.
6. Monthly borrowing base certificate, within
fifteen days after the end of each month.
7. Monthly statement as to the amount of the
Divicom Tax Liability, within fifteen days
after the end of each month.
8. Monthly unaudited financial statements, as
soon as available, and in any event within
thirty days after the end of each month.
9. Monthly Compliance Certificates, within
thirty days after the end of each month, in
such form as Silicon shall reasonably
specify, signed by the Chief Financial
Officer or Corporate Controller of Borrower,
certifying that as of the end of such month
Borrower was in full compliance with all of
the terms and conditions of this Agreement,
and setting forth calculations showing
compliance with the financial covenants set
forth in this Agreement and such other
information as Silicon shall reasonably
request, including, without limitation, a
statement that at the end of such month
there were no held checks.
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
10. Quarterly unaudited financial statements, as
soon as available, and in any event within
forty-five days after the end of each fiscal
quarter of Borrower.
11. Annual operating budgets (including income
statements, balance sheets and cash flow
statements, by quarter) for the upcoming
fiscal year of Borrower within thirty days
prior to the end of each fiscal year of
Borrower.
12. Annual financial statements, as soon as
available, and in any event within 90 days
following the end of Borrower's fiscal year,
certified by, and with an unqualified
opinion of, independent certified public
accountants acceptable to Silicon.
7. BORROWER INFORMATION:
Borrower represents and warrants that the information
set forth in the Representations and Warranties of
the Borrower dated March 14, 2003, previously
submitted to Silicon (the "Representations") is true
and correct as of the date hereof.
8. ADDITIONAL PROVISIONS
(1) BANKING RELATIONSHIP. Borrower shall at all
times maintain its primary banking and cash
management relationships with Silicon or SVB
Securities. Without limiting the generality
of the foregoing (but subject to Section
5(b) of this Schedule), Borrower shall, at
all times, maintain the greater of
$10,000,000 or 50% of Borrower's total cash
and cash equivalents with Silicon and SVB
Securities. As to any Deposit Accounts and
investment accounts maintained with another
institution, Borrower shall cause such
institution, within 30 days after the date
of this Agreement, to enter into a control
agreement in form acceptable to Silicon in
its good faith business judgment in order to
perfect Silicon's first-priority security
interest in said Deposit Accounts and
investment accounts.
(2) SUBORDINATION OF INSIDE DEBT. All present
and future indebtedness of Borrower to its
officers, directors and shareholders
("Inside Debt") shall, at all times, be
subordinated to the Obligations pursuant to
a subordination agreement on Silicon's
standard form. Borrower represents and
warrants that there is no Inside Debt
presently outstanding. Prior to incurring
any Inside Debt in the future, Borrower
shall cause the person to whom such Inside
Debt will be owed to execute and deliver to
Silicon a subordination agreement on
Silicon's standard form.
(3) STREAMLINE PROVISIONS.
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
(a) The Streamline Provisions below shall be applicable if and so long
as Borrower meets the following requirements (the "Streamline Requirements"): As
of the end of the most recent month Borrower had Available Cash of not less than
$20,000,000.
(b) The Streamline Provisions are as follows:
(i) Borrower will not be required to
provide Silicon with weekly
transaction reports and schedules
of collections as provided in
Section 6(1) of this Schedule (but
Borrower shall provide a
transaction report to Silicon with
each request for a Revolving Loan);
and
(ii) Borrower will not be required to
deliver to Silicon the proceeds of
Accounts, as received by Borrower,
as called for by Section 4.4 of
this Loan Agreement to be applied
to the Obligations; and
(c) If at any time the Streamline Requirements are not met,
the Streamline Provisions shall immediately cease to be applicable, and
thereafter Borrower will provide Silicon with weekly transaction reports and
schedules of collections as provided in Section 6(1) of this Schedule, and
Borrower will deliver to Silicon the proceeds of Accounts, as received by
Borrower, as called for by Section 4.4 of this Loan Agreement.
(d) Notwithstanding the foregoing, and without limiting its
other rights and remedies, if any Default or Event of Default has occurred and
is continuing, Silicon may terminate the Streamline Provisions.
