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EXHIBIT 10.10
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FIRST VIRTUAL CORPORATION
LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION 1
1.1 Definitions 1
1.2 Accounting Terms 6
2. LOAN AND TERMS OF PAYMENT 6
2.1 Advances 6
2.2 Overadvances 8
2.3 Interest Rates, Payments, and Calculations 8
2.4 Crediting Payments 9
2.5 Fees 9
2.6 Additional Costs 9
2.7 Term 10
3. CONDITIONS OF LOANS 10
3.1 Conditions Precedent to Initial Advance 10
3.2 Conditions Precedent to all Advances 10
4. CREATION OF SECURITY INTEREST 10
4.1 Grant of Security Interest 10
4.2 Delivery of Additional Documentation Required 11
4.3 Right to Inspect 11
5. REPRESENTATIONS AND WARRANTIES 11
5.1 Due Organization and Qualification 11
5.2 Due Authorization; No Conflict 11
5.3 No Prior Encumbrances 11
5.4 Bona Fide Eligible Accounts 11
5.9 Merchantable Inventory 11
5.6 Name; Location of Chief Executive Office 11
5.7 Litigation 11
5.8 No Material Adverse Change in Financial Statements 11
5.9 Solvency 12
5.10 Regulatory Compliance 12
5.11 Environmental Condition 12
5.12 Taxes 12
5.13 Subsidiaries 12
5.14 Government Consents 12
5.15 Full Disclosure 12
6. AFFIRMATIVE COVENANTS 12
6.1 Good Standing 13
6.2 Government Compliance 13
6.3 Financial Statements, Reports, Certificates 13
6.4 Taxes 13
6.5 Insurance 14
6.6 Principal Depository 14
6.7 Quick Ratio 14
6.8 Debt-Net Worth Ratio 14
6.9 Tangible Net Worth 14
6.10 Further Assurances 15
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7. NEGATIVE COVENANTS 15
7.1 Dispositions 15
7.2 Change in Business 15
7.3 Mergers or Acquisitions 15
7.4 Indebtedness 15
7.5 Encumbrances 15
7.6 Distributions 15
7.7 Investments 15
7.8 Transactions with Affiliates 16
7.9 Subordinated Debt 16
7.10 Inventory 16
7.11 Compliance 16
8. EVENTS OF DEFAULT 16
8.1 Payment Default 16
8.2 Covenant Default 16
8.3 Material Adverse Change 16
8.4 Attachment 17
8.5 Insolvency 17
8.6 Other Agreements 17
8.7 Subordinated Debt 17
8.8 Judgments 17
8.9 Misrepresentations 17
9. BANK'S RIGHTS AND REMEDIES 17
9.1 Rights and Remedies 17
9.2 Power of Attorney 18
9.3 Accounts Collection 19
9.4 Bank Expenses 19
9.5 Bank's Liability for Collateral 19
9.6 Remedies Cumulative 19
9.7 Demand; Protest 19
10. NOTICES 19
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER 20
12. GENERAL PROVISIONS 20
12.1 Successors and Assigns 20
12.2 Indemnification 20
12.3 Time of Essence 20
12.4 Severability of Provisions 20
12.5 Amendments in Writing, Integration 20
12.6 Counterparts 21
12.7 Survival 21
12.8 Confidentiality 21
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This LOAN AND SECURITY AGREEMENT is entered into as of July 3,1996 by
and between SILICON VALLEY BANK ("Bank") and FIRST VIRTUAL CORPORATION
("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following
terms shall have the following definitions:
"Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other 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 and Borrower's Books relating
to any, of the foregoing.
"Advance" or "Advances" means an Advance under the
Revolving Facility.
"Affiliate" means, with respect to any Person, any
Person that owns or controls directly or indirectly such Person, any Person that
controls or is controlled by or is under common control with such Person, and
each of such Person's senior executive officers, directors, and partners.
"Bank Expenses" means all reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
enforcing or defending the Loan Documents (including fees and expenses of
appeal), whether or not suit is brought
"Borrower's Books" means all of Borrower's books and
records including: ledgers; records concerning Borrower's assets or liabilities,
the Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such. information.
"Borrowing Base" has the meaning set forth in Section
2.1 hereof.
"Business Day" means any day that is not a Saturday,
Sunday, or other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A
attached hereto.
