EXHIBIT 10.13
LOAN AND SECURITY AGREEMENT
by and between
Silicon Valley Bank
and
California Micro Devices Corporation
June 17, 2002
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT dated June 17, 2002, between SILICON
VALLEY BANK ("Bank"), whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and CALIFORNIA MICRO DEVICES CORPORATION, a California
corporation ("Borrower"), whose address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, provides the terms on which Bank will lend to Borrower and
Borrower will repay Bank. The parties agree as follows:
1. ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement will be construed following
GAAP. Calculations and determinations must be made following GAAP. The term
"financial statements" includes the notes and schedules. The terms "including"
and "includes" always mean "including (or includes) without limitation," in this
or any Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1 Promise to Pay.
Borrower promises to pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1 Revolving Advances.
(a) Bank will make Advances not exceeding the lesser of (i) the
Committed Revolving Line minus the Sublimit Utilization Amount and
(ii) the Borrowing Base minus the sum of (a) the Sublimit Utilization
Amount and (b) an amount equal to 65% of the sum of the outstanding
principal balance of the Equipment Advances. Amounts borrowed under
this Section may be repaid (without penalty except for penalties which
may apply pursuant to Section 6.8(f)) and reborrowed during the term
of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile
or telephone by 12:00 p.m. Pacific time on the Business Day the
Advance is to be made. Borrower must promptly confirm the notification
by delivering to Bank the Payment/Advance Form attached as Exhibit B.
Bank will credit Advances to Borrower's deposit account. Bank may make
Advances under this Agreement based on instructions from a Responsible
Officer or his or her authorized designee or without instructions if
the Advances are necessary to meet Obligations which have become due.
Bank may rely on any telephone notice given by a person whom Bank
reasonably believes is a Responsible Officer or designee. Borrower
will indemnify Bank for any loss Bank suffers due to such reliance.
(c) The Committed Revolving Line terminates on the Revolving
Maturity Date, when all Advances are immediately payable.
(d) Bank's obligation to lend the undisbursed portion of the
Obligations will terminate if, in Bank's sole discretion, there has
been a material adverse change in the general affairs, management,
results of operations, condition (financial or otherwise) or the
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prospect of repayment of the Obligations, or there has been any material adverse
deviation by Borrower from the most recent business plan of Borrower presented
to and accepted by Bank prior to the execution of this Agreement.
2.1.2 Letters of Credit Sublimit.
Bank will issue or have issued Letters of Credit for Borrower's account not
exceeding the lesser of (i) the Committed Revolving Line minus the sum of (a)
all amounts for services utilized under the Cash Management Services Sublimit,
(b) the FX Reserve and (c) the sum of the outstanding principal balance of the
Advances, and (ii) the Borrowing Base minus the sum of (a) all amounts for
services utilized under the Cash Management Services Sublimit, (b) the FX
Reserve, (c) the sum of the outstanding principal balance of the Advances and
(d) an amount equal to 65% of the sum of the outstanding principal balance of
the Equipment Advances. Each Letter of Credit will have an expiry date of no
later than 180 days after the Revolving Maturity Date, but Borrower's
reimbursement obligation will be secured by cash on terms acceptable to Bank on
or before the Revolving Maturity Date if the term of this Agreement is not
extended by Bank. Borrower agrees to execute any further documentation in
connection with the Letters of Credit as Bank may reasonably request.
2.1.3 Foreign Exchange Sublimit.
If there is availability under the Committed Revolving Line and the
Borrowing Base, then Borrower may enter in foreign exchange forward contracts
with the Bank under which Borrower commits to purchase from or sell to Bank a
set amount of foreign currency more than one business day after the contract
date (the "FX Forward Contract"). Bank will subtract 10% of each outstanding FX
Forward Contract from the foreign exchange sublimit which is a maximum of the
lesser of (i) the Committed Revolving Line minus the sum of (a) all amounts for
services utilized under the Cash Management Services Sublimit, (b) the amount of
all outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit), and (c) the sum of the outstanding principal balance of the Advances,
and (ii) the Borrowing Base minus the sum of (a) all amounts for services
utilized under the Cash Management Services Sublimit, (b) the amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit), (c) the sum of the outstanding principal balance of the Advances and
(d) an amount equal to 65% of the sum of the outstanding principal balance of
the Equipment Advances (the "FX Reserve"). The total FX Forward Contracts at any
one time may not exceed 10 times the amount of the FX Reserve. Bank may
terminate the FX Forward Contracts if an Event of Default occurs.
2.1.4 Cash Management Services Sublimit.
Borrower may use up to the lesser of (i) the Committed Revolving Line minus
the sum of (a) the amount of all outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit), (b) the FX Reserve and (c) the sum of the
outstanding principal balance of the Advances, and (ii) the Borrowing Base minus
the sum of (a) the amount of all outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit), (b) the FX Reserve, (c) the sum of the
outstanding principal balance of the Advances and (d) an amount equal to 65% of
the sum of the outstanding principal balance of the Equipment Advances (the
"Cash Management Services Sublimit") for Bank's Cash Management Services, which
may include merchant services, direct
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deposit of payroll, business credit card, and check cashing services identified
in various cash management services agreements related to such services (the
"Cash Management Services"). Such aggregate amounts utilized under the Cash
Management Services Sublimit will at all times reduce the amount otherwise
available to be borrowed under the Committed Revolving Line. Any amounts Bank
pays on behalf of Borrower or any amounts that are not paid by Borrower for any
Cash Management Services will be treated as Advances under the Committed
Revolving Line and will accrue interest at the rate for Advances.
2.1.5 Equipment Advances.
(a) Through December 17, 2002 (the "Equipment Availability End Date"),
Bank will make advances ("Equipment Advance" and, collectively, "Equipment
Advances") not exceeding the lesser of the Committed Equipment Line and,
with respect to 65% of all Equipment Advances, the Borrowing Base. The
Equipment Advances may only be used to (i) repay amounts owing to Comerica
Bank-California and (ii) finance or refinance Equipment purchased on or
after 180 days before the date of each Equipment Advance and may not exceed
100% of the equipment invoice excluding taxes, shipping, warranty charges,
freight discounts and installation expense. Equipment eligible for
Equipment Advances is manufacturing, computer and office equipment and
furnishings. Software, tenant improvements, and other soft costs (including
maintenance and related training) may constitute up to 20% of the aggregate
Equipment Advances. Each Equipment Advance must be for a minimum of
$100,000. The number of Equipment Advances is limited to 5, excluding the
initial Equipment Advance.
(b) Interest accrues from the date of each Equipment Advance at the
rate in Section 2.3(a) and is payable monthly until the Equipment
Availability End Date occurs. Equipment Advances outstanding on the
Equipment Availability End Date are payable in 36 equal consecutive monthly
installments of principal, plus accrued interest, beginning on the 1st of
each month following the Equipment Availability End Date and ending 36
months thereafter (each, an "Equipment Maturity Date"). Equipment Advances
when repaid may not be reborrowed.
(c) To obtain an Equipment Advance, Borrower must notify Bank (the
notice is irrevocable) by facsimile no later than 12:00 p.m. Pacific time 1
Business Day before the day on which the Equipment Advance is to be made.
