EXHIBIT 10.22
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
CALLIDUS SOFTWARE INC.
AS BORROWER
AND
SILICON VALLEY BANK,
AS BANK
MARCH 8, 2004
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Agreement") dated March 8, 2004, between SILICON VALLEY BANK ("Bank"), whose
address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and having a loan
production office at and CALLIDUS SOFTWARE INC., a corporation organized and in
good standing in the State of Delaware ("Borrower"), whose address is ▇▇▇ ▇.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ provides the terms on
which Bank will lend to Borrower and Borrower will repay Bank.
Recitals
A. Bank and Borrower have entered into that certain Loan and
Security Agreement dated as of September 26, 2002 (the "Original Closing Date")
(the "Original Loan Agreement"). Pursuant to the Original Loan Agreement, Bank
agreed to make certain loans including, the revolving and term loans described
therein, and other financial accommodations to Borrower.
B. The Original Loan Agreement was amended pursuant to that
certain Loan Modification Agreement dated as of March 29, 2003 (the "First
Amendment") by and between Borrower and Bank, pursuant to which Bank agreed to
make an additional term loan to the Borrower ("Term Loan Two").
C. Borrower has requested and Bank has agreed pursuant to this
Agreement to amend and restate the Original Loan Agreement in its entirety.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Silicon and Borrower agree that
the Original Loan Agreement is amended and restated in its entirety as follows:
1. ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement will be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1 PROMISE TO PAY.
Borrower promises to pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1 REVOLVING ADVANCES.
(a) Bank will make Advances not exceeding the Committed Revolving
Line. 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
Loan Payment/Advance Request Form attached as Exhibit B (the "Payment/Advance
Form"). Bank will credit Advances to Borrower's deposit account on the Business
Day the Advance is to be made. 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 terminates on the Revolving
Maturity Date, when all Advances are immediately payable.
2.1.2 LETTERS OF CREDIT SUBLIMIT.
Bank will issue or have issued Letters of Credit for Borrower's account
not exceeding the Committed Revolving Line, minus (ii) the outstanding principal
balance of the Advances, minus the Cash Management Sublimit, minus the FX
Reserve; however, the face amount of outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit) may not at any time exceed the amount
of the Committed Revolving Line. Each Letter of Credit will have an expiry date
of no later than one hundred eighty (180) days after the Revolving Maturity
Date, but Borrower's obligations to reimburse Bank under the Letters of Credit
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.
Borrower agrees to execute any further documentation in connection with the
Letters of Credit as Bank may reasonably request. Prior to or simultaneously
with the opening of each Letter of Credit, Borrower shall pay to Bank, a letter
of credit fee (each a "Letter of Credit Fee" and collectively the "Letter of
Credit Fees") in an amount to be agreed upon by Borrower and Bank. If any Letter
of Credit is drawn upon, such amount shall constitute an Advance. Such Letter of
Credit Fees shall be paid in advance upon the issuance of the Letter of Credit
and upon each anniversary thereof, if any. In addition, Borrower shall pay to
Bank any and all additional issuance, negotiation, processing, transfer or other
fees to the extent and as and when required by Bank.
2.1.3 FOREIGN EXCHANGE SUBLIMIT.
If there is availability under the Committed Revolving Line, then
Borrower may enter in foreign exchange forward contracts with the Bank under
which Borrower commits to purchase from or sell to Bank a set amount of foreign
currency more than one business day after the contract date (the "FX Forward
Contract"). Bank will subtract 10% of each outstanding FX Forward Contract from
the foreign exchange sublimit which is a maximum of Ten Million Dollars
($10,000,000) (the "FX Reserve"). The total FX Forward Contracts at any one time
may not exceed 10 times the amount of the FX Reserve. Bank may terminate the FX
Forward Contracts if an Event of Default occurs.
2.1.4 CASH MANAGEMENT SERVICES SUBLIMIT.
Borrower may use up to Ten Million Dollars ($10,000,000) of the
Committed Revolving Line for Bank's Cash Management Services, which may include
merchant services, direct deposit of payroll, business credit card, and check
cashing services identified in various cash management services agreements
related to such services (the "Cash Management Services"). Such aggregate
amounts utilized under the Cash Management Services Sublimit will at all times
reduce the amount otherwise available to be borrowed under the Committed
Revolving Line. Any amounts Bank pays on behalf of Borrower or any amounts that
are not paid by Borrower for any Cash Management Services will be treated as
Advances under the Committed Revolving Line and will accrue interest at the rate
for Advances.
