EXHIBIT 10.34
LOAN AND SECURITY AGREEMENT
INVISION TECHNOLOGIES, INC.
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LOAN AND SECURITY AGREEMENT
TABLE OF CONTENTS
HEADING PAGE
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1. ACCOUNTING AND OTHER TERMS.............................................................................. 1
2. LOAN AND TERMS OF PAYMENT............................................................................... 1
2.1 Promise to Pay................................................................................. 1
2.1.1 Advances.............................................................................. 1
2.1.2 Cash Management Services Sublimit..................................................... 1
2.1.3 Foreign Exchange Reserve.............................................................. 2
2.1.4 Letter of Credit Sublimit............................................................. 2
2.2 Overadvances................................................................................... 2
2.3 Requests for Advances.......................................................................... 2
2.4 Conversions and Continuations of Loans......................................................... 3
2.5 Additional Provisions Regarding LIBOR Loans.................................................... 4
2.5.1 Changed Circumstances................................................................. 4
2.5.2 Illegality of LIBOR................................................................... 5
2.5.3 Funding Losses........................................................................ 5
2.6 Interest Rate, Payments........................................................................ 5
2.7 Fees and Expenses.............................................................................. 6
2.7.1 Bank Expenses......................................................................... 6
2.7.2 Commitment Fee........................................................................ 6
2.7.3 Letter of Credit Fee.................................................................. 6
2.8 Taxes.......................................................................................... 6
2.9 Mitigation of Costs............................................................................ 7
3. CONDITIONS OF LOANS..................................................................................... 7
3.1 Conditions Precedent to Initial Credit Extension............................................... 7
3.2 Conditions Precedent to all Credit Extensions.................................................. 8
4. GRANT OF SECURITY INTEREST.............................................................................. 8
5. REPRESENTATIONS AND WARRANTIES.......................................................................... 8
5.1 Due Organization and Authorization............................................................. 8
5.2 Collateral..................................................................................... 8
5.3 Litigation..................................................................................... 9
5.4 Financial Statements........................................................................... 9
5.5 Solvency....................................................................................... 9
5.6 Regulatory Compliance.......................................................................... 9
5.7 Investments.................................................................................... 9
5.8 Full Disclosure................................................................................ 10
6. AFFIRMATIVE COVENANTS................................................................................... 10
6.1 Government Compliance.......................................................................... 10
6.2 Financial Statements, Reports, Certificates.................................................... 10
6.3 Inventory; Returns............................................................................. 10
6.4 Taxes.......................................................................................... 10
6.5 Insurance...................................................................................... 11
6.6 Deposits....................................................................................... 11
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6.7 Financial Covenants............................................................................ 11
6.8 Further Assurances............................................................................. 11
7. NEGATIVE COVENANTS...................................................................................... 11
7.1 Dispositions................................................................................... 11
7.2 Changes in Business, Ownership, Management or Business Locations............................... 12
7.3 Mergers or Acquisitions........................................................................ 12
7.4 Indebtedness................................................................................... 12
7.5 Encumbrances................................................................................... 12
7.6 Distributions; Investments..................................................................... 12
7.7 Transactions with Affiliates................................................................... 12
7.8 Subordinated Debt.............................................................................. 12
7.9 Compliance..................................................................................... 12
7.10 Registration of Intellectual Property.......................................................... 13
8. EVENTS OF DEFAULT....................................................................................... 13
8.1 Payment Default................................................................................ 13
8.2 Covenant Default............................................................................... 13
8.3 Material Adverse Change........................................................................ 13
8.4 Attachment..................................................................................... 14
8.5 Insolvency..................................................................................... 14
8.6 Other Agreements............................................................................... 14
8.7 Judgments...................................................................................... 14
8.8 Misrepresentations............................................................................. 14
9. BANK'S RIGHTS AND REMEDIES.............................................................................. 14
9.1 Rights and Remedies............................................................................ 14
9.2 Power of Attorney.............................................................................. 15
9.3 Accounts Collection............................................................................ 15
9.4 Bank Expenses.................................................................................. 15
9.5 Bank's Liability for Collateral................................................................ 15
9.6 Remedies Cumulative............................................................................ 16
9.7 Waiver......................................................................................... 16
10. NOTICES................................................................................................. 16
11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER.............................................................. 16
12. GENERAL PROVISIONS...................................................................................... 16
12.1 Successors and Assigns......................................................................... 16
12.2 Indemnification................................................................................ 16
12.3 Time of Essence................................................................................ 17
12.4 Severability of Provisions..................................................................... 17
12.5 Amendments in Writing, Integration............................................................. 17
12.6 Counterparts................................................................................... 17
12.7 Survival....................................................................................... 17
12.8 Confidentiality................................................................................ 17
12.9 Attorneys' Fees, Costs and Expenses............................................................ 17
13. DEFINITIONS............................................................................................. 18
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EXHIBITS
EXHIBIT A -- DESCRIPTION OF COLLATERAL
EXHIBIT B-1 -- LOAN PAYMENT/ADVANCE REQUEST FORM
EXHIBIT B-2 -- LIBOR LOAN BORROWING CERTIFICATE
EXHIBIT B-3 -- LIBOR LOAN CONVERSION/CONTINUATION CERTIFICATE
EXHIBIT C -- COMPLIANCE CERTIFICATE
SCHEDULES
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement"), dated as of the
Effective Date, is entered into by and between SILICON VALLEY BANK, a
California-chartered bank ("Bank") whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and INVISION TECHNOLOGIES, INC., a Delaware corporation
("Borrower") whose address is ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and
provides the terms on which Bank will lend to Borrower and Borrower will borrow
from Bank. The parties agree as follows:
1. ACCOUNTING AND OTHER TERMS.
Capitalized terms used in this Agreement will have the respective
meanings accorded to them in Section 13 hereof. Accounting terms not defined in
this Agreement will be construed in accordance with GAAP, and all calculations
will be made in accordance with GAAP. The term "financial statements" includes
the notes and schedules thereto. The terms "including" and "includes" always
mean "including (or includes) without duplication or limitation" in this and
every other 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 all Credit Extensions.
2.1.1 ADVANCES.
(a) Bank will make Advances not exceeding at any time the Committed
Revolving Line, minus the sum of (i) the then-outstanding principal balance of
all Loans, plus (ii) all amounts then outstanding under the Cash Management
Services Sublimit, plus (iii) the Foreign Exchange Reserve, plus (iv) the face
amount of all outstanding Letters of Credit (including all amounts then utilized
under drawn but unreimbursed Letters of Credit). Amounts borrowed under this
Section 2.1.1 may be repaid and reborrowed at any time prior to the Maturity
Date except as otherwise provided herein.
(b) Bank's obligation to lend the undisbursed portion of the Committed
Revolving Line will terminate on the Maturity Date, when all Loans, and all
accrued and unpaid interest thereon, will be immediately due and payable.
(c) Bank's obligation to lend the undisbursed portion of the Committed
Revolving Line or any other credit available hereunder to Borrower will
terminate if there has been a Material Adverse Change.
2.1.2 CASH MANAGEMENT SERVICES SUBLIMIT.
Borrower may use up to the entire amount from time to time available
under Section 2.1.1(a) (the "Cash Management Services Sublimit") for Bank's cash
management services, which may include merchant services, direct deposit of
payroll, business credit card and check cashing services identified in various
cash management services agreements related to such services (the "Cash
Management Services"). All amounts at any one time outstanding under the Cash
Management Services Sublimit will reduce, on a dollar-for-dollar basis, the
amount otherwise available to be borrowed under the Committed Revolving Line.
Any amounts that Bank pays on behalf of Borrower, and any amounts that are not
paid by Borrower, for any Cash Management Services will be treated as Floating
Rate Loans under the Committed Revolving Line and will accrue interest at the
rate for Floating Rate Loans. Borrower agrees to execute any further
documentation in connection with the Cash Management Services as Bank may
request.
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2.1.3 FOREIGN EXCHANGE RESERVE.
To the extent that Advances are available under the Committed Revolving
Line, Borrower may enter into foreign exchange forward contracts with 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 reserve against amounts otherwise available under the
Committed Revolving Line an amount equal to 10% of the face amount of all
outstanding FX Forward Contracts (the "Foreign Exchange Reserve"), and the
aggregate amount of the Foreign Exchange Reserve will at all times reduce, on a
dollar-for-dollar basis, the amount otherwise available to be borrowed under the
Committed Revolving Line. Bank may terminate the FX Forward Contracts if an
Event of Default occurs.
2.1.4 LETTER OF CREDIT SUBLIMIT.
Bank will issue Letters of Credit for Borrower's account in an
aggregate face amount not to exceed the Committed Revolving Line minus the sum
of (i) the then-outstanding aggregate principal balance of all Loans, plus (ii)
all amounts then outstanding under the Cash Management Sublimit, plus (iii) the
Foreign Exchange Reserve. Each Letter of Credit with an expiry date after the
Maturity Date will be secured by cash in an amount equal to the undrawn face
amount of such Letter of Credit on terms reasonably acceptable to Bank at all
times after the Maturity Date if the Maturity Date is not extended by Bank.
