EXHIBIT 10.25
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
by and between
HARMONIC INC., AS BORROWER
and
SILICON VALLEY BANK, AS LENDER
December 17, 2004
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (as amended,
restated, or otherwise modified from time to time, this "AGREEMENT"), dated as
of December 17, 2004, is by and between SILICON VALLEY BANK ("BANK"), whose
address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, and HARMONIC INC.,
a Delaware corporation ("BORROWER"), whose address is ▇▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and provides the terms on which Bank will lend to Borrower and
Borrower will repay Bank. This Agreement amends and restates in its entirety
that certain Amended and Restated Loan and Security Agreement, dated December
19, 2003. The parties hereto agree as follows:
1. DEFINITIONS; ACCOUNTING AND OTHER TERMS
Capitalized terms used herein shall have the meanings given to such terms
in Section 13 of this Agreement. Accounting terms not defined in this Agreement
will be construed according to GAAP. Calculations and determinations must be
made following GAAP. The term "financial statements" includes the notes and
schedules thereto. The terms "including" and "includes" always mean "including
(or includes) without limitation," in this or any 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 Advances
and interest on the unpaid principal amount of the Advances.
2.1.1 ADVANCES.
(a) Bank will make Advances not exceeding the Committed
Revolving Line minus (A) the outstanding principal balance of the Advances minus
(B) the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit). Amounts borrowed hereunder that remain
available for borrowing under this Agreement may be repaid and reborrowed prior
to the Maturity Date.
(b) To obtain an Advance, Borrower must notify Bank by
facsimile or telephone by 12:00 noon Pacific Time on the Business Day the
Advance is to be made. Borrower must promptly confirm the notification by
delivering to Bank the Loan Payment/Advance Request Form attached as Exhibit B
(the "PAYMENT/ADVANCE FORM"). 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 such reliance.
(c) The Committed Revolving Line shall terminate on the
Maturity Date, and all Advances are immediately due and payable on the Maturity
Date.
2.1.2 LETTERS OF CREDIT.
(a) Bank will issue or have issued standby Letters of Credit
for Borrower's account not exceeding the amount available under the Committed
Revolving Line (each, a "LETTER OF CREDIT"). Each Letter of Credit will have an
expiry date of no later than 180 days after the Maturity Date, but Borrower's
reimbursement obligation will be secured by cash in an amount equal to 105% of
the face amount of all such Letters of Credit plus all interest, fees, and costs
due or to become due in connection therewith on terms acceptable to Bank at any
time after the Maturity Date if such Maturity Date is not extended by Bank or if
an Event of Default occurs and continues. Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may reasonably
request.
(b) Prior to or simultaneously with the opening of each Letter
of Credit, Borrower shall pay to Bank Bank's customary fees (subject to
negotiation) in connection with the opening of a letter of credit (the "LETTER
OF CREDIT FEES"). The Letter of Credit Fees shall be paid upon the opening of
each Letter of Credit and upon each anniversary thereof, if required. In
addition, Borrower shall pay to Bank, for its own account, any and all
additional issuance, negotiation, processing, transfer or other fees to the
extent and as and when required by the provisions of any application for Letters
of Credit. All Letter of Credit Fees shall be part of the Obligations.
(c) If any Letter of Credit is drawn upon, such amount shall
constitute an Advance but shall be immediately due and payable. If such amount
is not paid immediately, then the full amount thereof shall accrue interest at
the rate set forth in Section 2.4(a).
2.2 EQUIPMENT ADVANCES.
(a) Through December 16, 2005 (the "EQUIPMENT AVAILABILITY END
DATE"), Bank will make advances (each, an "EQUIPMENT ADVANCE" and, collectively,
"EQUIPMENT ADVANCES") not exceeding the Committed Equipment Line. The Equipment
Advances may only be used to purchase or refinance Equipment within 90 days of
the invoice date, or, in the case of the initial advance, purchased on or after
September 1, 2004.
(b) Interest accrues from the date of each Equipment Advance
(each, an "EQUIPMENT ADVANCE FUNDING DATE") at the rate in Section 2.4(a). Each
Equipment Advance is payable in 36 equal monthly installments of principal, plus
accrued interest, beginning on the first of the month following the Equipment
Advance Funding Date for such Equipment Advance and ending on the Equipment
Maturity Date for such Equipment Advance. Equipment Advances when repaid may not
be reborrowed.
