EXHIBIT 10.12
LOAN AND SECURITY AGREEMENT
ACTUATE SOFTWARE CORPORATION
TABLE OF CONTENTS
Page
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1 ACCOUNTING AND OTHER TERMS.............................................................. 4
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2 LOAN AND TERMS OF PAYMENT............................................................... 4
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2.1 Credit Extensions............................................................ 4
2.2 Overadvances................................................................. 6
2.3 Interest Rate, Payments...................................................... 6
2.4 Fees......................................................................... 6
3 CONDITIONS OF LOANS..................................................................... 6
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3.1 Conditions Precedent to Initial Credit Extension............................. 6
3.2 Conditions Precedent to all Credit Extensions................................ 6
4 CREATION OF SECURITY INTEREST........................................................... 7
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4.1 Grant of Security Interest................................................... 7
5 REPRESENTATIONS AND WARRANTIES.......................................................... 7
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5.1 Due Organization and Authorization........................................... 7
5.2 Collateral................................................................... 7
5.3 Litigation................................................................... 7
5.4 No Material Adverse Change in Financial Statements........................... 7
5.5 Solvency..................................................................... 8
5.6 Regulatory Compliance........................................................ 8
5.7 Subsidiaries................................................................. 8
5.8 Full Disclosure.............................................................. 8
6 AFFIRMATIVE COVENANTS................................................................... 8
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6.1 Government Compliance........................................................ 8
6.2 Financial Statements, Reports, Certificates.................................. 8
6.3 Inventory; Returns........................................................... 9
6.4 Taxes........................................................................ 9
6.5 Insurance.................................................................... 9
6.6 Primary Accounts............................................................. 9
6.7 Financial Covenants.......................................................... 9
6.8 Registration of Intellectual Property Rights................................. 10
6.9 Further Assurances........................................................... 10
7 NEGATIVE COVENANTS...................................................................... 10
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7.1 Dispositions................................................................. 10
7.2 Changes in Business, Ownership, Management or Business Locations............. 11
7.3 Mergers or Acquisitions...................................................... 11
7.4 Indebtedness................................................................. 11
7.5 Encumbrance.................................................................. 11
7.6 Distributions; Investments................................................... 11
7.7 Transactions with Affiliates................................................. 11
7.8 Subordinated Debt............................................................ 11
7.9 Compliance................................................................... 11
8 EVENTS OF DEFAULT....................................................................... 12
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8.1 Payment Default.............................................................. 12
8.2 Covenant Default............................................ 12
8.3 Material Adverse Change..................................... 12
8.4 Attachment.................................................. 12
8.5 Insolvency.................................................. 12
8.6 Other Agreements............................................ 12
8.7 Judgments................................................... 13
8.8 Misrepresentations.......................................... 13
9 BANK'S RIGHTS AND REMEDIES............................................. 13
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9.1 Rights and Remedies......................................... 13
9.2 Power of Attorney........................................... 13
9.3 Accounts Collection......................................... 14
9.4 Bank Expenses............................................... 14
9.5 Bank's Liability for Collateral............................. 14
9.6 Remedies Cumulative......................................... 14
9.7 Demand Waiver............................................... 14
10 NOTICES............................................................... 14
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11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER............................ 15
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12 GENERAL PROVISIONS.................................................... 15
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12.1 Successors and Assigns..................................... 15
12.2 Indemnification............................................ 15
12.3 Time of Essence............................................ 15
12.4 Severability of Provision.................................. 15
12.5 Amendments in Writing, Integration......................... 15
12.6 Counterparts............................................... 15
12.7 Survival................................................... 16
12.8 Confidentiality............................................ 16
12.9 Attorneys' Fees, Costs and Expenses........................ 16
13 DEFINITIONS........................................................... 16
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13.1 Definitions................................................ 16
This LOAN AND SECURITY AGREEMENT dated May 26, 1998, between SILICON
VALLEY BANK ("Bank"), whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ with a loan production office located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇.
▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and ACTUATE SOFTWARE CORPORATION ("Borrower"),
whose address is ▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ provides
the terms on which Bank will lend to Borrower and Borrower will repay Bank. The
parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
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Accounting terms not defined in this Agreement will be construed
following GAAP Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document. This Agreement shall be construed to
impart upon Bank a duty to act reasonably at all times.
2 LOAN AND TERMS OF PAYMENT
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2.1 CREDIT EXTENSIONS.
Borrower will pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1 REVOLVING ADVANCES.
(a) Bank will make Advances not exceeding (i) the lesser of (A) the
Committed Revolving Line minus the Cash Management Services Sublimit or (B) the
Borrowing Base, whichever is less, minus (ii) the amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit), and
minus (iii) the Foreign Exchange Reserve. Amounts borrowed under this Section
may be repaid and reborrowed during the term of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 3:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances and other amounts due under this Agreement are
immediately payable.
2.1.2 LETTERS OF CREDIT.
Bank will issue or have issued Letters of Credit for Borrowers account
not exceeding (i) the lesser of the Committed Revolving Line or the Borrowing
Base minus (ii) the outstanding principal balance of the Advances minus the Cash
Management Sublimit, minus the Foreign Exchange Reserve; however, the face
amount of outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve) may not exceed $1,000,000.