Borrower agrees to execute any further documentation in connection with the
Letters of Credit as Bank may reasonably request. If any Letter of Credit is
drawn upon, the amount so drawn will constitute a Floating Rate Loan that will
be immediately due and payable.
2.2 OVERADVANCES.
If the sum of Borrower's Obligations under Sections 2.1.1, 2.1.2, 2.1.3
and 2.1.4 at any time exceeds the Committed Revolving Line, then Borrower will
be in an Overadvance to the extent of such excess amount. If Borrower is in an
Overadvance, then Borrower shall immediately repay to Bank the amount by which
all outstanding principal and accrued interest relating to Advances exceeds the
Committed Revolving Line.
2.3 REQUESTS FOR ADVANCES.
(a) To obtain an Advance, Borrower must notify Bank in accordance with
this Section 2.3. Borrower must promptly confirm the notification by delivering
to Bank a completed Loan Payment/Advance Request Form in the form attached
hereto as Exhibit B-1 hereto and, if the Advance is a LIBOR Loan, a LIBOR Loan
Borrowing Certificate in the form attached hereto as Exhibit B-2. Bank will
credit Advances to Borrower's deposit account number 3300044177 with Bank. Bank
may make Advances under this Agreement based on written instructions from a
Responsible Officer or a person designated in writing by a Responsible Officer
to give such instructions, followed by a completed Loan Payment/Advance Request
Form or a LIBOR Loan Borrowing Certificate (as the case may be), or without
written instructions if the Advances are necessary to meet Obligations which
have become due.
(b) Each Advance that constitutes a Floating Rate Loan will be made
upon the irrevocable written request of Borrower received by Bank not later than
11:00 a.m. (Pacific Time) on the Business Day that is one Business Day prior to
the date on which such Advance is to be made. Each such notice will specify the
date such Advance is to be made (which day shall be a Business Day) and the
amount of such Advance, and will comply with such other requirements as Bank
determines are reasonable or desirable in connection therewith.
(c) Each Advance that constitutes a LIBOR Loan will be made upon the
irrevocable written request of Borrower received by Bank not later than 11:00
a.m. (Pacific Time) on the Business Day that is three Business Days prior to the
date on which such Advance is to be made. Each such notice will specify the date
on which such Advance is to be made (which day will be a Business Day), the
amount of such Advance (which will be in a minimum principal amount of
$1,000,000 and integral multiples of $250,000 in excess thereof) and the
Interest Period for such Advance, and will comply with such other
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requirements as Bank determines are reasonable or desirable in connection
therewith.
2.4 CONVERSIONS AND CONTINUATIONS OF LOANS.
(a) Borrower has the right at any time upon prior irrevocable notice
(which notice, if not in writing, will be confirmed promptly in writing) to Bank
before 11:00 a.m. (Pacific Time), on the day which is: (i) three Business Days
prior to Conversion, to Convert any Floating Rate Loan into a LIBOR Loan or to
Convert the Interest Period with respect to any LIBOR Loan to another
permissible Interest Period; and (ii) three Business Days prior to Continuation,
to Continue any LIBOR Loan into a subsequent Interest Period of similar
duration, subject in each case to the following:
(i) In the case of a Conversion or Continuation of less than
all Loans outstanding, the aggregate principal amount of Loans so Converted or
Continued will not be less than $1,000,000 and may be in an integral multiple of
$250,000 in excess thereof;
(ii) Accrued interest on a LIBOR Loan being Converted or
Continued will be paid by Borrower at the time of Conversion or Continuation (as
the case may be);
(iii) If any LIBOR Loan is Converted at a time other than the
end of the then-current Interest Period, Borrower shall pay all increased costs
associated therewith pursuant to Section 2.5 hereof;
(iv) No Loan may be Converted into or Continued as a LIBOR
Loan with an Interest Period ending after the Maturity Date, and any LIBOR Loan
for which the shortest available Interest Period, would extend beyond the
Maturity Date will be automatically Converted at the end of the then-current
Interest Period into a Floating Rate Loan; and
(v) No Event of Default or event which, with notice or the
passage of time (or both), would constitute an Event of Default exists.
(b) The Interest Period applicable to any LIBOR Loan resulting from a
Conversion or a Continuation shall be specified by Borrower in an irrevocable
notice in the form of a LIBOR Loan Conversion/Continuation Certificate in the
form of Exhibit B-3 attached hereto, and shall be delivered by Borrower to Bank
by the deadlines set forth above; provided, however, that if no such Interest
Period is specified in the irrevocable notice, Borrower will be deemed to have
selected an Interest Period of one month's duration, and provided further, that
if Borrower does not give timely notice to Continue or Convert any LIBOR Loan
into a subsequent Interest Period, such LIBOR Loan will automatically Continue
into a LIBOR Loan with an Interest Period of the same duration at the end of the
then-current Interest Period.
(c) Notwithstanding any provision of this Section 2.4 to the contrary:
(i) Upon the occurrence of a default and during the continued
existence thereof (and of the Event of Default into which it ripens): (A)
Borrower may not convert any Floating Rate Loan into a LIBOR Loan or Convert or
Continue a LIBOR Loan for a subsequent Interest Period; (B) Bank may in its sole
discretion Convert any outstanding LIBOR Loans into Floating Rate Loans; and (C)
if the Event of Default is one of the events specified in Section 8.5 hereof,
all LIBOR Loans then outstanding will automatically Convert to Floating Rate
Loans without need for notice or any action whatsoever on the part of Bank. In
the case of Conversions described in clauses (B) and (C) of the preceding
sentence, Borrower shall forthwith pay all increased costs associated with such
Conversion pursuant to Section 2.5 hereof.
(ii) In the event, and on each occasion, that on the day which
is two Business Days prior to the commencement of any Interest Period for a
LIBOR Loan Bank shall have determined that U.S. Dollar deposits in the requested
principal amount of the LIBOR Loan are not generally available to Bank in the
London interbank market, or that reasonable means do not exist for ascertaining
the LIBOR Rate, or that the rate at which U.S. Dollar deposits are being offered
will not adequately and fairly reflect the cost to Bank of making such LIBOR
Loan during such Interest Period, Bank shall, as soon as practicable thereafter,
give written notice of such determination to Borrower and any subsequent request
by Borrower for a LIBOR Loan will, until the circumstances giving rise to such
notice no longer exist, be deemed a
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request for a Floating Rate Loan. Each determination by Bank hereunder will be
conclusive absent manifest error.
(d) Notwithstanding anything to the contrary contained herein, Bank is
not required to purchase U.S. Dollar deposits in the London interbank market to
fund any LIBOR Loans, but the provisions hereof will be deemed to apply as if
Bank had purchased such U.S. Dollar deposits to fund LIBOR Loans.
2.5 ADDITIONAL PROVISIONS REGARDING LIBOR LOANS.
2.5.1 CHANGED CIRCUMSTANCES.
(a) In the event that after the date hereof any change in applicable
law or in the interpretation or administration thereof (including any request,
guideline or policy not having the force of law) by any Governmental Body
charged with the administration or interpretation thereof, or with respect to
any of clauses (ii), (iii) or (iv) below any change in conditions, occurs which
will:
(i) subject Bank to, or increase the net amount of, any tax,
levy, impost, duty, charge, fee, deduction or withholding with respect to any
LIBOR Loan; or
(ii) change the basis of taxation of any payment to Bank of
principal of or interest on any LIBOR Loan or other fees and amounts payable to
Bank hereunder, or any combination of the foregoing (other than taxes imposed on
the overall taxable income of Bank for any LIBOR Loan by any jurisdiction where
its lending office is located); or
(iii) impose, modify or deem applicable any reserve, special
deposit or similar requirement against any assets of, deposits with or for the
account of, or loans by Bank with respect to any LIBOR Loan; or
(iv) impose upon Bank or the London interbank market any other
condition with respect to an office of Bank, the making of LIBOR Loans or this
Agreement;
and the result of any of the foregoing is directly or indirectly to increase the
cost to Bank of making or maintaining any LIBOR Loan hereunder or to reduce the
amount of any payment (whether of principal, interest or otherwise) received or
receivable by Bank, or to require Bank to make any payment in connection with
any LIBOR Loan, in each case by or in an amount which Bank deems material, then
and in each case Borrower shall pay to Bank, as provided in paragraph (c) below,
such amounts as are necessary to compensate Bank for such cost, reduction or
payment.
(b) If Bank has reasonably determined that the applicability after the
date hereof of any law, rule, regulation or guideline regarding capital
adequacy, or any change after the date hereof in the interpretation or
administration of any of the foregoing by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or the compliance by Bank (or any lending office of Bank) or Bank's
holding company (if any) with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on Bank's capital or on the capital of Bank's holding company (if any) as
a consequence of this Agreement or the Loans made by Bank pursuant hereto to a
level below that which Bank or its holding company could have achieved but for
such applicability, adoption, change or compliance by an amount deemed by Bank
to be material, then from time to time Borrower shall pay to Bank such
additional amount or amounts as will compensate Bank or its holding company for
any such reduction suffered to the extent attributable to this Agreement or the
Loans made pursuant hereto.