2.1.5 TERM LOAN ONE.
(a) The term loan made under the Original Loan Agreement ("Term
Loan One") in the original principal amount of One Million Five Hundred Thousand
Dollars ($1,500,000) shall be repaid in thirty six (36) equal installments of
principal plus; interest (each a "Term Loan One Payment"). Each Term Loan One
Payment is payable on the first (1st) day of each month during the term of the
Term Loan One. Borrower's final Term Loan One Payment, due on September 1, 2005,
includes all outstanding Term Loan One principal and accrued interest. In the
event Borrower prepays Term Loan One in full or in part, Borrower shall at the
time of such prepayment make an additional payment to Bank in the amount of one
percent (1.0%) of the amount being prepaid.
2.1.6 TERM LOAN TWO.
(a) The term loan made under the First Amendment ("Term Loan Two")
in the original principal amount of One Million Dollars ($1,000,000) shall be
repaid in thirty six (36) equal installments of principal plus; interest (each a
"Term Loan Two Payment"). Each Term Loan Two Payment is payable on the first
(1st) day of each month during the term of the Term Loan Two. Borrower's final
Term Loan Two Payment, due on June 1, 2006, includes all outstanding Term Loan
Two principal and accrued interest. In the event Borrower prepays Term Loan Two
in full or in part, Borrower shall at the time of such prepayment make an
additional payment to Bank in the amount of one percent (1.0%) of the amount
being prepaid.
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2.2 OVERADVANCES.
If Borrower's Obligations under Section 2.1.1, 2.1.2, 2.1.3 and 2.1.4
exceed the Committed Revolving Line, unless otherwise agreed to in writing by
Bank in its sole discretion, Borrower shall immediately pay Bank the excess.
2.3 INTEREST RATE, PAYMENTS.
(a) Interest Rate. Advances on the Committed Revolving Line accrue
interest on the outstanding principal balance at a per annum rate the greater of
(i) the Prime Rate or (ii) four percent (4.0%) per annum. Term Loan One accrues
interest on the outstanding principal balance at a per annum rate of one half
one (0.50) percentage points above the Prime Rate. Term Loan Two accrues
interest at a per annum rate of one half one (0.50) percentage points above the
Prime Rate. After an Event of Default, Obligations accrue interest at five
percent (5%) 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 fifth (5th) day of each month. Interest due on Term Loan One and
Term Loan Two is payable on the first (1st) day of each month. Bank may debit
any of Borrower's deposit accounts including Account Number 3300050867 for
principal and interest payments owing or any amounts Borrower owes Bank. Bank
will promptly notify Borrower when it debits Borrower's accounts. These debits
are not a set-off. Payments received after 12:00 noon Pacific time are
considered received at the opening of business on the next Business Day. When a
payment is due on a day that is not a Business Day, the payment is due the next
Business Day and additional fees or interest accrue.
2.4 FEES.
Borrower will pay:
(a) Facility Fee. A nonrefundable fee in the amount of Ten
Thousand Dollars ($10,000), which fee has been paid and which shall be deemed
earned on the Closing Date.
(b) Bank Expenses. All Bank Expenses (including reasonable
attorneys' fees and reasonable expenses) incurred through and after the date of
this Agreement, are payable when due.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.
Bank's obligation to make the initial Credit Extension is subject to
the condition precedent that it receive the agreements, documents and fees it
requires.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.
Bank's obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 must be true
on the date of the Payment/Advance Form and on the effective date of each Credit
Extension and no Event of Default may have occurred and be continuing, or result
from the Credit Extension. Each Credit Extension is Borrower's representation
and warranty on that date that the representations and warranties of Section 5
remain true.
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. Bank upon the occurrence of any Event of Default, may place a "hold"
on any deposit account of Borrower maintained with Bank. If this Agreement is
terminated, Bank's lien and security interest in the
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Collateral will continue until Borrower fully satisfies its Obligations.
