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EXHIBIT 10.26
REVOLVING CREDIT LOAN & SECURITY AGREEMENT
(ACCOUNTS AND EQUIPMENT LOANS)
OBLIGOR # NOTE # AGREEMENT DATE
June 1, 1999
CREDIT LIMIT INTEREST RATE OFFICER NO./INITIALS
$6,500,00 Base Rate 48711, ▇▇▇▇▇▇ ▇▇▇▇▇
THIS AGREEMENT is entered into on June 1, 1999, between Comerica
Bank-California ("Bank") as secured party, whose Headquarter Office is ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ and Accelerated Networks, Inc.
("Borrower") a corporation whose chief executive office is located at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇. The parties agree as follows:
I. DEFINITIONS.
1.1 "Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly more than fifty percent (50%) of the
ownership of such Person, any Person that controls or is controlled by or is
under common control with such Person, and each of such Person's senior
executive officers, directors, and partners.
1.2 "Agreement" as used in this Agreement means and includes this
Revolving Credit Loan & Security Agreement (Accounts and Inventory), any
concurrent or subsequent rider and any extensions, supplements, amendments or
modifications hereto.
1.3 "Bank Expenses" as used in this Agreement means and includes: all
costs or expenses required to be paid by Borrower under this Agreement which are
paid or advanced by Bank; taxes and insurance premiums of every nature and kind
of Borrower paid by Bank; filing, recording, publication and search fees,
appraiser fees, auditor fees and costs, and title insurance premiums paid or
incurred by Bank in connection with Bank's transactions with Borrower; costs and
expenses incurred by Bank in collecting the Receivables (with or without suit)
to correct any default or enforce any provision of this Agreement, or in gaining
possession of, maintaining, handling, preserving, storing, shipping, selling,
disposing of, preparing for sale and/or advertising to sell the Collateral,
whether or not a sale is consummated; costs and expenses of suit incurred by
Bank in enforcing or defending this Agreement or any portion hereof, including,
but not limited to, expenses incurred by Bank in attempting to obtain relief
from any stay, restraining order, injunction or similar process which prohibits
Bank from exercising any of its rights or remedies; and attorneys.' fees and
expenses incurred by Bank in advising, structuring, drafting, reviewing,
amending, terminating, enforcing, defending or concerning this Agreement, or any
portion hereof or any agreement related hereto, whether or not suit is brought.
Bank Expenses shall include Bank's in-house legal charges at reasonable rates.
1.4 "Base Rate" as used in this Agreement means that variable rate of
interest so announced by Bank at its headquarters office in San Jose, California
as its "Base Rate" from time to time and which serves as a basis upon which
effective rates of interest are calculated for those loans making reference
thereto.
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1.5 "Borrower's Books" as used in this Agreement means and includes
all of the Borrower's books and records including but not limited to: minute
books; ledgers; records indicating, summarizing or evidencing Borrower's assets,
liabilities, Receivables, business operations or financial conditions, and all
information relating thereto, computer programs; computer disk or tape files,
computer printouts; computer runs; and other computer prepared information and
equipment of any kind.
1.6 "Borrowing Base" as used in this Agreement means the sum of
Eighty Percent (80%) of the net amount of Eligible Accounts after deducting
therefrom all payments, adjustments and credits applicable thereto ("Accounts
Receivable Borrowing Base").
1.7 [Intentionally Deleted]
1.8 "Collateral" as used in this Agreement means and includes each
and all of the following: the Receivables; the Intangibles; the Negotiable
Collateral, the Inventory; all money, deposit accounts and all other assets of
Borrower in which Bank receives a security interest or which hereafter come into
the possession, custody or control of Bank; and the proceeds of any of the
foregoing, including, but not limited to, proceeds of insurance covering the
Collateral and any and all Receivables, Intangibles, Negotiable Collateral,
Inventory, equipment, money, deposit accounts or other tangible and intangible
property of borrower resulting from the sale or other disposition of the
Collateral, and the proceeds thereof. Notwithstanding anything to the contrary
contained herein, neither Collateral nor any of its constituent elements shall
include (i) any waste or other materials which have been or may be designated as
toxic or hazardous by Bank or (ii) any Third-Party Equipment Collateral to the
extent a grant of a security interest to Bank therein would constitute a default
under any provision of the agreement or agreements pursuant to which Borrower
has an interest in such Third-Party Equipment Collateral provided that such
Third-Party Equipment Collateral shall automatically become part of the
Collateral upon the termination, lapse or ineffectiveness of such provision.
1.9 "Credit" as used in this Agreement means all Obligations, except
those obligations arising pursuant to any other separate contract, instrument,
note, or other separate agreement which, by its terms, provides for a specified
interest rate and term.
1.10 "Current Assets" as used in this Agreement means, as of any
applicable date of determination, all cash, non-affiliated customer receivables,
United States government securities, claims against the United States
government, and inventories.
1.11 "Current Liabilities" as used in this Agreement means, as of any
applicable date of determination (i) all liabilities of a person that should be
classified as current in accordance with GAAP, including without limitation any
portion of the principal of the Indebtedness classified as current, plus (ii) to
the extent not otherwise included, all liabilities of the Borrower to any of its
affiliates whether or not classified as current in accordance with GAAP.
1.12 "Daily Balance" as used in this Agreement means the amount
determined by taking the amount of the Credit owed at the beginning of a given
day, adding any new Credit advanced or incurred on such date, and subtracting
any payments or collections which are deemed to be paid and are applied by Bank
in reduction of the Credit on that date under the provisions of this Agreement,
but not including the amount of any outstanding, undrawn Letter of Credit.
1.13 "Eligible Accounts" as used in this Agreement means and includes
those accounts of Borrower which are due an payable within thirty (30) days, or
less, from the date of invoice,
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have been validly assigned as security to Bank and strictly comply with all of
Borrower's warranties and representations to Bank; but Eligible Accounts shall
not include the following unless otherwise agreed in advance by Bank: (a)
accounts with respect to which the account debtor is an officer, employee,
PARTNER, joint venturer or agent of Borrower; (b) accounts with respect to which
goods are placed on consignment, guaranteed sale or other terms by reason of
which the payment by the account debtor may be conditional; (c) accounts with
respect to which the account debtor is not a resident of the United States
(other than Siemens AG and its affiliates); (d) accounts with respect to which
the account debtor is the United States or any department, agency or
instrumentality of the United States; (e) accounts with respect to which the
account debtor is any State of the United States or any city, county, town
municipality or division thereof, (f) accounts with respect to which the account
debtor is a subsidiary of, related to, affiliated or has common controlling
shareholders, officers or directors with Borrower; (g) accounts with respect to
which Borrower is or may become liable to the account debtor for goods sold or
services rendered by the account debtor to Borrower; (h) accounts not paid by an
account debtor within ninety (90) days from the date of the invoice; (i)
accounts with respect to which account debtors dispute liability or make any
claim, or have any defense, crossclaim, counterclaim, or offset; 0) accounts
with respect to which any Insolvency Proceeding is filed by or against the
account debtor, or if an account debtor becomes insolvent, fails or goes out of
business; and (k) accounts owed by any single account debtor which exceed twenty
percent (20%) of all of the Eligible Accounts (except that the concentration
limit for Siemens AG and its United States subsidiaries shall be ninety percent
(90%) until December 1, 1999, and seventy-five percent (75%) thereafter, and the
concentration limit for MGC Group shall be eighty percent (80%) until December
1, 1999, and fifty percent (50%) thereafter; and (1) accounts with a particular
account debtor on which over twenty-five percent (25%) of the aggregate amount
owing is greater than ninety (90) days from the date of the invoice.
1.14 "Event of Default" as used in this Agreement means those events
described in Section 7 contained herein below.
1.15 Intentionally Deleted.
1.16 "GAAP" as used in this Agreement means as of any applicable
period, generally accepted accounting principles in effect during such period.
1.17 "Insolvency Proceeding" as used in this Agreement means and
includes any proceeding or case commenced by or against the Borrower, or any
guarantor of Borrower's Obligations, or any borrower's account debtors, under
any provisions of the Bankruptcy Code, as amended, or any other bankruptcy or
insolvency law, including but not limited to assignments for the benefit of
creditors, formal or informal moratoriums, composition or extensions with some
or all creditors, any proceeding seeking reorganization, arrangement or any
other relief under the Bankruptcy code, as amended, or any other bankruptcy or
insolvency law.
1.18 "Intangibles" as used in this Agreement means and includes all
Borrower's present and future general intangibles and other personal property
(including, without limitation, any and all rights in any legal proceeding,
goodwill, patents, trade names, copyrights, trademarks, blueprints, drawings,
purchase orders, computer programs, computer disks, computer tapes, literature,
reports, catalogs and deposit accounts) other than goods and Receivables, as
well as Borrower's Books relating to any of the foregoing.