(c) Bank will deliver to Borrower, with reasonable promptness after it
becomes aware of an event set forth in either of paragraphs (a) or (b) of this
Section 2.5.1, one or more certificates setting forth, in reasonable detail, the
amounts due to Bank under said paragraphs (a) or (b), the changes as a result of
which such amounts are due and the manner of computing such amounts. Each such
certificate will be conclusive in the absence of manifest error. Borrower shall
pay to Bank the amounts shown as due on
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any such certificate within 30 days after its receipt of same. No failure by
Bank to deliver (or delay in giving) such a certificate will adversely affect
Bank's rights to such compensation; provided, however, that Borrower shall not
be required to compensate Bank under this Section 2.5.1 for increased costs or
reductions to returns arising from changes that become effective more than 150
days prior to the date on which Bank notifies Borrower of such increased costs
or reductions to returns, but provided further that the foregoing restriction on
Bank's right to compensation will not apply to changes that are retroactive in
nature. No failure on the part of Bank to demand compensation under either of
paragraphs (a) or (b) of this Section 2.5.1 on any one occasion will constitute
a waiver of Bank's right to demand compensation on any other occasion. The
protection of this Section 2.5.1 will be available to Bank regardless of any
possible contention of the invalidity or inapplicability of any law, regulation
or other condition which gives rise to any demand by Bank for compensation
hereunder.
2.5.2 ILLEGALITY OF LIBOR.
(a) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, if any change after the date hereof in applicable law or
guideline, or change in the interpretation thereof by any Governmental Body
charged with the administration thereof, makes it unlawful for Bank to make or
maintain any LIBOR Loan or to give effect to its obligations as contemplated
hereby with respect to a LIBOR Loan, then by written notice to Borrower Bank may
(i) declare that LIBOR Loans will not thereafter be made by Bank hereunder,
whereupon any subsequent LIBOR Loan will instead be a Floating Rate Loan unless
such declaration is subsequently withdrawn, and/or (ii) require that, subject to
paragraph (a) of Section 2.5.3 hereof, all outstanding LIBOR Loans be Converted
to Floating Rate Loans, whereupon all of such LIBOR Loans will automatically be
Converted to Floating Rate Loans as of the effective date of such notice as
provided in paragraph 2.5.2(b) hereof.
(b) A notice to Borrower pursuant to paragraph 2.5.2(a) hereof will be
effective, for purposes of clause (ii) thereof, on the last day of the current
Interest Period for each outstanding LIBOR Loan if it is lawful for such LIBOR
Loans to remain outstanding until that time and on the date of receipt of such
notice by Borrower in all other cases.
2.5.3 FUNDING LOSSES.
Borrower shall reimburse Bank on demand for any loss incurred or to be
incurred by Bank in the reemployment of the funds released (i) by any prepayment
or Conversion (for any reason whatsoever, including but not limited to the
occurrence of an Event of Default) of a LIBOR Loan required or permitted under
this Agreement, if such LIBOR Loan is prepaid or Converted other than on the
last day of the Interest Period for such LIBOR Loan, and (ii) in the event that,
after Borrower delivers a Borrowing Request under Section 2.3 hereof or a notice
of Continuation or Conversion under Section 2.4 hereof with respect to a LIBOR
Loan, such LIBOR Loan is not made, Continued or Converted on the first day of
the Interest Period specified in such Borrowing Request for any reason. Such
loss shall be the amount as reasonably determined by Bank as the excess, if any,
of (i) the amount of interest which would have accrued to Bank on the amount so
paid or not borrowed, Continued or Converted at a rate of interest equal to the
interest rate applicable to such Loan for the period from the date of such
payment or failure to borrow, Continue or Convert to the last day (x) in the
case of a payment other than on the last day of the Interest Period for such
Loan, of the then-current Interest Period for such Loan, or (y) in the case of
such failure to borrow, Continue or Convert, of the Interest Period for such
Loan which would have commenced on the date of such failure to borrow, Continue
or Convert, over (ii) the amount realized by Bank in reemploying the funds not
advanced or the funds received in prepayment or realized from the Loan so
Continued or Converted during the period specified above.
2.6 INTEREST RATE, PAYMENTS.
(a) All Loans will bear interest as follows:
(i) Each Floating Rate Loan will bear interest at a rate per
annum equal to the Floating Rate, computed on the basis of the actual number of
days elapsed over a calendar year of 360 days. The Floating Rate will increase
or decrease each time that the Prime Rate changes.
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(ii) Each LIBOR Loan will bear interest at a rate per annum
equal to the LIBOR Rate for the Interest Period from time to time in effect for
such LIBOR Loan, computed on the basis of the actual number of days elapsed over
a year of 360 days.
(iii) Upon the occurrence and continuation of an Event of
Default, each Loan will accrue interest at a rate per annum equal to five
percent (5.00%)in excess of the rate of interest otherwise applicable to that
Loan had the Event of Default not occurred.
(b) Interest on each Loan will be due and payable on each applicable
Interest Payment Date in an amount as determined by Bank, which determination
shall be conclusive absent manifest error. Interest on each Loan will accrue
from and include the date on which such Loan is made to but excluding the date
on which such Loan is repaid in full, unless the date of repayment is the same
as the date on which such Loan is made and the amount repaid is not reborrowed
on such date, in which case such date will be included. Bank may debit any of
Borrower's deposit accounts with Bank, including deposit account number
3300044177, for principal and interest payments owing and any other amounts that
Borrower owes Bank. Bank will promptly notify Borrower when it debits Borrower's
accounts for any payment other than interest, and Bank will give Borrower two
days' prior notice when it debits Borrower's accounts for interest payments.
These debits are not a set-off. Payments received after 2:00 p.m. (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.
2.7 FEES AND EXPENSES.
2.7.1 BANK EXPENSES.
Borrower shall pay all Bank Expenses (including reasonable attorneys'
fees and reasonable expenses) incurred through and after the Effective Date. All
Bank Expenses are due and payable within five days after Bank sends an invoice
to Borrower for such Bank Expenses.
2.7.2 COMMITMENT FEE.
Borrower shall pay Bank the Commitment Fee for the first year of the
term of this Agreement as follows: (i) $52,500 on or before the Effective Date;
(ii) $26,250 on or before January 19, 2004; and (iii) $26,250 on or before April
19, 2004; provided, however, that Borrower shall not be obligated to pay the
installment due if Borrower terminates this Agreement prior to the due date of
such installment payment. Borrower shall pay Bank the Commitment Fee for the
second year of the term of this Agreement in full on or before July 19, 2004.
2.7.3 LETTER OF CREDIT FEE.
Borrower shall pay Bank the Letter of Credit Fee at the time of the
issuance or renewal (as the case may be) of each Letter of Credit, and on each
anniversary of such date.
2.8 TAXES.
(a) Any and all payments by Borrower hereunder will be made free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding taxes imposed on Bank's net income or that of any transferee
or assignee, including a participation holder (any such entity, a "Transferee")
and franchise taxes imposed on Bank (or Transferee, as the case may be) by the
United States or any jurisdiction under the laws of which it is organized or is
engaged in business or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If Borrower is required by law to deduct
any Taxes from or in respect of any sum payable hereunder to Bank (or any
Transferee, as the case may be): (i) the sum payable will be increased by the
amount necessary so that, after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.8), Bank
(or Transferee, as the case may be)
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receives an amount equal to the sum it would have received had no such deduction
been made; (ii) Borrower shall make such deductions; and (iii) Borrower shall
pay the full amount deducted to the relevant taxing authority or other
governmental authority in accordance with applicable law.
(b) In addition, Borrower shall pay all present and future stamp and
documentary taxes and any other excise or property taxes, charges or similar
levies which may arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
other Loan Document (hereinafter referred to as "Other Taxes").
(c) Borrower hereby indemnifies Bank (or Transferee, as the case may
be) for the full amount of Taxes and Other Taxes (including any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this Section 2.8)
paid by Bank (or Transferee, as the case may be) and any liability (including
penalties, interest and reasonable expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted by the relevant taxing authority or other governmental authority. Such
indemnification will be made within 30 days after the date on which Bank (or
Transferee, as the case may be) makes written demand therefor. If Bank (or
Transferee, as the case may be) becomes aware that it is entitled to receive a
refund with respect to Taxes or Other Taxes, it shall promptly notify Borrower
in writing of the availability of such refund and shall, within 30 days after
receipt of a request by Borrower, apply for such refund at Borrower's expense.
If Bank (or Transferee, as the case may be) receives a refund with respect to
any Taxes or Other Taxes for which Bank (or Transferee, as the case may be) has
received payment from Borrower under this Section 2.8, it shall promptly notify
Borrower in writing of such refund and shall, within 30 days after receipt of a
request by Borrower (or promptly upon receipt, if Borrower has requested
application for such refund pursuant hereto), repay such refund to Borrower, net
of all out-of-pocket expenses of Bank and without interest; provided that
Borrower agrees, upon the request of Bank (or Transferee, as the case may be) to
return such refund (plus penalties, interest or other charges) to Bank (or
Transferee, as the case may be) in the event that Bank (or Transferee, as the
case may be) is required to repay such refund.