NOTWITHSTANDING THE FOREGOING, THE SECURITY INTEREST GRANTED HEREIN DOES NOT
EXTEND TO AND THE TERM "COLLATERAL" DOES NOT INCLUDE ANY LICENSES WHERE BORROWER
IS THE LICENSEE TO THE EXTENT THAT (I) THE GRANTING OF A SECURITY INTEREST
THEREIN WOULD BE CONTRARY TO APPLICABLE LAW, OR (II) THAT SUCH RIGHTS ARE
NON-ASSIGNABLE BY THEIR TERMS (BUT ONLY TO THE EXTENT SUCH PROHIBITION IS
ENFORCEABLE UNDER APPLICABLE LAW, INCLUDING THE CODE).
4.2 AUTHORIZATION TO FILE.
Borrower authorizes Bank to file financing statements without notice to
Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in
order to perfect or protect Bank's interest in the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION.
Borrower is duly existing and in good standing in the State of Delaware
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's legal name is as set
forth on the first page of this Agreement. The execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby (i) have been duly and validly authorized, (ii) are enforceable against
Borrower in accordance with their terms (except as enforcement may be limited by
equitable principles and by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to creditors' rights generally), and (iii) do not
violate Borrower's articles or certificate of incorporation, or Borrower's
by-laws, or any law or any material agreement or instrument which is binding
upon Borrower or its property, and (iv) do not constitute grounds for
acceleration of any material indebtedness or obligation under any agreement or
instrument which is binding upon Borrower or its property.
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. All Inventory is in all material respects of good and marketable
quality, free from material defects. Borrower is the sole owner of the
Intellectual Property, except for non-exclusive licenses granted to its
customers in the ordinary course of business. Each Patent is valid and
enforceable and no part of the Intellectual Property has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
the Intellectual Property violates the rights of any third party, except to the
extent such claim could not reasonably be expected to cause a Material Adverse
Change.
5.3 LITIGATION.
There are no actions or proceedings pending or, to the knowledge of
Borrower's Responsible Officers, threatened by or against Borrower in which a
likely adverse decision could reasonably be expected to cause a Material Adverse
Change.
5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower 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 consolidated 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
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in this Agreement or any of the Loan Documents; 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 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 properties or assets has been used by Borrower 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
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 has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change.
5.7 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 FULL DISCLOSURE.
No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading. It
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected and forecasted results.
6. AFFIRMATIVE COVENANTS
Borrower will do all of the following for so long as Bank has an
obligation to make any Credit Extension, or there are outstanding Obligations:
6.1 GOVERNMENT COMPLIANCE.
Borrower will maintain its legal existence and good standing as a
Registered Organization in only the State of Delaware 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 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 five (5) days after Borrower files its Form 10-Q with the
Securities Exchange Commission ("SEC"), a company prepared consolidated
quarterly 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 five (5) days
after Borrower files its Form 10-K with the SEC, audited annual consolidated
financial statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm reasonably acceptable to Bank; (iii) a prompt report of
any legal actions pending or threatened against Borrower that could result in
damages or costs to Borrower of Five Million Dollars ($5,000,000) or more; (iv)
as soon as available, but no more than forty five (45) after the end of each
fiscal year, a forecast for the next fiscal year, including, without limitation,
projected balance sheets, income statements and cash flows; (v) upon request of
Bank, such other financial information, including, budgets, sales projections,
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operating plans, as Bank reasonably requests; and (vi) prompt notice of any
material change in the composition of the Intellectual Property, including any
subsequent ownership right of Borrower in or to any Copyright, Patent or
Trademark not shown in the Intellectual Property Security Agreement or knowledge
of an event that materially adversely affects the value of the Intellectual
Property. Borrower's 10K and 10Q reports required to be delivered pursuant to
this Section shall be deemed to have been delivered on the date on which
Borrower posts such report or provides a link thereto on Borrower's website on
the Internet; provided, that Borrower shall provide paper copies to Bank of the
Compliance Certificates required by subsection (b) below. Bank will take
reasonable and customary steps to insure that information provided to Bank
pursuant to this Agreement will not be provided to Bank employees with
responsibility for making any investment decisions with respect to Bank's equity
ownership in Borrower.
(b) Borrower will deliver to Bank with the quarterly financial
statements described in (a)(i) above, a Compliance Certificate signed by a
Responsible Officer in the form of Exhibit C.