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1.19 "Inventory" as used in this Agreement means and includes all
present and future inventory in which Borrower has any interest, including, but
not limited to, goods held by Borrower for sale or lease or to be furnished
under a contract of service and all of Borrower's present and future raw
materials, work in process, finished goods, advertising materials and packing
and shipping materials, wherever located and any documents of title representing
any of the above, and any equipment, fixtures or other property used in the
storing, moving, preserving, identifying, accounting for and shipping or
preparing for the shipping of inventory, and any and all other items hereafter
acquired by Borrower by way of substitution, replacement, return, repossession
or otherwise, and all additions and accessions thereto, and the resulting
product or mass, and any documents of title respecting any of the above.
1.20 "Letter of Credit" means a letter of credit issued pursuant to
Section 2.5.
1.21 "Net Income" as used in this Agreement means the net income (or
loss) of a person for any period determined in accordance with GAAP but
excluding in any event:
(a) any gains or losses on the sale or other disposition, not in
the ordinary course of business, of investments or fixed or capital assets, and
any taxes on the excluded gains and any tax deductions or credits on account on
any excluded losses; and
(b) in the case of the Borrower, net earnings of any Person in
which Borrower has an ownership interest, unless such net earnings shall have
actually been received by Borrower in the form of cash distributions.
1.22 "Judicial Officer or Assignee" as used in this Agreement means
and includes any trustee, receiver, controller, custodian, assignee for the
benefit of creditors or any other person or entity having powers or duties like
or similar to the powers and duties of trustee, receiver, controller, custodian
or assignee for the benefit of creditors.
1.23 "Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
1.24 "Obligations" as used in this Agreement means and includes any
and all loans, advances, overdrafts, debts, liabilities, obligations in respect
of drawn or undrawn Letters of Credit issued hereunder (including, without
limitation, any and all amounts charged to Borrower's account pursuant to any
agreement authorizing Bank to charge Borrower's account), obligations, lease
payments, guaranties, covenants and duties owing by Borrower to Bank of any kind
and description whether advanced pursuant to or evidenced by this Agreement; by
any note or other instrument; or by any other agreement between Bank and
Borrower and whether or not for the payment of money, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including, without limitation, any debt, liability or
obligation owing from Borrower to others which Bank may have obtained by
assignment, participation, purchase or otherwise, and further including, without
limitation, all interest not paid when due and all Bank Expenses which Borrower
is required to pay or reimburse by this Agreement, by law, or otherwise.
1.25 "Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement;
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(b) Indebtedness secured by a Lien described in Subsection (c) of
the definition of "Permitted Liens" below provided the principal amount of such
Indebtedness does not exceed the cost of' the Equipment financed;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business;
(e) Contingent Obligations of Borrower consisting of guarantees
(and other credit support) of the obligations of vendors and suppliers of
Borrower in respect of transactions entered into in the ordinary course of
business:
(f) Indebtedness with respect to capital lease obligations
(including leases of real property);
(g) prepaid royalties and deferred revenue in connection with
prepaid support services and deferred sales; and
(h) extensions, renewals, refundings, refinancings,
modifications, amendments and restatements of any of the items of Permitted
Indebtedness (a) through (g) above, provided that the principal amount thereof
is not increased or the terms thereof are not modified to impose more burdensome
terms upon Borrower;
1.26 "Permitted Investment" means:
(a) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof;
(b) Corporate commercial paper, corporate notes and bonds, master
notes, medium term notes, bankers acceptances, institutional money market funds,
certificates of deposit and repurchase agreements which, if short-term, have a
minimum credit rating of A-I or P-I or, if long-term, have a minimum credit
rating of A by Standard Poor's or ▇▇▇▇▇'▇ Investor Services; and nondiversified
short duration mutual funds with an average credit rating of at least A- and a
duration not to exceed three (3) years. Investments shall mature no more than
three (3) years from the date of purchase by Borrower, and shall have been
approved by Borrower's investment policy, provided that such investment policy
and any amendments thereto have been approved by Bank, which approval shall not
be unreasonably withheld;
(c) Certificates of deposit maturing no more than one (1) year
from the date of investment therein issued by Bank;
(d) Extensions of credit in the nature of accounts receivable or
note receivable arising from the sale or lease of goods or services in the
ordinary course of business;
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(e) Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business;
(f) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of business; and
(g) Investments consisting of (i) compensation of employees,
officers and directors of Borrower so long as the Board of Directors of Borrower
determines that such compensation is in the best interests of Borrower, (ii)
travel advances, employee relocation loans and other employee loans and advances
in the ordinary course of business, (iii) loans to employees, officers or
directors relating to the purchase of equity securities of Borrower, and (iv)
other loans to officers and employees approved by the Board of Directors,
provided that all Investments permitted under this clause (g) shall be excluded
from the calculation of Borrower's Tangible Effective Net Worth);
1.27 "Permitted Liens" means:
(a) any Liens existing on the Closing Date and disclosed in the
Schedule or arising under the terms of this Agreement;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank's
security interests;
(c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries (other than Equipment financed under Section
2.4 hereof) to secure the purchase price of such equipment or indebtedness
incurred solely for the purpose of financing the acquisition of such equipment,
(ii) upon any Third Party Equipment Collateral, or (iii) existing on such
equipment at the time of its acquisition, provided that the Lien is confined
solely to the property so acquired and improvements thereon, and the proceeds of
such equipment;
(d) Liens on Equipment and on Third Party Equipment Collateral
(other than Equipment financed under Section 2.4 hereof) leased by Borrower or
any Subsidiary pursuant to an operating or capital lease in the ordinary course
of business (including proceeds thereof and accessions thereto) incurred solely
for the purpose of financing the lease of such Equipment;
(e) Leases or subleases and licenses and sublicenses granted to
others in the ordinary course of Borrower's business not interfering in any
material respect with the business of Borrower;
(f) Liens on assets (including the proceeds thereof and
accessions thereto) that existed at the time such assets were acquired by
Borrower or any Subsidiary (including Liens on assets of any corporation that
existed at the time it became or becomes a Subsidiary); provided such Liens are
not granted in contemplation of or in connection with the acquisition of such
asset by Borrower or a Subsidiary;
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(g) easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
affecting real property not constituting a Material Adverse Effect;
(h) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payments of customs duties in connection with the
importation of goods; and
(i) Liens that are not prior to the Lien of Bank which constitute
rights of set-off of a customary nature or banker's Liens with respect to
amounts on deposit, whether arising by operation of law or by contract, In
connection with arrangement entered in to with banks in the ordinary course of
business.
1.28 "Person" or "person" as used in this Agreement means and
includes any individual, corporation, partnership, joint venture, association,
trust unincorporated association, joint stock company, government, municipality,
political subdivision or agency, or other entity.
1.29 "Receivables" as used in this Agreement means and includes all
presently existing and hereafter arising accounts, instruments, documents,
chattel paper, general intangibles, all other forms of obligations owing to
Borrower, all of Borrower's rights in, to and under all purchase orders
heretofore or hereafter received, all moneys due to Borrower under all contracts
or agreements (whether or not yet earned or due), all merchandise returned to or
reclaimed by Borrower and the Borrower's books (except minutes books) relating
to any of the foregoing.
1.30 "Subordinated Debt" as used in this Agreement means indebtedness
of the Borrower to third parties which has been subordinated to the Obligations
pursuant to a subordination agreement in form and content satisfactory to the
Bank.
1.31 [Intentionally Deleted]
1.32 "Tangible Effective Net Worth" as used in the Agreement means
net worth as determined in accordance with GAAP consistently applied, increased
by Subordinated Debt, if any, and decreased by the following: patents, licenses,
goodwill, subscription lists, organization expenses, trade receivables converted
to notes, money due from affiliates (including officers, directors, subsidiaries
and commonly held companies).
1.33 "Tangible Net Worth" as used in the Agreement means, as of any
applicable date of determination, the excess of
(a) the net book value of all assets of a person (other than
patents, patent rights, trademarks, trade names, franchises, copyrights,
licenses, goodwill, and similar tangible assets) after all appropriate
deductions in accordance with GAAP (including, without limitation, reserves for
doubtful receivables, obsolescence, depreciation and amortization), over
(b) all Debt of such person.
1.34 "Third-Party Equipment Collateral" means equipment now or
hereafter leased from or financed, on a secured basis, by a third-party lessor
or financier, together with all rents, issues,
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income, profits and other proceeds arising from the disposition thereof and
insurance proceeds paid thereon, subject to and in accordance with Section 6.17
hereof.