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes withheld by Borrower with respect to any payment to Bank (or Transferee,
as the case may be), Borrower shall furnish to Bank (or Transferee, as the case
may be) the original or a certified copy of a receipt evidencing payment
thereof.
(e) Without prejudice to the survival of any other provision of this
Agreement, the agreements and obligations contained in this Section 2.8 will
survive the payment in full of the principal of and interest on the Loans.
2.9 MITIGATION OF COSTS.
If Bank can mitigate any adverse effect on Borrower under Section 2.5
or Section 2.8 by changing its lending office or taking any other reasonable
action (so long as making such change or taking such other action is not deemed
by Bank to be disadvantageous to it in any financial, regulatory or other
respect), Bank shall take such action.
3. CONDITIONS OF LOANS.
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.
Bank's obligation to make the first Credit Extension is, in addition to
the other applicable conditions precedent set forth in this Section 3, subject
to the satisfaction of the following conditions precedent:
(i) Bank has received the agreements, documents and fees that
it requires, including this Agreement, the Intellectual Property Security
Agreement, the Securities Account Control Agreement, a Deposit Account Control
Agreement and the Corporate Borrowing Resolution (with all attachments);
7
(ii) Bank has received from Borrower evidence reasonably
satisfactory to Bank showing Bank as loss payee on all of Borrower's insurance
policies pursuant to Section 6.5; and
(iii) Borrower has opened investment and depository accounts
with Bank or an Affiliate of Bank such that Borrower is in compliance with
Section 6.6 hereof.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.
Bank's obligation to make each Credit Extension, including the initial
Credit Extension, is subject to the satisfaction of the following conditions
precedent:
(i) Bank has timely received a Loan Payment/Advance Request
Form or, if applicable, a LIBOR Loan Borrowing Certificate; and
(ii) The representations and warranties in Section 5 are true,
correct and complete in all material respects on the date of the Loan
Payment/Advance Request Form and the LIBOR Loan Borrowing Certificate (if any),
and on the effective date of each Credit Extension, and no Event of Default has
occurred and is continuing, or results from the Credit Extension. Each Credit
Extension constitutes Borrower's representation and warranty on that date that
the representations and warranties of Section 5 remain true, correct and
complete in all material respects; provided, however, that any representation or
warranty that expressly refers to a specific date will continue to be true in
all material respects as of that date.
4. GRANT OF SECURITY INTEREST.
Borrower grants Bank a continuing security interest in all
presently existing and later acquired Collateral to secure all Obligations and
the 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. If this Agreement is terminated, Bank's lien and
security interest in the Collateral will continue until Borrower fully satisfies
its Obligations (except for the contingent indemnity obligations under Section
12.2 hereof that may arise after the date on which all Loans and other sums due
and owing to Bank have been paid in full and Bank is under no further obligation
hereunder to make Loans to Borrower).
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION.
(a) Borrower and each Subsidiary is duly existing and in good standing
in its jurisdiction of formation and is qualified and licensed to do business
in, and in good standing in, each jurisdiction 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 result in a
Material Adverse Change. Borrower is a Delaware corporation.
(b) The execution, delivery and performance by Borrower of the Loan
Documents have been duly authorized and do not conflict with Borrower's
formation documents or constitute an event of default under any material
agreement by which Borrower is bound. Borrower is not in default under any
agreement by which it is bound such that the default could reasonably be
expected to result in a Material Adverse Change.
5.2 COLLATERAL.
Borrower has good title to its Collateral, free of Liens except
Permitted Liens. The Accounts are bona fide, existing obligations. Borrower has
no notice of any actual or imminent Insolvency Proceeding of any Account debtor.
All Inventory is in all material respects of good and marketable quality, free
from
8
material defects other than ordinary wear and tear. Borrower owns or possesses
adequate rights to use all of its respective Intellectual Property, except for
non-exclusive licenses granted to its respective customers in the ordinary
course of business. To the best knowledge of Borrower's Responsible Officers,
each Patent is valid and enforceable, no part of the Intellectual Property has
been judged invalid or unenforceable (in whole or in part), and Borrower's
Responsible Officers have no knowledge that any claim has been made that any
part of the Intellectual Property violates the rights of any third party, except
to the extent such claim, if the subject of an unfavorable decision, ruling or
finding, could not reasonably be expected to result in a Material Adverse
Change.
5.3 LITIGATION.
Except as shown in the Schedules, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers, threatened by
or against Borrower or any Subsidiary in which an adverse decision could
reasonably be expected to result in a Material Adverse Change.
5.4 FINANCIAL STATEMENTS.
All separate or consolidated financial statements for Borrower and any
Subsidiary delivered to Bank fairly present in all material respects such
entity's separate and consolidated financial condition and separate and
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. Borrower is not
left with unreasonably small capital after the transactions contemplated in this
Agreement, and Borrower is able to pay its debts (including trade debts) as they
mature.
5.6 REGULATORY COMPLIANCE.
Neither Borrower nor any Subsidiary is an "investment company" or a
company "controlled" by an "investment company" under the Investment Company Act
of 1940. Neither Borrower nor any Subsidiary is engaged, as one of its material
activities, in extending credit for margin stock (under Regulations T and U
promulgated by the Board of Governors of the Federal Reserve System). 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 result in 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 in a legal manner in material compliance with all environmental laws
and regulations. Each of 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 taken
in accordance with Borrower's internal accounting policies. Each of 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 would not reasonably be expected to result in
a Material Adverse Change.
5.7 INVESTMENTS.
Borrower owns no stock, partnership interest or other equity securities
except for Permitted Investments.
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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 at the time made 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 shall 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 shall maintain, and shall cause each of its Subsidiaries to
maintain, its legal existence and good standing in its respective jurisdictions
of formation and maintain qualification in each jurisdiction in which the
failure to so qualify could reasonably be expected to result in a Material
Adverse Change. Borrower shall comply, and cause each Subsidiary to comply, with
all laws, ordinances and regulations to which it is subject, noncompliance with
which could reasonably be expected to result in a Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower shall deliver to Bank: (i) as soon as available, but no
later than five days after filing the same with the SEC, Borrower's Forms 10-Q,
10-K and 8-K; (ii) a prompt report of any legal actions pending or threatened
against Borrower or any Subsidiary that could result in damages or costs to
Borrower or any Subsidiary of $2,000,000 or more; (iii) as soon as available but
no later than 90 days following the last day of Borrower's fiscal year a copy of
Borrower's board-approved business plan and financial projections for the
following year, and (iv) budgets, sales projections, operating plans and such
other information as Bank may reasonably request. Notwithstanding the foregoing,
the public availability of any materials required to be delivered pursuant to
this Section 6.2(a) on the SEC's website will be deemed to satisfy the delivery
requirement of this Section 6.2(a) with respect to such materials.
(b) Within 30 days after the last day of each fiscal quarter, Borrower
shall deliver to Bank a Compliance Certificate in the form attached hereto as
Exhibit C, signed by a Responsible Officer.
(c) Borrower shall allow Bank to audit the Collateral at Borrower's
expense if an Event of Default has occurred and is continuing.
6.3 INVENTORY; RETURNS.
Borrower shall keep all Inventory in good and marketable condition,
free from material defects except for ordinary wear and tear. 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 when the aggregate value of all returns, recoveries,
disputes and claims with respect to a single customer involves more than
$5,000,000.
6.4 TAXES.
Borrower shall make, and shall 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 Borrower's internal accounting
policies) and shall deliver to Bank, on demand, appropriate certificates
attesting to the
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payment.
6.5 INSURANCE.
Borrower shall keep its business and the Collateral insured for risks
and in amounts (in each case, as is customary and commercially available to
Borrower) as Bank may reasonably request. Insurance policies will be in forms,
with companies, and in amounts that are reasonably satisfactory to Bank. All
property policies will have a lender's loss payable endorsement showing Bank as
an additional loss payee, all liability policies will show the Bank as an
additional insured, and all policies will provide that the insurer must give
Bank at least 20 days notice before canceling its policy. At Bank's request,
Borrower shall deliver certified copies of policies and evidence of all premium
payments. So long as no Event of Default has occurred and is continuing,
Borrower will have the option of applying the proceeds of any casualty policy to
the replacement or repair of destroyed or damaged property; provided that, at
the occurrence and during the continuance of an Event of Default, all proceeds
payable under any such casualty policy will, at the option of Bank, be payable
to Bank on account of the Obligations.
6.6 DEPOSITS.
Borrower shall at all times maintain its primary operating accounts
with Bank. In addition, Borrower shall at all times maintain in accounts with
Bank, or an Affiliate of Bank, aggregate balances equal to the lesser of (i)
$40,000,000 of Unrestricted Cash or (ii) 25% of its investment balances.