The notice in the form of Exhibit B (Payment/Advance Form) must be signed
by a Responsible Officer or authorized designee and include a copy of the
invoice for the Equipment being financed.
2.2 Overadvances.
If Borrower's Obligations under Section 2.1.1, 2.1.2, 2.1.3 and 2.1.4
exceed the lesser of either (i) the Committed Revolving Line or (ii) the
Borrowing Base minus the Formula Portion, Borrower must immediately pay Bank the
excess. If Borrower's obligations under the Committed Revolving Line and the
Committed Equipment Line exceed $5,000,000, Borrower must immediately pay Bank
the excess.
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2.3 Interest Rate, Payments.
(a) Interest Rate. (i) Advances accrue interest on the
outstanding principal balance at a per annum rate of 0.75 percentage points
above the Prime Rate, or, after achieving two consecutive quarters of net profit
of at least $1, at the prime Rate; and (ii) Equipment Advances accrue interest
on the outstanding principal balance at a per annum rate of 3.00 percentage
points above the Prime Rate. After an Event of Default, Obligations accrue
interest at 5 percent above the rate effective immediately before the Event of
Default. The interest rate increases or decreases when the Prime Rate changes.
Interest is computed on a 360 day year for the actual number of days elapsed.
(b) Payments. Interest due on the Committed Revolving Line is
payable on the 1st day of each month. Interest due on the Equipment Advances is
payable on the 1st day of each month. Bank may debit any of Borrower's deposit
accounts including Account Number _____________________________ for principal
and interest payments owing or any amounts Borrower owes Bank. Bank will
promptly notify Borrower when it debits Borrower's accounts. These debits are
not a set-off. Payments received after 12:00 noon Pacific time are considered
received at the opening of business on the next Business Day. When a payment is
due on a day that is not a Business Day, the payment is due the next Business
Day and additional fees or interest accrue.
2.4 Fees.
Borrower will pay:
(a) Loan Fee. A fully earned, non-refundable facility fee of
$40,000; and
(b) Bank Expenses. All Bank Expenses (including reasonable
attorneys' fees and reasonable expenses) incurred through and after the date of
this Agreement, are payable when due.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension.
Bank's obligation to make the initial Credit Extension is subject to the
condition precedent that (a) it receive the agreements, documents and fees it
requires, (b) that it receives a payoff letter satisfactory to Bank with respect
to the payoff of Comerica Bank-California and the release of the Liens in favor
of Comerica Bank-California, (c) that an Equipment Advance is requested to pay
off all amounts owing to Comerica Bank-California and to terminate all related
Liens, and (d) such Equipment Advance is used to repay all amounts owing to
Comerica Bank-California before any other Credit Extension.
3.2 Conditions Precedent to all Credit Extensions.
Bank's obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
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(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 must be
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension and no Event of Default may have occurred and be continuing, or
result from the Credit Extension. Each Credit Extension is Borrower's
representation and warranty on that date that the representations and warranties
of Section 5 remain true.
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. Bank may place a "hold" on any deposit account pledged as
Collateral. If this Agreement is terminated, Bank's lien and security interest
in the Collateral will continue until Borrower fully satisfies its Obligations
and all obligations of the Bank to make Credit Extensions or otherwise extend
credit accommodations have terminated.
4.2 Authorization to File Financing Statements.
Borrower authorizes Bank to file financing statements without notice to
Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in
order to perfect or protect Bank's interest in the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that the following statements are true and
correct on the date hereof and Borrower covenants that the following statements
will continue to be true and correct throughout the term of this Agreement and
so long as any Obligations are outstanding:
5.1 Due Organization and Authorization.
Borrower and each Subsidiary is duly existing and in good standing in its
state of formation (or reincorporation) and qualified and licensed to do
business in, and in good standing in, any state in which the conduct of its
business or its ownership of property requires that it be qualified, except
where the failure to do so could not reasonably be expected to cause a Material
Adverse Change. Borrower has not changed its state of formation or its
organizational structure or type or any organizational number (if any) assigned
by its jurisdiction of formation.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it is
bound in which the default could reasonably be expected to cause a Material
Adverse Change.
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5.2 Collateral.
Borrower has good title to the Collateral, free of Liens except Permitted
Liens. Borrower has no other deposit account, other than the deposit accounts
described in the Schedule (which Schedule Borrower may update from time to time
by written notice to Bank). Except as set forth in the Schedule (which Schedule
Borrower may update from time to time by written notice to Bank), (a) the
Accounts are bona fide, existing obligations, and the service or property has
been performed or delivered to the account debtor or its agent for immediate
shipment to and unconditional acceptance by the account debtor, and (b) the
Collateral is not in the possession of any third party bailee (such as at a
warehouse). In the event that Borrower, after the date hereof, intends to store
or otherwise deliver the Collateral to such a bailee, then Borrower will receive
the prior written consent of Bank and such bailee must acknowledge in writing
that the bailee is holding such Collateral for the benefit of Bank. Except as
set forth in the Schedule (which Schedule Borrower may update from time to time
by written notice to Bank), Borrower has no notice of any actual or imminent
Insolvency Proceeding of any account debtor whose accounts are an Eligible
Account in any Borrowing Base Certificate. All Inventory is in all material
respects of good and marketable quality, free from material defects. Borrower is
the sole owner of the Intellectual Property, except for non-exclusive licenses
granted to its customers in the ordinary course of business. Each Patent is
valid and enforceable and no part of the Intellectual Property has been judged
invalid or unenforceable, in whole or in part, and no claim has been made that
any part of the Intellectual Property violates the rights of any third party,
except to the extent such invalidity, unenforceability, judgment, or claim could
not reasonably be expected to cause a Material Adverse Change.
5.3 Litigation.
Except as set forth in the Schedule (which Schedule Borrower may update
from time to time by written notice to Bank), there are no actions or
proceedings pending or, to the knowledge of Borrower's Responsible Officers,
threatened by or against Borrower or any Subsidiary which could result in
damages or costs to Borrower or any Subsidiary of $100,000 or more, or in which
an adverse decision could reasonably be expected to cause a Material Adverse
Change.
5.4 No Material Adverse Change in Financial Statements.
All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 Solvency.
The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.
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5.6 Regulatory Compliance.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate provision to pay, all material taxes,
except those being contested in good faith with adequate reserves under GAAP and
which do not result in any tax lien on any of the Collateral. Borrower and each
Subsidiary has obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all government
authorities that are necessary to continue its business as currently conducted,
except where the failure to do so could not reasonably be expected to cause a
Material Adverse Change.
5.7 Subsidiaries.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 Full Disclosure.
No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading. It
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected and forecasted results.
6. AFFIRMATIVE COVENANTS
Borrower will do all of the following for so long as Bank has an obligation
to lend, or there are outstanding Obligations:
6.1 Government Compliance.
Borrower will maintain its and all Subsidiaries' legal existence and good
standing in its jurisdiction of formation (or reincorporation) and maintain
qualification in each jurisdiction in which the failure to so qualify would
reasonably be expected to cause a material adverse effect on Borrower's business
or operations. Borrower will comply, and have each Subsidiary comply, with all
laws, ordinances and regulations to which it is subject, noncompliance with
which could
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have a material adverse effect on Borrower's business or operations or would
reasonably be expected to cause a Material Adverse Change.