(c) Allow Bank to audit Borrower's Collateral at Borrower's
expense after an Event of Default has occurred and while it is continuing.
6.3 INVENTORY; RETURNS.
Borrower will keep all Inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower and its account
debtors will follow Borrower's customary practices as they exist at execution of
this Agreement. Borrower must promptly notify Bank of all returns, recoveries,
disputes and claims, that involve more than Five Million Dollars ($5,000,000).
6.4 TAXES.
Borrower will make timely payment of all material federal, state, and
local taxes or assessments (other than taxes and assessments which Borrower is
contesting in good faith, with adequate reserves maintained in accordance with
GAAP) and 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 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. At Bank's
request, Borrower will deliver certified copies of policies and evidence of all
premium payments.
6.6 PRIMARY ACCOUNTS.
Borrower will maintain its primary operating accounts with Bank.
6.7 FINANCIAL COVENANTS.
Borrower will maintain:
(a) QUICK RATIO. As of the last day of each fiscal quarter a ratio
of Quick Assets to outstanding Obligations of at least 2.50 to 1.00.
(b) TANGIBLE NET WORTH. As of the last day of each fiscal quarter
a Tangible Net Worth of at least Fifty Million Dollars ($50,000,000).
6.8 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
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 material
to Borrower's business to be abandoned, forfeited or dedicated to the public
without Bank's written consent.
6.9 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.
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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 make Credit Extensions or
there are any outstanding Obligations:
7.1 DISPOSITIONS.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), all or any part of its business or property, except for 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 in the
ordinary course of business; (iii) of worn-out or obsolete Equipment; or (iv)
Transfers not otherwise permitted in this Section, provided that the aggregate
book value of all such Transfers shall not exceed Five Million Dollars
($5,000,000) in the aggregate in any fiscal year.
7.2 CHANGES IN LOCATIONS.
Borrower will not, without at least thirty (30) days prior written
notice, change its state of formation.
7.3 MERGERS OR ACQUISITIONS.
Borrower may merge or consolidate, or permit any of its Subsidiaries to
merge or consolidate, with any Person other than with Borrower or any
Subsidiary, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of a Person other than
Borrower or any Subsidiary, if at the time of such merger or consolidation no
Event of Default has occurred and is continuing or would result from such
action. In addition, a Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.
7.4 INDEBTEDNESS.
Create, incur, assume, or be liable for any Indebtedness, 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, except
for Permitted Liens, or permit any Collateral not to be subject to the first
priority security interest granted here, subject to Permitted Liens.
7.6 DISTRIBUTIONS; INVESTMENTS.
Except as permitted in Section 7.3 hereof or in connection with any
Permitted Investments, directly or indirectly acquire or own any Person, or make
any Investment in any Person. Pay any dividends or make any distribution or
payment or redeem, retire or purchase any capital stock in excess of Five
Million Dollars ($5,000,000), provided that at the time of such distribution,
payment, redemption, retirement or repurchase no Event of Default has occurred
and is continuing or would result from such action.
7.7 TRANSACTIONS WITH AFFILIATES.
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except as otherwise permitted in this
Agreement and for transactions that are in the ordinary course of Borrower's
business, upon fair and reasonable terms that are no less favorable to Borrower
than would be obtained in an arm's length transaction with a nonaffiliated
Person.
7.8 SUBORDINATED DEBT.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.
7.9 COMPLIANCE.
Become an "investment company" or a company controlled by an
"investment company," under the Investment Company Act of 1940 or undertake as
one of its important activities extending credit to purchase or carry margin
stock, or use the proceeds of any Credit Extension for that purpose; fail to
meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as
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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.