Each Letter of Credit will have an expiry date of no later than 180 days after
the Revolving Maturity Date, but Borrowers reimbursement obligation will be
secured by cash on terms acceptable to Bank at any time after the Revolving
Maturity Date if the term of this Agreement is not extended by Bank.
2.1.3 FOREIGN EXCHANGE CONTRACT; FOREIGN EXCHANGE SETTLEMENTS.
Borrower may enter foreign exchange contracts (the Exchange Contracts)
not exceeding an aggregate amount of $1,000,000 (the Contract Limit), under
which Bank will sell to or purchase from Borrower foreign currency on a spot or
future basis. Borrower may not request any Exchange Contracts if it is out of
compliance with any provision of this Agreement. Exchange Contracts must provide
for delivery of settlement on or before the Revolving Maturity Date. The amount
available under the Committed Revolving Line is reduced by the following (the
Foreign Exchange Reserve) on any given day (the Determination Date): (i) on all
outstanding Exchange Contracts on which delivery is to be effected or settlement
allowed more than two business days after the Determination Date, 10% of the
gross amount of the Exchange Contracts; plus (ii) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement allowed within two
business days after the Determination Date, 100% of the gross amount of the
Exchange Contracts.
Bank may terminate the Exchange Contracts if (a) an Event of Default
occurs or (b) there is not sufficient availability under the Committed Revolving
Line and Borrower does not have available funds in its deposit account for the
Foreign Exchange Reserve. If Bank terminates the Exchange Contracts, Borrower
will reimburse Bank for all fees, costs and expenses in connection with the
Exchange Contracts.
Borrower may not permit the total of all Exchange Contracts on which
delivery is to be effected and settlement allowed in any two business day period
to be more than $1,000,000 (the Settlement Limit) nor may Borrower permit the
total of all Exchange Contracts outstanding at any one time, to exceed the
Contract Limit. However, the amount which may be settled in any 2 business day
period may be increased above the Settlement Limit up to, but not above the
Contract Limit if:
(i) there is sufficient availability under the Committed Revolving Line
in the amount of the Foreign Exchange Reserve for each Determination
Date, provided that Bank in advance shall reserve the full amount of the
Foreign Exchange Reserve against the Committed Revolving Line; or
(ii) there is insufficient availability under the Committed Revolving
Line for settlements within any 2 business day period, but Bank: (A)
verifies good funds overseas before crediting Borrowers deposit account
(if Borrower sells foreign currency); or (B) debits Borrowers deposit
account before delivering foreign currency overseas (if Borrower
purchases foreign currency).
If Borrower purchases foreign currency, Borrower in advance must instruct
Bank either to treat the settlement as an advance under the Committed Revolving
Line, or to debit Borrowers account for the amount settled.
Borrower will execute all Banks standard applications and agreements in
connection with the Exchange Contracts and pay all Banks standard fees and
charges.
Borrower will indemnify Bank and hold it harmless from all claims,
liabilities, demands, obligations, actions, costs and expenses (including
reasonable attorneys fees) which it incurs arising out of or in any way relating
to any of the Exchange Contracts or any contemplated transactions.
2.1.4 CASH MANAGEMENT SERVICES SUBLIMIT.
Borrower may use up to $1,000,000 for Banks 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
Bank pays for any Cash Management Services will be treated as Advances under the
Committed Revolving Line.
2.2 OVERADVANCES.
If Borrowers Obligations under Section 2.1.1, 2.1.2 and 2.1.3 exceed the
Borrowing Base or if Borrower's Obligations under Section 2.1.1, 2.1.2, 2.1.3
and 2.1.4 exceed the Committed Revolving Line, Borrower must immediately pay
Bank the excess. At no time shall the sum of (a) the face amount of outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit and any
Letter of Credit Reserve) plus (b) the Foreign Exchange Reserve plus (c) Cash
Management Sublimit exceed $1,000,000.
2.3 INTEREST RATE, PAYMENTS.
(a) Interest Rate. Advances accrue interest on the outstanding principal
balance at a per annum rate at Borrower's election of either a rate equal to the
Prime Rate or the LIBOR Rate described in the LIBOR Supplement to Loan and
Security Agreement attached hereto. After an Event of Default, Obligations
accrue interest at 5 percent above the rate effective immediately before the
Event of Default. The interest rate increases or decreases when the Prime Rate
changes. Interest is computed on a 360 day year for the actual number of days
elapsed.
(b) Payments. Interest due on the Committed Revolving Line is payable on
the 25th of each month. Bank may debit any of Borrowers deposit accounts
including Account Number __________________________ for principal and interest
payments or any amounts Borrower owes Bank. Bank will notify Borrower when it
debits Borrower's accounts. These debits are not a set-off. Payments received
after 12:00 noon Pacific time are considered received at the opening of business
on the next Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees or interest
accrue.
2.4 FEES.
Borrower will pay:
(a) Bank Expenses. All Bank Expenses (including reasonable attorneys'
fees and expenses and audit expenses) incurred through and after the date of
this Agreement, are payable when due, provided, however, such expenses shall be
capped at $2,500.
3 CONDITIONS OF LOANS
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3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.
Banks obligation to make the initial Credit Extension is subject to the
condition precedent that it receive the agreements, documents and fees it
requires.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.