6.2 Financial Statements, Reports, Certificates.
(a) Borrower will deliver to Bank: (i) as soon as available,
but no later than 30 days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during the period certified by a Responsible Officer and in a form
acceptable to Bank; (ii) as soon as available, but no later than 120 days after
the last day of Borrower's fiscal quarter or within 5 days of filing with the
SEC, if earlier, Borrower's Report on Form 10-Q containing consolidated
financial statements prepared under GAAP, consistently applied, subject to
year-end audit adjustments; (iii) as soon as available, but no later than 120
days after the last day of Borrower's fiscal year or within 5 days of filing
with the SEC, if earlier, Borrower's Report on Form 10-K containing audited
consolidated financial statements prepared under GAAP, consistently applied,
together with an unqualified opinion on the financial statements from an
independent certified public accounting firm reasonably acceptable to Bank; (iv)
a prompt report of any legal actions pending or threatened against Borrower or
any Subsidiary that could reasonably result in damages or costs to Borrower or
any Subsidiary of $100,000 or more; (v) budgets, sales projections, operating
plans, 8-K filings or other financial information Bank reasonably requests; and
(vi) prompt notice of any material change in the composition of the Intellectual
Property, including any subsequent ownership right of Borrower in or to any
Copyright, Patent or Trademark not shown in any intellectual property security
agreement between Borrower and Bank or knowledge of an event that materially
adversely affects the value of the Intellectual Property.
(b) Within 30 days after the last day of each month, Borrower
will deliver to Bank a Borrowing Base Certificate signed by a Responsible
Officer in the form of Exhibit C, with aged listings of accounts receivable and
accounts payable.
(c) Within 30 days after the last day of each month, Borrower
will deliver to Bank with the monthly financial statements a Compliance
Certificate signed by a Responsible Officer in the form of Exhibit D, and
containing a report of backlog and bookings.
(d) Borrower will allow Bank to audit Borrower's Collateral at
Borrower's reasonable expense. Such audits will be conducted no more often than
every 6 months unless an Event of Default or an event which, with notice or
passage of time or both would constitute an Event of Default, has occurred and
is continuing.
6.3 Inventory; Returns.
Borrower will keep all Inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower and its account
debtors will follow Borrower's customary practices as they exist at execution of
this Agreement. Borrower must promptly notify Bank of all returns, recoveries,
disputes and claims, that involve more than $100,000, excluding distributor
stock rotation.
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6.4 Taxes.
Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state, and local taxes or assessments (other than taxes
and assessments which Borrower is contesting in good faith, with adequate
reserves maintained in accordance with GAAP and which do not result in any tax
lien on any of the Collateral) and will deliver to Bank, on demand, appropriate
certificates attesting to the payment.
6.5 Insurance.
Borrower will keep its business and the Collateral insured for risks and in
amounts as Bank may reasonably request. Insurance policies will be in a form,
with companies, and in amounts, that are satisfactory to Bank in Bank's
reasonable discretion. All property policies will have a lender's loss payable
endorsement showing Bank as an additional loss payee and all liability policies
will show the Bank as an additional insured and provide that the insurer must
give Bank at least 20 days notice before canceling its policy. At Bank's
request, Borrower will deliver certified copies of policies and evidence of all
premium payments. Proceeds payable under any policy will, at Bank's reasonable
option, be payable to Bank on account of the Obligations.
6.6 Bank Accounts.
(a) Borrower will open an account into which all funds received from
account debtors will be deposited (the "Collateral Account"). Borrower will
require its account debtors to mail payments to a post office box designated by
Bank, over which Bank has exclusive access. Bank will collect the payments for
credit to the Collateral Account. Account debtors may pay by electronic transfer
of funds directly to the Collateral Account. Borrower holds any payments that it
receives directly in trust for Bank and will immediately deliver the payments to
Bank for deposit to the Collateral Account. As provided in Section 9.1(e), Bank
may transfer any funds from any other Borrower account to the Collateral
Account. Borrower may not maintain any accounts other than with Bank except for
(i) accounts from which all funds are transferred daily to the Collateral
Account and (ii) accounts set forth in the Schedule (which Schedule Borrower may
update from time to time by written notice to Bank). Bank may, in its sole
discretion, apply all amounts in the Collateral Account against Borrower's
outstanding Obligations; provided, however, Bank shall not apply amounts in the
Collateral Account against amounts owing under the Committed Equipment Line
unless an Event of Default has occurred and is continuing. So long as (x) an
Event of Default has occurred and is continuing, and (y) any Obligations less
amounts owing under the Committed Equipment Line remain unpaid, neither Borrower
nor any person claiming through Borrower shall have any right in the Collateral
Account, and Bank shall have all right, title, and interest in all of the items
in the Collateral Account and their proceeds.
(b) Borrower will maintain its primary depository and operating accounts
with Bank.
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6.7 Financial Covenants.
(a) Borrower will maintain as of the last day of each month: Quick Ratio. A
ratio of Quick Assets to Current Liabilities of at least 0.70 to 1.00.
(b) Borrower will maintain as of the last day of each quarter: Tangible Net
Worth. A Tangible Net Worth of at least $5,000,000.
6.8 Asset Based Lending Facility. If Borrower fails to maintain the Quick
Ratio set forth in Section 6.7(a) above (the "Triggering Event"), the credit
facilities will immediately and without notice convert to an asset based lending
facility with modifications as follows:
(a) Section 6.6(a) shall be deleted in its entirety and replaced with the
following: "Borrower will open an account into which all funds received from
account debtors will be deposited (the "Collateral Account"). Borrower will
require its account debtors to mail payments to a post office box designated by
Bank, over which Bank has exclusive access. Bank will collect the payments for
credit to the Collateral Account. Account debtors may pay by electronic transfer
of funds directly to the Collateral Account. Borrower holds any payments that it
receives directly in trust for Bank and will immediately deliver the payments to
Bank for deposit to the Collateral Account. Bank may transfer any funds from any
other Borrower account to the Collateral Account. Borrower may not maintain any
accounts other than with Bank except for (i) accounts from which all funds are
transferred daily to the Collateral Account and (ii) accounts set forth in the
Schedule (which Schedule Borrower may update from time to time by written notice
to Bank). Bank has all right, title and interest in all of the items in the
Collateral Account and their proceeds. Bank will daily sweep amounts in the
Collateral Account to apply to the outstanding Obligations; provided, however,
Bank shall not apply amounts in the Collateral Account against amounts owing
under the Committed Equipment Line unless an Event of Default has occurred and
is continuing. Amounts deposited in the Collateral Account will be credited to
the Collateral Account three (3) Business Days after receipt, if by check, or on
the same day, if by wire or other electronic transfer. Neither Borrower nor any
person claiming through Borrower shall have any right in the Collateral
Account."
(b) Section 6.7(a), "Quick Ratio", shall be deleted in its entirety.