"Committed Line" means One Million Dollars ($1,000,000).
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"Contingent Obligation" means, as applied to any Person,
any direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency, or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of me primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement
"Current Liabilities" means, as of any applicable date,
all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its Subsidiaries,
except that "Current Liabilities" shall not include Deferred Revenue, as at such
date, plus, to the extent not already included therein, all outstanding Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Daily Balance" means the amount of the Obligations owed
at the end of a given day.
"Eligible Accounts" means those Accounts that arise in the ordinary course of
Borrower's business that comply with all of Borrower's representations and
warranties to Bank set forth in Section 5.4; provided, that standards of
eligibility may be fixed and revised from time to time by Bank in Bank's
reasonable judgment and upon notification thereof to Borrower in accordance with
the provisions hereof. Unless otherwise agreed to by Bank; Eligible Accounts
shall not include the following:
(a) Accounts that the account debtor has failed to
pay within ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor,
fifty percent (50%) of whose Accounts the account debtor has failed to pay
within ninety (90) days of invoice date;
(c) Accounts with respect to which the account
debtor is an officer, employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed
on consignment, guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and
hold, or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account
debtor is an Affiliate of Borrower;
(f) Accounts with respect to which the account
debtor does not have its principal place of business in the United States,
except for Eligible Foreign Accounts;
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(g) Accounts with respect to which the account
debtor is the United States or any department, agency, or instrumentality of the
United States;
(h) Accounts with respect to which Borrower is
liable to the account debtor for goods sold or services rendered by the account
debtor to Borrower, but only to the extent of any amounts owing to the account
debtor against amounts owed to Borrower;
(i) Accounts with respect to an account debtor,
including Subsidiaries and Affiliates, whose total obligations to Borrower
exceed twenty-five percent (25%) of all Accounts, to the extent such obligations
exceed the aforementioned percentage, except as approved in writing by Bank;
(j) Accounts with respect to which the account
debtor disputes liability or makes any claim with respect thereto as to which
Bank believes, in its sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(k) Accounts the collection of which Bank reasonably
determines to be doubtful.
"Eligible Foreign Accounts" means Accounts with respect
to which the account debtor does not have its principal place of business in the
United States and that are: (1) covered by credit insurance in form and amount,
and by an insurer satisfactory to Bank less the amount of any deductibles) which
may be or become owing thereon; or (2) supported by one or more letters of
credit in favor of Bank as beneficial, in an amount and of a tenor; and issued
by a financial institution, acceptable to Bank; or (3) that Bank approves on a
case-by-case basis.
"Equipment" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security
Act of 1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as
in effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed
money or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced
by or against any person or entity under any provision of the United States
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
"Inventory" means all 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 at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds,
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including insurance proceeds, resulting from the sale or disposition of any of
the foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing.
"Investment" means any beneficial ownership of
(including stock, partnership interest or other securities) any Person, or any
loan, advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement,
any note or notes executed by Borrower, and any other agreement entered into
between Borrower and Bank in connection with this Agreement, all as amended or
extended from time to time.
"Material Adverse Effect" means a material adverse
effect on (i) the business operations or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan
Documents.
"Maturity Date" means July 2, 1997.
"Negotiable Collateral" means all of Borrower's present
and future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Bank pursuant to the terms and provisions of any instrument or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank
arising under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and
disclosed in the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the
ordinary course of business; and
(e) Indebtedness secured by Permitted Liens.
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"Permitted Investment" means:
(a) Investments existing on the Closing Date
disclosed in the Schedule;
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank;
(c) Investments consisting of (i) compensation of
employees, officers and directors of Borrower or its Subsidiaries so long as the
Board of Directors of Borrower determines that such compensation is in the best
interests of Borrower, (ii) travel advances, employee relocation loans and other
employee loans and advances in the ordinary course of business; (iii) loans to
employees, officers or directors relating to the purchase of equity securities
of Borrower or its Subsidiaries, (iv) other loans to officers and employees
approved by the Board of Directors in an aggregate amount not in excess of
$250,000 outstanding at any time; and
(d) Other Investments aggregating not in excess of
$150,000 at any one time.