Banks obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension and no Event of Default may have occurred and be continuing, or
result from the Credit Extension. Each Credit Extension is Borrowers
representation and warranty on that date that the representations and warranties
of Section 5 remain true.
4 CREATION OF SECURITY INTEREST
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4.1 GRANT OF SECURITY INTEREST.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrowers duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. Bank may place a "hold" on any deposit account pledged as
Collateral.
5 REPRESENTATIONS AND WARRANTIES
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Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION.
Borrower and each Subsidiary is duly existing and in good standing in its
state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it
is bound in which the default could cause a Material Adverse Change.
5.2 COLLATERAL.
Borrower has good title to the Collateral, free of Liens except Permitted
Liens. The Accounts are bona fide, existing obligations, and the service or
property has been performed or delivered to the account debtor or its agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has no notice of any actual or imminent Insolvency Proceeding of any
account debtor whose accounts are an Eligible Account in any Borrowing Base
Certificate. All Inventory is in all material respects of good and marketable
quality, free from material defects. Borrower is the sole owner of the
Intellectual Property, except for non-exclusive licenses granted to its
customers in the ordinary course of business. Each Patent is valid and
enforceable and no part of the Intellectual Property has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
the Intellectual Property violates the rights of any third party.
5.3 LITIGATION.
Except as shown in the Schedule, there are no actions or proceedings
pending or, to Borrower's knowledge, threatened by or against Borrower or any
Subsidiary in which an adverse decision could cause a Material Adverse Change.
5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrowers
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 SOLVENCY.
The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.
5.6 REGULATORY COMPLIANCE.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations G, T and U of the Federal Reserve Board of Governors). Borrower has
complied with the Federal Fair Labor Standards Act. Borrower has not violated
any laws, ordinances or rules, the violation of which could cause a Material
Adverse Change. None of Borrower's or any Subsidiary's properties or assets has
been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge,
by previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Borrower and each Subsidiary has
timely filed all required tax returns and paid, or made adequate provision to
pay, all taxes, except those being contested in good faith with adequate
reserves under GAAP. 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.
5.7 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 FULL DISCLOSURE.
No representation, warranty or other statement of Borrower in any
certificate or written statement given 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.
6 AFFIRMATIVE COVENANTS
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Borrower will do all of the following:
6.1 GOVERNMENT COMPLIANCE.
Borrower will maintain its and all Subsidiaries' legal existence and good
standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify could have a material adverse
effect on Borrowers business or operations. Borrower will comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, noncompliance with which could have a material adverse effect on
Borrowers business or operations or cause a Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) as soon as available, but no later
than 30 days after the last day of each month (or 50 days after the last day of
each fiscal quarter if Borrower completes its Initial Public Offering on or
before September 30, 1998), a company prepared consolidated balance sheet and
income statement covering Borrower's consolidated operations during the period,
in a form and certified by a Responsible Officer acceptable to Bank; (ii) as
soon as available, but no later than 90 days (or 95 days at such time as
Borrower completes its Initial Public Offering) after the last day of Borrower's
fiscal year, audited consolidated financial statements prepared under GAAP,
consistently applied, together with
an unqualified opinion on the financial statements from an independent certified
public accounting firm acceptable to Bank; (iii) within 5 days of filing, copies
of all statements, reports and notices made available to Borrowers security
holders or to any holders of Subordinated Debt and all reports on Form 10-K, 10-
Q and 8-K filed with the Securities and Exchange Commission; (iv) 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 $100,000 or more; (v) budgets, sales projections, operating plans or other
financial information Bank requests; and (vi) prompt notice of any material
change in the composition of the Intellectual Property, including any subsequent
ownership right of Borrower in or to any Copyright, Patent or Trademark not
shown in any intellectual property security agreement between Borrower and Bank
or knowledge of an event that materially adversely affects the value of the
Intellectual Property.
(b) Within 20 days after the last day of each month, Borrower will
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
the form of Exhibit C, with aged listings of accounts receivable and accounts
payable.
(c) Borrower will deliver to Bank with the financial statements described
in Section 6.2(a), a Compliance Certificate signed by a Responsible Officer in
the form of Exhibit D.
(d) Bank has the right to audit Borrower's Accounts at Borrower's
expense, but the audits will be conducted no more often than every 6 months
unless an Event of Default has occurred and is continuing.
6.3 INVENTORY; RETURNS.
Borrower will keep all Inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower and its account
debtors will follow Borrowers customary practices as they exist at execution of
this Agreement. Borrower must promptly notify Bank of all returns, recoveries,
disputes and claims, that involve more than $50,000.
6.4 TAXES.
Borrower will make, and cause each Subsidiary to make, timely payment of
all material federal, state, and local taxes or assessments and will deliver to
Bank, on demand, appropriate certificates attesting to the payment.
6.5 INSURANCE.
Borrower will keep its business and the Collateral insured for risks and
in amounts, as Bank requests. Insurance policies will be in a form, with
companies, and in amounts that are satisfactory to Bank. All property policies
will have a lender's loss payable endorsement showing Bank as an additional loss
payee and all liability policies will show the Bank as an additional insured and
provide that the insurer must give Bank at least 20 days notice before canceling
its policy. At Bank's request, Borrower will deliver certified copies of
policies and evidence of all premium payments. Proceeds payable under any policy
will, at Banks option, be payable to Bank on account of the Obligations.