(c) Section 6.7(b), "Tangible Net Worth", shall be amended to require a
Tangible Net Worth of not less than an amount to be reasonably determined by
Bank following the Triggering Event.
(d) The Borrowing Base must be adequate to support all outstanding Advances
and Equipment Advances, with any Advances or Equipment Advances in excess of the
Borrowing Base being immediately repaid.
(e) Section 2.3(a), "Interest Rate", shall be amended to require the
accrual of interest on Advances and Equipment Advances at a per annum rate of
1.25 percentage points above the Prime Rate.
(f) A new Section 2.4(c) shall be added as follows: "A Collateral Handling
Fee of $750 per month when amounts are outstanding under either the Committed
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Revolving Line or the Committed Equipment Line, payable monthly on the 1st day
of each month."
(g) A new Section 2.4(d) shall be added as follows: "A Prepayment Fee of
$25,000 upon the payment and termination, in whole or in part, of the Committed
Revolving Line and Committed Equipment Line, whether as a result of acceleration
or otherwise, provided, that no Prepayment Fee shall be due if the commitments
hereunder are transferred to another lending area within the Bank or if Borrower
continues to maintain its primary banking and depositary relationship with
Bank."
(h) Section 6.2(d) shall be amended to provide for quarterly audits of
Borrower's Collateral.
(i) A new Section 6.2(e) shall be added as follows: "Within 2 days of the
end of each week, and each time an Advance or Equipment Advance is requested, a
transaction report listing sales, credit memos and other Collateral adjustments
for the previous week.
6.9 Intellectual Property Rights.
Borrower will (a) protect, defend and maintain the validity and
enforceability of the Intellectual Property material to Borrower's business and
promptly advise Bank in writing of material infringements and (b) not allow any
Intellectual Property material to Borrower's business to be abandoned, forfeited
or dedicated to the public without Bank's written consent.
6.10 Further Assurances.
Borrower will execute any further instruments and take further action as
Bank reasonably requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld, for so long as Bank has an
obligation to lend or there are any outstanding Obligations:
7.1 Dispositions.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers (a) of Inventory in the ordinary
course of business; (b) of exclusive or non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; or (c) of worn-out or obsolete Inventory and
Equipment.
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7.2 Changes in Business, Non-Ordinary Course Transactions, Ownership, or
Business Locations.
Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses currently engaged in by Borrower or reasonably related
thereto, or enter into any transaction outside the ordinary course of business,
or permit any person or group of persons (within the meaning of Rule 13d-5 and
successor rules promulgated under Section 13 of the Securities Exchange Act of
1934, as amended (the "34 Act")) to (a) acquire beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities Exchange Commission under
the 34 Act) of thirty percent (30%) or more of the outstanding equity securities
of Borrower entitled to vote for members of the board of directors, or (b)
acquire all or substantially all substantially all of the assets of Borrower and
its Subsidiaries taken as a whole. Borrower will not, without at least 30 days
prior written notice to the Bank, relocate its chief executive office (except
Borrower may relocate to ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇), change
its state of formation (including reincorporation), change its organizational
number or name or add any new offices or business locations (including
warehouses) in which Borrower maintains or stores over $50,000 in Collateral.
7.3 Mergers or Acquisitions.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except that a Subsidiary may merge or consolidate
into another Subsidiary or into Borrower.
7.4 Indebtedness.
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance.
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
here, subject to Permitted Liens.
7.6 Distributions; Investments.
Directly or indirectly acquire or own any Person, or make any Investment in
any Person, other than Permitted Investments, or permit any of its Subsidiaries
to do so. Pay any cash dividends or make any distribution or payment or redeem,
retire or purchase any capital stock, except for the repurchase of stock from
employees, officers, and directors of Borrower pursuant to the terms of
applicable repurchase agreement in an aggregate amount not to exceed $50,000 in
the aggregate in any fiscal year, provided that no Event of Default has occurred
or is continuing or would exist after giving effect to such repurchases.
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7.7 Transactions with Affiliates.
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in
the ordinary course of Borrower's business, upon fair and reasonable terms that
are no less favorable to Borrower than would be obtained in an arm's length
transaction with a nonaffiliated Person.
7.8 Subordinated Debt.
Make or permit any payment on any Subordinated Debt, except under the terms
of the Subordinated Debt, or amend any provision in any document relating to the
Subordinated Debt without Bank's prior written consent.
7.9 Compliance.
Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonably be expected to have a material adverse effect on Borrower's
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.
8. EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 Payment Default.
If Borrower fails to pay any of the Obligations within 3 days after their
due date. During the additional period the failure to cure the default is not an
Event of Default (but no Credit Extension will be made during the cure period);
8.2 Covenant Default.
If Borrower does not perform any obligation in Section 6 (subject to
Section 6.8) or violates any covenant in Section 7; or
If Borrower does not perform or observe any other material term, condition
or covenant in this Agreement, any Loan Documents, or in any agreement between
Borrower and Bank and as to any default under a term, condition or covenant that
can be cured, has not cured the default within 10 days after it occurs, or if
the default cannot be cured within 10 days or cannot be cured after Borrower's
attempts within 10 day period, and the default may be cured within a reasonable
time, then Borrower has an additional period (of not more than 30 days) to
attempt to cure the default. During the additional time, the failure to cure the
default is not an Event of Default (but no Credit Extensions will be made during
the cure period);
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8.3 Material Adverse Change.
If there (i) occurs a material adverse change in the business, operations,
or condition (financial or otherwise) of the Borrower, or (ii) is a material
impairment of the prospect of repayment of any portion of the Obligations or
(iii) is a material impairment of the value or priority of Bank's security
interests in the Collateral (each of (i), (ii) and (iii) above shall be referred
to herein as a "Material Adverse Change").
8.4 Attachment.
If any of Borrower's assets having a value in the aggregate of more than
$50,000 is seized, or comes into possession of a trustee or receiver, or is
attached or levied on and the attachment or levy is not removed in 10 days, or
if Borrower is enjoined, restrained, or prevented by court order from conducting
a material part of its business or if a judgment or other claim becomes a Lien
on a material portion of Borrower's assets, or if a notice of lien, levy, or
assessment is filed against any of Borrower's assets by any government agency
and not paid within 10 days after Borrower receives notice. These are not Events
of Default if stayed or if a bond is posted pending contest by Borrower (but no
Credit Extensions will be made during the cure period);
8.5 Insolvency.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);
8.6 Other Agreements.
If there is a default in any agreement between Borrower and a third party
that gives the third party the right to accelerate any Indebtedness exceeding
$500,000 or that could cause a Material Adverse Change, or if there is a default
under the Loan Agreement between The Industrial Development Authority of the
City of Tempe, Arizona and Borrower dated as of March 1, 1988, as may be
amended, and the Trustee (as defined therein) exercises any of its remedies
thereunder or under the Indenture of Trust, dated as of March 1, 1988;
8.7 Judgments.
If a money judgment(s) in the aggregate of at least $200,000 is rendered
against Borrower and is unsatisfied and unstayed for 10 days (but no Credit
Extensions will be made before the judgment is stayed or satisfied); or
8.8 Misrepresentations.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.
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9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies.