"Permitted Liens" means the following:
(e) Any Liens existing on the Closing Date and
disclosed in the Schedule or arising under this Agreement or the other Loan
Documents;
(f) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, provided the same have no priority over any of
Bank's security interests;
(g) Liens (i) upon or in any equipment acquired or
held by Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(h) Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by, liens of the type
described in clauses (a) through (c) above, provided that any extension, renewal
or replacement Lien shall be limited to the property encumbered by the existing
Lien and be principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per
annum, most recently announced by Bank as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank. 5
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"Quick Assets" means, at any date as of which the amount
thereof shall be determined, the consolidated cash, cash-equivalents, accounts
receivable and investments, with maturities not to exceed 90 days, of Borrower
determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive
Officer, the Chief Financial Officer and the Controller of Borrower.
"Revolving Facility" means the facility under which
Borrower may request Bank to issue cash advances, as specified in Section 2.1
hereof.
"Schedule" means the schedule of exceptions attached
hereto, if any.
"Subordinated Debt" means any debt incurred by Borrower
that is subordinated to the debt owing by Borrower to Bank on terms acceptable
to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in
which (i) any general partnership interest or (ii) more than 50% of the stock of
which by the terms thereof ordinary voting power to elect the Board of
Directors, managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.
"Tangible Net Worth" means at any date as of which the
amount thereof shall be determined, the consolidated total assets of Borrower
and its Subsidiaries minus, without duplication, (i) the sum of 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) all reserves
not already deducted from assets, and (ii) Total Liabilities.
"Total Liabilities" means at any date as of which the
amount thereof shall be determined, all obligations that should, in accordance
with GAAP be classified as liabilities on the consolidated balance sheet of
Borrower, including in any event all Indebtedness, but specifically excluding
Subordinated Debt.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
2.1 Advances. Subject to and upon the terms and conditions
of this Agreement, Bank agrees to make Advances to Borrower in an aggregate
amount not to exceed the lesser of (i) the Committed Line minus the face amount
of all outstanding Letters of Credit (including drawn but unreimbursed Letters
of Credit) minus the Exchange Reserve or (ii) the Borrowing Base minus the face
amount of all outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit minus the Exchange Reserve. For purposes of this Agreement,
"Borrowing Base" shall mean an amount equal to seventy-five percent (75%) of
Eligible Accounts, including accounts owing by account debtors that do not have
their principal place of business in the United States but that are otherwise
Eligible Accounts in an aggregate amount not to exceed Two Hundred Fifty
Thousand Dollars ($250,000). Subject to the terms and conditions of this
Agreement amounts borrowed pursuant to this Section 2.1 may be repaid and
reborrowed at any time prior to the Maturity Date.
Whenever Borrower desires an Advance, Borrower will notify Bank by facsimile
transmission or telephone no later than 3:00 p.m. California time, on the
Business Day that the Advance is to be
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made. Each such notification shall be promptly confirmed by a Payment/Advance
Form in substantially the form of Exhibit B hereto. Bank is authorized to make
Advances under this Agreement, based upon instructions received from a
Responsible Officer, or without instructions if in Bank's discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer, and Borrower
shall indemnify and hold Bank harmless for any damages or loss suffered by Bank
as a result of such reliance. Bank will credit the amount of Advances made under
this Section 2.1 to Borrower's deposit account.
The Revolving Facility shall terminate on the Maturity Date, at which
time all Advances under this Section 2.1 shall be immediately due and payable.
2.1.1 Letters of Credit.
(a) Subject to the terms and conditions of this
Agreement Bank agrees to issue or cause to be issued Letters of Credit for the
account of Borrower in an aggregate face amount not to exceed (i) the lesser of
the Committed Line or the Borrowing Base minus (ii) the then outstanding
principal balance of the Advances provided that the face amount of outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit) shall not
in any case exceed Two Hundred Fifty Thousand Dollars ($250,000) minus the
amount of the Exchange Reserve. Each such letter of credit shall have an expiry
date no later than the Maturity Date; provided that the expiry date may be
extended up to 180 days beyond the expiry date provided Borrower secures its
reimbursement and other obligations in connection with such letter of credit
upon terms reasonably acceptable to Bank. All such letters of credit shall be,
in form and substance, acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank's form of application and letter of
credit agreement. All amounts actually paid by Bank in respect of a letter of
credit shall, when paid, constitute an Advance under this Agreement.