1.35 "Total Liabilities" as used in this Agreement means the total of
all items of indebtedness, obligation or liability which, in accordance with
GAAP consistently applied, would be included in determining the total
liabilities of the Borrower as of the date Total Liabilities is to be
determined, including without limitation (a) all obligations secured by any
mortgage, pledge, security interest or other lien on property owned or acquired,
whether or not the obligations secured thereby shall have been assumed; (b) all
obligations which are capitalized lease obligations; and (c) all guaranties,
endorsements or other contingent or surety obligations with respect to the
indebtedness of others, whether or not reflected on the balance sheets of the
Borrower, including any obligation to furnish funds, directly or indirectly
through the purchase of goods, supplies, services, or by way of stock purchase,
capital contribution, advance or loan or any obligation to enter into a contract
for any of the following.
1.36 Intentionally Deleted.
1.37 Any and all terms used in this Agreement shall be construed and
defined in accordance with the meaning and definition of such terms under and
pursuant to the California Uniform Commercial Code (hereinafter referred to as
the "Code") as amended.
2. LOAN AND TERMS OF PAYMENTS.
For value received, Borrower promises to pay to the order of Bank
such amount, as provided for below, together with interest, as provided for
below.
2.1 Upon the request of Borrower, made at any time and from time to
time through December 1, 2000, and so long as no Event of Default exists, Bank
shall lend to Borrower and/or issue Letters of Credit for the account of
Borrower an amount equal to the Borrowing Base; provided, however, that in no
event shall Bank be obligated to make advances to Borrower under this Section
2.1 whenever the Daily Balance exceeds, at any time, either the Borrowing Base
or the sum of Four Million Dollars ($4,000,000), such amount being referred to
herein as an "Overadvance". Notwithstanding the limitations on advances of this
Section 2.1 Bank shall permit Borrower to request cash advances ("Advances") or
Letters of Credit in excess of the Borrowing Base, provided the outstanding
balance of Advances and the face amount of the outstanding Letters of Credit
before and after the making of such Advance or issuance of such Letter of Credit
is not in excess of $500,000.
2.2 Except as hereinbelow provided, the Credit shall bear interest,
on the Daily Balance owing, at a rate equal to the Base Rate (the "Rate"). The
Credit shall bear interest, during the continuance of an Event of Default and
without constituting a waiver of any such Event of Default, on the Daily Balance
owing, at a rate of three (3) percentage points per annum above the Rate. All
interest chargeable under this Agreement that is based upon a per annum
calculation shall be computed on the basis of a three hundred sixty (360) day
year for actual days elapsed. The Base Rate as of the date of this Agreement is
Seven and 75/100 (7.75%) per annum. In the event that the Base Rate announced
is, from time to time hereafter changed, adjustment in the Rate shall be made
and based on the Base Rate in effect on the date of such change. The Rate, as
adjusted, shall apply to the Credit until the Base Rate is adjusted again. All
interest payable by Borrower under the Credit shall be due and payable on the
first day of each calendar month during the term of the Agreement and Bank may,
at its option, elect to treat such interest and any and all Bank Expenses as
advances under the Credit, which amounts shall thereupon constitute
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Obligations and shall thereafter accrue interest at the rate applicable to the
Credit under the terms of the Agreement.
Borrower will pay Bank a fee equal to $20,000 on account of the
revolving facility, payable in six (6) quarterly payments of $3,333.34 each,
with the first payment due on the date hereof, and subsequent payments due on
the first day of each fiscal quarter thereafter.
2.3 All principal and accrued but unpaid interest under Sections 2.1
and 2.2 shall be due and payable in full on November 20, 2000.
2.4 Equipment Advances.
(a) At any time from the date hereof through May 20, 2000, Bank
agrees to make advances (each an "Equipment Advance" and, collectively, the
"Equipment Advances") to Borrower in an aggregate outstanding amount not to
exceed Two Million Five Hundred Thousand Dollars ($2,500,000). Each Equipment
Advance shall not exceed one hundred percent (100%) of the invoice amount of
equipment, leasehold improvements, and software presented to Bank from time to
time, provided that Bank may exercise its right of prior consent in respect of
used equipment or leasehold improvements such consent not to be unreasonably
withheld, excluding taxes, shipping, warranty charges, freight discounts and
installation expense, provided that aggregate Equipment Advances used for
leasehold improvements and software shall not exceed Seven Hundred Fifty
Thousand Dollars ($750,000), and provided further that, except for the initial
Equipment Advance in a principal amount of up to $360,000 (which Borrower will
use to repay an obligation to Silicon Valley Bank), Equipment Advances shall
finance only Equipment purchased or acquired after February 21, 1999. Each
Equipment Advance shall be for a minimum of Fifty Thousand Dollars ($50,000),
provided that individual items of equipment may be for lesser amounts.
(b) Interest shall accrue from the date of each Equipment Advance
at a rate equal to the Base Rate plus one half percent (0.5%), and shall be
payable monthly on the first (1st) day of each month through June 1, 2003.
During the continuance of an Event of Default, the Equipment Advances shall bear
interest at a rate of three (3) percentage points above the rate applicable
prior to such continuance. Any Equipment Advances that are outstanding on
December 1, 1999 ("First Tranche Advances") shall be payable in thirty-six (36)
equal monthly installments of principal, plus all accrued interest, beginning on
January 1, 2000, and continuing on the same day of each month thereafter through
December 1, 2002. Any Equipment Advances that are outstanding on June 1, 2000
and not outstanding as of December 1, 1999 (the "Second Tranche Advances") shall
be payable in thirty-six (36) equal monthly installments of principal, plus all
accrued interest, beginning on June 1, 2000, and continuing on the same day of
each month thereafter through June 1, 2003, at which time all outstanding
Equipment Advances and interest thereon shall be immediately due and payable.
Equipment Advances, once repaid, may not be reborrowed. Borrower may prepay any
Equipment Advances without penalty or premium. Notwithstanding the foregoing,
any or all First Tranche Advances or Second Tranche Advances, or both, that are
outstanding before December 1, 1999, or on June 1, 2000, may upon Borrower's
three (3) day prior written notice to Bank, accrue interest at a fixed rate
equal to three and one quarter of one percent (3.25%) above the rate quoted by
Bank to Borrower as the "Cost of Funds Rate." For the purposes of this
paragraph, "Cost of Funds Rate" shall mean the rate of interest generally
determined by Bank for purposes of all loans and credits making reference to
such "Cost of Funds," in its sole discretion, from time to time, as its cost of
funds, as such rate may change from time to time.
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(c) When Borrower desires to obtain an Equipment Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 5:00 p.m. Pacific Time one (1)
Business Day before the day on which the Equipment Advance is to be made. The
notice shall be signed by an officer of Borrower or its designee and (except for
the initial Equipment Advance refinancing the Silicon Valley Bank debt) include
a copy of the invoice for any equipment, leasehold improvements, and/or software
to be financed.
(d) Borrower shall pay Bank a fee on account of the equipment
facility equal to $20,000, which shall be due and payable on the date hereof.
2.5 Letters of Credit. Subject to the terms and conditions of this
Agreement, Bank agrees to issue or cause to be issued Letters of Credit for the
account of Borrower in an aggregate outstanding face amount not to exceed (i)
the lesser of the Borrowing Base or $4,000,000, minus (ii) the then outstanding
principal balance of the Advances; provided the face amount of such undrawn
Letters of Credit shall not at any time exceed $500,000. All Letters of Credit
shall be, in form and substance, acceptable to Bank in its sole discretion and
shall be subject to the terms and conditions of Bank's form of standard
Application and Letter of Credit Agreement. The expiry date of each Letter of
Credit shall be not later than June 1, 2000, unless Borrower secures all
obligations relating to such Letter of Credit with cash on terms reasonably
acceptable to Bank. Borrower shall pay Bank a fee as a condition to the issuance
of any Letter of Credit equal to 1.25 percent of the face amount of such Letter
of Credit.
3. TERM.
3.1 This Agreement shall remain in full force and effect until June
1, 2003, or until terminated by notice by Borrower. Notice of such termination
by Borrower shall be effectuated by mailing of a registered or certified letter
not less than thirty (30) days prior to the effective date of such termination,
addressed to the Bank at the address set forth herein and the termination shall
be effective as of the date so fixed in such notice. Notwithstanding the
foregoing, during the continuance of an Event of Default, Bank may terminate
this Agreement at any time without notice. Notwithstanding the foregoing, should
either Bank or Borrower become insolvent or unable to meet its debts as they
mature, or fail, suspend, or go out of business, the other party shall have the
right to terminate this Agreement at any time without notice. On the date of
termination all Obligations shall become immediately due and payable without
notice or demand; no notice of termination by Borrower shall be effective until
Borrower shall have paid all Obligations to Bank in full. Notwithstanding
termination, until all Obligations have been fully satisfied, Bank shall retain
its security interest in all existing Collateral and Collateral arising
thereafter, and Borrower shall continue to perform all of its Obligations.
3.2 After termination and when Bank has received payment in full in
satisfaction of Borrower's Obligations to Bank, Bank shall reassign to Borrower
all Collateral held by Bank, and shall execute a termination of all security
agreements and security interests given by Borrower to Bank, upon the execution
and delivery of mutual general releases.