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 five (5)
Business days after their due date. During the additional period the failure to
cure the default is not an Event of Default (but no Credit Extension will be
made during the cure period);
8.2 COVENANT DEFAULT.
(a) If Borrower fails to perform any obligation under Sections 6.2
or 6.7 or violates any of the covenants contained in Article 7 of this
Agreement, or
(b) If Borrower fails or neglects to perform, keep, or observe any
other material term, provision, condition, covenant, or agreement contained in
this Agreement, in any of the Loan Documents, or in any other present or future
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) Business Days after the occurrence thereof;
provided, however, that if the default cannot by its nature be cured within the
ten (10) Business Day period or cannot after diligent attempts by Borrower be
cured within such ten (10) Business Day period, and such default is likely to be
cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed thirty (30) days) to
attempt to cure such default, and within such reasonable time period the failure
to have cured such default shall not be deemed an Event of Default (provided
that no Credit Extensions will be made during such cure period);
8.3 MATERIAL ADVERSE CHANGE.
If there occurs: (i) a material adverse change in the business,
operations, or financial or other condition of the Borrower; or (ii) a material
impairment of the prospect of repayment of any portion of the Obligations; or
(iii) a material impairment of the value or priority of Bank's security
interests in the Collateral
8.4 ATTACHMENT.
If twenty percent (20%) or more of consolidated total assets of
Borrower is attached, seized, levied on, or comes into possession of a trustee
or receiver and the attachment, seizure or levy is not removed in ten (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 ten (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 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 Five Million Dollars ($5,000,000) or that could cause a Material
Adverse Change; provided, however, that the Event of Default under this Section
caused by the occurrence of a default under such other agreement shall be cured
or waived for purposes of this Agreement upon Bank receiving written notice of
such cure or wavier of the default under such other agreement, if at the time of
such cure or waiver (i) Bank has not declared an Event of Default under this
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Agreement and exercised any rights with respect thereto, and (ii) any such cure
or wavier does not result in an Event of Default under any other provision of
this Agreement or any Loan Document, and (iii) in connection with any such cure
or waiver, the terms of any agreement with such third party are not modified or
amended in any manner which could in the good faith judgment of the Bank be
materially less advantageous to the Borrower.
8.7 JUDGMENTS.
If a money judgment(s) in the aggregate of at least Five Million
Dollars ($5,000,000) 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);
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 lawfully 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 with Bank or its Affiliate it holds, or (ii) 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, 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 Borrower's name on any
9
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.
Borrower shall have the right to collect all Accounts, unless and until
an Event of Default has occurred and is continuing. Whether or not an Event of
Default has occurred and is continuing, Borrower shall hold all payments on, and
proceeds of, Accounts in trust for Bank, and Borrower shall immediately deliver
all such payments and proceeds to Bank in their original form, duly endorsed, to
be applied to the Obligations in such order as Bank shall determine. All
proceeds of Collateral shall be immediately deposited by Borrower on a daily
basis into a lockbox account, or such other "blocked account" as Bank may
specify, pursuant to a blocked account agreement in such form as Bank may
specify in its good faith business judgment.
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 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 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 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.
10
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 directly related to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge into this
Agreement and the Loan Documents.
12.6 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 SURVIVAL.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8 CONFIDENTIALITY.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their business with Borrower (provided that such subsidiaries
or affiliates are bound by non-disclosure obligations consistent with this
Agreement), (ii) to prospective transferees or purchasers of any interest in the
loans (provided, however, Bank shall use commercially reasonable efforts in
obtaining such prospective transferee or purchasers agreement of the terms of
this provision and shall handle the Collateral in a manner designed not to
disclose any proprietary information to any other Person), (iii) as required by
law, regulation, subpoena, or other order, (iv) as required in connection with
Bank's examination or audit and (v) as Bank considers appropriate in exercising
remedies under this Agreement. Confidential information does not include
information that either: (a) is in the public domain or in Bank's possession
when disclosed to Bank, or becomes part of the public domain
11
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 EFFECTIVE DATE.
Notwithstanding anything set forth in this Agreement or any Loan
Document to the contrary, this Agreement and all of the Loan Documents shall not
be effective until the date on which the Bank executes this Agreement as
indicated on the signature page to this Agreement.
12.10 INTENTIONALLY OMITTED.
12.11 ATTORNEYS' FEES, COSTS AND EXPENSES.
In any action or proceeding between Borrower and Bank arising out of
the Loan Documents, the prevailing party will be entitled to recover its
reasonable attorneys' fees and other reasonable costs and expenses incurred, in
addition to any other relief to which it may be entitled.