(c) To obtain an Equipment Advance, Borrower must provide
notice in the form of a Payment/Advance Form to Bank (the notice is irrevocable)
by facsimile no later than 12:00 noon Pacific Time one Business Day before the
day on which the Equipment Advance is to be made. The Payment/Advance Form must
be signed by a Responsible Officer or designee and include a copy of the invoice
for the Equipment being financed.
(d) The outstanding principal amount of term loans previously
advanced by Bank to Borrower pursuant to that certain Loan and Security
Agreement dated
2.
March 28, 2003, as amended by that Amendment to Loan Documents dated July 17,
2003, as further amended by that certain Amendment to Loan Documents dated
September 26, 2003, and Amended and Restated Loan and Security Agreement dated
December 19, 2003 are set forth on Schedule A attached hereto (the "EXISTING
EQUIPMENT DEBT"). The Existing Equipment Debt shall, for all purposes hereof, be
"Equipment Advances" hereunder and be governed by all the terms and conditions
of this Agreement, except that the principal of said Existing Equipment Debt
shall continue to be payable as set forth on Schedule A.
2.3 OVERADVANCES.
If, at any time, Borrower's Obligations hereunder exceed the Committed
Revolving Line, Borrower shall immediately pay Bank the excess.
2.4 INTEREST RATE, PAYMENTS.
(a) ADVANCES. Advances accrue interest on the outstanding
principal balance thereof at a per annum rate equal to the Prime Rate. Equipment
Advances, including the Existing Equipment Debt, accrue interest on the
outstanding principal balance thereof at a per annum rate equal to one-half
percentage point (0.50%) above the Prime Rate. After an Event of Default has
occurred, Obligations shall accrue interest at a rate per annum equal to two
percent (2%) 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 Advances and Equipment
Advances is payable on the first of each month. Bank may debit any of Borrower's
deposit accounts, including account number 0341964970, for principal and
interest payments owing 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.
2.5 FEES.
Borrower will pay:
(a) LOAN FEE. Fully earned, non-refundable loan fees in the
amount of $20,000 for the Committed Revolving Line and in the amount of $4,800
for the Committed Equipment Line are due on or before the Closing Date. If, at
any time, Borrower fails to maintain a minimum aggregate amount of $20,000,000
of unrestricted funds on deposit for 10 consecutive Business Days with SVB Asset
Management and/or SVB Securities, Borrower shall pay an additional $30,000 fee
for the Committed Revolving Line and an additional $7,200 fee for the Committed
Equipment Line.
(b) BANK EXPENSES. All Bank Expenses (including reasonable
attorneys' fees and expenses) incurred through the date of this Agreement are
payable upon demand, and Bank Expenses incurred after the date of this Agreement
are payable within ten
3.
(10) Business Days after delivery of invoice to Borrower.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.
Bank's obligation to make the initial Credit Extension is subject to the
condition precedent that it receive the agreements, documents, and fees it
requires.
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 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 Advance and no Event of Default may have occurred and be
continuing, or result from such Advance. Each Credit Extension is Borrower's
representation and warranty on that date that the representations and warranties
of Section 5 remain true in all material respects; provided, however, that those
representations and warranties expressly referring to another date shall be true
in all material respects as of such date only.
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. 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 (other than inchoate indemnity
obligations).
4.2 AUTHORIZATION TO FILE; DELIVERY OF ADDITIONAL DOCUMENTATION.
Borrower authorizes Bank to file financing statements without notice to
Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in
order to perfect or protect Bank's security interest in the Collateral. Borrower
shall execute and deliver to Bank, at the request of Bank, all documents that
Bank may reasonably request, in form satisfactory to Bank, to perfect and
continue perfected Bank's security interest in the Collateral and in order to
fully consummate all of the transactions contemplated under the Loan Documents.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
4.
5.1 DUE ORGANIZATION; ORGANIZATIONAL STRUCTURE; 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, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change.
Borrower has not changed its state of formation or organizational
structure or type or any organizational number assigned by its jurisdiction of
formation.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it is
bound in which the default could reasonably be expected to cause a Material
Adverse Change.
5.2 PLACES OF BUSINESS; LOCATION OF COLLATERAL.
Except as set forth in the Disclosure Letter, the Equipment and Inventory
is not in the possession of any third party bailee (such as at a warehouse, but
excluding Equipment or Inventory in the possession of third parties for
demonstration or evaluation purposes, or otherwise in the ordinary course of
business consistent with past practices). In the event that Borrower, after the
date hereof, intends to store or otherwise deliver the Collateral to such a
bailee, then Borrower may amend the Disclosure Letter so long as such new
location is within the continental United States.