6.6 PRIMARY ACCOUNTS.
Borrower will maintain its primary depository and operating accounts with
Bank. At such time as Borrower completes its Initial Public Offering, and for
no less than 1 year thereafter or until the Revolving Maturity Date, whichever
is earlier, Borrower shall maintain an amount not less than $3,000,000 in daily
balances in its primary depository and operating accounts with Bank.
6.7 FINANCIAL COVENANTS.
Borrower will maintain as of the last day of each quarter, unless
otherwise stated:
(i) QUICK RATIO [ADJUSTED]. A ratio of Quick Assets to Current
Liabilities minus Deferred Maintenance Revenue of at least 1.25 to 1.00 (to be
tested monthly).
(ii) LIQUIDITY COVERAGE. A ratio of unrestricted cash (and
equivalents) plus net availability under the Committed Revolving Line divided by
outstanding Advances of not less than 2.00 to 1.00.
(iii) PROFITABILITY. Borrower will be profitable each quarter, except
that Borrower may suffer a loss not to exceed $1,700,000 for the fiscal quarter
ending June 30, 1998 and $300,000 for the fiscal quarter ending September 30,
1998.
In the event that Borrower completes its Initial Public Offering on or
before September 30, 1998, the above covenants shall be replaced with the
following:
Borrower will maintain as of the last day of each quarter:
(i) QUICK RATIO. A ratio of Quick Assets to Current Liabilities of
at least 2.00 to 1.00.
(ii) LIQUIDITY COVERAGE. A ratio of unrestricted cash (and
equivalents) plus net availability under the Committed Revolving Line divided by
outstanding Advances of not less than 2.00 to 1.00.
(iii) TANGIBLE NET WORTH. A Tangible Net Worth of at least
$10,000,000.
6.8 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
Borrower will register with the United States Patent and Trademark Office
or the United States Copyright Office Intellectual Property rights on Exhibits
A, B, C, and D to the Intellectual Property Security Agreement within 30 days of
the date of this Agreement, and additional Intellectual Property rights
developed or acquired including revisions or additions with any product before
the sale or licensing of the product to any third party.
Borrower will (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in writing
of material infringements and (ii) not allow any Intellectual Property to be
abandoned, forfeited or dedicated to the public without Banks written consent.
6.9 FURTHER ASSURANCES.
Borrower will execute any further instruments and take further action as
Bank requests to perfect or continue Bank's security interest in the Collateral
or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
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Borrower will not do any of the following:
7.1 DISPOSITIONS.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, other than Transfers (i) of Inventory in the ordinary
course of business; (ii) of non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the ordinary course
of business; or (iii) of worn-out or obsolete Equipment.
7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or have a material
change in its ownership of greater than 25%. Borrower will not, without at least
30 days prior written notice, relocate its chief executive office or add any new
offices or business locations.
7.3 MERGERS OR ACQUISITIONS.
(i) Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, if no Event of Default has occurred and is
continuing or would result from such action during the term of this Agreement or
result in a decrease of more than 25% of Tangible Net Worth; or (ii) merge or
consolidate a Subsidiary into another Subsidiary or into Borrower.
7.4 INDEBTEDNESS.
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 ENCUMBRANCE.
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
here.
7.6 DISTRIBUTIONS; INVESTMENTS.
Directly or indirectly acquire or own any Person, or make any Investment
in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so. Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock.
7.7 TRANSACTIONS WITH AFFILIATES.
Directly or indirectly enter or permit any material transaction with any
Affiliate except transactions that are in the ordinary course of Borrower's
business, 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.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.
7.9 COMPLIANCE.
Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Advance for that purpose; fail to meet the minimum funding
requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as
defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards
Act or violate any other law or regulation, if the violation could have a
material adverse effect on Borrowers business or operations or cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
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Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT.
If Borrower fails to pay any of the Obligations;
8.2 COVENANT DEFAULT.
If Borrower does not perform any obligation in Section 6 or violates any
covenant in Section 7 or does not perform or observe any other material term,
condition or covenant in this Agreement, any Loan Documents, or in any agreement
between Borrower and Bank and as to any default under a term, condition or
covenant that can be cured, has not cured the default within 10 days after it
occurs, or if the default cannot be cured within 10 days or cannot be cured
after Borrowers attempts within 10 day period, and the default may be cured
within a reasonable time, then Borrower has an additional period (of not more
than 30 days) to attempt to cure the default. During the additional time, the
failure to cure the default is not an Event of Default (but no Credit Extensions
will be made during the cure period);
8.3 MATERIAL ADVERSE CHANGE.
(i) If there occurs a material impairment in the perfection or priority
of the Banks security interest in the Collateral or in the value of such
Collateral which is not covered by adequate insurance or (ii) if the Bank
determines, based upon information available to it and in its reasonable
judgment, that there is a reasonable likelihood that Borrower will fail to
comply with one or more of the financial covenants in Section 6 during the next
succeeding financial reporting period.