4. CREATION OF SECURITY INTEREST.
4.1 Borrower hereby grants to Bank a continuing security interest in
all presently existing and hereafter arising Collateral in order to secure
prompt repayment of any and all Obligations owed by Borrower to Bank and in
order to secure prompt performance by Borrower of each and all of its covenants
and Obligations under the Agreement and otherwise created. Bank's security
interest in the
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Collateral shall attach to all Collateral without further act on the part of
Bank or Borrower. In the event that any Collateral, including proceeds, is
evidenced by or consists of Negotiable Collateral, Borrower shall, immediately
upon Bank's request, endorse and assign such Negotiable Collateral over to Bank
and deliver actual physical possession of the Negotiable Collateral to Bank.
4.2 Bank's security interest in Receivables shall attach to all
Receivables without further act on the part of Bank or Borrower. Upon request
from Bank, Borrower shall provide Bank with schedules describing all Receivables
created or acquired by Borrower (including without limitation agings listing the
names and addresses of, and amounts owing by date by account debtors), and
during the continuance of an Event of Default shall execute and deliver written
assignments of all Receivables to Bank all in a form acceptable to Bank,
provided, however, Borrower's failure to execute and deliver such schedules
and/or assignments shall not affect or limit Bank's security interest and other
rights in and to the Receivables. Together with each schedule, Borrower shall
furnish Bank upon Bank's reasonable request with copies of Borrower's customers'
invoices or the equivalent, and original shipping or delivery receipts for all
merchandise sold, and Borrower warrants the genuineness thereof. During the
continuance of an Event of Default, Bank or Bank's designee may notify customers
or account debtors of collection costs and expenses to Borrower's account but,
unless and until Bank does so or gives Borrower other written instructions,
Borrower shall collect all Receivables for Bank, receive in trust all payments
thereon as Bank's trustee, and, if so requested to do so from Bank, Borrower
shall during the continuance of an Event of Default immediately deliver said
payments to Bank in their original form as received from the account debtor and
all letters of credit, advices of credit, instruments, documents, chattel paper
or any similar property evidencing or constituting Collateral. The receipt of
any check or other item of payment by Bank shall not be considered a payment on
account until such check or other item of payment is honored when presented for
payment, in which event, said check or other item of payment shall be deemed to
have been paid to Bank two (2) calendar days after the date Bank actually
receives such check or other item of payment.
4.3 Bank's security interest in Inventory shall attach to all
Inventory without further act on the part of Bank or Borrower. Upon Bank's
request during the continuance of an Event of Default Borrower will from time to
time at Borrower's expense pledge, assemble and deliver such Inventory to Bank
or to a third party as Bank's bailee; or hold the same in trust for Bank's
account or store the same in a warehouse in Bank's name; or deliver to Bank
documents of title representing said Inventory; or evidence of Bank's security
interest in some other manner acceptable to Bank.
4.4 Borrower shall execute and deliver to Bank concurrently with
Borrower's execution of this Agreement, and at any time or times hereafter at
the request of Bank, all financing statements, continuation financing
statements, security agreements, mortgages, collateral assignments, certificates
of title, affidavits, reports, notices, schedules of accounts, letters of
authority and all other documents that Bank may request, in form satisfactory to
Bank, to perfect and maintain perfected Bank's security interest in the
Collateral and in order to fully consummate all of the transactions contemplated
under this Agreement. Borrower hereby irrevocably makes, constitutes and
appoints Bank (and any of Bank's officers, employees or agents designated by
Bank) as Borrower's true and lawful attorney-in-fact with owner to sign the name
of Borrower on any financing statements, continuation financing statements,
security agreement, mortgage, collateral assignment, certificate of title,
affidavit, letter of authority, notice of other similar documents which must be
executed and/or filed in order to perfect or continue perfected Bank's security
interest in the Collateral.
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Borrower shall make appropriate entries in Borrower's Books
disclosing Bank's security interest in the Receivables. Bank (through any of its
officers, employees or agents) all have the right at any time or times hereafter
during Borrower's usual business hours, or during the usual business hours of
any third party having control over the records of Borrower, to inspect and
verify Borrower's Books in order to verify the amount or condition of, or any
other matter, relating to, said Collateral and Borrower's financial condition.
4.5 Borrower appoints Bank or any other person whom Bank may
designate as Borrower's attorney-in-fact, effective upon the occurrence of an
Event of Default, with power to endorse Borrower's name on any checks, notes,
acceptances, money order, drafts or other forms of payment or security that may
come into Bank's possession; to sign Borrower's name on any invoice or ▇▇▇▇ of
lading relating to any Receivables, on drafts against account debtors, on
schedules and assignments of Receivables, on verifications of Receivables and on
notices to account debtors; to establish a lock box arrangement and/or to notify
the post office authorities to change the address for delivery of Borrower's
mail addressed to Borrower to an address designated by Bank, to receive and open
all mail addressed to Borrower, and to retain all mail related to the Collateral
and forward all other mail to Borrower; to send, whether in writing or by
telephone, requests for verification of Receivables; and to do all things
necessary to carry out this Agreement. Borrower ratifies and approves all acts
of the attorney-in-fact. Neither Bank nor its attorney- in-fact will be liable
for any acts or omissions or for any error of judgment or mistake of fact or
law. This power being coupled with an interest, is irrevocable so long as any
Receivables in which Bank has a security interest remain unpaid and until the
Obligations have been fully satisfied.
4.6 During the continuance of an Event of Default, in order to
protect or perfect any security interest which Borrower is granted hereunder,
Borrower may, in its sole discretion, upon notice to Borrower, discharge any
lien or encumbrance or bond the same, pay any insurance, maintain guards,
warehousemen, or any personnel to protect the Collateral, pay any service
bureau, or, obtain any records, and all costs for the same shall be added to the
Obligations and shall be payable on demand.
4.7 Borrower agrees that Bank may provide information relating to
this Agreement or relating to Borrower to Bank's parent, affiliates,
subsidiaries and services providers.
5. CONDITIONS PRECEDENT.
5.1 Conditions precedent to the making of the loans and the extension
of the financial accommodations hereunder, Borrower shall execute, or cause to
be executed, and deliver to Bank, in form and substance satisfactory to Bank and
its counsel, the following:
(a) This Agreement and other documents required by Bank, provided
that Bank shall not require any opinion of counsel in connection herewith;
(b) Financing statements (Form UCC-1) in form satisfactory to
Bank for filing and recording with the appropriate governmental authorities;
(c) Certified extracts from the minutes of the meeting of its
board of directors, authorizing the borrowings and the granting of the security
interest provided for herein and authorizing specific officers to execute and
deliver the agreements provided for herein;
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(d) A certificate of good standing showing that Borrower is in
good standing under the laws of the state of its incorporation and certificates
indicating that Borrower is qualified to transact business and is in good
standing in any other state in which it conducts business;
(e) UCC searches, tax lien and litigation searches, fictitious
business statement filings, insurance certificates, notices or other similar
documents which Bank may require and in such form as Bank may require, in order
to reflect, perfect or protect Bank's first priority security interest in the
Collateral and in order to fully consummate all of the transactions contemplated
under this Agreement;
(f) Evidence that Borrower has obtained insurance and acceptable
endorsements; and
(g) Warranties and representations of officers.
6. WARRANTIES REPRESENTATIONS AND COVENANTS.
6.1 If so requested by Bank, Borrower shall, not more frequently than
once per calendar month, during the term hereof execute and deliver a Report of
Accounts Receivable or similar report, in form customarily used by Bank.
Borrower's Borrowing Base at all times pertinent hereto shall not be less than
the advances made hereunder when the Daily Balance exceeds $500,000. Bank shall
have the right to recompute Borrower's Borrowing Base in conformity with this
Agreement.
6.2 If any warranty is breached as to any account previously included
in the Borrowing Base, or any such account is not paid in full by an account
debtor within ninety (90) days from the date of invoice and such failure relates
to more than twenty-five percent (25%) of outstanding Receivables from such
account debtor, or an account debtor disputes liability, or a petition in
bankruptcy or other application for relief under the Bankruptcy Code or any
other insolvency law is filed by or against an account debtor, or an account
debtor makes an assignment for the benefit of creditors, becomes insolvent,
fails or goes out of business, then Bank may deem ineligible any and all
accounts owing by that account debtor, and reduce Borrower's Borrowing Base by
the amount thereof Bank may retain its security interest in all Receivables and
accounts, whether eligible or ineligible, until all Obligations have been fully
paid and satisfied. Returns and allowances, if any, as between Borrower and its
customers, will be on the same basis and in accordance with the usual customary
practices of the Borrower, as they exist at this time. Borrower shall promptly
notify Bank of all disputes and claims, relating to the Collateral, in excess of
$50,000. During the continuance of an Event of Default, no discount, credit or
allowance shall be granted to any account debtor by Borrower and no return of
merchandise shall be accepted by Borrower without Bank's consent. Bank may,
during the continuance of an Event of Default, settle or adjust disputes and
claims directly with account debtors for amounts and upon terms which Bank
considers advisable, and in such cases Bank will credit Borrower's account with
only the net amounts received by Bank in payment of the accounts, after
deducting all Bank Expenses in connection therewith.