5.3 COLLATERAL.
(a) Borrower has rights in the Collateral and its Intellectual
Property sufficient to grant a security interest therein, free of Liens except
Permitted Liens. All of Borrower's Deposit Accounts and any existing commercial
tort claims are described on the Disclosure Letter. 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. 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 and
exclusive licenses granted in the ordinary course of business. Each issued
Patent owned by Borrower is valid and enforceable and no part of the
Intellectual Property has been judged invalid or unenforceable, in whole or in
part, and no claim has been made that any part of the Intellectual Property
violates the rights of any third party, except to the extent such claim could
not reasonably be expected to cause a Material Adverse Change. None of the
Equipment financed by Bank now is or will be affixed to any real property in
such a manner, or with such intent, as to become a fixture.
(b) All statements made and all unpaid balances appearing in
all invoices, instruments, and other documents evidencing the Accounts are and
shall be true and correct. All such invoices, instruments, and other documents,
and all of Borrower's Books are and shall be genuine and in all respects are
what they purport to be. All sales and other transactions underlying or giving
rise to each Account shall comply in all material respects with
5.
all applicable laws and governmental rules and regulations. To the best of
Borrower's knowledge, all signatures and endorsements on all documents,
instruments, and agreements relating to all Accounts are and shall be genuine,
and all such documents, instruments, and agreements are and shall be legally
enforceable in accordance with their terms.
5.4 LITIGATION.
Except as shown in the Disclosure Letter, 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 a likely adverse
decision could reasonably be expected to cause a Material Adverse Change.
5.5 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.6 TAXES.
As of the date hereof, and except as set forth on the Disclosure Letter,
Borrower is unaware of any claims or adjustments proposed for any of Borrower's
prior tax years which could result in additional taxes becoming due and payable
by Borrower.
5.7 SOLVENCY.
The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower's
remaining assets after the transactions contemplated herein are not unreasonably
small in relation to its business; and Borrower is able to pay its debts
(including trade debts) as they mature.
5.8 EXISTING TERM DEBT.
Schedule A accurately reflects the outstanding principal amount, payment
amounts, and maturity dates with respect to the Existing Equipment Debt.
5.9 REGULATORY COMPLIANCE.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or
6.
transporting any hazardous substance other than legally. Borrower and each
Subsidiary has timely filed all required tax returns and paid, or made adequate
provision to pay, all material taxes, except those being contested in good faith
with adequate reserves under GAAP. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all government authorities that are necessary to
continue its business as currently conducted, except where the failure to do so
could not reasonably be expected to cause a Material Adverse Change.
5.10 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.11 FULL DISCLOSURE.
No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading (it
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected and forecasted results).
6. AFFIRMATIVE COVENANTS
Borrower will do all of the following for so long as Bank has an
obligation to lend, or there are outstanding Obligations:
6.1 GOVERNMENT COMPLIANCE.
Subject to Section 7.3, 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 would
reasonably be expected to cause a material adverse effect on Borrower's business
or operations. Borrower will comply, and have each Subsidiary comply, with all
laws, ordinances and regulations to which it is subject, noncompliance with
which could have a material adverse effect on Borrower's business or operations
or would reasonably be expected to cause a Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) as soon as available,
but no later than 45 days after the last day of each quarter, a company prepared
consolidated and consolidating balance sheet and income statement covering
Borrower's consolidated operations during the period certified by a Responsible
Officer and in a form acceptable to Bank; (ii) as soon as available, but no
later than 120 days after the last day of Borrower's fiscal year, audited
consolidated and consolidating financial statements prepared under GAAP,
consistently applied, together with an opinion on the financial statements from
an independent certified public
7.
accounting firm reasonably acceptable to Bank; (iii) annual financial
projections in form and substance commensurate with those provided to Borrower's
board of directors or utilized by Borrower's executive management, in form and
substance satisfactory to Bank; (iv) within 5 days of filing, copies of all
statements, reports and notices made available to Borrower's 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 (the "SEC") (other than those
reports on Form 10-K, 10-Q or 8-K (relating to certification) that are otherwise
publicly available through the SEC's ▇▇▇▇▇ system); (v) a prompt report of any
claim, proceeding, litigation, or investigation in the future threatened or
instituted against Borrower which would reasonably be expected to result in
damages to Borrower of $500,000 or more, exclusive of litigation the potential
liability in connection with which is fully insured against; and (vi) budgets,
sales projections, operating plans or other financial information Bank
reasonably requests.