8.4 ATTACHMENT.
If any material portion of Borrower's assets is attached, seized, levied
on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period);
8.5 INSOLVENCY.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);
8.6 OTHER AGREEMENTS.
If there is a default in any agreement between Borrower and a third party
that gives the third party the right to accelerate any Indebtedness exceeding
$100,000 or that could cause a Material Adverse Change;
8.7 JUDGMENTS.
If a money judgment(s) in the aggregate of at least $50,000 is rendered
against Borrower and is unsatisfied and unstayed for 10 days (but no Credit
Extensions will be made before the judgment is stayed or satisfied); or
8.8 MISREPRESENTATIONS.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.
9 BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an Event
of Default described in Section 8.5 occurs all Obligations are immediately due
and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrowers benefit under
this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower it
holds, or (ii) any amount held by Bank owing to or for the credit or the account
of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral. Bank is granted a non-
exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
and
(g) Dispose of the Collateral according to the Code.
9.2 POWER OF ATTORNEY.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's
name on any checks or other forms of payment or security; (ii) sign Borrower's
name on any invoice or ▇▇▇▇ of lading for any Account or drafts against
account debtors, (iii) make, settle, and adjust all claims under Borrower's
insurance policies; (iv) settle and adjust disputes and claims about the
Accounts directly with account debtors, for amounts and on terms Bank determines
reasonable; and (v) transfer the Collateral into the name of Bank or a third
party as the Code permits. Bank may exercise the power of attorney to sign
Borrowers name on any documents necessary to perfect or continue the perfection
of any security interest regardless of whether an Event of Default has occurred.
Banks appointment as Borrower's attorney in fact, and all of Bank's rights and
powers, coupled with an interest, are irrevocable until all Obligations have
been fully repaid and performed and Bank's obligation to provide Credit
Extensions terminates.
9.3 ACCOUNTS COLLECTION.
When an Event of Default occurs and continues, Bank may notify any Person
owing Borrower money of Bank's security interest in the funds and 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 Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to make
similar payments in the future or Banks waiver of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices it is not liable for:
(a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral;
(c) any diminution in the value of the Collateral; or (d) any act or default of
any carrier, warehouseman, bailee, or other person. Borrower bears all risk of
loss, damage or destruction of the Collateral.
9.6 REMEDIES CUMULATIVE.
Bank's rights and remedies under this Agreement, the Loan Documents, and
all other agreements are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Banks exercise of one right or remedy is
not an election, and Banks waiver of any Event of Default is not a continuing
waiver. Banks 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 DEMAND WAIVER.
Borrower waives demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
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 telefacsimile to the addresses set forth at the beginning of
this Agreement. A Party may change its notice address by giving the other Party
written notice.
11 CHOICE OF LAW , 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 WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
------------------
12.1 SUCCESSORS AND ASSIGNS.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.
12.2 INDEMNIFICATION.
Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other provision
in determining the enforceability of any provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge into this
Agreement and the Loan Documents.
12.6 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 SURVIVAL.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The
obligations of Borrower in Section 12.2 to indemnify Bank will survive until all
statutes of limitations for actions that may be brought against Bank have run.
12.8 CONFIDENTIALITY.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Banks subsidiaries or affiliates in
connection with their business with Borrower, (ii) to prospective transferees or
purchasers of any interest in the Loans, (iii) as required by law, regulation,
subpoena, or other order, (iv) as required in connection with Banks examination
or audit and (v) as Bank considers appropriate exercising remedies under this
Agreement. Confidential information does not include information that either:
(a) is in the public domain or in Banks possession when disclosed to Bank, or
becomes part of the public domain after disclosure to Bank; or (b) 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 costs and expenses incurred, in addition to any other
relief to which it may be entitled.
13 DEFINITIONS
-----------
13.1 DEFINITIONS.
In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Persons managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs or
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.
"BORROWING BASE" is 80% of Eligible Accounts as determined by Bank from
Borrowers most recent Borrowing Base Certificate.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.
"CASH MANAGEMENT SERVICES" are defined in Section 2.1.4.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the California Uniform Commercial Code.
"COLLATERAL" is the property described on Exhibit A.
----------
"COMMITTED REVOLVING LINE" is an Advance of up to $5,000,000.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"COPYRIGHTS" are all copyright rights, applications or registrations and
like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"CREDIT EXTENSION" is each Advance, Letter of Credit, Exchange Contract,
or any other extension of credit by Bank for Borrowers benefit.
"CURRENT LIABILITIES" are the aggregate amount of Borrowers Total
Liabilities which mature within one (1) year.
"ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5.2;
but Bank may change eligibility standards by giving Borrower notice. Unless
---
Bank agrees otherwise in writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has not paid within 90 days of
invoice date;
(b) Accounts for an account debtor, 50% or more of whose Accounts have
not been paid within 90 days of invoice date;
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, for the amounts that
exceed that percentage, unless the Bank approves in writing;
(e) Accounts for which the account debtor does not have its principal
place of business in the United States;
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality;
(g) Accounts for which Borrower owes the account debtor, but only up to
the amount owed (sometimes called "contra" accounts, accounts payable,
customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on approval,
▇▇▇▇ and hold, or other terms if account debtors payment may be
conditional;
(i) Accounts for which the account debtor is Borrowers Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes any
claim and Bank believes there may be a basis for dispute (but only up to
the disputed or claimed amount), or if the Account Debtor is subject to
an Insolvency Proceeding, or becomes insolvent, or goes out of business;
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
"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.