(b) The obligation of Borrower to immediately
reimburse Bank for drawings made under Letters of Credit shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement and such Letters of Credit, under all
circumstances whatsoever. Borrower shall indemnify, defend and hold Bank
harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys' fees, arising out of or in connection with any
letters of credit.
2.1.2 Letter of Credit Reimbursement; Reserve.
(a) Borrower may request that Bank issue a Letter of
Credit payable in a currency other than United States Dollars, If a demand for
payment is note under any such letter of credit Bank shall treat such demand as
an advance to Borrower of the equivalent of the amount thereof (plus cable
charges) in United States currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other currency for cable transfer
to the country of which it is the currency.
(b) Upon the issuance of any Letter of Credit
payable in a currency other than United States Dollars, Bank shall create a
reserve under the Committed Line for Letters of Credit against fluctuations in
currency exchange rates, in an amount equal to twenty percent (20%) of the face
amount of such letter of credit. The amount of such reserve may be amended by
Bank from time to time to account for fluctuations in the exchange rate. The
availability of funds under the Committed Line shall be reduced by the amount of
such reserve for so long as such letter of credit remains outstanding.
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2.1.3 Foreign Exchange Contract; Foreign Exchange
Settlements.
(a) Subject to the terms of this Agreement, Borrower
may utilize up to Two Hundred Fifty Thousand Dollars ($250,000) less the amount
of outstanding Letters of Credit for foreign exchange contracts (the "Exchange
Contracts"). All Exchange Contracts must provide for delivery or settlement on
or before the Maturity Date. The amount available under the Committed Line at
any time shall be reduced by the following amounts (the "Foreign Exchange
Reserve") on each day (the "Determination Date"): (i) on all outstanding
Exchange Contracts on which delivery is to be effected or settlement allowed
more than two business days from the Determination Date, 10% of the gross amount
of the Exchange Contracts; plus (ii) on all outstanding Exchange Contracts on
which delivery is to be effected or settlement allowed within two business days
after the Determination Date, 100% of the gross amount of the Exchange
Contracts. In lieu of the Exchange Reserve, Borrower may request that Bank treat
such amount as an Advance under the Committed Line.
(b) Bank may, in its discretion, terminate the
Exchange Contracts at any time (a) that an Event of Default occurs or (b) that
there is no sufficient availability under the Committed Line and Borrower does
not have available funds in its bank account to satisfy the Exchange Reserve. If
Bank terminates the Exchange Contracts, and without limitation of any applicable
indemnities, Borrower agrees to reimburse Bank for any and all fees, costs and
expenses relating thereto or arising in connection therewith.
(c) Borrower shall not permit the total gross amount
of all Exchange Contracts on which delivery is to be effected and settlement
allowed in any, two business day period to be more than $250,000 nor shall
Borrower permit the total gross amount of all Exchange Contracts to which
Borrower is a party, outstanding at any one time, to exceed $250,000.
(d) Borrower shall execute all standard form
applications and agreements of Bank in connection with the Exchange Contracts
and, without limiting any of the terms of such applications and agreements,
Borrower will pay all standard fees and charges of Bank in connection with the
Exchange Contracts.
2.2 Overadvances. If, at any time or for any reason, the
amount of Obligations owed by Borrower to Bank pursuant to this Agreement is
greater than the lesser of (i) the Committed Line or (ii) the Borrowing Base,
Borrower shall immediately pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section
2.3(b), any Advances shall bear interest, on the average Daily Balance, at a
rate equal to one and one-quarter (1.25%) percentage points above the Prime Raw,
until December 31, 1996, and at a rate equal to three-quarters of one percentage
point (.75%) above the Prime Rate thereafter.
(b) Default Rate. AD Obligations shall bear interest
from and after the occurrence of an Event of Default, at a rate equal to five
(5) percentage points above the interest rate applicable immediately prior to
the occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and
payable on the second calendar day of each month during the term hereof. Bank
shall, at its option, charge such interest, all Bank Expenses, and all Periodic
Payments against any of Borrower's deposit accounts or against the Committed
Line, in which case those amounts shall thereafter accrue interest at the rate
then applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
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(d) Computation. In the event the Prime Rate is
changed from time to time hereafter, the applicable rate of interest hereunder
shall be increased or decreased effective as of 12:01 a.m. on the day the Prime
Rate is changed, by an amount equal to such change in the Prime Rate. All
interest chargeable under the Loan Documents shall be computed on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event
of Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of art Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon California time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. A Facility Fee equal to Five
Thousand Seven Hundred Fifty Dollars ($5,750), which fee shall be due on the
Closing Date and shall be fully earned and nonrefundable (Bank acknowledges
receipt of such fee); and
(b) Bank Expenses. All Bank Expenses incurred after
the date of an Event. of Default.