(b) Within 45 days after the last day of each quarter,
Borrower will deliver to Bank with the quarterly financial statements a
Compliance Certificate.
(c) Borrower will allow Bank to audit Borrower's Collateral at
Borrower's expense, and the charge therefor shall be $750 per person per day (or
such higher amount as shall represent Bank's then current standard charge for
the same), plus reasonable out-of-pocket expenses. In the event Borrower and
Bank schedule and audit more than 10 days in advance, and Borrower seeks to
reschedule the audit with less than 10 days written notice to Bank, then
(without limiting any of Bank's rights and remedies) Borrower shall pay Bank a
cancellation fee of $1,000 plus any out-of-pocket expenses incurred by Bank to
compensate Bank for the anticipated costs and expenses of cancellation. The
results of audits will be satisfactory to Bank, and audits will be conducted no
more often than once every year unless an Event of Default shall have occurred.
6.3 INVENTORY; RETURNS.
Borrower will keep all Inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower and its account
debtors will follow Borrower's customary practices as they exist at execution of
this Agreement. Borrower must promptly notify Bank of all returns, recoveries,
disputes and claims that occur after the occurrence and during the continuance
of an Event of Default.
6.4 COLLATERAL.
(a) Borrower will give Bank at least 30 days prior written
notice before opening any additional place of business, changing its chief
executive office, or moving any of the Equipment or Inventory (but excluding
Equipment or Inventory in the possession of third parties for documentation or
evaluation purposes, or otherwise in the ordinary course of business consistent
with past practices) to a location other than Borrower's address set forth in
the preamble hereof or in the Disclosure Letter, except that Borrower may
maintain sales offices in the ordinary course of business at which not more than
a total of $10,000 fair market value of Equipment is located.
8.
(b) In the event that Borrower shall at any time after the
date hereof have any commercial tort claims against others, which it is
asserting or intends to assert, and in which the likely recovery exceeds
$1,000,000, Borrower shall promptly notify Bank thereof in writing and provide
Bank with such information regarding the same as Bank shall request (unless
providing such information would waive Borrower's attorney-client privilege).
Such notification to Bank shall constitute a grant of a security interest in the
commercial tort claim and all proceeds thereof to Bank, and Borrower shall
execute and deliver all such documents and take all such actions as Bank shall
request in connection therewith.
6.5 TAXES; PENSION CONTRIBUTIONS.
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.
Notwithstanding the foregoing, Borrower may defer payment of any contested
taxes, provided that Borrower (a) in good faith contests its obligations to pay
the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (b) notifies Bank in writing of the commencement of, and any material
development in, any such proceedings involving more than $500,000, and (c) posts
bonds or takes other steps required to keep the contested taxes from becoming a
lien upon any of the Collateral. Borrower has paid, and shall continue to pay
all amounts necessary to fund all present and future pension, profit sharing,
and deferred compensation plans in accordance with their terms, and Borrower has
not and will not withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.
6.6 INSURANCE.
Borrower will keep its business and the Collateral insured for risks and
in amounts standard for Borrower's industry, and as Bank may reasonably request.
Insurance policies will be in a form, with companies, and in amounts that are
satisfactory to Bank in Bank's reasonable discretion. All property policies will
have a lender's loss payable endorsement showing Bank as an additional loss
payee and all liability policies will show the Bank as an additional insured and
provide that the insurer must give Bank at least 20 days notice before canceling
its policy. At Bank's request, Borrower will deliver certified copies of
policies and evidence of all premium payments. Proceeds payable under any policy
will, at Bank's option if an Event of Default has occurred and is continuing, be
payable to Bank on account of the Obligations. Bank shall release to Borrower,
so long as no Event of Default is reasonably likely to occur as a result of such
release by Bank, insurance proceeds with respect to Equipment which proceeds
shall be utilized by Borrower for the replacement of the Equipment with respect
to which the insurance proceeds were paid. Bank may require reasonable assurance
that the insurance proceeds were utilized by Borrower for such purpose.
6.7 FINANCIAL COVENANT.
At all times, Borrower shall have unrestricted cash and cash
equivalents (net of Credit Extensions) of no less than $50,000,000.
9.