"EXCHANGE CONTRACT" is defined in Section 2.1.3.
"GAAP" is generally accepted accounting principles.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INITIAL PUBLIC OFFERING" means a sale of Borrower of its equity
securities pursuant to a registration statement filed under the Securities Act
of 1933, as amended, in which Borrower receives net proceeds of not less than
$10,000,000.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INTELLECTUAL PROPERTY" is:
(a) Copyrights, Trademarks, Patents, and Mask Works including amendments,
renewals, extensions, and all licenses or other rights to use and all license
fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created, acquired
or held;
(c) All design rights which may be available to Borrower now or later
created, acquired or held;
(d) Any claims for damages (past, present or future) for infringement of
any of the rights above, with the right, but not the obligation, to ▇▇▇ and
collect damages for use or infringement of the intellectual property rights
above;
All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.
"INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"LETTER OF CREDIT" is defined in Section 2.
"LIBOR RATE" is defined in the LIBOR Supplement to Loan and Security
Agreement attached hereto.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
"MASK WORKS" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"MATERIAL ADVERSE CHANGE" is defined in Section 8.3.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit and
Exchange Contracts and including interest accruing after Insolvency Proceedings
begin and debts, liabilities, or obligations of Borrower assigned to Bank.
"PATENTS" are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.
"PERMITTED INDEBTEDNESS" is:
(a) Borrowers indebtedness to Bank under this Agreement or any other Loan
Document;
(b) Indebtedness existing on the Closing Date and shown on the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(e) Indebtedness secured by Permitted Liens.
"PERMITTED INVESTMENTS" ARE:
(a) Investments shown on the Schedule and existing on the Closing Date; and
(b) (i) marketable direct obligations issued or unconditionally guaranteed
by the United States or its agency or any State maturing within 1 year from its
acquisition, (ii) commercial paper maturing no more than 1 year after its
creation and having the highest rating from either Standard & Poor's Corporation
or ▇▇▇▇▇'▇ Investors Service, Inc., and (iii) Banks certificates of deposit
issued maturing no more than 1 year after issue.
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the Schedule or arising
under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
--
any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower or
its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
--
property and improvements and the proceeds of the equipment;
(d) Leases or subleases and licenses or sublicenses granted in the ordinary
course of Borrower's business and any interest or title of a lessor, licensor or
under any lease or license, if the leases, subleases, licenses and sublicenses
--
permit granting Bank a security interest;
(e) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
---
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
"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 Banks most recently announced "prime rate," even if it is
not Banks lowest rate.
"QUICK ASSETS" is, on any date, the Borrowers consolidated, unrestricted
cash, cash equivalents, net billed accounts receivable and investments with
maturities of fewer than 12 months determined according to GAAP.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"REVOLVING MATURITY DATE" is May 25, 1999.
"SCHEDULE" is any attached schedule of exceptions.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrowers debt to Bank (and identified as subordinated by Borrower and Bank).
"SUBSIDIARY" is for any Person, or any other business entity of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) any amounts attributable to (a)
------
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, Copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities plus Subordinated Debt.
"TRADEMARKS" are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.
BORROWER:
Actuate Software Corporation
By:___________________________
Title:________________________
BANK:
SILICON VALLEY BANK
By:___________________________
Title:________________________
EXHIBIT A
---------
The Collateral consists of all of Borrowers right, title and interest in
and to the following:
All goods and equipment now owned or hereafter acquired, including, without
limitation, all machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities entitlements,
securities accounts, investment property, financial assets, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and
All Borrower's Books relating to the foregoing and any and all claims, rights
and interests in any of the above and all substitutions for, additions and
accessions to and proceeds thereof.
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE: ________________
FAX#: (▇▇▇) ▇▇▇-▇▇▇▇ TIME: ________________
-------------------------------------------------------------------------------
FROM: Actuate Software Corporation
------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY: _________________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE: _________________________________________________________
PHONE NUMBER: _________________________________________________________________
FROM ACCCOUNT # _________________ TO ACCOUNT # ______________________________
REQUESTED TRANSACTION TYPE REQUESTED DOLLAR AMOUNT
-------------------------- -----------------------
PRINCIPAL INCREASE (ADVANCE) $_____________________________________
PRINCIPAL PAYMENT (ONLY) $_____________________________________
INTEREST PAYMENT (ONLY) $_____________________________________
PRINCIPAL AND INTEREST (PAYMENT) $_____________________________________
OTHER INSTRUCTIONS:____________________________________________________________
-------------------------------------------------------------------------------
All Borrower's representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone request for and Advance confirmed by this Borrowing Certificate; but
those representations and warranties expressly referring to another date shall
be true, correct and complete in all material respects as of that date.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
BANK USE ONLY
TELEPHONE REQUEST:
-----------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
___________________________________________ __________________________
Authorized Requester Phone #
___________________________________________ __________________________
Received By (Bank) Phone #
_________________________________________
Authorized Signature (Bank)
-------------------------------------------------------------------------------
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: Actuate Software Corporation Lender: Silicon Valley Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Commitment Amount: $5,000,000
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ____ $____________
2. Additions (please explain on reverse) $____________
3. TOTAL ACCOUNTS RECEIVABLE $____________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $____________
5. Balance of 50% over 90 day accounts $____________
6. Credit balances $____________
7. Concentration Limits $____________
8. Foreign Accounts $____________
9. Governmental Accounts $____________
10 Contra Accounts $____________
11 Promotion or Demo Accounts $____________
12 Intercompany/Employee Accounts $____________
13 Other (please explain on reverse) $____________
14 TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $____________
15 Eligible Accounts (#3 minus #14) $____________
16 LOAN VALUE OF ACCOUNTS (80% of #15) $____________
BALANCES
17. Maximum Loan Amount minus Cash Management Sublimit $____________
18. Total Funds Available [Lesser of #17 or #16] $____________
19. Present balance owing on Line of Credit $____________
20. Outstanding under Sublimits (LC or FX) $____________
21. RESERVE POSITION (#18 minus #19 and #20) $____________
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.