6.7 FINANCIAL COVENANTS.
(a) Borrower shall maintain, as of the end of each of its fiscal
quarters, Unrestricted Cash and cash equivalents in accounts maintained in the
United States in an amount of not less than $75,000,000.
(b) Borrower shall maintain a minimum Tangible Net Worth of
$215,000,000 plus 50% of quarterly net profits (but not reduced for net losses)
as of the end of each of its fiscal quarters, commencing with the fiscal quarter
ended September 28, 2003.
6.8 FURTHER ASSURANCES.
Borrower shall execute all further instruments and take all further
actions as Bank reasonably requests to perfect or continue Bank's security
interest in the Collateral and to effect the purposes of this Agreement,
including without limitation providing Bank with control agreements, in form and
substance acceptable to Bank, for any and all deposit and securities accounts
maintained by Borrower with account holders other than Bank.
7. NEGATIVE COVENANTS.
For so long as Bank has an obligation to lend or there are any
outstanding Obligations, Borrower shall not do any of the following without
Bank's prior written consent:
7.1 DISPOSITIONS.
Borrower shall not 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: (i) Transfers of Inventory
in the ordinary course of business, non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business, worn-out or obsolete Equipment (or Equipment that
Borrower determines in good faith to be in excess of its business needs), or
assets the proceeds of which are used to repay Loans or acquire replacement
assets within three months of such Transfer; (ii) Transfers that constitute
Permitted Investments; and (iii) payments of Permitted Indebtedness (including
outstanding principal and interest), subject to the constraints of Section 7.8
hereof.
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7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Borrower shall not engage in, or permit any of its Significant
Subsidiaries (as that term is defined under Regulation SX promulgated under the
Securities Exchange Act of 1934, as amended) to engage in, any business other
than the businesses currently engaged in by Borrower and its Significant
Subsidiaries and those reasonably related thereto. Borrower shall not have a
Change in Control. Borrower shall not, without at least 30 days prior written
notice to Bank, change its state of incorporation or its name.
7.3 MERGERS OR ACQUISITIONS.
Borrower shall not merge or consolidate, or permit any of its
significant Subsidiaries (as determined in accordance with Regulation S-X, or
any successor thereto, promulgated by the SEC) to merge or consolidate, with any
other Person unless Borrower ( or such significant Subsidiary, as the case may
be) is the surviving entity, or acquire, or permit any of its significant
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person except where the cash consideration to be paid by
Borrower in all such transactions does not exceed $40,000,000 in the aggregate
in each twelve-month period ending on July 19, and no Event of Default has
occurred and is continuing or would exist after giving effect to the
transactions. A Subsidiary may merge or consolidate into another Subsidiary or
into Borrower, so long as Borrower remains the obligor of all Obligations.
7.4 INDEBTEDNESS.
Borrower shall not create, incur, assume or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.
7.5 ENCUMBRANCES.
Borrower shall not create, incur or allow to exist any Lien on any of
its properties, 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 herein granted to Bank, subject to Permitted Liens.
7.6 DISTRIBUTIONS; INVESTMENTS.
Borrower shall not, except as permitted under Section 7.3 hereof or as
a Permitted Investment, directly acquire or own any Person, or make any
Investment in any Person, or pay any dividends (other than dividends payable
solely in stock of Borrower) or make any distribution or payment or redeem,
retire or purchase any capital stock for an amount in excess of $25,000,000.00
in the aggregate, in each case other than in the ordinary course of business and
only to the extent that a default under Section 6.7 hereof above would not
result, or permit any of its Subsidiaries to do so.
7.7 TRANSACTIONS WITH AFFILIATES.
Except for transactions that are in the ordinary course of Borrower's
business, Borrower shall not directly or indirectly enter into or permit any
material transaction with any Affiliate on terms less favorable to Borrower than
would be obtained in an arm's length transaction with a non-affiliated Person.
7.8 SUBORDINATED DEBT.
Borrower shall not make or permit any payment on any Subordinated Debt
except under the express 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.
Borrower shall not, and shall not permit any of its Subsidiaries to:
(i) become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of
12
1940, or undertake as one of its material activities extending credit to
purchase or carry margin stock, or use the proceeds of any Credit Extension for
that purpose; (ii) fail to meet the minimum funding requirements of ERISA,
permit a Reportable Event or Prohibited Transaction (as defined in ERISA) to
occur; or (iii) fail to comply with the Federal Fair Labor Standards Act or
violate any other law or regulation, in each case if the violation could
reasonably be expected to result in a Material Adverse Change.
7.10 REGISTRATION OF INTELLECTUAL PROPERTY.
Borrower shall not register any Copyrights or Mask Works with the
United States Copyright Office unless it: (i) has given at least 15 days' prior
written notice to Bank of its intent to register such Copyrights or Mask Works
and has provided Bank with a copy of the application it intends to file with the
United States Copyright Office (excluding exhibits thereto); (ii) executes a
security agreement or such other documents as Bank may reasonably request in
order to maintain the perfection and priority of Bank's security interest in the
Copyrights proposed to be registered with the United States Copyright Office;
and (iii) records such security documents with the United States Copyright
Office contemporaneously with filing the Copyright application(s) with the
United States Copyright Office. Borrower will promptly provide to Bank a copy of
the Copyright application(s) filed with the United States Copyright Office,
together with evidence of the recording of the security documents necessary for
Bank to maintain the perfection and priority of its security interest in such
Copyrights or Mask Works. Borrower shall provide written notice to Bank of any
application filed by Borrower in the United States Patent and Trademark Office
for a patent, or to register a trademark or service ▇▇▇▇, within 30 days of any
such filing.
8. EVENTS OF DEFAULT.
Each of the following will constitute an Event of Default hereunder:
8.1 PAYMENT DEFAULT.
Borrower fails to pay any of the Obligations within three Business Days
after their due date. During the three Business-Day period, the failure to cure
the default is not itself an Event of Default (but Bank will have no obligation
to make a Credit Extension during the three Business-Day period).
8.2 COVENANT DEFAULT.
(a) Borrower fails to perform any obligation under Section 6.6 or
Section 6.7, or violates any of the covenants in Article 7 of this Agreement, or
(b) Borrower fails or neglects to perform, keep or observe any other
material term, provision, condition, covenant or agreement in this Agreement, in
any other Loan Documents or in any other present or future agreement between
Borrower and Bank and, as to any default under such other term, provision,
condition, agreement or covenant that can be cured, has failed to cure the
default within ten days after the occurrence thereof; provided, however, that if
the default cannot by its nature be cured within the ten-day period, and such
default is likely to be cured within a reasonable time thereafter, then Borrower
shall have an additional reasonable time period (which shall not in any case
exceed ten additional days) to cure such default. During the ten-day period and
(if applicable) the additional ten-day period, the failure to cure the default
is not itself an Event of Default (but Bank will have no obligation to make a
Credit Extension during such periods).
8.3 MATERIAL ADVERSE CHANGE.
There occurs (i) a material adverse change in the business, operations
or condition (financial or otherwise) of Borrower, (ii) a material impairment of
the prospect of repayment of any portion of the Obligations, or (iii) a material
impairment to the value or priority of Bank's security interest in the
Collateral (or any material portion thereof).
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8.4 ATTACHMENT.
Any material portion of Borrower's assets is attached, seized or levied
on, or comes into possession of a trustee or receiver, and the attachment,
seizure or levy is not removed, or the possession by a trustee or receiver is
not terminated, in ten days; or Borrower is enjoined, restrained or prevented by
court order from conducting a material part of its respective businesses; or a
judgment or other claim becomes a Lien on a material portion of Borrower's
assets; or a notice of lien, levy or assessment is filed against any of
Borrower's assets by any government agency and not paid within ten days after
Borrower receives notice thereof. None of the foregoing is an Event of Default
if stayed or if a bond is posted pending contest by Borrower (but Bank will have
no obligation to make a Credit Extension during such stay period or pending
contest).
8.5 INSOLVENCY.
Borrower becomes insolvent or begins an Insolvency Proceeding, or an
Insolvency Proceeding is begun against Borrower and is not dismissed or stayed
within 30 days (but Bank will have no obligation to make a Credit Extension
before any Insolvency Proceeding is dismissed).
8.6 OTHER AGREEMENTS.
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
$5,000,000 or that could reasonably be expected to result in a Material Adverse
Change.
8.7 JUDGMENTS.
One or more money judgments in the aggregate of at least $5,000,000 are
rendered against Borrower and are unsatisfied and unstayed for ten days (but
Bank will have no obligation to make a Credit Extension before the judgments are
stayed or satisfied).
8.8 MISREPRESENTATIONS.
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 in order
to induce Bank to enter this Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and is continuing and any period for
cure has expired, 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 that Bank considers necessary or
reasonable to protect its security interest in the Collateral, and in
furtherance thereof: (i) Borrower will assemble the Collateral if Bank requires
and make it available as Bank designates; (ii) 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
14
expenses incurred; and (iii) 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
that Bank holds, and (ii) amounts 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, and in furtherance
thereof: (i) 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 (ii) Borrower's rights under all licenses and all franchise
agreements inure to Bank's benefit in connection with the foregoing;
(g) Dispose of the Collateral according to the Code; and
(h) Exercise any and all other rights and remedies available to Bank,
whether at law, in equity, by contract or otherwise.