6.8 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
Borrower will (a) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in writing
of material infringements, (b) not allow any Intellectual Property material to
Borrower's business to be abandoned, forfeited or dedicated to the public
without Bank's written consent, (c) concurrently with the filing of any Patent
or Trademark with the United States Patent and Trademark Office, any Copyright
with the United States Copyright Office, or any similar office or agency in any
other country or any political subdivision thereof, by either itself or through
any agent, employee, licensee or designee, promptly inform Bank (if any such
additional Patents, Trademarks, and/or Copyrights are not otherwise disclosed in
Borrower's public filings with the SEC), and, upon request of Bank, execute and
deliver any and all agreements, instruments, documents, and papers as Bank may
request to evidence Bank's security interest in such Copyright, Patent or
Trademark, including, with respect to Trademarks, the goodwill of Borrower,
relating thereto or represented thereby.
6.9 INTENTIONALLY OMITTED.
Intentionally Omitted.
6.10 USE OF PROCEEDS.
Borrower shall use the Advances (including Advances constituting Letters
of Credit) only for its general working capital requirements. Borrower shall use
the Equipment Advances only to purchase Equipment.
10.
6.11 PRIMARY ACCOUNTS.
Borrower shall maintain its primary operating accounts with Bank.
6.12 ACCOUNT CONTROL AGREEMENTS.
Borrower shall provide five (5) Business Days written notice to Bank
before establishing any new deposit account or securities account and shall
deliver to Bank a Control Agreement within 30 days after the opening any such
account.
6.13 FURTHER ASSURANCES.
Borrower will execute any further instruments and take further action as
Bank reasonably requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower will not do any of the following without Bank's prior written
consent for so long as Bank has an obligation to lend or there are any
outstanding Obligations (other than inchoate indemnity obligations):
7.1 DISPOSITIONS.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"TRANSFER"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, except for Transfers of (a) Inventory in the ordinary
course of business; (b) non-exclusive licenses and exclusive licenses limited to
a geographic range or field of use and similar arrangements (such as source code
escrow arrangements) for the use of the property of Borrower or its Subsidiaries
in the ordinary course of business; (c) worn-out, surplus, or obsolete Equipment
in good faith in an arm's-length transaction; (d) Accounts where Adelphia
Communications and/or its Subsidiaries are the account debtor(s) and claims in
the bankruptcy proceedings of Adelphia Communications and/or its Subsidiaries
related to such Accounts, such Accounts and claims in an aggregate amount not to
exceed $3,000,000, to Satellite Asset Management or to such other purchaser in
good faith in an arm's-length transaction; or (e) cash or cash equivalents so
long as Borrower is in compliance with Section 6.7.
7.2 CHANGES IN BUSINESS, OWNERSHIP, OR STATE OF INCORPORATION.
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto or have a Change in Control. Borrower will not, without at least 30 days
prior written notice to Bank, change its state of incorporation.
7.3 MERGERS OR ACQUISITIONS.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the
11.
capital stock or property of another Person, except where (a) no Event of
Default has occurred and is continuing or would result from such action during
the term of this Agreement, (b) Borrower is the sole surviving entity, and (c)
such transactions do not result in a decrease of more than 25% of Tangible Net
Worth.
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 (including its
Intellectual Property), or assign or convey any right to receive income,
including the sale of any Accounts (except as permitted by Section 7.1), 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
hereunder.
7.6 DISTRIBUTIONS; INVESTMENTS.
Directly or indirectly acquire or own any Person, or make any Investment
in any Person, other than Permitted Investments or as permitted by Section 7.3,
or permit any of its Subsidiaries to do so. Pay any dividends (other than
dividends payable solely in capital stock) or make any distribution or payment
or redeem, retire or purchase any capital stock except for (a) repurchases of
stock from former employees or directors of Borrower under the terms of
applicable repurchase agreements, provided that no Event of Default has
occurred, is continuing or would exist after giving effect to the repurchases,
and (b) the conversion of any convertible securities into other securities
pursuant to the terms of such convertible securities or otherwise in exchange
therefore, and payments in cash for any fractional shares of such convertible
securities.
7.7 TRANSACTIONS WITH AFFILIATES.
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower (other than Subsidiaries of Borrower)
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a 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
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for that purpose; fail to meet the minimum funding requirements of ERISA, permit
a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur;
fail to comply with the Federal Fair Labor Standards Act or violate any other
law or regulation, if the violation could reasonably be expected to have a
material adverse effect on Borrower's business or operations or would reasonably
be expected to cause a Material Adverse Change, or permit any of its
Subsidiaries to do so.
8. EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT.
If Borrower fails to pay any of the Obligations within three (3) Business
Days of their due date;
8.2 COVENANT DEFAULT.
If Borrower does not perform any obligation in Section 6 or violates any
covenant in Section 7;
8.3 MATERIAL ADVERSE CHANGE.
If there (a) occurs a material adverse change in the business, operations,
or condition (financial or otherwise) of the Borrower, (b) is a material
impairment of the prospect of repayment of any portion of the Obligations or (c)
is a material impairment of the value or priority of Bank's security interests
in the Collateral;
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 Advances 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 45 days (but no Advances will be made before any
Insolvency Proceeding is dismissed);
8.6 OTHER AGREEMENTS.
If there is a default in any agreement between Borrower or a third party
that gives the
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third party the right to accelerate an Indebtedness exceeding $1,000,000 or that
could cause or result in a Material Adverse Change;
8.7 JUDGMENTS.
If money judgments in excess of $1,000,000 are rendered against Borrower
and unsatisfied and unstayed for 10 days (but no Advances will be made before
the judgment is stayed or satisfied);
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; or
9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but
if an Event of Default described in Section 8.5 occurs all Obligations are
immediately due and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's
benefit under this Agreement or under any other agreement between Borrower and
Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary
or reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;
(e) Apply to the Obligations any (i) balances and deposits of
Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or
the account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
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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: (a) endorse Borrower's name
on any checks or other forms of payment or security; (b) sign Borrower's name on
any invoice or ▇▇▇▇ of lading for any Account or drafts against account debtors,
(c) make, settle, and adjust all claims under Borrower's insurance policies; (d)
settle and adjust disputes and claims about the Accounts directly with account
debtors, for amounts and on terms Bank determines reasonable; and (e) transfer
the Collateral into the name of Bank or a third party as the Code permits. Bank
may exercise the power of attorney to sign Borrower's name on any documents
necessary to perfect or continue the perfection of any security interest
regardless of whether an Event of Default has occurred. Bank's appointment as
Borrower's attorney in fact, and all of Bank's rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.
9.3 ACCOUNTS COLLECTION.
When an Event of Default occurs and continues, (a) Bank may notify any
Person owing Borrower money of Bank's security interest in the funds and verify
the amount of the Account, and (b) 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 6.6, 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 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 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
15.
agreements are cumulative. Bank has all rights and remedies provided under the
Code, by law, or in equity. Bank's exercise of one right or remedy is not an
election, and Bank's waiver of any Event of Default is not a continuing waiver.
Bank's delay is not a waiver, election, or acquiescence. No waiver is effective
unless signed by Bank and then is only effective for the specific instance and
purpose for which it was given.
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 facsimile to the addresses set forth at the beginning of this
Agreement. A party may change its notice address by giving the other party
written notice.
11. CHOICE OF LAW , 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,
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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 with respect to (a)
and (b) above, for obligations, demands, claims, liabilities or 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 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 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 (a) to Bank's subsidiaries or affiliates
in connection with their business with Borrower, (b) to prospective transferees
or purchasers of any interest in the loans (provided, however, Bank shall use
commercially reasonable efforts in obtaining such prospective transferee or
purchasers agreement of the terms of this provision), (c) as required by law,
regulation, subpoena, or other order, (d) as required in connection with Bank's
examination or audit, and (e) as Bank considers appropriate exercising remedies
under this Agreement. Confidential information includes information that is not
either: (x) in the public domain or already in Bank's possession before
17.
disclosed to Bank by Borrower, or becomes part of the public domain after
disclosure to Bank; or (y) 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.
13. 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, including Advances used to issue or fund Letters of
Credit.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"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.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
"CHANGE IN CONTROL" is a transaction in which any "PERSON" or "GROUP"
(within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934) becomes the "BENEFICIAL OWNER" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of a sufficient number
of shares of all classes of stock then outstanding of Borrower ordinarily
entitled to vote in the election of directors, empowering such "PERSON" or
"GROUP" to elect a majority of the board of directors of Borrower, who did not
have such power before such transaction.
18.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the Uniform Commercial Code in effect in any applicable
jurisdiction.
"COLLATERAL" is the property described on Exhibit A.
"COMMITTED EQUIPMENT LINE" is an Equipment Advance or Equipment Advances
of up to the aggregate principal amount of $2,400,000.00.
"COMMITTED REVOLVING LINE" is an Advance or Advances of up to the
aggregate principal amount of $10,000,000.
"COMPLIANCE CERTIFICATE" is a Compliance Certificate signed by a
Responsible Officer in substantially the same form of Exhibit C attached hereto.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (a) 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; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) 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.