2.6 Additional Costs. In case any change in any law,
regulation, treaty or official directive or the interpretation or application
thereof by any court or any governmental authority charged with the
administration thereof or the compliance with any guideline or request of any
central bank or other governmental authority (whether or not having the force of
law), in each case after the date of this Agreement:
(a) subjects Bank to any tax with respect to
payments of principal or interest or any other amounts payable hereunder by
Borrower or otherwise with respect to the transactions contemplated hereby
(except for taxes on the overall net income of Bank imposed by the United States
of America or any political subdivision thereof);
(b) imposes, modifies or deans applicable any
deposit insurance, reserve, special deposit or similar requirement against
assets held by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with
respect to its performance under this Agreement and the result of any of the
foregoing is to increase the cost to Bank, reduce the income receivable by Bank
or impose any expense upon Bank the respect to any loans, Bank shall notify
Borrower thereof. Borrower agrees to pay to Bank the amount of such increase in
cost, reduction in income or additional expense as and when such cost, reduction
or expense is incurred or determined, upon presentation by Bank of a statement
of the amount and setting forth Bank's calculation thereof, all in reasonable
detail, which statement shall be deemed true and correct absent manifest error;
provided however that Borrower shall not be liable for any such amount
attributable to any period prior to the date one
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hundred eighty (180) days prior to the date of such certificate. Bank agrees
that it will allocate all such increased costs among its customers similarly
affected in good faith and in a manner consistent with Bank's customary
practice.
2.7 Term. This Agreement shall become effective on the
Closing Date and, subject to Section 12.7, shall continue in full force and
effect for a term ending on the Maturity Date. Notwithstanding the foregoing,
Bank shall have the right to terminate its obligation to make Advances under
this Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank's Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Advance. The obligation
of Bank to make the initial Advance is subject to the condition precedent that
Bank shall have received, in form and substance satisfactory to Bank, the
following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with
respect to incumbency and resolutions authorizing the execution and delivery of
this Agreement;
(c) financing statement (Form UCC-1);
(d) insurance certificate;
(e) payment of me fees and Bank Expenses then due
specified in Section 2.5 hereof; and
(f) such other documents, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of
Bank to make each Advance, including the initial Advance, is further subject to
the following conditions:
(a) timely receipt by Bank of the Payment/Advance
Form as provided in Section 2.1; and
(b) the representations and warranties contained in
Section 5 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Advance as
dough made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Advance. The making of
each Advance shall be deemed to be a representation and warranty by Borrower on
the date of such Advance as to the accuracy of the facts referred to in this
Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower grants and pledges
to Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
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4.2 Delivery of Additional Documentation Required. Borrower
shall from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each
Subsidiary corporation duly existing and in good standing under the laws of its
state of incorporation and qualified and licensed to do business in, and is in
good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery,
and performance of the Loan Documents are with Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and
indefeasible title to the Collateral, free and clear of Liens, except for
Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are
bona fide existing obligations. The property giving rise to such Eligible
Accounts has been delivered to the account debtor or to the account debtor's
agent for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has not received notice of actual or imminent Insolvency
Proceeding of any account debtor that is included in any Borrowing Base
Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material
respects of good and marketable quality, free from all material defects.
5.6 Name; Location of Chief Executive Office. Except as
disclosed in the Schedule, Borrower has not done business under any name other
than that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.
5.7 Litigation. Except as set forth in the Schedule, there
are no actions or proceedings pending by or against Borrower or any Subsidiary
before any court or administrative agency in which an adverse decision could
have a Material Adverse Effect or a material adverse effect on Borrower's
interest or Bank's security interest in the Collateral. Borrower does not have
knowledge of any such pending or threatened actions or proceedings.
5.8 No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not
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been a material adverse change in the consolidated financial condition of
Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.9 Solvency. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has
met the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. No event has occurred resulting from Borrower's
failure to comply with ERISA that is reasonably likely to result in Borrower's
incurring any liability that could have a Material Adverse Effect. Borrower is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of the important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.11 Environmental Condition. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or caused
to be filed all tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein, other than
those which Borrower is contesting in. good faith and for which Borrower has
made appropriate reserves in accordance with GAAP.