13. DEFINITIONS
13.1 DEFINITIONS.
In this Agreement:
"ACCOUNTS" has the meaning set forth in the Code and includes all
existing and later arising accounts, contract rights, and other obligations owed
Borrower in connection with its sale or lease of goods (including licensing
software and other technology) or provision of services, all credit insurance,
guaranties, other security and all merchandise returned or reclaimed by Borrower
and Borrower's Books relating to any of the foregoing.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs
and expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"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.
"CASH MANAGEMENT SERVICES" are defined in Section 2.1.4.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the Uniform Commercial Code, in effect in the State of
California as in effect from time to time.
"COLLATERAL" is the property described on Exhibit A.
"COMMITTED REVOLVING LINE" is Advances of up to Ten Million Dollars
($10,000,000).
"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
12
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, Term Loan One, Term Loan Two,
Letter of Credit, Exchange Contract, or any other extension of credit by Bank
for Borrower's benefit.
"CURRENT ASSETS" are amounts that under GAAP should be included on that
date as current assets on Borrower's consolidated balance sheet.
"EQUIPMENT" has the meaning set forth in the Code and includes 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.
"FX FORWARD CONTRACT" is defined in Section 2.1.3.
"FX RESERVE " is defined in Section 2.1.3.
"GAAP" is generally accepted accounting principles.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INTELLECTUAL PROPERTY" is:
(a) Copyrights, Trademarks and Patents 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; and
(e) All Proceeds and products of the foregoing, including all
insurance, indemnity or warranty payments.
"INTELLECTUAL PROPERTY SECURITY AGREEMENT" means the Intellectual
Property Security Agreement dated September 26, 2002 between the Borrower and
Bank.
"INVENTORY" has the meaning set forth in the Code and includes 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
13
possession or in transit and including returns on any accounts or other Proceeds
from the sale or disposition of any of the foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"LETTER OF CREDIT" is defined in Section 2.1.2.
"LETTER-OF-CREDIT RIGHT" means a right to payment or performance under
a letter of credit, whether or not the beneficiary has demanded or is at the
time entitled to demand payment or performance.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, Intellectual
Property Security Agreement any note, or notes or guaranties executed by
Borrower, and any other present or future agreement between Borrower and/or for
the benefit of Bank in connection with this Agreement, all as amended, extended
or restated.
"MATERIAL ADVERSE CHANGE" has the meaning set forth in Section 8.3.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"PATENTS" are patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues, extensions
and continuations-in-part of the same.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or any
other Loan Document;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business;
(e) Indebtedness secured by Permitted Liens; and
(f) Other Indebtedness in an aggregate amount outstanding at any
time not to exceed Five Million Dollars ($5,000,000).
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Schedule and existing on the Closing
Date;
(b) Investments in, or loans to, Subsidiaries, in an aggregate
amount in any fiscal year not to exceed Seven Million Five Hundred Thousand
Dollars ($7,500,000);
(c) Investments approved by the Borrower's Board of Directors or
otherwise pursuant to a Board-approved investment policy;
(d) Investments consisting of deposit and investment accounts in
the name of Borrower or any Subsidiary;
(e) Investments consisting of extensions of credit in the nature
of accounts receivable, prepaid royalties or notes receivable arising from the
sale or lease of goods;
(f) Investments received in satisfaction or partial satisfaction
of obligations owed by financially troubled obligors;
(g) Investments acquired in exchange for any other Investments in
connection with or as a result of a bankruptcy, workout, reorganization or
recapitalization;
(h) Investments acquired as a result of a foreclosure with respect
to any secured Investment;
14
(i) Investments consisting of interest rate, currency, or
commodity swap agreements, interest rate cap or collar agreements or
arrangements designated to protect a Person against fluctuations in interest
rates, currency exchange rates, or commodity prices;
(j) Investments consisting of loans and advances to employees; and
(k) (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) Bank's 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) purchase money security interests in specific items of
Equipment;
(c) leases or other financing of specific items of Equipment;
(d) Liens for taxes not yet payable;
(e) additional security interests and Liens consented to in
writing by Bank, which consent may be withheld in its good faith business
judgment;
(f) security interests being terminated substantially concurrently
with this Agreement;
(g) Liens of materialmen, mechanics, warehousemen, carriers, or
other similar Liens arising in the ordinary course of business and securing
obligations which are not delinquent or are being contested in good faith and
for which Borrower maintains adequate reserves on its books, provided such Liens
have no priority over any of Bank's security interests;
(h) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described above in
clauses (b) or (c) above, provided that any extension, renewal or replacement
Lien is limited to the property encumbered by the existing Lien and the
principal amount of the Indebtedness being extended, renewed or refinanced does
not increase;
(i) Liens in favor of customs and revenue authorities which secure
payment of customs duties in connection with the importation of goods,
(j) leases or subleases and nonexclusive licenses or sublicenses
granted to others not interfering in any material respect with the business of
the Borrower, and
(k) Liens in the nature of a lessor's interest under any lease
entered into by Borrower which is otherwise permitted under the terms of this
Agreement. Bank will have the right to require, as a condition to its consent
under subparagraph (e) above, that the holder of the additional security
interest or Lien sign an intercreditor agreement on Bank's then standard form,
acknowledge that the security interest is subordinate to the security interest
in favor of Silicon, and agree not to take any action to enforce its subordinate
security interest so long as any Obligations remain outstanding, and that
Borrower agree that any uncured default in any obligation secured by the
subordinate security interest 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.