COMMENTS:
Actuate Software Corporation
By:_______________________________
Authorized Signer
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FROM: ACTUATE SOFTWARE CORPORATION
The undersigned authorized officer of Actuate Software Corporation
("Borrower") certifies that under the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending _______________ with all required
covenants except as noted below and (ii) all representations and warranties in
the Agreement are true and correct in all material respects on this date.
Attached are the required documents supporting the certification. The Officer
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) consistently applied from one period to the next
except as explained in an accompanying letter or footnotes. The Officer
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days* Yes No
+Comp. Cert
Annual (Audited) FYE within 90 days** Yes No
10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No
A/R & A/P Agings Monthly within 20 days Yes No
A/R Audit Initial and Semi-Annual Yes No
Borrowing Base Certificate Monthly within 20 days Yes No
*Quarterly within 50 days if Borrower's Initial Public Offering is completed on or before September 30, 1998.
**FYE within 95 days at such time as Borrower completes its Initial Public Offering.
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Quarterly Basis, unless otherwise noted:
Minimum Adjusted Quick Ratio (monthly) 1.25 : 1.00 _____: 1.00 Yes No
Minimum Liquidity Ratio 2.00 : 1.00 _____: 1.00 Yes No
Profitability: Quarterly $__________ Yes No
Losses not to exceed: $1,700,000 for the fiscal quarter ending June 30, Yes No
1998 and $300,000 for the fiscal quarter ending
September 30, 1998
In the event Borrower completes its Initial Public Offering prior to September 30, 1998, the above Covenants shall be
replaced with:
Maintain on a Quarterly Basis:
Minimum Tangible Net Worth $10,000,000 $ ___________ Yes No
Minimum Liquidity Ratio 2.00 : 1.00 _____: 1.00 Yes No
Minimum Quick Ratio 2.00 : 1.00 _____: 1.00 Yes No
---------------------------------
BANK USE ONLY
COMMENTS REGARDING EXCEPTIONS: See Attached.
Received by:___________________
AUTHORIZED SIGNER
Sincerely,
Date:__________________________
Actuate Software Corporation
Verified:______________________
AUTHORIZED SIGNER
____________________________
SIGNATURE
Date:__________________________
____________________________
TITLE Compliance Status: Yes No
---------------------------------
____________________________
DATE
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: ACTUATE SOFTWARE CORPORATION
LOAN OFFICER: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
DATE: MAY 26, 1998
CREDIT REPORT 35.00
UCC SEARCH FEE 150.00
UCC FILING FEE 20.00
INTELLECTUAL PROPERTY FILING FEES 550.00
DOCUMENTATION FEE 350.00
TOTAL FEE DUE $1,105.00
------------- =========
PLEASE INDICATE THE METHOD OF PAYMENT:
{ } A CHECK FOR THE TOTAL AMOUNT IS ATTACHED.
{ } DEBIT DDA # __________________ FOR THE TOTAL AMOUNT.
{ } LOAN PROCEEDS
BORROWER:
BY:
------------------------------------
(AUTHORIZED SIGNER)
____________________________________
SILICON VALLEY BANK (DATE)
ACCOUNT OFFICER'S SIGNATURE
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement is entered into as of May 26,
1998 by and between SILICON VALLEY BANK ("Bank") and Actuate Software
Corporation ("Grantor").
RECITALS
--------
A. Bank has agreed to make certain advances of money and to extend certain
financial accommodation to Grantor (the "Loans") in the amounts and manner set
forth in that certain Loan and Security Agreement by and between Bank and
Grantor dated May 26, 1998 (as the same may be amended, modified or supplemented
from time to time, the "Loan Agreement"; capitalized terms used herein are used
as defined in the Loan Agreement). Bank is willing to make the Loans to
Grantor, but only upon the condition, among others, that Grantor shall grant to
Bank a security interest in certain Copyrights, Trademarks, Patents, and Mask
Works to secure the obligations of Grantor under the Loan Agreement.