5.13 Subsidiaries. Borrower does not own any stock,
partnership interest or other equity securities of any Person, except for
Permitted Investments.
5.14 Government Consents. Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower's business as currently
conducted.
5.15 Full Disclosure. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
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6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of
its Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall
cause each Subsidiary to meet, the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA. Borrower shall comply,
and shall cause each Subsidiary to comply, with all statutes, laws, ordinances
and government rules and regulations to which it is subject noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower
shall deliver to Bank: (a) as soon as available, but in any event within (i)
thirty (30) days of the end of each fiscal quarter when the balance of all
outstanding Advances (including the face amount of outstanding Letter of Credit
and the Exchange Reserve) is less than $500,000 or (ii) thirty (30) days after
the end of each month when the balance of outstanding Advances (including the
face amount of outstanding Letters of Credit and the Exchange Reserve), a
company prepared consolidated balance sheet and income statement covering
Borrower's consolidated operations during such period, certified by a
Responsible Officer; (b) as soon as available, but in any event within one
hundred twenty (120) days after the end of Borrower's fiscal year, audited
consolidated financial statements of Borrower prepared in accordance with GAAP,
consistently applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (c) within five (5) days upon becoming available, copies of
all statements, reports and notices sent or made available generally by Borrower
to its security holders or to any holders of Subordinated Debt and all reports
on Form 10-K and 10-Q filed with the Securities and Exchange Commission; (d)
promptly upon receipt of notice thereof, a report of any legal actions pending
or threatened against Borrower or any Subsidiary that could result in damages or
costs to Borrower or any Subsidiary of One Hundred Thousand Dollars ($100,000)
or more; and (e) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time.
Within fifteen (15) days after the last day of each month in which any
Advances (including any Letters of Credit or the Exchange Reserve) are
outstanding, Borrower shall deliver to Bank a Borrowing Base Certificate signed
by a Responsible Officer in substantially the form of Exhibit C hereto, together
with aged listings of accounts receivable and accounts payable.
Borrower shall deliver to Bank with the quarterly or monthly financial
statements, whichever is required by the terms of this section 6.3, a Compliance
Certificate signed by a Responsible Officer in substantially the form of Exhibit
D hereto.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts, provided that such audits will be conducted no more often than every
six (6) months unless an Event of Default has occurred and is continuing.
6.4 Taxes. Borrower shall make, and shall cause each
Subsidiary to make, due and timely payment or deposit of all material federal,
state, and local taxes, assessments, or contributions
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required of it by law, and will execute and deliver to Bank, on demand,
appropriate certificates attesting to the payment or deposit thereof; and
Borrower will make, and will cause each Subsidiary to make, timely payment or
deposit of all material tax payments and withholding taxes required of it by
applicable laws, including, but not limited to, those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Bank with proof satisfactory to Bank indicating that
Borrower or a Subsidiary has made such payments or deposits; provided that
Borrower or a Subsidiary need not make any payment if the amount or validity of
such payment is contested in good faith by appropriate proceedings and is
reserved against (to the extent required by GAAP) by Borrower.
6.5 Insurance.
6.5.1 Borrower, at its expense, shall keep the
Collateral insured against loss or damage by fire, theft, explosion, sprinklers,
and all other hazards and risks, and in such amounts, as ordinarily insured
against by other owners in similar businesses conducted in the locations where
Borrower's business is conducted on the date hereof. Borrower shall also
maintain insurance relating to Borrower's ownership and use of the Collateral in
amounts and of a type that are customary to businesses similar to Borrower's.
6.5.2 All such policies of insurance shall be in such
form, with such companies, and in such amounts as reasonably satisfactory to
Bank. All such policies of property insurance shall contain a lender's loss
payable endorsement, in a form satisfactory to Bank, showing Bank as an
additional loss payee thereof and all liability insurance policies shall show
the Bank as an additional insured, and shall specify that the insurer must give
at least twenty (20) days notice to Bank before canceling its policy for any
reason. Upon Bank's request, Borrower shall deliver to Bank certified copies of
such policies of insurance and evidence of the payments of all premiums
therefor. All proceeds payable under any such policy shall, at the option of
Bank, be payable to Bank to be applied on account of the Obligations.