When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit under
this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors for
amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or reasonable
to protect its security interest in the Collateral. Borrower will assemble the
Collateral if Bank requires and make it available as Bank designates. Bank may
enter premises where the Collateral is located, take and maintain possession of
any part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to exercise any of Bank's rights or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower it
holds, or (ii) any amount held by Bank owing to or for the credit or the account
of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
(g) Require Borrower to provide cash collateral in the face amount of all
undrawn Letters of Credit; and
(h) Dispose of the Collateral according to the Code.
9.2 Power of Attorney.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign Borrower's name
on any invoice or ▇▇▇▇ of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under
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Borrower's insurance policies; (iv) settle and adjust disputes and claims about
the Accounts directly with account debtors, for amounts and on terms Bank
determines reasonable; and (v) transfer the Collateral into the name of Bank or
a third party as the Code permits. Bank may exercise the power of attorney to
sign Borrower's name on any documents necessary to perfect or continue the
perfection of any security interest regardless of whether an Event of Default
has occurred. Bank's appointment as Borrower's attorney in fact, and all of
Bank's rights and powers, coupled with an interest, are irrevocable until all
Obligations have been fully repaid and performed and Bank's obligation to
provide Credit Extensions terminates.
9.3 Accounts Collection.
When an Event of Default occurs and continues, Bank may notify any Person
owing Borrower money of Bank's security interest in the funds and demand payment
of, and collect any Accounts, general intangibles and other Collateral, and, in
connection therewith, Borrower irrevocably authorizes Bank to endorse or sign
Borrower's name on all collections, receipts, instruments and other documents,
and, in Bank's good faith business judgment, to grant extensions of time to pay,
compromise claims and settle Accounts and general intangibles for less than face
value. When an Event of Default occurs and continues, Borrower shall collect all
payments in trust for Bank and, if requested by Bank, immediately deliver the
payments to Bank in the form received from the account debtor, with proper
endorsements for deposit.
9.4 Bank Expenses.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any reasonable amounts paid by Bank are Bank
Expenses and immediately due and payable, bearing interest at the then
applicable rate and secured by the Collateral. No payments by Bank are deemed an
agreement to make similar payments in the future or Bank's waiver of any Event
of Default.
9.5 Bank's Liability for Collateral.
If Bank complies with reasonable banking practices and Section 9207 of the
Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any loss
or damage to the Collateral; (c) any diminution in the value of the Collateral;
or (d) any act or default of any carrier, warehouseman, bailee, or other person.
Borrower otherwise bears all risk of loss, damage or destruction of the
Collateral.
9.6 Remedies Cumulative.
Bank's rights and remedies under this Agreement, the Loan Documents, and
all other agreements are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank's exercise of one right or remedy is
not an election, and Bank's waiver of any Event of Default is not a continuing
waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver is
effective unless signed by Bank and then is only effective for the specific
instance and purpose for which it was given.
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9.7 Demand Waiver.
Borrower waives demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
9.8 Collateral Control Provisions
Without limiting Bank's other rights and remedies, if an Event of Default
occurs and is continuing, the provisions of Exhibit E hereto (the "Collateral
Control Provisions") shall be effective, upon written notice by Bank to the
Borrower.
10. NOTICES
All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by facsimile to the addresses set forth at the beginning of this
Agreement. A party may change its notice address by giving the other party
written notice.
11. CHOICE OF LAW, FORUM AND JURY TRIAL WAIVER
California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Santa ▇▇▇▇▇ County, California.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12. GENERAL PROVISIONS
12.1 Successors and Assigns.
This Agreement binds and is for the benefit of the successors and permitted
assigns of each party. Borrower may not assign this Agreement or any rights
under it without Bank's prior written consent which may be granted or withheld
in Bank's discretion. Bank has the right, without the consent of or notice to
Borrower, to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank's obligations, rights and benefits under this
Agreement.
12.2 Indemnification.
Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other
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party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses incurred, or paid by Bank from, following,
or consequential to transactions between Bank and Borrower (including reasonable
attorneys fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.
12.3 Time of Essence.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 Severability of Provision.
Each provision of this Agreement is severable from every other provision in
determining the enforceability of any provision.
12.5 Amendments in Writing, Integration.
All amendments to this Agreement must be in writing and signed by Borrower
and Bank. This Agreement represents the entire agreement about this subject
matter, and supersedes prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement merge into this Agreement and
the Loan Documents.
12.6 Counterparts.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 Survival.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8 Confidentiality.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans (provided, however, Bank shall use
commercially reasonable efforts in obtaining such prospective transferee or
purchasers agreement of the terms of this provision), (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with Bank's
examination or audit and (v) as Bank considers appropriate exercising remedies
under this Agreement. Confidential information does not include information that
either: (a) is in the public domain or in Bank's possession when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank; or (b) is
disclosed to Bank
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by a third party, if Bank does not know that the third party is prohibited from
disclosing the information.
12.9 Attorneys' Fees, Costs and Expenses.
In any action or proceeding between Borrower and Bank arising out of the
Loan Documents, the prevailing party will be entitled to recover its reasonable
attorneys' fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.
13. DEFINITIONS
13.1 Definitions.
In this Agreement:
"Accounts" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" is a loan advance (or advances) under the Committed
Revolving Line.
"Affiliate" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"Bank Expenses" are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings), or otherwise relating to Borrower
or the Loan Documents, including, but not limited to, any reasonable attorneys'
fees and costs Bank incurs in order to do the following: obtain legal advice in
connection with this Agreement or Borrower; enforce, or seek to enforce, any of
Bank's 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 bankruptcy claim, third-party claim, or other claim; protect, obtain
possession of, lease, dispose of, or otherwise enforce Bank's security interest
in, the Collateral; and otherwise represent Bank in any litigation relating to
Borrower.
"Borrower's Books" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.
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"Borrowing Base" is 80% of Eligible Accounts as determined by Bank from
Borrower's most recent Borrowing Base Certificate; provided, however, that Bank
may lower the percentage of the Borrowing Base after performing an audit of
Borrower's Collateral.
"Business Day" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
"Cash Management Services" are defined in Section 2.1.4.
"Cash Management Services Sublimit" are defined in Section 2.1.4.
"Closing Date" is the date of this Agreement.
"Code" is the Uniform Commercial Code, as applicable.
"Collateral" is the property described on Exhibit A.
"Committed Equipment Line" is a Credit Extension of up to $3,500,000,
provided that the sum of all advances under the Committed Equipment Line and the
Committed Revolving Line shall not exceed $5,000,000 at any time.
"Committed Revolving Line" is an Advance of up to $3,500,000, provided that
the sum of all advances under the Committed Equipment Line and the Committed
Revolving Line shall not exceed $5,000,000 at any time.
"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.
"Copyrights" are all copyright rights, applications or registrations and
like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"Credit Extension" is each Advance, Equipment Advance, Letter of Credit,
Exchange Contract, or any other extension of credit by Bank for Borrower's
benefit.
"Current Assets" are amounts that under GAAP should be included on that
date as current assets on Borrower's consolidated balance sheet.
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"Current Liabilities" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year, and include the face amount of all
outstanding Letters of Credit, all FX Forward Contracts and Cash Management
Services.