6.3 Borrower warrants, represents, covenants and agrees that:
(a) Borrower has good and marketable title to the Collateral.
Bank has and shall continue to have a first priority perfected security interest
in and to the Collateral. The Collateral shall at all times remain free and
clear of all liens, encumbrances and security interests (except those in favor
of Bank and Permitted Liens).
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(b) All Eligible Accounts are and will, at all times pertinent
hereto, be bona fide existing obligations created by the sale and delivery of
merchandise or the rendition of services to account debtors in the ordinary
course of business, free of liens, claims, encumbrances and security interests
(except as held by Bank and except as may be consented to, in writing, by Bank)
and are unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims, rights of return or cancellation, and Borrower shall have
received no notice of actual or imminent bankruptcy or insolvency of any account
debtor at the time an account due from such account debtor is assigned to Bank.
6.4 At the time each Eligible Account is assigned to Bank, such
Eligible Account will be due and payable on terms set forth in Section 1.12, or
on such other terms approved in writing by Bank in advance of the creation of
such accounts and which are expressly set forth on the face of all invoices,
copies of which shall be held by Borrower as custodian for Bank, and no such
Eligible Account will then be past due.
6.5 [Deleted]
6.6 Borrower represents, warrants and covenants with Bank that
Borrower will not, without Bank's prior written consent:
(a) Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than: (i) Transfers of Inventory
in the ordinary course of business; (ii) Transfers of non-exclusive licenses
granted in the ordinary course of business and similar arrangements for the use
of the property of Borrower or its Subsidiaries by licensee(s); (iii) Transfers
of worn-out or obsolete Equipment, (iv) transfers in connection with Permitted
Indebtedness or (iv) other Transfers not exceeding One Million Dollars
($1,000,000) in the aggregate in any fiscal year, provided that in each such
case an Event of Default does not exist before or after giving effect to such
Transfer;
(b) Engage in any business, or permit any of its Subsidiaries to
engage in any business, other than the businesses currently engaged in by
Borrower and any business substantially similar or related thereto (or
incidental thereto). Borrower will not, without thirty (30) days prior written
notification to Bank, relocate its chief executive office;
(c) Merge or consolidate, or permit any of its Subsidiaries to
merge or consolidate, with or into any other business organization, or acquire,
or permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person; provided that without Bank's
consent, (i) any Subsidiary may merge into Borrower or another Subsidiary, and
(ii) Borrower may merge or consolidate with another entity, or acquire all or
substantially all of the capital stock or property of another Person where the
aggregate consideration in such merger, consideration or acquisition consists of
not more than Ten Million Dollars ($ 10,000,000) of Borrower's capital stock or
not more than Five Million Dollars ($5,000,000) in cash, so long as Borrower in
any case is the surviving entity after giving effect to such transaction.
(d) Create, incur, assume or be or remain liable with respect to
any Indebtedness, or permit any Subsidiary so to do, other than Permitted
Indebtedness;
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LOAN & SECURITY AGREEMENT
(e) Create, incur, assume or suffer to exist any Lien with
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens;
(f) Pay any dividends or make any other distribution or payment
on account of or in redemption, retirement or purchase of any capital stock,
other than, for so long as an Event of Default has not occurred or would not
exist after giving effect to such transaction, payments made for the repurchase
of stock or the exercise of options effected in connection with the termination
of an employee, officer or director;
(g) Directly or indirectly acquire, or make any Investment in or
to any Person, or permit any of its Subsidiaries so to do, other than Permitted
Investments;
(h) 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;
(i) Make any payment in respect of any Subordinated Debt, or
permit any of its Subsidiaries to make any such payment, except in compliance
with the terms of such Subordinated Debt, or amend any provision contained in
any documentation relating to the Subordinated Debt without Bank's prior written
consent;
Become an "investment company" or become "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Term Advance for such purpose.
Fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur, fail to comply
with the Federal Fair Labor Standards Act or violate any law or regulation,
which violation could have a Material Adverse Effect or a material adverse
effect on the Collateral or the priority of Bank's Lien on the Collateral, or
permit any of its Subsidiaries to do any of the foregoing; or
6.7 Borrower is not a merchant whose sales for resale of goods for
personal, family or household purposes exceeded seventy-five percent (75%) in
dollar volume of its total sales of all goods during the 12 months preceding the
filing by Bank of a financing statement describing the Collateral. At no time
hereafter shall Borrower's sales for resale of goods for personal, family or
household purposes exceed seventy-five (75%) in dollar volume of its total
sales.
6.8 Except as disclosed in writing to Bank, Borrower's sole place of
business or chief executive office or residence is located at the address
indicated above and Borrower covenants and agrees that it will not, during the
term of this Agreement, without prior written notification to Bank, relocate
said sole place of business or chief executive office or residence.
6.9 Borrower represents, warrants and covenants as follows:
(a) [Deleted]
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LOAN & SECURITY AGREEMENT
(b) Borrower is and shall at all times hereafter be a corporation
duly organized and existing in good standing under the laws of the state of its
incorporation and qualified and licensed to do business in California or any
other state in which it conducts its business;
(c) Borrower has the right and power and is duly authorized to
enter into this Agreement; and
(d) The execution by Borrower of this Agreement shall not
constitute a breach of any provision contained in Borrower's articles of
incorporation or by-laws.
6.10 The execution of and performance by Borrower of all of the terms
and provisions contained in this Agreement shall not result in a breach of or
constitute an event of default under any agreement to which Borrower is now or
hereafter becomes a party.
6.11 [Deleted]
6.12 All assessments and taxes, whether real, personal or otherwise,
due or payable by, or imposed, levied or assessed against, Borrower or any of
its property have been paid, and shall hereafter be paid in full, before
delinquency. Borrower shall make due and timely payment or deposit of all
federal, state and local taxes, assessments or contributions required of it by
law, and will execute and deliver to Bank, on demand, appropriate certificates
attesting to the payment or deposit thereof. Borrower will make timely payment
or deposit of all F.I.C.A. payments and withholding taxes required of it by
applicable laws, and will upon request furnish Bank with proof satisfactory to
it that Borrower has made such payments or deposit. If Borrower fails to pay any
such assessment, tax, contribution, or make such deposit, or furnish the
required proof, Bank may, in its sole and absolute discretion, and without
notice to Borrower, (i) make payment of the same or any part thereof; or (ii)
set up such reserves in Borrower's account as Bank deems necessary to satisfy
the liability therefor, or both. Bank may conclusively rely on the usual
statements of the amount owing or other official statements issued by the
appropriate governmental agency. Each amount so paid or deposited by Banks shall
constitute a Bank Expense and an additional advance to Borrower.
6.13 There are no actions or proceedings pending by or against
Borrower or any guarantor of Borrower before any court or administrative agency
and Borrower has no knowledge of any pending, threatened or imminent litigation,
governmental investigations or claims, complaints, actions or prosecutions
involving Borrower or any guarantor of Borrower, except as heretofore
specifically disclosed in writing to Bank. If any of the foregoing arise during
the term of the Agreement, Borrower shall immediately notify Bank in writing.
6.14 (a) Borrower, at its expense, shall keep and maintain its assets
insured against loss or damage by fire, theft, explosion, sprinklers and all
other hazards and risks ordinarily insured against by other owners who use such
properties in similar businesses for the full insurable value thereof Borrower
shall also keep and maintain business interruption insurance and public
liability and property damage insurance relating to Borrower's ownership and use
of the Collateral and its other assets. All such policies of insurance shall be
in such form, with such companies, and in such amounts as may be satisfactory to
Bank. Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All such
policies of insurance (except those of public liability and property damage)
shall contain an endorsement in a form satisfactory to Bank showing Bank as a
loss payee thereof in respect of the Collateral, with a waiver of warranties
(Form 438-BFU), and all
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LOAN & SECURITY AGREEMENT
proceeds payable thereunder shall be payable to Bank and, upon receipt by Bank,
shall be applied on account of the Obligations owing to Bank. To secure the
payment of the Obligations, Borrower grants Bank a security interest in and to
all such policies of insurance (except those of public liability and property
damage) and the proceeds thereof, and Borrower shall direct all insurers under
such policies of insurance to pay all proceeds thereof directly to Bank.