9.2 POWER OF ATTORNEY.
Borrower irrevocably appoints and constitutes Bank as its lawful
attorney-in-fact, with full power and in the name of Borrower, to do all of the
following upon the occurrence and continuation of an Event of Default: (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
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. Notwithstanding the foregoing, 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, are coupled
with an interest and 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 verify
the amount of the Account. Borrower must 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 that Bank deems prudent. Any amounts paid by Bank pursuant to this
Section 9.4 are Bank Expenses and immediately due and payable, bearing interest
at the then-applicable rate for Floating Rate Loans and secured by the
Collateral. No payments by Bank are deemed an agreement to make similar payments
in the future or constitute Bank's waiver of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices and the Code, it
shall not be liable for: (i) the safekeeping of the Collateral; (ii) any loss or
damage to the Collateral; (iii) any diminution in the value of the Collateral;
or (iv) any act or default of any carrier, warehouseman, bailee, or other
person. Borrower bears all risk of loss, damage or destruction of the
Collateral.
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9.6 REMEDIES CUMULATIVE.
Bank's rights and remedies under this Agreement, the other Loan
Documents and all other agreements are cumulative. Bank has all rights and
remedies provided under the Code, by law and 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.
9.7 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 guaranties held by Bank on which Borrower is
liable.
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 telephonic facsimile transmission to the addresses set forth at
the beginning of this Agreement. Notices or demands sent to Borrower will be
directed to the attention of a Responsible Officer and Borrower's in-house
counsel. A party may change its notice address by giving the other party written
notice thereof.
11. CHOICE OF LAW, VENUE 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 WAIVES ITS 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 participations in all
or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.
12.2 INDEMNIFICATION.
Borrower shall indemnify, defend and hold harmless Bank and its
officers, employees, and agents against: (i) all obligations, demands, claims,
and liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (ii) all losses and Bank Expenses
incurred or paid by Bank arising out of transactions between Bank and Borrower
(including reasonable attorneys fees and expenses), except for losses caused by
Bank's gross negligence or willful misconduct.
16
12.3 TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 SEVERABILITY OF PROVISIONS.
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 all prior negotiations and agreements, including
that certain Loan and Security Agreement by and between Bank and Borrower dated
November 8, 2000 (as amended), which is superseded hereby and shall hereafter be
of no further force or effect whatsoever.
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 of which, taken together, constitute this
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 in no
event less than a reasonable degree of care), and disclosure of confidential
information may be made by Bank: (i) to Bank's subsidiaries or Affiliates in
connection with their respective businesses with Borrower; (ii) to prospective
transferees or purchasers of any interest in the Loan Documents; (iii) as
required by law, regulation, subpoena or other court or governmental order; (iv)
as required in connection with Bank's examination or audit; and (v) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (i) is in the public
domain or is legally in Bank's possession when disclosed to Bank, or becomes
part of the public domain after disclosure to Bank; or (ii) is disclosed to Bank
by a third party, if Bank does not know that the third party is prohibited from
disclosing the information.
12.9 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.
17
13. DEFINITIONS.
In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract rights
and other obligations owed to Borrower in connection with its sale or lease of
goods (including the licensing of 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.
"ADVANCES" are the aggregate sum of (i) the then-outstanding principal
balance of all Prime Rate Loans and all LIBOR Loans, plus (ii) all amounts
utilized under the Cash Management Services Sublimit, plus (iii) the face amount
of all outstanding Letters of Credit (including drawn but unreimbursed Letters
of Credit).
"AFFILIATE" of a Person is a Person that owns or directly or indirectly
controls 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 reasonable 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 and Insolvency Proceedings).
"BORROWER'S BOOKS" are all of 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.
"BUSINESS DAY" is any day that is not (i) a Saturday, Sunday or other
day on which banks in the State of California are authorized or required to
close and (ii) with respect to LIBOR Loans, any day on which banks in London do
not engage in dealings on the London inter-bank market.
"CASH MANAGEMENT SERVICES" are defined in Section 2.1.2.
"CASH MANAGEMENT SERVICES SUBLIMIT" is defined in Section 2.1.2.
"CHANGE IN CONTROL" means the occurrence of either of the following
conditions: (i) any Person or group of associated Persons acting in concert
shall have acquired an aggregate of more than 51% of the outstanding shares of
voting stock of Borrower, or (ii) individuals who constitute the Board of
Directors of Borrower on the date hereof (the "Incumbent Board") cease for any
reason to constitute at least a majority thereof, provided that any person
becoming a director subsequent to the date hereof whose election, or nomination
for election by Borrower's shareholders, was approved by a vote of at least
three-quarters (3/4) of the directors comprising the Incumbent Board (either by
a specific vote or by approval of the proxy statement of Borrower in which such
person is named as a nominee for director, without objection to such nomination)
shall be, for purposes of this clause (ii), considered as though such person
were a member of the Incumbent Board.
"CLOSING DATE" is the Effective Date of this Agreement.
"CODE" is the Uniform Commercial Code, as applicable.
"COLLATERAL" is the property described on Exhibit A attached hereto.
"COMMITTED REVOLVING LINE" is $30,000,000.00
"COMMITMENT FEE" is an amount equal to $105,000 per annum.
18
"COMPLIANCE CERTIFICATE" is attached hereto as Exhibit C.
"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, in each case on a
"marked to market" basis; 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.
"CONTINUE," "CONTINUED" and "CONTINUATION" is the continuation of a
LIBOR Loan from one Interest Period to a subsequent Interest Period of similar
duration.
"CONVERT," "CONVERTED" AND "CONVERSION" is the conversion of a Floating
Rate Loan into a LIBOR Loan or of a LIBOR Loan into a Floating Rate Loan, or the
Conversion of a LIBOR Loan from one Interest Period into another Interest Period
of different duration.
"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 Loan, Cash Management Service, Letter of
Credit and every other extension of credit made by Bank to Borrower or for
Borrower's benefit under the Loan Documents.
"DOLLARS" and "$" is United States dollars.
"EFFECTIVE DATE" is December 8, 2003.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"EVENT OF DEFAULT" is the occurrence of any event described in Article
8 and the expiration of the respective cure period provided therein.
"FLOATING RATE" is the rate of interest, for the applicable Interest
Period, equal to the Prime Rate minus one-half of one percent (0.50%).
"FLOATING RATE LOAN" is any Loan that bears interest at the Floating
Rate.
"FOREIGN EXCHANGE RESERVE" is defined in Section 2.1.3.
"FX FORWARD CONTRACT" is defined in Section 2.1.3.
"GAAP" is generally accepted accounting principles in the United
States, consistently applied over the period(s) in question.
"GOVERNMENTAL BODY" means any federal, state or local government, or
agency or instrumentality thereof, whether domestic or foreign.
19
"INDEBTEDNESS" is (i) 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, (ii) obligations evidenced by notes, bonds,
debentures or similar instruments, (iii) capital lease obligations and (iv)
Contingent Obligations.
"INSOLVENCY PROCEEDINGS" 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:
(i) Copyrights, Trademarks, Patents and Mask Works, including all
amendments, renewals, extensions and licenses or other rights to use same, and
all license fees and royalties from the use of same;
(ii) Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created, acquired
or held;
(iii) All design rights which may be available to Borrower or Guarantor
now or later created, acquired or held;
(iv) 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; and
(v) All proceeds and products of the foregoing, including all
insurance, indemnity and warranty payments.
"INTEREST PAYMENT DATE" means: (i) with respect to each Floating Rate
Loan, the first day of each calendar month; and (ii) with respect to each LIBOR
Loan, the first day of each calendar month and, in addition, the last day of
each Interest Period applicable to that LIBOR Loan. Notwithstanding the
foregoing, all accrued and unpaid interest will be due and payable in full on
the Maturity Date.
"INTEREST PERIOD" means: (i) with respect to any portion of the
outstanding principal of the Loans bearing interest from time to time at the
Floating Rate, the period commencing on the date on which such principal amount
is advanced, the date on which the Loan is converted from a LIBOR Loan to a
Floating Rate Loan or the first day of each calendar month (as the case may be)
and ending on the last day of the calendar month in which the foregoing has
occurred; and (ii) with respect to any portion of the outstanding principal of
the Loans bearing interest from time to time at the LIBOR Rate, the period
commencing on and including the date on which such principal amount is advanced
or the date on which the Loan is Converted from a Floating Rate Loan to a LIBOR
Loan or Converted or Continued from one LIBOR Interest Period to another LIBOR
Interest Period (as the case may be) and ending on but excluding the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is one, two or three months thereafter, as the
Borrower may elect; provided, however, that if any Interest Period would end on
a day that is not a Business Day, such Interest Period will be extended to the
next day that is a Business Day (unless, with respect to a LIBOR Loan, extending
such Interest Period to the next Business Day would cause the Interest Period to
end in a different calendar month, in which case the last day of such Interest
Period will be the immediately preceding Business Day). Notwithstanding the
foregoing, in no event will an Interest Period extend beyond the Maturity Date,
and if any Interest Period would otherwise end after the Maturity Date then the
LIBOR Rate will not be available hereunder for such Interest Period and the
Floating Rate will automatically apply and interest will be calculated in
accordance therewith from the first day of such Interest Period through the
Maturity Date.