"Eligible Accounts" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5;
but Bank may reasonably change eligibility standards by giving Borrower notice.
Unless Bank agrees otherwise in writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has not paid within 90 days of
invoice date;
(b) Accounts for an account debtor, 50% or more of whose Accounts have
not been paid within 90 days of invoice date (net of retentions);
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, for the amounts that
exceed that percentage (except, on a case-by-case basis, concentrations up
to 50% with Bank's prior written consent);
(e) Accounts for which the account debtor does not have its principal
place of business in the United States, except for those foreign Accounts
determined to be eligible by Bank on a case-by-case basis up to $3,000,000;
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality;
(g) Accounts for which Borrower owes the account debtor, but only up
to the amount owed (sometimes called "contra" accounts, accounts payable,
customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on approval,
▇▇▇▇ and hold, or other terms if account debtor's payment may be
conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes
any claim and Bank believes there may be a basis for dispute (but only up
to the disputed or claimed amount), or if the Account Debtor is subject to
an Insolvency Proceeding, or becomes insolvent, or goes out of business;
and
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
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"Equipment" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"Equipment Advance" is defined in Section 2.1.5.
"Equipment Availability End Date" is defined in Section 2.1.5.
"Equipment Maturity Date" is defined in Section 2.1.5.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"Formula Portion" means an amount equal to 65% of the outstanding principal
balance of the Equipment Advances.
"FRB" means the Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.
"FX Forward Contract" is defined in Section 2.1.3.
"FX Reserve" is defined in Section 2.1.3.
"GAAP" is generally accepted accounting principles.
"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.
"Insolvency Proceeding" are proceedings by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Intellectual Property" is:
(a) Copyrights, Trademarks, Patents, and Mask Works including
amendments, renewals, extensions, and all licenses or other rights to use
and all license fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created,
acquired or held;
(c) All design rights which may be available to Borrower now or later
created, acquired or held;
(d) Any claims for damages (past, present or future) for infringement
of any of the rights above, with the right, but not the obligation, to ▇▇▇
and collect damages for use or infringement of the intellectual property
rights above;
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All associated goodwill, and all proceeds and products of the foregoing,
including all insurance, indemnity or warranty payments.
"Inventory" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"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.
"Letter of Credit" is defined in Section 2.1.2.
"Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Documents" are, collectively, this Agreement, any note, or notes
executed by Borrower, and any other present or future agreement between Borrower
and/or for the benefit of Bank in connection with this Agreement, all as
amended, extended or restated.
"Mask Works" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"Material Adverse Change" is defined in Section 8.3.
"Obligations" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"Patents" are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.
"Permitted Indebtedness" is:
(a) Borrower's indebtedness to Bank under this Agreement or any other
Loan Document;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors and for payroll obligations and
taxes incurred in the ordinary course of business; and
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(e) Indebtedness secured by Permitted Liens.
"Permitted Investments" are:
(a) Investments shown on the Schedule and existing on the Closing
Date;
(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., (iii) Bank's
certificates of deposit issued maturing no more than 1 year after issue,
and (iv) investments maintained with Bank and Bank Affiliates; and
(c) Joint ventures and other strategic alliances entered into in the
ordinary course of Borrower's business, provided that any cash investments
by Borrower shall not exceed $50,000 in the aggregate in any fiscal year.
"Permitted Liens" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for
which Borrower maintains adequate reserves on its Books, if they have no
priority over any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the
Equipment, or (ii) existing on equipment when acquired, if the Lien is
confined to the property and improvements and the proceeds of the
equipment;
(d) Licenses or sublicenses granted in the ordinary course of
Borrower's business and any interest or title of a licensor or under any
license or sublicense, if the licenses and sublicenses permit granting Bank
a security interest;
(e) Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the
indebtedness may not increase;
(g) Liens securing claims of materialmen, mechanics, carriers,
warehousemen, landlords, repairmen, and the like incurred in the ordinary
course of business which are not delinquent or remain payable without
penalty;
-24-
(h) Deposits made in the ordinary course of business with respect to
workers compensation insurance, unemployment insurance, and other social
security legislation (other than any Lien imposed by ERISA); and
(i) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; provided that (i) such deposit account is
not a dedicated cash collateral account and is not subject to restrictions
against access by the Borrower in excess of those set forth by regulations
promulgated by the FRB, and (ii) such deposit account is not intended by
the Borrower or any Subsidiary to provide collateral to the depository
institution.
"Person" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"Prime Rate" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.
"Quick Assets" is, on any date, the Borrower's consolidated, unrestricted
cash (of which not less than $2,750,000 shall be on deposit with Bank on an
ongoing basis), cash equivalents, net billed accounts receivable, investments
with maturities of fewer than 12 months determined according to GAAP, and
investments maintained with Bank and Bank Affiliates.
"Responsible Officer" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" is June 17, 2003.
"Schedule" is any attached schedule of exceptions.
"Sublimit Utilization Amount" means the sum of (a) all amounts for services
utilized under the Cash Management Services Sublimit, (b) the amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit) and (c) the FX Reserve.
"Subordinated Debt" is debt incurred by Borrower subordinated to Borrower's
indebtedness owed to Bank and which is reflected in a written agreement in a
manner and form acceptable to Bank and approved by Bank in writing.
"Subsidiary" is for any Person, or any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.
"Tangible Net Worth" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, Copyrights
-25-
and research and development expenses except prepaid expenses, (c) restricted
cash, and (d) reserves not already deducted from assets, and (ii) Total
Liabilities.
"Total Liabilities" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and the current portion of Subordinated Debt allowed to be
paid, but excluding all other Subordinated Debt.
"Trademarks" are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.
[Next page is signature page.]