"PROCEEDS" has the meaning described in the Code as in effect from time
to time.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.
"QUICK ASSETS" is, on any date, the Borrower's, unrestricted cash and
cash equivalents, plus marketable securities and net billed accounts receivable,
all determined according to GAAP.
15
"REGISTERED ORGANIZATION" means an organization organized solely under
the law of a single state or the United States and as to which the state or the
United States must maintain a public record showing the organization to have
been organized.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"REVOLVING MATURITY DATE" is March 8, 2005.
"SCHEDULE" is any attached schedule of exceptions.
"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.
"SUPPORTING OBLIGATION" means a Letter-of-credit right, secondary
obligation or obligation of a secondary obligor or that supports the payment or
performance of an account, chattel paper, a document, a general intangible, an
instrument or investment property.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower 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, (c) reserves not already deducted from assets, (d) and restricted
cash, and (ii) Total Liabilities, plus Subordinated Debt.
"TERM LOAN ONE" a term loan in the original principal amount of One
Million Five Hundred Thousand Dollars ($1,500,000).
"TERM LOAN ONE MATURITY DATE" is September 1, 2005.
"TERM LOAN TWO" a term loan in the original principal amount of One
Million Dollars ($1,000,000).
"TERM LOAN TWO MATURITY DATE" is June 1, 2006.
"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 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 Borrower connected with the trademarks.
[Signatures appear on the following page]
16
BORROWER:
CALLIDUS SOFTWARE INC.
By: /s/ ▇▇▇ ▇. ▇▇▇▇
----------------------
Name: ▇▇▇ ▇. ▇▇▇▇
Title: VP/CFO
BANK:
SILICON VALLEY BANK
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: VICE PRESIDENT
Effective as of March 8th, 2004
17
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest
in and to the following:
All goods and equipment as defined in the Uniform Commercial Code 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 as defined in the Uniform Commercial Code and includes,
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, 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 Accounts as defined in the Uniform Commercial Code and includes 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 Letter-Of-Credit Rights (whether or not the letter of credit is
evidenced by a writing);
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 Supporting Obligations and all of the 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 REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.S.T.
FAX TO: 408/___-____ DATE: ______
? Loan Payment: _______________ Client Name (Borrower)
From Account # ___________________ To Account # ________________
(Deposit Account #) (Loan Account #)
Principal $ ______________________ and/or Interest $ _________________________
All Borrower's representations and warranties in the Amended and Restated Loan
and Security Agreement are true, correct and complete in all material respects
to on the date of the telephone transfer request for and advance, but those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of the date:
AUTHORIZED SIGNATURE: ______________________________ Phone Number: ___________
? LOAN ADVANCE:
COMPLETE OUTGOING WIRE REQUEST SECTION BELOW IF ALL OR A PORTION OF THE FUNDS
FROM THIS LOAN ADVANCE ARE FOR AN OUTGOING WIRE.
From Account # ___________________________ To Account # ___________________
(Loan Account #) (Deposit Account #)
Amount of Advance $ ______________________
All Borrower's representations and warranties in the Amended and Restated Loan
and Security Agreement are true, correct and complete in all material respects
to on the date of the telephone transfer request for and advance, but those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of the date:
AUTHORIZED SIGNATURE: ______________________ Phone Number: ___________
OUTGOING WIRE REQUEST
COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO
BE WIRED.