(4) AUDITS. Audits under Section 5.4 of this
Loan Agreement shall be limited to one in
each six month period so long as Borrower
has Available Cash of not less than
$20,000,000. If as of the end of any month
Borrower's Available Cash is less than
$20,000,000, then such audits may be
performed up to three times in the next
twelve months. Notwithstanding the
foregoing, nothing herein shall limit
Silicon's right to conduct such audits, if
any Default or Event of Default has occurred
and is continuing, or if Silicon in its good
faith business judgment believes that a
Default or Event of Default may have
occurred or that there has been
deterioration in Borrower's financial
performance or in the Collateral.
(5) ACOM TRANSACTION.
(a) ACOM AMENDMENT. Pursuant to that
certain Amendment dated 2000 to
Second Amended and Restated Loan
and Security Agreement dated as of
March 5, 1999 (as amended, the
"Acom Amendment") between Borrower
and Silicon, Silicon purchased the
rights to payment (the "Payment
Rights") of El Camino Resources de
America Latina, Inc. ("Lessor"),
relating to a lease of certain
equipment (as amended, the "Lease")
by the Lessor to Acom Communicacoes
Ltds. ("Acom"), under a Receivables
Purchase Agreement between Silicon
and the Lessor dated as of April
28, 2000 (the "Acom Purchase
Agreement"), and Borrower agreed to
purchase from Silicon all of the
Payment Rights in certain
circumstances.
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
Pursuant to an Agreement among
Acom, Lessor, Borrower and Silicon,
agreed to by Silicon on May 7,
2002, payments on the Lease were
changed from quarterly payments to
monthly payments as set forth in
the payment schedule in said
Agreement (the "Monthly Payments"),
and the Monthly Payments are
currently $103,796 per month, and
continue hereafter at $103,796 per
month.
(b) ACOM AMENDMENT CONTINUES. Borrower
and Silicon agree that the terms of
the Acom Amendment and the
documents relating thereto continue
in full force and effect, and all
indebtedness, liabilities and
obligations of the Borrower under
or in connection therewith are
included in the "Obligations" as
defined in this Agreement, for all
purposes of this Agreement.
Borrower is currently making the
Monthly Payments under the Lease to
Silicon, and Borrower agrees to
continue to make the Monthly
Payments to Silicon during the term
of this Agreement. On the Maturity
Date (unless sooner paid under
subsection (d) below), Borrower
shall pay Silicon the full unpaid
principal balance of the Monthly
Payments, plus any accrued and
unpaid interest, plus all other
sums due in connection therewith
(collectively, the "Acom Balance").
(c) ACOM RESERVE. Without limiting any
of the other provisions of this
Agreement relating to Reserves,
during the term of this Agreement,
there shall be reserved, from
Revolving Loans otherwise available
to Borrower, an amount equal to the
unpaid Acom Balance from time to
time outstanding, and if, for any
reason, there are not sufficient
Revolving Loans otherwise available
to Borrower for such Reserve,
Borrower shall repay the
outstanding Revolving Loans in an
amount sufficient so that the Acom
Balance can be reserved from
Revolving Loans otherwise available
to Borrower. If for any reason,
even after paying in full all
outstanding Revolving Loans, there
are not sufficient Revolving Loans
otherwise available to Borrower to
reserve the Acom Balance, then
Borrower shall provide cash
collateral to Silicon in an amount
equal to the Acom Balance, which
shall be "Collateral" for all
purposes of this Agreement.
(d) ACOM ASSIGNMENT. Borrower has
advised Silicon that it wishes to
acquire all right, title and
interest of Silicon under the Acom
Purchase Agreement, including
without limitation the Payment
Rights, so that it can transfer the
same to a third party. To
facilitate that transaction, at the
request of the Borrower, Silicon is
concurrently executing and
delivering to Borrower an
Assignment with respect to all of
Silicon's rights under the Lease,
in accordance with the Acom
Amendment (the "Silicon
Assignment").
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SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
Borrower agrees to hold the Silicon
Assignment in trust and only to use
the same if, substantially
concurrently therewith, Borrower
pays to Silicon the entire unpaid
Acom Balance. If Borrower has not
used the Silicon Assignment and
paid Silicon such sums within 90
days after the date hereof,
Borrower shall return the Silicon
Assignment to Silicon. If Borrower
does pay the Acom Balance to
Silicon, the Silicon Assignment
shall be effective.
Borrower: Silicon:
HARMONIC, INC. SILICON VALLEY BANK
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By /s/ ▇▇▇▇ ▇▇▇▇▇
-------------------------------- ----------------------
President or Vice President Title Vice President
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Secretary or Ass't Secretary
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Schedule 2