(b) During the continuance of an Event of Default, Borrower
hereby irrevocably appoints Bank (and any of Bank's officers, employees or
agents designated by Bank) as Borrower's attorney for the purpose of making,
selling and adjusting claims under such policies of insurance, endorsing the
name of Borrower or any check, draft, instrument or other item of payment for
the proceeds of such policies of insurance and for making all determinations and
decisions with respect to such policies of insurance. Borrower will not cancel
any of such policies without Bank's prior written consent. Each such insurer
shall agree by endorsement upon the policy or policies of insurance issued by it
to Borrower as required above, or by independent instruments furnished to Bank,
that it will give Bank at least ten (10) days written notice before any such
policy or policies of insurance shall be altered or canceled, and that no act or
default of Borrower, or any other person, shall affect the right of Bank to
recover under such policy or policies of insurance required above or to pay any
premium in whole or in part relating thereto. Bank, without waiving or releasing
any Obligations or any Event of Default, may, but shall have no obligation to do
so, obtain and maintain such policies of insurance and pay such premiums and
take any other action with respect to such policies which Bank deems advisable.
All sums so disbursed by Bank, as well as reasonable attorneys' fees, court
costs, expenses and other charges relating thereto, shall constitute Bank
Expenses and are payable on demand.
6.15 All financial statements and information relating to Borrower
which have been or may hereafter be delivered by Borrower to Bank are true and
correct and have been prepared in accordance with GAAP consistently applied and
there has been no material adverse change in the financial condition of Borrower
since the submission of such financial information to Bank.
6.16 (a) Borrower at all times hereafter shall maintain a standard
and modem system of accounting in accordance with GAAP consistently applied with
ledger and account cards and/or computer tapes and computer disks, computer
printouts and computer records pertaining to the Collateral which contain
information as may from time to time be requested by Bank, not modify or change
its method of accounting or enter into, modify or terminate any agreement
presently existing, or at any time hereafter entered into with any third party
accounting firm and/or service bureau for the preparation and/or storage of
Borrower's accounting records without the written consent of Bank first obtained
and without said accounting firm and/or service bureau agreeing to provide
information regarding the Receivables and Inventory and Borrower's financial
condition to Bank; permit Bank and any of its employees, officers or agents,
upon demand, during Borrower's usual business hours, or the .usual business hour
of third persons having control thereof, to have access to and examine all of
the Borrower's Books relating to the Collateral, Borrower's Obligations to Bank,
Borrower's financial condition and the results of Borrower's operations and in
connection therewith, permit Bank or any of its agents, employees or officers to
copy and make extracts therefrom.
(b) Borrower shall deliver to Bank within twenty (20) days after
the end of each month, a company prepared balance sheet and profit and loss
statement covering Borrower's operations (together with a compliance
certificate), and deliver to Bank within one hundred twenty (120) days after the
end of each of Borrower's fiscal year a statement of the financial condition of
the Borrower for each such fiscal year audited by an independent certified
public accountant reasonably satisfactory to
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LOAN & SECURITY AGREEMENT
Bank, including but not limited to,
a balance sheet and profit and loss statement and any other report requested by
Bank relating to the Collateral and the financial condition of Borrower, and a
certificate signed by an authorized employee of Borrower to the effect that all
reports, statements, computer disk or tape files, computer printouts, computer
runs, or other computer prepared information of any kind or nature relating to
the foregoing or documents delivered or caused to be delivered to Bank under
this subparagraph are complete, correct and fairly present the financial
condition of Borrower and that there exists on the date of delivery to Bank no
condition or event which constitutes an Event of Default under this Agreement.
(c) In addition to the financial statements requested above, the
Borrower agrees to provide Bank with the following schedules:
XX Accounts Payable Agings on a monthly basis within 20 days of
------------ month end;
XX Borrowing Base Certificate on a monthly basis.
------------
XX Projections or other financial exhibits upon request.
------------
XX Semi-annual Accounts Receivable audits at Borrower's expense.
------------
6.17 Borrower shall maintain, as of the last day of each calendar
month, the following financial ratios and covenants on a consolidated and
non-consolidated basis:
(a) Tangible Effective Net Worth in an amount not less than
$17,000,000, to step up by 50% of all profits earned, new equity or subordinated
debt issued after the date hereof, other than equity issued to officers,
directors or employees.
(b) A quick ratio of unrestricted cash equivalents plus
securities plus Receivables to Current Liabilities not less than 2.50: 1.00,
Current Liabilities to include outstandings under the Line of Credit.
(c) A ratio of Total Liabilities (less debt subordinated to Bank)
to Tangible Effective Net Worth of less than 1.50: 1.00.
(d) Borrower shall not without Bank's prior written consent
acquire or expend for or commit itself to acquire or expend for fixed assets by
lease, purchase or otherwise in an aggregate principal (or imputed principal)
amount that exceeds Four Million Dollars ($4,000,000) in any fiscal year;
(e) Borrower shall not incur aggregate additional obligations on
account of leased or financed equipment in excess of $1,500,000 per fiscal year
(other than Equipment financed by Bank); and
(f) Borrower shall maintain more than eighty percent (80%) of its
assets (measured by fair market value) in the United States, not including
Receivables and Intangibles owing by foreign entities to Borrower.
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All financial covenants shall be computed in accordance with GAAP
consistently applied except as otherwise specifically set forth in this
Agreement. All monies due from Affiliates (including officers, directors and
shareholders) shall be excluded from Borrower's assets for all purposes
hereunder.
6.18 Borrower shall promptly supply Bank (and cause any guarantor to
supply Bank) with such other information (including tax returns) concerning its
financial affairs (or that of any guarantor) as Bank may request from time to
time hereafter, and shall promptly notify Bank of any material adverse change in
Borrower's financial condition and of any condition or event which constitute a
breach of or an event which constitutes an Event of Default under this
Agreement.
6.19 Borrower is now and shall be at all times hereafter solvent and
able to pay its debts (including trade debts) as they mature.
6.20 Borrower shall immediately and without demand reimburse Bank for
all sums expended by Bank in connection with any act brought by Bank to correct
any default or enforce any provision of this Agreement, including all Bank
Expenses; Borrower authorizes and approves all advances and payments by Bank for
items described in this Agreement as Bank Expenses.
6.21 Each warranty, representation and agreement contained in this
Agreement shall be automatically deemed repeated with each advance and shall be
conclusively presumed to have been relied on by Bank regardless of any
investigation made or information possessed by Bank. The warranties,
representations and agreements set forth herein shall be cumulative and in
addition to any and all other warranties, representations and agreements which
Borrower shall give, or cause to be given, to Bank either now or hereafter.
6.22 Borrower shall keep all of its primary operating accounts with
Bank and shall notify Bank in writing within thirty (30) days after opening any
other bank account, deposit account or any other account into which money can be
deposited.
6.23 Borrower shall furnish to the Bank: (a) as soon as possible, but
in no event later than thirty (30) days after Borrower knows or has reason to
know that `any reportable event with respect to any deferred compensation plan
has occurred, a statement of chief financial officer of Borrower setting forth
the details concerning such reportable event and the action which Borrower
proposes to take with respect thereto, together with a copy of the notice of
such reportable event given to the Pension Benefit Guaranty Corporation, if a
copy of such notice is available to Borrower; (b) promptly after the filing
thereof with the United States Secretary of Labor or the Pension Benefit
Guaranty Corporation, copies of each annual report with respect to each deferred
compensation plan; (c) promptly after receipt thereof, a copy of any notice
Borrower may receive from the Pension Benefit Guaranty Corporation or the
Internal Revenue Service with respect to any deferred compensation plan;
provided, however, this subparagraph shall not apply to notice of general
application issued by the Pension Benefit Guaranty Corporation or the Internal
Revenue Service; and (d) when the same is made available to participants in the
deferred compensation plan, all notices and other forms of information from time
to time disseminated to the participants by the administrator of the deferred
compensation plan.
6.24 Borrower is now and shall at all times hereafter remain in
compliance with all material federal, state and municipal laws, regulations and
ordinances relating to the handling, treatment and disposal of toxic substances,
wastes and hazardous material and shall maintain all necessary authorizations
and permits.
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6.25 [Deleted]
6.26 [Deleted]
6.27 Borrower shall perform all acts reasonably necessary to ensure
that (a) Borrower and any business in which Borrower holds a substantial
interest, and (b) all customers, suppliers and vendors that are material to
Borrower's business, become Year 2000 Compliant in a timely manner, or shall
develop feasible contingency plans to address third-party failures to become
Year 2000 Compliant. Such acts shall include, without limitation, performing a
comprehensive review and assessment of all Borrower's systems and adopting a
detailed plan, with itemized budget, for the remediation, monitoring and testing
of such systems. As used in this paragraph, "Year 2000 Compliant" shall mean, in
regard to any entity, that all software, hardware, firmware, equipment, goods or
systems utilized by and material to the business operations or financial
condition of such entity, will properly perform date sensitive functions before,
during and after the year 2000. Borrower shall immediately upon request, provide
to Bank such certifications or other evidence of Borrower's compliance with the
terms of this paragraph as Bank may from time to time require.