-26-
BORROWER:
CALIFORNIA MICRO DEVICES CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------
Title: Vice President Finance & Administration and CFO
BANK:
SILICON VALLEY BANK
By: /s/ ▇▇▇ ▇▇▇▇▇
---------------------------------------
Title: Senior Relationship Manager
---------------------------------------
-27-
Schedule to Loan and Security Agreement
The exact correct corporate name of Borrower is (attach a copy of the formation
documents, e.g., articles, partnership agreement):
-----------------------------
Borrower's State of formation:
-------------------------------------------------
Borrower has operated under only the following other names (if none, so state):
-------------------------------------------------------------------------------
All other address at which the Borrower does business are as follows (attach
additional sheets if necessary and include all warehouse addresses):
-----------
-------------------------------------------------------------------------------
Borrower has deposit accounts and/or investment accounts located only at the
following institutions:
--------------------------------------------------------
List Acct. Numbers:
------------------------------------------------------------
Liens existing on the Closing Date and disclosed to and accepted by Bank in
writing:
-----------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Investments existing on the Closing Date and disclosed to and accepted by Bank
in writing:
--------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Subordinated Debt:
Indebtedness on the Closing Date and disclosed to and consented to by Bank in
writing:
-----------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
The following is a list of the Borrower's copyrights (including copyrights of
software) which are registered with the United States Copyright Office. (Please
include name of the copyright and registration number and attach a copy of the
registration):
-----------------------------------------------------------------
-28-
The following is a list of all software which the Borrower sells, distributes or
licenses to others, which is not registered with the United States Copyright
Office. (Please include versions which are not registered:
---------------------
-------------------------------------------------------------------------------
The following is a list of all of the Borrower's patents which are registered
with the United States Patent Office. (Please include name of the patent and
registration number and attach a copy of the registration.):
-------------------
-------------------------------------------------------------------------------
The following is a list of all of the Borrower's patents which are pending with
the United States Patent Office. (Please include name of the patent and a copy
of the application.):
----------------------------------------------------------
The following is a list of all of the Borrower's registered trademarks. (Please
include name of the trademark and a copy of the registration.):
----------------
-------------------------------------------------------------------------------
Borrower is not subject to litigation which would have a material adverse effect
on the Borrower's financial condition, except the following (attach additional
comments, if needed):
----------------------------------------------------------
Tax ID Number------------------------------------------------------------------
Organizational Number, if any:
------------------------------------------------
-29-
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest in
and to the following:
All goods and equipment now owned or hereafter acquired, including, without
limitation, all machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not be deemed to
include any copyrights, mask works, mask work applications, copyright
applications, copyright or mask
-30-
work registrations and like protection in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
any patents, patent applications and like protections including without
limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same, trademarks, servicemarks and
applications therefor, whether registered or not, and the goodwill of the
business of Borrower connected with and symbolized by such trademarks, any trade
secret rights, including any rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; or any claims for damage by way of any past,
present and future infringement of any of the foregoing (collectively, the
"Intellectual Property"), except that the Collateral shall include the proceeds
of all the Intellectual Property that are accounts, (i.e. accounts receivable)
of Borrower, or general intangibles consisting of rights to payment, if a
judicial authority (including a U.S. Bankruptcy Court) holds that a security
interest in the underlying Intellectual Property is necessary to have a security
interest in such accounts and general intangibles of Borrower that are proceeds
of the Intellectual Property, then the Collateral shall automatically, and
effective as of the Closing Date, include the Intellectual Property to the
extent necessary to permit perfection of Bank's security interest in such
accounts and general intangibles of Borrower that are proceeds of the
Intellectual Property.
-31-
EXHIBIT B
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T.
Fax To: Date:_____________________
--------------------------------------------------------------------------------
Loan Payment:
California Micro Devices Corporation (Borrower)
From Account #___________________________ To Account #__________________________
(Deposit Account #) (Loan Account #)
Principal $_____________________ and/or Interest $______________________________
All Borrower's representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone transfer request for an advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date.
Authorized Signature:___________________________ Phone Number:__________________
--------------------------------------------------------------------------------
LOAN ADVANCE:
Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.
From Account #___________________________ To Account #__________________________
(Loan Account #) (Deposit Account #)
Amount of Advance $_______________________
All Borrower's representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone transfer request for an advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date.
Authorized Signature:__________________________ Phone Number:___________________
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OUTGOING WIRE REQUEST
Complete only if all or a portion of funds from the loan advance above are to be
wired. Deadline for same day processing is 12:00pm, P.S.T.
Beneficiary Name:____________________________ Account of Wire: $________________
Beneficiary Name:____________________________ Account of Wire: $________________
City and State:_________________________________________________________________
Beneficiary Bank Transit (ABA) # Beneficiary __________________________________
Bank Code (Swift, Sort, Chip, etc.):____________________________________________
(For International Wire Only)
Intermediary Bank:___________________________ Transit(ABA) #:___________________
For Further Credit to:__________________________________________________________
Special Instruction:____________________________________________________________
By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).
Authorized Signature:__________________________________________________________
Print Name/Title:______________________________________________________________
Telephone:_____________________________________________________________________
2nd Signature (if Required):___________________________________________________
Print Name/Title:______________________________________________________________
Telephone:_____________________________________________________________________
-32-
EXHIBIT C
BORROWING BASE CERTIFICATE
-----------------------------------------------------------------------------------------------------------------------------------
Borrower: California Micro Devices Bank: Silicon Valley Bank
Corporation ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Commitment Amount: $3,500,000 (Committed Revolving Line)*
-----------------------------------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ____________ $
2. Additions (please explain on reverse) $
3. TOTAL ACCOUNTS RECEIVABLE $
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication) $
4. Amounts over 90 days due $
5. Balance of 50% over 90 day accounts $
6. Credit balances over 90 days $
7. Concentration Limits $
8. Foreign Accounts $
9. Governmental Accounts $
10. Contra Accounts $
11. Promotion or Demo Accounts $
12. Intercompany/Employee Accounts $
13. Other (please explain on reverse) $
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
15. Eligible Accounts (#3 minus #14) $
16. LOAN VALUE OF ACCOUNTS (80% of #15) $
BALANCES
17. Principal balance of Advances $
18. Outstanding under Sublimits (LC, FX and Cash Management) $
19. 19.65% of principal balance of Equipment Advances $
REVOLVING LINE AVAILABILITY
20. Revolving Line Availability Calculation ($3,500,000 minus #17 and #18) $
21. Borrowing Base Availability Calculation (#16 minus #17, #18 and #19) $
22. AMOUNT AVAILABLE FOR ADVANCES (lesser of #20 and #21) $
* Obligations under the Committed Revolving Line and the Committed Equipment
Line are limited to $4,725,000. Equipment Advances are limited to $3,500,000.
65% of the Equipment Advances must be supported by the Borrowing Base.
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.
COMMENTS:
Sample documents
By:_______________________________________________
Auth. Signer
BANK USE ONLY
Rec'd By:_________________________________________
Auth. Signer
Date:_____________________________________________
Verified:_________________________________________
Auth. Signer
Date:_____________________________________________
-33-
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FROM: California Micro Devices Corporation
The undersigned authorized officer of California Micro Devices Corporation
("Borrower") certifies that under the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending _______________ with all required
covenants except as noted below, and (ii) all representations and warranties in
the Agreement are true and correct in all material respects on this date.
Attached are the required documents supporting the certification. The Officer
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) consistently applied from one period to the next
except as explained in an accompanying letter or footnotes. The Officer
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies"
column.
Reporting Covenant Required Complies
------------------ -------- --------
Monthly financial statements + CC Monthly within 30 days Yes No
10Q, 10K (Audited) Quarterly/FYE (as applicable) within Yes No
120 days or within 5 days of issuance
A/R & A/P Agings Monthly within 30 days Yes No
Backlog and Booking Reports Monthly within 30 days Yes No
Borrowing Base Certificate Monthly within 30 days Yes No
Budgets, sales projections, operating plans, or other Promptly after Lender requests Yes No
financial information as Lender may request
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain:
Minimum Quick Ratio (monthly) 0.70:1.00 _____:1.00 Yes No
Minimum Tangible Net Worth (quarterly) $5,000,000 $________ Yes No
Have there been updates to Borrower's Intellectual Yes No
Property?
Borrower only has deposit accounts located
at the following institutions:
-34-
Comments Regarding Exceptions: See attached.