B. Pursuant to the terms of the Loan Agreement, Grantor has granted to
Bank a security interest in all of Grantor's right, title and interest, whether
presently existing or hereafter acquired, in, to and under all of the
Collateral.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound, as collateral security
for the prompt and complete payment when due of its obligations under the Loan
Agreement, Grantor hereby represents, warrants, covenants and agrees as follows:
AGREEMENT
---------
To secure its obligations under the Loan Agreement, Grantor grants and
pledges to Bank a security interest in all of Grantor's right, title and
interest in, to and under its Intellectual Property Collateral (including
without limitation those Copyrights, Patents, Trademarks and Mask Works listed
on Schedules A, B, C, and D hereto), and including without limitation all
proceeds thereof (such as, by way of example but not by way of limitation,
license royalties and proceeds of infringement suits), the right to ▇▇▇ for
past, present and future infringements, all rights corresponding thereto
throughout the world and all re-issues, divisions continuations, renewals,
extensions and continuations-in-part thereof.
This security interest is granted in conjunction with the security interest
granted to Bank under the Loan Agreement. The rights and remedies of Bank with
respect to the security interest granted hereby are in addition to those set
forth in the Loan Agreement and the other Loan Documents, and those which are
now or hereafter available to Bank as a matter of law or equity. Each right,
power and remedy of Bank provided for herein or in the Loan Agreement or any of
the Loan Documents, or now or hereafter existing at law or in equity shall be
cumulative and concurrent and shall be in addition to every right, power or
remedy provided for herein and the exercise by Bank of any one or more of the
rights, powers or remedies provided for in this Intellectual Property Security
Agreement, the Loan Agreement or any of the other Loan Documents, or now or
hereafter existing at law or in equity, shall not preclude the simultaneous or
later exercise by any person, including Bank, of any or all other rights, powers
or remedies.
IN WITNESS WHEREOF, the parties have cause this Intellectual Property
Security Agreement to be duly executed by its officers thereunto duly authorized
as of the first date written above.
GRANTOR:
Address of Grantor: Actuate Software Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇ By:______________________________
--------------------------
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Title:___________________________
--------------------------
Attn:_____________________
BANK:
Address of Bank: SILICON VALLEY BANK
1731 Embarcadero, Ste. 220 By:______________________________
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Title:___________________________
Attn:_____________________
EXHIBIT A
---------
Copyrights
Description Registration/ Registration/
------------ Application Application
Number Date
------ ----
EXHIBIT B
---------
Patents
Description Registration/ Registration/
----------- Application Application
Number Date
------ ----
EXHIBIT C
---------
Trademarks
Description Registration/ Registration/
----------- Application Application
Number Date
------ ----
EXHIBIT D
---------
Mask Works
Description Registration/ Registration/
----------- Application Application
Number Date
------ ----
CORPORATE BORROWING RESOLUTION
BORROWER: ACTUATE SOFTWARE CORPORATION BANK: SILICON VALLEY BANK
▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇ 1731 EMBARCADERO, ▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
I, THE UNDERSIGNED SECRETARY OR ASSISTANT SECRETARY OF ACTUATE SOFTWARE
CORPORATION ("BORROWER"), HEREBY CERTIFY that Borrower is a corporation duly
organized and existing under and by virtue of the laws of the State of
California.
I FURTHER CERTIFY that at a meeting of the Directors of Borrower (or by other
duly authorized corporate action in lieu of a meeting), duly called and held, at
which a quorum was present and voting, the following resolutions were adopted.
BE IT RESOLVED, that ANY ONE (1) of the following named officers, employees, or
agents of Borrower, whose actual signatures are shown below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
_____________________ _____________________ _____________________
_____________________ _____________________ _____________________
_____________________ _____________________ _____________________
_____________________ _____________________ _____________________
acting for and on behalf of Borrower and as its act and deed be, and they hereby
are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers of
Borrower and Bank, such sum or sums of money as in their judgment should be
borrowed.
EXECUTE LOAN DOCUMENTS. To execute and deliver to Bank the loan documents
of Borrower, on Bank's forms, at such rates of interest and on such terms
as may be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of Borrower to Bank, and also to execute and deliver to Bank
one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the loan documents, or
any portion of the loan documents.
GRANT SECURITY. To grant a security interest to Bank in any of Borrowers
assets, which security interest shall secure all of Borrower's obligations
to Bank
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness
payable to or belonging to Borrower or in which Borrower may have an
interest, and either to receive cash for the same or to cause such proceeds
to be credited to the account of Borrower with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.
LETTERS OF CREDIT. To execute letter of credit applications and other
related documents pertaining to Bank's issuance of letters of credit.
FOREIGN EXCHANGE CONTRACTS. To execute and deliver foreign exchange
contracts, either spot or forward, from time to time, in such amount as, in
the judgment of the officer or officers herein authorized.
ISSUE WARRANTS. To issue warrants to purchase Borrower's capital stock,
for such class, series and number, and on such terms, as an officer of
Borrower shall deem appropriate.
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder,
and in all cases, to do and perform such other acts and things, to pay any
and all fees and costs, and to execute and deliver such other documents and
agreements, including agreements waiving the right to a trial by jury, as
they may in their discretion deem reasonably necessary or proper in order
to carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
Resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of Borrower's agreements or commitments in effect at the
time notice is given.
I FURTHER CERTIFY that the persons named above are principal officers of the
Borrower and occupy the positions set opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Borrower; and that
they are in full force and effect and have not been modified or revoked in any
manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on May 26, 1998 and attest that
the signatures set opposite the names listed above are their genuine signatures.
CERTIFIED TO AND ATTESTED BY:
X ______________________________________________
*Secretary or Assistant Secretary
X ______________________________________________
*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.
2