Deadline for same day processing is 12:00 p.m., E.S.T.
Beneficiary Name: __________________________ Amount of Wire: $ __________
Beneficiary Bank: __________________________ Account Number: ____________
City and State: ____________________________
Beneficiary Bank Transit (ABA) #: __ __ __ __ Beneficiary Bank Code
(Swift, Sort, Chip, etc.): __
(FOR INTERNATIONAL WIRE ONLY)
Intermediary Bank: __________________________ Transit (ABA) #: _____________
For Further Credit to: _______________________________________________________
Special Instruction: _________________________________________________________
By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).
Authorized Signature: ___________________ 2nd Signature (If Required): ______
Print Name/Title: _______________________ Print Name/Title: _________________
Telephone # _____________________________ Telephone # _______________________
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FROM: CALLIDUS SOFTWARE, INC.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
The undersigned authorized officer of Callidus Software, Inc.
("Borrower") certifies that under the terms and conditions of the Amended and
Restated 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 on this
date. Attached are the required documents supporting the certification. In
addition, the undersigned authorized officer of Borrower certifies that Borrower
(i) has timely filed all required tax returns and paid, or made adequate
provision to pay, all material taxes, except those being contested in good faith
with adequate reserves under GAAP and (ii) does not have any legal actions
pending or threatened against Borrower which Borrower has not either disclosed
in its SEC filings or previously notified in writing to Bank. 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
------------------ -------- --------
Quarterly financial statements + CC Quarterly within 5 days of 10-Q Yes No
Annual (Audited) FYE within 5 days of 10-K Yes No
Projections w/i 45 days of FYE Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Minimum Quick Ratio 2.50:1.00 _____:1.00 Yes No
Minimum Tangible Net Worth $50,000,000 $_________ Yes No
Have there been updates to Borrower's intellectual property, if appropriate? Yes No
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
CALLIDUS SOFTWARE, INC.
__________________________________
SIGNATURE
__________________________________
TITLE
__________________________________
DATE
BANK USE ONLY
Received by: _______________________________________
AUTHORIZED SIGNER
Date: ______________________________________________
Verified: __________________________________________
AUTHORIZED SIGNER
Date: ______________________________________________
Compliance Status: Yes No
Schedule to Loan and Security Agreement
The exact correct corporate name of Borrower is (attach a copy of the formation
documents, e.g., articles, partnership agreement): Callidus Software Inc.
Borrower's State of formation: Delaware
Borrower has operated under only the following other names (if none, so state):
Tally Up Software, Inc.
All other address at which the Borrower does business are as follows (attach
additional sheets if necessary and include all warehouse addresses):
Borrower has deposit accounts and/or investment accounts located only at the
following institutions:
List Acct. Numbers:
Liens existing on the Closing Date and disclosed to and accepted by Bank in
writing:
Investments existing on the Closing Date and disclosed to and accepted by Bank
in writing:
SUBORDINATED DEBT:
Indebtedness on the Closing Date and disclosed to and consented to by Bank in
writing:
The following is a list of the Borrower's copyrights (including copyrights of
software) which are registered with the United States Copyright Office. (Please
include name of the copyright and registration number and attach a copy of the
registration):
TrueComp Software
The following is a list of all software which the Borrower sells, distributes or
licenses to others, which is not registered with the United States Copyright
Office. (Please include versions which are not registered:
TruePerformance
The following is a list of all of the Borrower's patents which are registered
with the United States Patent Office. (Please include name of the patent and
registration number and attach a copy of the registration.):
N/A
The following is a list of all of the Borrower's patents which are pending with
the United States Patent Office. (Please include name of the patent and a copy
of the application.):
N/A
The following is a list of all of the Borrower's registered trademarks. (Please
include name of the trademark and a copy of the registration.):
Callidus Software
Callidus Software logo
TrueChannel
TrueComp
Borrower is not subject to litigation which would have a material adverse effect
on the Borrower's financial condition, except the following (attach additional
comments, if needed):
Tax ID Number ▇▇-▇▇▇▇▇▇▇
Delaware Organizational Number:______________________________