6.28 None of Borrower's or any Subsidiary's properties or assets has
ever been used by Borrower or any Subsidiary or, to the best of Borrower's
knowledge, by previous owners or operators, in the disposal of, or to produce,
store, handle, treat, release, or transport, any hazardous waste or hazardous
substance other than in accordance with applicable law; to the best of
Borrower's knowledge, none of Borrower's properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a hazardous waste or hazardous substance disposal site, or a
candidate for closure pursuant to any environmental protection statute; no lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned by Borrower or any Subsidiary; and
neither Borrower nor any Subsidiary has received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal, state
or other governmental agency concerning any action or omission by Borrower or
any Subsidiary resulting in the releasing, or otherwise disposing of hazardous
waste or hazardous substances into the environment.
7. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute a default by
Borrower under this Agreement:
(a) If Borrower fails or neglects to comply with any provision of
sections 6.6, 6.16 or 6.17 hereof, or fails or neglects to perform, keep or
observe any other covenant or agreement contained in this Agreement, or any
other present or future agreement between Borrower and Bank, and as to such
other covenant or agreement such failure continues for more than ten (10) days;
provided, however, that if the default cannot by its nature be cured within the
ten (10) day period or cannot after diligent attempts by Borrower to be cured
within such ten (10) day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed, thirty (30) days) to attempt to cure such default,
and within such reasonable time period the failure to have cured such default
shall not be deemed an Event of Default (provided that no Advances, Equipment
Advances or Letters of Credit will be made or issued during such cure period);
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(b) If any representation, statement, report or certificate made
or delivered by Borrower, or any of its officers, employees or agents to Bank is
not true in any material respect;
(c) If Borrower fails to pay when due and payable or declared due
and payable, all or any portion of the Borrower's obligations (whether of
principal, interest, taxes, reimbursement of Bank Expenses, or otherwise);
(d) If there is a material impairment of the prospect of
repayment of all or any portion of Borrower's Obligations or a material
impairment of the value or priority of Bank's security interest in the
Collateral;
(e) If all or any of Borrower's assets are attached, seized,
subject to a writ or distress warrant, or are levied upon, or come into the
possession of any Judicial Officer or Assignee and the same are not released,
discharged or bonded against within twenty (20) days thereafter;
(f) If any Insolvency Proceeding is filed or commenced by or
against Borrower without being dismissed within thirty (30) days thereafter;
(g) If any proceeding is filed or commenced by Borrower for its
dissolution or liquidation, or against Borrower and is not dismissed within
thirty (30) days;
(h) If Borrower is enjoined, restrained or in any way prevented
by court order from continuing to conduct all or any material part of its
business affairs;
(i) If a notice of lien, levy or assessment is filed of record
with respect to any or all of Borrower's assets by the United States Government,
or any department, agency or instrumentality thereof, or by any state, county,
municipal or other government agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a lien, whether ▇▇▇▇▇▇ or
otherwise, upon any or all of the Borrower's assets and the same is not paid on
the payment date thereof,
(j) If a judgment or other claim becomes a lien or encumbrance
upon any or all of Borrower's assets and the same is not satisfied, dismissed or
bonded against within ten (10) days thereafter;
(k) If Borrower's records are prepared and kept by an outside
computer service bureau at the time this Agreement is entered into or during the
term of this Agreement such an agreement with an outside service bureau is
entered into, and at any time thereafter, without first obtaining the written
consent of Bank, Borrower terminates, modifies, amends or changes its
contractual relationship with said computer service bureau or said computer
service bureau fails to provide Bank with any request information or financial
data pertaining to Bank's Collateral, Borrower's financial condition or the
results of Borrower's operations;
(1) If Borrower permits a default in any material agreement to
which Borrower is a party with third parties so as to result in an acceleration
of the maturity of Borrower's indebtedness to others, whether under any
indenture, agreement or otherwise of an amount in excess of Two Hundred Fifty
Thousand Dollars ($250,000);
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(m) If Borrower makes any payment on account of indebtedness
which has been subordinated to Borrower's Obligations to Bank in violation of
the terms of such subordination;
(n) If any misrepresentation exists now or hereafter in any
warranty or representation made by Bank by any officer or director of Borrower,
or if any such warranty or representation is withdrawn by any officer or
director;
(o) If any party subordinating its claims to that of Bank's or
any guarantor of Borrower's Obligations dies or terminates its subordination or
guaranty, becomes insolvent or an Insolvency Proceeding is commenced by or
against any such subordinating party or guarantor;
(p) If any reportable event, which the Bank determines
constitutes grounds for the termination of any deferred compensation plan by the
Pension Benefit Guaranty Corporation or for the appointment by the appropriate
United States District Court of a trustee to administer any such plan, shall
have occurred and be continuing thirty (30) days after written notice of such
determination shall have been given to Borrower by Bank, or any such Plan shall
be terminated within the meaning of Title IV of the Employment Retirement Income
Security Act ("ERISA"), or a trustee shall be appointed by the appropriate
United States District Court to administer any such plan, or the Pension Benefit
Guaranty Corporation shall institute proceedings to terminate any plan and in
case of any event described in this Section 7, the aggregate amount of the
Borrower's liability to the Pension Benefit Guaranty Corporation under Sections
4062, 4063 or 4064 of ERISA shall exceed five percent (5%) of Borrower's
Tangible Effective Net Worth.
Notwithstanding anything contained in Section 7 to the contrary, Bank
shall refrain from exercising its rights and remedies and Event of Default shall
thereafter not be deemed to have occurred by reason of the occurrence of any of
the events set forth in Sections 7.e, 7.f or 7.j of this Agreement if, within
ten (10) days from the date thereof, the same is released, discharged,
dismissed, bonded against or satisfied; provided, however, if the event is the
institution of Insolvency Proceedings against Borrower, Bank shall not be
obligated to make advances to Borrower during such cure period.
8. BANK'S RIGHTS AND REMEDIES.
8.1 Upon the occurrence of an Event of Default by Borrower under this
Agreement, Bank may, at its election, without notice of its election and without
demand, do any one or more of the following, all of which are authorized by
Borrower:
(a) Declare Borrower's Obligations, whether evidenced by this
Agreement, installment notes, demand notes or otherwise, immediately due and
payable to the Bank;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, or any other agreement between
Borrower and Bank;
(c) Terminate this Agreement as to any future liability or
obligation of Bank, but without affecting Bank's rights and security interests
in the Collateral, and the Obligations of Borrower to Bank;
(d) Without notice to or demand upon Borrower or any guarantor,
make such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the
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Collateral. Borrower agrees to assemble the Collateral if Bank so requires and
to make the Collateral available to Bank as Bank may designate. Borrower
authorizes Bank to enter the premises where the Collateral is located, take and
maintain possession of the Collateral and the premises (at no charge to Bank),
or any part thereof, and to pay, purchase, contest or compromise any
encumbrance, charge or lien which in the opinion of Bank appears to be prior or
superior to its security interest and to pay all expenses incurred in connection
therewith;
(e) Without limiting Bank's rights under any security interest,
Bank is hereby granted a license or other right to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade secret,
trade names, trademarks and advertising matter, or any property of a similar
nature as it pertains to the Collateral, in completing production of,
advertising for sale and selling any Collateral and Borrower's rights under all
licenses and all franchise agreement shall inure to Bank's benefit, and Bank
shall have the right and power to enter into sublicense agreements with respect
to all such rights with third parties on terms acceptable to Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sales and sell (in the manner provided for
herein) the Inventory;
(g) Sell or dispose the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as is
commercially reasonable in the opinion of Bank. It is not necessary that the
Collateral be present at any such sale;
(h) Bank shall give notice of the disposition of the Collateral
as follows:
(i) Bank shall give the Borrower and each holder of a
security interest in the Collateral who has filed with Bank a written request
for notice, a notice in writing of the time and place of public sale, or, if the
sale is a private sale or some disposition other than a public sale is to be
made of the Collateral, the time on or after which the private sale or the
disposition is to be made;
(ii) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower's address appearing in this Agreement, at least
five (5) calendar days before the date fixed for the sale, or at least five (5)
calendar days before the date on or after which the private sale .or other
disposition is to be made, unless the Collateral is perishable or threatens to
decline speedily in value. Notice to persons other than Borrower claiming an
interest in the Collateral shall be sent to such addresses as they have
furnished to Bank;
(iii) If the sale is to be a public sale, Bank shall also
give notice of the time and place by publishing a notice one time at least five
(5) calendar days before the date of this sale in a newspaper of general
circulation in the county in which the sale is to be held; and
(iv) Bank may credit bid and purchase at any public sale.