Sincerely,
California Micro Devices Corporation
________________________________________________
SIGNATURE
________________________________________________
TITLE
________________________________________________
DATE
BANK USE ONLY
Rec'd By:______________________________________
Authorized Signer
Date:__________________________________________
Verified:______________________________________
Authorized Signer
Date:__________________________________________
Compliance Status: Yes No
-35-
EXHIBIT E
Collateral Control and Related Provisions on Event of Default
Without limiting Bank's other rights and remedies, if an Event of Default
occurs and is continuing, the following provisions (the "Collateral Control
Provisions") shall be effective immediately upon notice by Bank to the Borrower:
(1) Schedules and Documents relating to Accounts. Borrower shall deliver to
Bank transaction reports and loan requests, schedules and assignments of all
Accounts, and schedules of collections, all on Bank's standard forms; provided,
however, that Borrower's failure to execute and deliver the same shall not
affect or limit Bank's security interest and other rights in all of Borrower's
Accounts. Together with each such schedule and assignment, or later if requested
by Bank, Borrower shall furnish Bank with copies (or, at Bank's request,
originals) of all contracts, orders, invoices, and other similar documents, and
all original 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 Bank an aged accounts receivable trial
balance in such form and at such intervals as Bank shall request. In addition,
Borrower shall deliver to Bank the originals of all instruments, chattel paper,
security agreements, guarantees and other documents and property evidencing or
securing any Accounts, immediately upon receipt thereof and in the same form as
received, with all necessary endorsements, all of which shall be with recourse.
Borrower shall also provide Bank with copies of all credit memos from time to
time on request by Bank.
(2) Collection of Accounts. Borrower shall hold all payments on, and
proceeds of, Accounts and all other Collateral in trust for Bank, and Borrower
shall immediately deliver all such payments and proceeds to Bank in their
original form, duly endorsed, to be applied to the Obligations in such order as
Bank shall determine. Borrower agrees that it will not commingle such payments
and proceeds with any of Borrower's other funds or property, but will hold such
payments and proceeds separate and apart from such other funds and property and
in an express trust for Bank. Bank may, in its discretion, require that all
proceeds of Collateral be deposited by Borrower into a lockbox account, or such
other "blocked account" as Bank may specify, pursuant to a blocked account
agreement in such form as Bank may specify. Bank or its designee may, at any
time, notify Account Debtors that the Accounts have been assigned to Bank.
Nothing in this Exhibit limits the restrictions on Transfers of Collateral set
forth elsewhere in this Agreement.
(3) Loan Requests. Without limiting the right of Bank to cease making Loans
on an Event of Default, requests for Loans shall be in writing and shall be
accompanied by a current Transaction Report on Bank's standard form.
(4) Reserves. Without limiting the right of Bank to cease making Loans on
an Event of Default, Bank shall have the right, from time to time, to establish
and deduct the following reserves from the amount of Loans, Letters of Credit
and other financial accommodations under the lending formula(s) provided in the
Schedule: (a) reserves to reflect events, conditions, contingencies or risks
which, as determined by Bank in good faith, do or may affect adversely
-36-
(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 (iii) the
security interests and other rights of Bank in the Collateral (including the
enforceability, perfection and priority thereof); and (b) reserves to reflect
Bank's good faith belief that any collateral report or financial information
furnished by or on behalf of Borrower to Bank is or may have been incomplete,
inaccurate or misleading in any material respect.
-▇▇-
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
This Negative Pledge Agreement is made as of June 17, 2002, by and between
California Micro Devices Corporation, a California corporation ("Borrower"), and
Silicon Valley Bank ("Bank").
RECITAL
Bank has agreed to make certain advances of money and to extend certain
financial accommodations to Borrower (the "Loans") in the amounts and manner set
forth in that certain Loan and Security Agreement by and between Bank and
Borrower dated June 17, 2002 (as the same may be amended, modified or
supplemented from time to time, the "Loan Agreement"; capitalized terms used
herein are used as defined in the Loan Agreement). Bank is willing to make the
Loans to Borrower, but only upon the condition, among others, that Borrower
shall provide to Bank a negative pledge in Borrower's Intellectual Property.
NOW, THEREFORE, in consideration of the foregoing and for good and valuable
consideration, receipt of which is hereby acknowledged, and intending to be
legally bound, Borrower hereby represents, warrants, covenants and agrees as
follows:
1. Borrower shall not sell, transfer, assign, mortgage, pledge, lease,
grant a security interest in, or encumber (other than transfers permitted under
Section 7.1 of the Loan Agreement") any of Borrower's Intellectual Property
(including without limitation those Copyrights, Patents, Trademarks and Mask
Works listed on Schedules A, B, C, and D hereto), without Bank's prior written
consent.
2. It shall be an event of default under the Loan Documents and under any
of the related documents between Borrower and Bank if there is a breach of any
term of this Negative Pledge Agreement.
BORROWER:
CALIFORNIA MICRO DEVICES CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-----------------------------------------------
Title: Vice President Finance & Administration and CFO
-------------------------------------------------------
BANK:
SILICON VALLEY BANK
By: /s/ ▇▇▇ ▇▇▇▇▇
-------------------------------------------------
Name: ▇▇▇ ▇▇▇▇▇
-----------------------------------------------
Title: Senior Relationship Manager
----------------------------------------------
-38-
SCHEDULE A
Copyrights
Description Registration/ Registration/
----------- Application Application
Number Date
------ ----
-39-
SCHEDULE B
Patents
Description Registration/ Registration/
----------- Application Application
Number Date
------ ----
-40-
SCHEDULE C
Trademarks
Description Registration/ Registration/
----------- Application Application
Number Date
------ ----
-41-
SCHEDULE D
Mask Works
Description Registration/ Registration/
----------- Application Application
Number Date
------ ----
-42-
CORPORATE BORROWING RESOLUTIONS
Borrower: California Micro Devices Corporation Lender:Silicon Valley Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
I, the Secretary or Assistant Secretary of California Micro Devices Corporation
("Borrower"), CERTIFY that Borrower is a corporation existing under the laws of
the State of California.
I certify that at a meeting of Borrower's Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.
It is resolved that any one of the following officers of Borrower, whose name,
title and signature is below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ President and CEO /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------- ------------------- ------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ CFO /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------- ------------------- ------------------------------
------------------------- ------------------- ------------------------------
may act for Borrower, and:
Borrow Money. Borrow money from Silicon Valley Bank ("Bank").
Execute Loan Documents. Execute any loan documents Bank requires.
Grant Security. Grant Bank a security interest in any of Borrower's
assets.
Negative Pledge on Intellectual Property. Execute a negative pledge
agreement with Bank with respect to the Borrower's intellectual property.
Negotiate Items. Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest
and receive cash or otherwise use the proceeds.
Letters of Credit. Apply for letters of credit from Bank.
Foreign Exchange Contracts. Execute spot or forward foreign exchange
contracts.
Further Acts. Designate other individuals to request advances, pay
fees and costs and execute other documents or agreements (including
documents or agreement that waive Borrower's right to a jury trial) they
think necessary to effectuate these Resolutions.
-43-
Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.
I certify that the persons listed above are Borrower's officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.
CERTIFIED TO AND ATTESTED BY:
X /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------------
*Secretary or Assistant Secretary
X
-----------------------------------------------
*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.
-44-