"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
20
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" means, with respect to any Person, any investment of such
Person so classified under GAAP, and whether or not so classified includes: (i)
any loan or advance made by such Person to any other Person, (ii) any guaranty
made by such Person, and (iii) any ownership or similar interest in any other
Person; and the amount of any Investment will be the original principal or
capital amount thereof less all cash returns of principal or equity thereof
(without adjustment by reason of the financial condition of such other Person);
provided, that no Loan or other sum advanced hereunder by Bank will constitute
an Investment.
"LETTERS OF CREDIT" are described in Section 2.1.4.
"LETTER OF CREDIT FEE" is that fee for the issuance and renewal of each
Letter of Credit in an amount equal to (i) one and one-eighth percent (1.125%)
of the face amount of each Letter of Credit over $500,000 and (ii) one and
one-half percent (1.50%) of the face amount of each Letter of Credit up to and
including $500,000.
"LIBOR" means, with respect to any portion of the outstanding Loans for
any Interest Period therefor, an interest rate per annum equal to the quotient
(rounded upwards to the next 1/16 of 1.00%) of (i) the rate at which U.S. Dollar
deposits in an amount approximately equal in principal amount to such portion of
the Loans and for a maturity equal to the applicable Interest Period are offered
to Bank in immediately available funds in the London interbank market for U.S.
Dollars at approximately 11:00 a.m., London time, on the day that is two
Business Days prior to the commencement of such Interest Period, divided by (ii)
1.00 minus Bank's applicable statutory reserve requirements, expressed as a
decimal (including all basic, supplemental, marginal and emergency reserves),
from time to time in effect under Regulation D or similar regulations of the
Board of Governors of the Federal Reserve System of the United States. For
purposes of this definition, LIBOR Loans made hereunder will be deemed to
constitute "Eurocurrency Liabilities" as defined in Regulation D and to be
subject to the reserve requirements of Regulation D.
"LIBOR CONVERSION/CONTINUATION CERTIFICATE" is attached as Exhibit B-3.
"LIBOR LOAN" means any Loan that bears interest at the LIBOR Rate.
"LIBOR LOAN BORROWING CERTIFICATE" is attached hereto as Exhibit B-2.
"LIBOR RATE" means that rate of interest, for the applicable Interest
Period, equal to the sum of LIBOR for that Interest Period plus 150 basis
points.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN" is each LIBOR Loan and each Floating Rate Loan.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note or notes
and any other present or future agreement between Borrower and Bank, or made by
Borrower to or for the benefit of Bank, in each case in connection with this
Agreement, all as may be from time to time 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 described in Section 8.3.
"MATURITY DATE" is July 19, 2005; provided, however, that prior to each
then-applicable Maturity Date Bank will determine, in its sole discretion,
whether to extend the Maturity Date for an additional period of one year, which
extension will only be effective upon the execution by each of Bank and
21
Borrower of a written agreement evidencing such extension.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts that Borrower owes to Bank now or later under the Loan Documents,
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.
"OVERADVANCE" is described in Section 2.2.
"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:
(i) Borrower's indebtedness to Bank under this Agreement or any other
Loan Document;
(ii) Indebtedness existing on the Effective Date that has been approved
by Bank in writing and is shown on the Schedules;
(iii) Subordinated Debt;
(iv) Indebtedness to trade creditors incurred in the ordinary course of
business;
(v) Indebtedness secured by Permitted Liens;
(vi) Indebtedness of Borrower to any Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of Borrower (provided
that the primary obligations are not prohibited hereby), and Indebtedness of any
Subsidiary to any other Subsidiary and Contingent Obligations of any Subsidiary
with respect to obligations of any other Subsidiary (provided that the primary
obligations are not prohibited hereby);
(vii) Other Indebtedness of Borrower or any of its Subsidiaries not
exceeding $25,000,000 in the aggregate outstanding at any time; provided, that
Borrower gives Bank prior written notice that Borrower is incurring such other
Indebtedness; and
(viii) Extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (i) through (vi) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.
"PERMITTED INVESTMENTS" are:
(i) Investments existing on the Closing Date that have been approved by
Bank in writing and is shown on the Schedules;
(ii) (A) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within two
years from its acquisition or having an expected remaining life of two years or
less, (B) commercial paper maturing no more than one year after its creation and
having a rating of A1/P1 or higher from either Standard & Poor's Rating Services
or ▇▇▇▇▇'▇ Investors Service, Inc., (C) time deposits, certificates of deposit
and bankers' acceptances maturing no more than one year after issuance, (D)
fully collateralized repurchase obligations with a term of not more than 30 days
for underlying securities of Borrower, (E) investments that are consistent with
Borrower's investment policy in effect on the Effective Date as approved by
Borrower's Board of Directors, and (F) investments in money market funds
substantially all of whose assets comprise securities of the types described in
(A) through (E) above;
(iii) Investments consisting of the endorsement of negotiable
instruments for deposit or collection
22
or similar transactions in the ordinary course of Borrower;
(iv) Investments in connection with Transfers permitted by Section 7.1
and acquisitions permitted by Section 7.3;
(v) Investments of Subsidiaries in or to other Subsidiaries or Borrower
and Investments by Borrower in Subsidiaries not to exceed $15,000,000 in the
aggregate in any fiscal year;
(vi) Investments consisting of (A) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (B) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plans or agreements approved by Borrower's Board of
Directors;
(vii) 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;
(viii) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions, to customers and suppliers who are not
Affiliates, in the ordinary course of business; provided that this paragraph
(viii) will not apply to Investments of Borrower in any Subsidiary;
(ix) Joint ventures or strategic alliances in the ordinary course of
Borrower's business consisting of the non-exclusive licensing of technology, the
development of technology or the providing of technical support, provided that
any cash investments by Borrower do not exceed $15,000,000 in the aggregate in
any fiscal year;
(x) checking, savings, money market and investment accounts with Bank
or an Affiliate of Bank;
(xi) distributions payable solely in Borrower's capital stock; and
(xii) conversions of any of Borrower's convertible securities into
other securities pursuant to the terms of such convertible securities or
otherwise in exchange therefore.
"PERMITTED LIENS" are:
(i) Liens existing on the Closing Date that have been approved by Bank
in writing and are shown on the Schedules or arising under this Agreement or
other Loan Documents;
(ii) 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;
(iii) Purchase money Liens (A) on Equipment leased, acquired or held by
Borrower or its Subsidiaries incurred for financing the acquisition or lease of
the Equipment, or (B) existing on Equipment when leased or acquired, if the Lien
is confined to the property and improvements and the proceeds of the Equipment;
(iv) Non-exclusive 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 and only so long as no foreclosure, restraint, sale or
similar proceedings have commenced with respect thereto;
(v) Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;
(vi) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (i) through (iii), but any extension,
renewal or replacement Lien must be limited to the
23
property encumbered by the existing Lien and the principal amount of the
indebtedness so secured may not increase;
(vii) Liens in favor of other financial institutions arising in
connection with Borrower's deposit accounts held at such institutions, provided
that Bank has a perfected security interest in the amounts held in such deposit
accounts;
(viii) (A) Liens on real estate for real estate taxes not yet
delinquent, (B) Liens created by lease agreements, statute or common law to
secure the payments of rental amounts and other sums not yet due thereunder, and
(C) Liens on leasehold interests created by the lessor in favor of any mortgagee
of the leased premises;
(ix) Liens of carriers, warehousemen, mechanics, laborers and
materialmen and other similar Liens incurred in the ordinary course of business
for sums not yet due or being contested in good faith, if such reserve or
appropriate provision, if any, as shall be required by GAAP shall have been made
therefore;
(x) Liens incurred in the ordinary course of business in connection
with worker's compensation, unemployment insurance or similar legislation;
(xi) Easements, right-of-way, matters of public record, restrictions
and other similar encumbrances on the use of real property which do not
materially interfere with the ordinary conduct of the business of such Person as
currently conducted;
(xii) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (A) Borrower shall have established adequate reserves for such
judgments or awards, or (B) such judgments or awards will be fully insured and
the insurer shall not have denied coverage, or (C) such judgments or awards have
been bonded to the satisfaction of Bank; and
(xiii) Liens on foreign assets of Borrower to the extent such Liens
secure Indebtedness of Borrower's foreign Subsidiaries;
(xiv) Pledges of cash up to $5,000,000 in the aggregate to secure
credit facilities with other financial institutions or to secure bona fide
interest rate or currency hedging arrangements, subject to prior written
notification to Bank; and
(xv) cash security deposits of up to $5,000,000 in the aggregate to
landlords to secure lease obligations of Borrower or its significant Subsidiary.