"CONTROL AGREEMENT" is an account control agreement, in form and substance
satisfactory to Bank, executed and delivered by Borrower, Bank and all
applicable depositary institutions, with respect to Borrower's deposit or
operating accounts, or all applicable securities intermediaries, with respect to
Borrower's securities accounts.
"COPYRIGHTS" are all copyright rights, applications or registrations and
like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"CREDIT EXTENSION" is each Advance, Equipment Advance, Letter of Credit,
the Existing Equipment Debt or any other extension of credit by Bank for
Borrower's benefit.
"DEPOSIT ACCOUNTS" means all present and future "deposit account" as
defined in the California Uniform Commercial Code in effect on the date hereof
with such additions to such term as may hereafter be made, and includes, without
limitation, all general and special bank accounts, demand accounts, checking
accounts, savings accounts, and certificates of deposit.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
19.
"EQUIPMENT ADVANCE" is defined in Section 2.2(a).
"EQUIPMENT AVAILABILITY END DATE" is defined in Section 2.2(a).
"EQUIPMENT MATURITY DATE" is with respect to each Equipment Advance, the
last day of the Repayment Period for such Equipment Advance, or if earlier, the
date of acceleration of such Equipment Advance by Bank following an Event of
Default.
"EXISTING EQUIPMENT DEBT" is defined in Section 2.2(d).
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"FOREIGN SUBSIDIARY" is any Subsidiary of Borrower that is organized under
the laws of any jurisdiction outside of the United States.
"GAAP" is generally accepted accounting principles.
"GENERAL INTANGIBLES" means all present and future "general intangibles"
as defined in the California Uniform Commercial Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes,
without limitation, all Intellectual Property, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income tax refunds,
security and other deposits, options to purchase or sell real or personal
property, rights in all litigation presently or hereafter pending (whether in
contract, tort, or otherwise), insurance policies (including, without
limitation, key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.
"GUARANTOR" is any present or future guarantor of the Obligations.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INTELLECTUAL PROPERTY" is:
(a) Copyrights, Trademarks, Patents, and Mask Works including
amendments, renewals, extensions, and all licenses or other rights to use and
all license fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in
computer software and computer software products now or later existing, created,
acquired or held; and
20.
(c) All design rights which may be available to Borrower now
or later created, acquired or held.
"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.
"INVESTMENT PROPERTY" means all present and future investment property,
securities, stocks, bonds, debentures, debt securities, partnership interests,
limited liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts, and all financial assets held
in any securities account or otherwise, and all option and warrants to purchase
any of the foregoing, wherever located, and all other securities of every kind,
whether certificated or uncertificated.
"LETTER OF CREDIT" is defined in Section 2.1.2.
"LETTER OF CREDIT FEES" is defined in Section 2.1.2.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, any account control agreements,
and any other present or future agreement between Borrower 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 described in Section 8.3.
"MATURITY DATE" is December 16, 2005.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"OTHER PROPERTY" means the following as defined in the California Uniform
Commercial Code in effect on the date hereof with such additions to such term as
may hereafter be made, and all rights relating thereto: all present and future
"commercial tort claims" (including, without
21.
limitation, any commercial tort claims identified pursuant to Sections 5.3 or
6.4(b)), "documents", "instruments", "promissory notes", "chattel paper",
"letters of credit", "letter-of-credit rights", "fixtures", "farm products", and
"money"; and all other goods and personal property of every kind, tangible and
intangible, whether or not governed by the California Uniform Commercial Code.
"PATENTS" are patents, patent applications and like protections, including
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's Obligations;
(b) Indebtedness existing on the Closing Date and shown on the
Disclosure Letter;
(c) Subordinated Debt;
(d) Indebtedness of Borrower to any Subsidiary of Borrower and
of Subsidiaries to any other Subsidiary or to Borrower;
(e) Indebtedness to trade creditors incurred in the ordinary
course of business;
(f) Indebtedness to financial institutions other than Bank in
connection with obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect Borrower against fluctuation in interest
rates, currency exchange rates or commodity prices so long as such Indebtedness
does not to exceed $10,000,000;
(g) Indebtedness secured by Permitted Liens;
(h) Indebtedness of any Person existing at the time such
Person is merged with or into Borrower or becomes a Subsidiary as permitted
hereby, provided that such Indebtedness is not incurred in connection with, or
in contemplation of, such Person merging with and into the Borrower or becoming
a Subsidiary of the Borrower; and
(i) Indebtedness with respect to surety, appeal, indemnity,
performance or other similar bonds incurred in the ordinary course of business,
consistent with past practices.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Disclosure Letter and existing on
the Closing Date;
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within
22.