(i) Borrower shall pay all Bank Expenses incurred in connection
with Bank's enforcement and exercise of any of its rights and remedies as herein
provided, whether or not suit is commenced by Bank;
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(j) Any deficiency which exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any excess
will be returned, without interest and subject to the rights of third parties,
to Borrower by Bank, or, in Bank's discretion, to any party who Bank believes,
in good faith, is entitled to the excess; and
(k) Without constituting a retention of Collateral in
satisfaction of an obligation within the meaning of 9505 of the Uniform
Commercial Code or an action under California Code of Civil Procedure 726, apply
any and all amounts maintained by Borrower as deposit accounts (as that term is
defined under 9105 of the Uniform Commercial Code) or other accounts that
Borrower maintains with Bank against the Obligations.
8.2 Bank's rights and remedies under this Agreement and all other
agreements shall be cumulative. Bank shall have all other rights and remedies
not inconsistent herewith as provided by law or in equity. No exercise by Bank
of one right or remedy shall be deemed an election, and no waiver by Bank of any
default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election or acquiescence by Bank.
9. TAXES AND EXPENSES REGARDING BORROWER'S PROPERTY.
If Borrower fails to pay promptly when due to another person or
entity, monies which Borrower is required to pay by reason of any provision in
this Agreement, Bank may, but need not, pay the same and charge Borrower's
account therefor, and Borrower shall promptly reimburse Bank. All such sums
shall become additional indebtedness owing to Bank, shall bear interest at the
rate hereinabove provided, and shall be secured by all Collateral. Any payments
made by Bank shall not constitute (i) an agreement by it to make similar
payments in the future; or (ii) a waiver by Bank of any default under this
Agreement. Bank need not inquire as to, or contest the validity of, any such
expense, tax security interest, encumbrance or lien and the receipt of the usual
official notice of the payment thereof shall be conclusive evidence that the
same was validly due and owing. Such payments shall constitute Bank Expenses and
additional advances to Borrower.
10. WAIVERS.
10.1 Borrower agrees that checks and other instruments received by
Bank in payment or on account of Borrower's Obligations constitute only
conditional payment until such items are actually paid to Bank and Borrower
waives the right to direct the application of any and all payments at any time
or times hereafter received by Bank on account of Borrower's Obligations and
Borrower agrees that Bank shall have the continuing exclusive right to apply and
reapply such payments in any manner as Bank may deem advisable, notwithstanding
any entry by Bank upon its books.
10.2 Borrower waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension or renewal of
any or all commercial paper, accounts, documents, instruments, chattel paper,
and guarantees at any time held by Bank on which Borrower may in any way be
liable.
10.3 Bank shall not in any way or manner be liable or responsible for
(a) the safekeeping of the Inventory; (b) any loss or damage thereto occurring
or arising in any manner or fashion from any cause; (c) any diminution in the
value thereof-, or (d) any act or default of any carrier,
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LOAN & SECURITY AGREEMENT
warehouseman, bailee, forwarding agency or other person whomsoever. All risk of
loss, damage or destruction of Inventory shall be borne by Borrower.
10.4 Borrower waives the right and the right to assert a confidential
relationship, if any, it may have with any accountant, accounting firm and/or
service bureau in connection with any information requested by Bank pursuant to
or in accordance with this Agreement, and agrees that a Bank may contact
directly any such accountants, accounting firm and/or service bureau in order to
obtain such information. Borrower consents to Bank's responding to credit
inquiries with respect to Borrower.
10.5 BORROWER AND BANK EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY TRANSACTION HEREUNDER, OR
CONTEMPLATED HEREUNDER, OR ANY OTHER CLAIM (INCLUDING TORT OR BREACH OF DUTY
CLAIMS) OR DISPUTE HOWSOEVER ARISING BETWEEN BANK AND BORROWER.
10.6 In the event that Bank elects to waive any rights or remedies
hereunder, or compliance with any of the terms hereof, or delays or fails to
pursue or enforce any terms, such waiver, delay or failure to pursue or enforce
shall only be effective with respect to that single act and shall not be
construed to affect any subsequent transactions or Bank's right to later pursue
such rights and remedies.
11. ONE CONTINUING LOAN TRANSACTION.
All loans and advances heretofore, now or at any time or times
hereafter made by Bank to Borrower under this Agreement or any other agreement
between Bank and Borrower, shall constitute one loan secured by Bank's security
interests in the Collateral and by all other security interests, liens,
encumbrances heretofore, now or from time to time hereafter granted by Borrower
to Bank.
Notwithstanding the above, (i) to the extent that any portion of the
Obligations are a consumer loan, that portion shall not be secured by any deed
or trust or mortgage on or other security interest in the Borrower's principal
dwelling which is not a purchase money security interest as to that portion,
unless expressly provided to the contrary in another place, or (ii) if the
Borrower (or any of them) has (have) given or give(s) Bank a deed of trust or
mortgage covering real property, that deed of trust or mortgage shall not secure
the loan and any other Obligation of the Borrower (or any of them), unless
expressly provided to the contrary in another place.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands
by either party on the other relating to this Agreement shall be in writing and
sent by facsimile transmission, overnight courier service, or regular United
States mail, postage prepaid, properly addressed to Borrower or to Bank at the
addresses stated in this Agreement, or to such other addresses as Borrower or
Bank may from time to time specify to the other in writing. Requests to Borrower
by Bank hereunder may be made orally.
13. AUTHORIZATION TO DISBURSE.
Bank is hereby authorized to make loans and advances hereunder upon
telephonic or other instructions received from anyone purporting to be an
officer, employee, or representative of Borrower, or at the discretion of Bank
if said loans and advances are necessary to meet any Obligations of
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Borrower to Bank. Bank shall have no duty to make inquiry or verify the
authority of any such party, and Borrower shall hold the Bank harmless from any
damage, claims or liability by reason of Bank's honor of, or failure to honor,
any such instructions.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
Any documents, schedules, invoices or other papers delivered to
Bank, may be destroyed or otherwise disposed of by Bank six (6) months after
they are delivered to or received by Bank, unless Borrower requests, in writing,
the return of the said documents, schedules, invoices or other papers and makes
arrangements, at Borrower's expense, for their return.
15. CHOICE OF LAW.
The validity of this Agreement, its construction, interpretation and
enforcement, and the rights of the parties hereunder and concerning the
Collateral, shall be determined according to the laws of the State of
California. The parties agree that all actions or proceedings arising in
connection with this Agreement shall be tried and litigated only in the state
and federal courts in the Northern District of California or County of Santa
▇▇▇▇▇.
16. GENERAL PROVISIONS.
16.1 This Agreement shall be binding and deemed effective when
executed by the Borrower and accepted and executed by Bank at its Headquarter
Office.
16.2 This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties, provided, however,
that Borrower may not assign this Agreement or any rights hereunder without
Bank's prior written consent and any prohibited assignment shall be absolutely
void. No consent to an assignment by Bank shall release Borrower or any
guarantor from their Obligations to Bank. Bank may assign this Agreement and its
rights and duties hereunder. Bank reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in
Bank's rights and benefits hereunder. In connection therewith, Bank may disclose
all documents and information which Bank now or hereafter may have relating to
Borrower or Borrower's business.
16.3 Paragraph headings and paragraph numbers have been set forth
herein for convenience only; unless the contrary is compelled by the context,
everything contained in each paragraph applies equally to this entire Agreement.
16.4 Neither this Agreement nor any uncertainty or ambiguity herein
shall be construed or resolved against Bank or Borrower, whether under any rule
of construction or otherwise; on the contrary, this Agreement has been reviewed
by all parties and shall be construed and interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and intentions
of all parties hereto. When permitted by the context, the singular includes the
plural and vice versa.
16.5 Each provision of this Agreement shall be severable from every
other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
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16.6 This Agreement cannot be changed or terminated orally. Except as
to currently existing Obligations owing by Borrower to Bank, all prior
agreements, understandings, representations, warranties, and negotiations, if
any, with respect to the subject matter hereof, are merged into this Agreement.
16.7 The parties intend and agree that their respective rights,
duties, powers, liabilities, obligations and discretions shall be performed,
carried out, discharged and exercised reasonably and in good faith.
IN WITNESS WHEREOF, the parties hereto have caused this Revolving Credit
Loan & Security Agreement (Accounts and Inventory) to be executed as of the date
first hereinabove written.
ATTEST: BORROWER:
ACCELERATED NETWORKS, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------- -----------------------------
Title Signature of
Title: Chief Financial Officer
---------------------------
Accepted and effective as
of_______________at Bank's
Headquarters Office By:
-----------------------------
Signature of
Title:
----------------------------
BANK:
COMERICA BANK-CALIFORNIA
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
Signature of
Title: Vice President
--------------------------
By:
-----------------------------
Title:
---------------------------
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