"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 the lowest rate at which Bank makes loans or otherwise extends credit.
The Prime Rate may change from time to time over the term of this Agreement and
during any Interest Period.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer and the
Chief Financial Officer of Borrower.
"SCHEDULES" are the attached schedules of exceptions.
"SEC" is the United States Securities and Exchange Commission.
24
"SUBORDINATED DEBT" is debt incurred by Borrower that is subordinated
to Borrower's Indebtedness owed to Bank and that is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.
"SUBSIDIARY" is, for Borrower, any business entity of which more than
50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by Borrower or one or more Affiliates of Borrower.
"TANGIBLE NET WORTH" is the excess of Total Assets over Total
Liabilities, determined in accordance with GAAP, with the following adjustments:
(i) There will be excluded from Total Assets: (A) notes,
accounts receivable and other obligations owing to Borrower from its officers or
other unconsolidated Affiliates, and (B) all assets which would be classified as
intangible assets under GAAP, including goodwill, licenses, patents, trademarks,
trade names, copyrights, capitalized software and organizational costs, licenses
and franchises.
(ii) There will be excluded from Total Liabilities all
indebtedness of Borrower that is subordinated to the Obligations under one or
more subordination agreements in form specified by Bank or by language in the
instrument evidencing such indebtedness that Bank agrees in writing is
acceptable to Bank in its reasonable discretion.
(iii) The minimum Tangible Net Worth specified in Section
6.7(b) will be adjusted upward on a quarterly basis by 100% of the proceeds of
all equity and subordinated debt received by Borrower after the Effective Date,
excluding any proceeds thereof used to repurchase shares of Borrower's stock or
to purchase intangible assets, including goodwill, licenses, patents,
trademarks, trade names, copyrights, capitalized software and organizational
costs, licenses and franchises.
"TOTAL ASSETS" are, on any day, all assets that should, under GAAP, be
classified as such on Borrower's consolidated balance sheet.
"TOTAL LIABILITIES" are, on any day, obligations that should, under
GAAP, be classified as liabilities on Borrower's consolidated balance sheet.
"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 Borrower connected with the trademarks.
[Remainder of Page Intentionally Left Blank]
25
"UNRESTRICTED CASH" is all cash that (i) is not subject to any Lien or
(ii) does not otherwise fall within the definition of "restricted cash" as
determined under GAAP.
IN WITNESS WHEREOF, each of the parties hereto has caused its duly
authorized representative to execute and deliver this Agreement on the date
first set forth above.
BANK: BORROWER:
SILICON VALLEY BANK, INVISION TECHNOLOGIES, INC.,
a California-chartered bank a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------- ---------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Senior Vice President Title: Senior Vice President and CFO
26
EXHIBIT A
DESCRIPTION OF COLLATERAL
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 also
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;
All of Borrower's Intellectual Property; and
All of 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.
EXHIBIT B-1
LOAN PAYMENT/ADVANCE REQUEST FORM
FAX TO: __________________________ DATE: _____________________________
[ ] Loan Payment:
INVISION TECHNOLOGIES, INC.
From Account #_______________________ To Account #__________________________
(Deposit Account #) (Loan Account #)
Principal $_________________________and/or Interest $_______________________
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 $____________________
All of Borrower's representations and warranties in the Loan and
Security Agreement to which this form is an exhibit are true, correct and
complete in all material respects on the dates of the transfer request and
the advance, but those representations and warranties expressly referring to
another date are true, correct and complete in all material respects as of
the date.
AUTHORIZED SIGNATURE:_________________________ Phone Number:________________
OUTGOING WIRE REQUEST
COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO
BE WIRED.
Deadline for same day processing is 12:00 p.m., P.T.
Beneficiary Name: _________________________ Amount of Wire:$ ________________
Beneficiary Bank: ________________________ Account Number: __________________
City and Sate: ___________________________
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:___________________ 2nd Signature (If Required):________
Print Name/Title:_______________________ Print Name/Title:___________________
Telephone #_____________________________ Telephone #_________________________
EXHIBIT B-2
LIBOR LOAN BORROWING CERTIFICATE
The undersigned hereby certifies as follows:
I, ________________________, am the duly elected and acting
__________________ of INVISION TECHNOLOGIES, INC. ("BORROWER").
This certificate is delivered pursuant to that certain Loan and
Security Agreement dated as of December 8, 2003 by and between Borrower and
SILICON VALLEY BANK ("BANK) (the "LOAN AGREEMENT"). The terms used in this
Borrowing Certificate that are defined in the Loan Agreement shall have the same
meaning herein as ascribed to them therein .
Borrower hereby requests on __________________, 200_ a LIBOR Loan (the
"LOAN") as follows:
(a) The date on which the Loan is to be made is ______________,
200_.
(b) The amount of the Loan is to be __________________________
($__________________) for an Interest Period of ___________ month( s).
All representations and warranties of Borrower stated in the Loan
Agreement are true, correct and complete in all material respects as of the date
of this request for the Loan; provided, however, that those representations and
warranties expressly referring to another date are true, correct and complete in
all material respects as of such date.
IN WITNESS WHEREOF, this LIBOR Loan Borrowing Certificate is executed
by the undersigned as of this ____ day of _______________, 200_.
INVISION TECHNOLOGIES, INC.
By:__________________________________
Title:_______________________________
FOR INTERNAL BANK USE ONLY
LIBOR Pricing Date I LIBOR Rate I LIBOR Rate Variance Maturity Date
------------------ ------------ --------------------- -------------
---%
EXHIBIT B-3
LIBOR LOAN CONVERSION/CONTINUATION CERTIFICATE
The undersigned hereby certifies as follows:
I, ________________________, am the duly elected and acting
_________________ of INVISION TECHNOLOGIES, INC. ("BORROWER").
This certificate is delivered pursuant to that certain Loan and
Security Agreement dated as of December 8, 2003 by and between Borrower and
SILICON VALLEY BANK ("BANK") (the "LOAN AGREEMENT"). The terms used in this
LIBOR Conversion/Continuation Certificate that are defined in the Loan Agreement
shall have the same meaning herein as ascribed to them therein.
Borrower hereby requests on ____________, 200_ a LIBOR Loan (the
"LOAN") as follows:
(a) ____ (i) A Conversion of an existing Floating Rate Loan
to a LIBOR Loan; or
____ (ii) A Conversion or Continuation of the Interest
Period of an existing
LIBOR Loan to another Interest Period;
[Check (i) or (ii) above]
(b) The date on which the Loan is to be made is ___________,
200_.
(c) The amount of the Loan is to be
_____________($_____________), for an Interest Period of ___________ month(s).
All representations and warranties of Borrower stated in the Loan
Agreement are true, correct and complete in all material respects as of the date
of this request for the Loan; provided, however, that those representations and
warranties expressly referring to another date are true, correct and complete in
all material respects as of such date.
IN WITNESS WHEREOF, this LIBOR Conversion/Continuation Certificate is
executed by the undersigned as of this __ day of ___________, 200_.
INVISION TECHNOLOGIES, INC.
By:__________________________________
Title:_______________________________
FOR INTERNAL BANK USE ONLY
LIBOR Pricing Date I LIBOR Rate I LIBOR Rate Variance Maturity Date
------------------ ------------ --------------------- -------------
---%
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: INVISION TECHNOLOGIES, INC.
DATED: ___________________
The undersigned authorized officer ("Officer") of INVISION
TECHNOLOGIES, INC. ("Borrower") certifies, in his or her capacity as an officer
of Borrower, that under the terms and conditions of the Loan and Security
Agreement dated as of December 8, 2003 between Borrower and Bank (the
"Agreement"), (i) Borrower is in complete compliance for the period ending on
the date first set forth above with all required covenants except as noted below
and (ii) all representations and warranties in the Agreement are true, correct
and complete in all material respects on this date, provided that any
representation or warranty that specified an earlier date continues to be true
as of that specified earlier date. Attached are the required documents
supporting the certification. The Officer certifies, in his or her capacity as
an officer of Borrower, that the attached supporting documents 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 COVENANTS REQUIRED COMPLIES
------------------- -------- --------
Interim financial statements + CC Quarterly Yes No
Annual audited financial statements + CC Annually Yes No
FINANCIAL COVENANTS
Maintain on a quarterly basis:
REQUIRED ACTUAL COMPLIES
Minimum Unrestricted Cash (Domestic) $75,000,000 _______ Yes No
Minimum Tangible Net Worth $215,000,000 _______ Yes No
(plus adjustments)
Have there been any new filings with any Yes No
governmental entity relating to
Borrower's intellectual property?
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
INVISION TECHNOLOGIES, INC.,
a Delaware corporation
________________________________
SIGNATURE
________________________________
TITLE
________________________________
DATE
BANK USE ONLY
Received by:_________________________
AUTHORIZED SIGNER
Date:________________________________
Verified:____________________________
AUTHORIZED SIGNER
Date:________________________________
Compliance Status: Yes No