one (1) year from the date of acquisition thereof, (ii) commercial paper
maturing no more than one (1) year from the date of creation thereof and
currently having rating of at least A-2 or P-2 from either Standard & Poor's
Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., (iii) certificates of deposit
maturing no more than one (1) year from the date of investment therein issued by
Bank, and (iv) future Investments in similar types of Investments pursuant to
Borrower's investment policy (attached hereto as Schedule B) that has been
formally adopted or otherwise approved by Borrower's Board of Directors;
(c) Investments accepted in connection with Transfers
permitted by Section 7.1;
(d) Investments in connection with the acquisition of any part
of the capital stock or property of another Person so long as (i) no Event of
Default has occurred and is continuing or would result from such action during
the term of this Agreement, (ii) Borrower is in compliance with Section 7.3
hereof, and (iii) such transactions do not result in a decrease of more than 25%
Tangible Net Worth;
(e) Investments consisting of (i) travel advances, employee
relocation loans and other employee loans and advances in the ordinary course of
business not to exceed $1,000,000 and (ii) non-cash loans to employees, officers
or directors relating to the purchase of equity securities of Borrower pursuant
to employee stock purchase plans or arrangements approved by Borrower's board of
directors;
(f) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of business;
(g) Investments consisting of notes receivable or, prepaid
royalties and other credit obligations to customers and suppliers who are not
Affiliates, in the ordinary course of business.
(h) Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of Borrower;
(i) Investments of Subsidiaries in or to other Subsidiaries or
Borrower and Investments by Borrower in Subsidiaries; and
(j) 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 (i) any cash investments by Borrower do not exceed $5,000,000 in
the aggregate in any fiscal year, and (ii) Borrower remains in compliance with
Section 6.7 hereof.
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the
Disclosure Letter or arising under this Agreement or other Loan Documents;
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(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) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(e) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payments of customs duties in connection with the
importation of goods;
(f) Liens in favor of other financial institutions arising in
connection with Borrower's deposit accounts or securities accounts held at such
institutions, provided that Bank has a first priority perfected security
interest in such accounts and in the amounts and securities held therein;
(g) Liens in connection with surety or appeals bonds or
letters of credit securing such bonds or reimbursement obligations in connection
with statutory obligations, bids, tenders, or otherwise in the ordinary course
of business provided all such Liens in the aggregate could not (even if
enforced) reasonably be likely cause or result in an Event of Default;
(h) Leases or subleases granted in the ordinary course of
Borrower's business, including in connection with Borrower's leased premises or
leased property;
(i) Additional Liens consented to in writing by Bank which
consent may be withheld in Bank's good faith business judgment;
(j) 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;
(k) Other Liens not described above arising in the ordinary
course of business and not having or not reasonably likely to have a material
adverse effect on Borrower's and it Subsidiaries' business or operations taken
as a whole or would reasonably be expected to cause or result in a Material
Adverse Change; and
(l) 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.
Bank shall have the right to require, as a condition to its consent under
clause (i) above, that the holder of the additional Lien sign an intercreditor
agreement, in favor of Bank in form and substance satisfactory to Bank in its
sole discretion, to acknowledge that the holder's Lien is subordinate to the
Lien in favor of Bank and agree not to take any action to enforce its
24.
subordinate Lien so long as any of the Obligations remain outstanding, and that
Borrower agree that any uncured default in any obligation secured by the
subordinate Lien shall also constitute an Event of Default under this Agreement.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate, and, in any event, shall not be less than four percent
(4.00%) per annum.
"REPAYMENT PERIOD" as to each Equipment Advance, is 36 months.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.
"SUBSIDIARY" is for any Person, or any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, Copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness and the current portion Subordinated Debt allowed to be paid,
but excluding all other Subordinated Debt.
"TRADEMARKS" are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.
"TRANSFER" is defined in Section 7.1.
[The signature page follows.]
25.
IN WITNESS WHEREOF, the parties have duly authorized and caused this
Agreement to be executed as of the date first written above.
BORROWER:
HARMONIC INC.
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Printed Name: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Chief Financial Officer
BANK:
SILICON VALLEY BANK
By: /s/▇▇▇▇ ▇▇▇▇▇▇▇▇
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Printed Name: /s/▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title: Relationship Manager