6.6 Principal Depository. Borrower shall maintain its
principal depository and operating accounts with Bank, provided that quality of
service is satisfactory, which satisfaction is to be determined on a
commercially reasonable basis
6.7 Quick Ratio. Borrower shall maintain (a) as of the last
day of each fiscal quarter when the aggregate amount of all outstanding Advances
(including the face amount of outstanding Letters of Credit and the Exchange
Reserve) is less than $500,000 or, (b) as of the last day of each calendar month
when the aggregate amount of all Advances (including the face amount of
outstanding Letters of Credit and the Exchange Reserve) is equal to or greater
than $500,000, a ratio of Quick Assets to Current Liabilities, excluding
deferred revenue, of at least 1.0 to 1.0; provided however, that on and after
December 31, 1996, Borrower shall maintain a ratio of Quick Assets to Current
Liabilities, excluding deferred revenue, of at least 1.25 to 1.0.
6.8 Debt-Net Worth Ratio. Borrower shall maintain (a) as of
the last day of each fiscal quarter when the aggregate amount of all outstanding
Advances (including the face amount of outstanding Letters of Credit and the
Exchange Reserve) is less than $500,000 or (b) as of the last day of each
calendar month when the aggregate amount of all outstanding Advances (including
the face amount of outstanding Letters of Credit and the Exchange Reserve) is
equal to or greater than $500,000, a ratio of Total Liabilities less
Subordinated Debt, excluding deferred revenue, to Tangible Net Worth plus
Subordinated Debt of not more than 2.25 to 1.0.
6.9 Tangible Net Worth. Borrower shall maintain (a) as of
the last day of each fiscal quarter when the aggregate amount of all Advances
(including the face amount of outstanding Letters of Credit and the Exchange
Reserve) is less than $500,000 or (b) as of the last day of each calendar month
when the aggregate amount of all Advances (including the face amount of
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Outstanding Letters of Credit and the Exchange Reserve) is equal to or greater
than $500,000, a Tangible Net Worth of not less than Six Hundred Twenty-Five
Thousand Dollars ($625,000); provided, however, that on and after December 31,
1996, Borrower shall maintain a Tangible Net Worth of not less than One Million
Dollars ($1,000,000).
6.10 Further Assurances. At any time and from time to time
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than: (i) Transfers
of Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; (iii) Transfers of worn-out or obsolete Equipment, or (iv)
Transfers of Equipment in connection with sale-leasebacks entered into in the
ordinary course of Borrower's business.
7.2 Change in Business. Engage in any business, or permit
any of its Subsidiaries to engage in any business, other than the businesses
currently engaged in by Borrower and any business substantially similar or
related thereto (or incidental thereto), or suffer a change in more than 49% of
Borrower's ownership, as of the Closing Date. Borrower will not, without thirty
(30) days prior written notification to Bank, relocate its chief executive
office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit
any of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person;
notwithstanding the foregoing, Borrower may complete such merger, acquisition or
consolidation provided that (i) Borrower is the surviving entity following such
transaction, (ii) an Event of Default is not continuing at the time of such
transaction, and would not exist after giving effect thereto, and (iii) the
consideration paid in a transaction entered into before Borrower's initial
public offering does not exceed the lesser of One Hundred Thousand Dollars
($100,000) or twenty-five percent (25%) of Borrower's Tangible Net Worth, and
the consideration paid in a transaction entered into after Borrower's initial
public offering does not exceed ten percent (10%) of Borrower's Tangible Net
Worth.
7.4 Indebtedness. Create, incur, assume or be or remain
liable with respect to any Indebtedness, or permit any Subsidiary so to do,
other than Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist
any Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock.
7.7 Investments. Directly or indirectly acquire or own, or
make any Investment in or to any Person, or permit any of its Subsidiaries so to
do, other than Permitted Investments.
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7.8 Transactions with Affiliates. Directly or indirectly
enter into or permit to exist any material transaction with any Affiliate of
Borrower except for transactions that are in the ordinary course of Borrower's
business, upon fair and reasonable terms that are no less favorable to Borrower
than would be obtained in an arm's length transaction with a nonaffiliated
Person.
7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee,
warehouseman, or similar party unless Bank has received a pledge of the
warehouse receipt covering such Inventory. Except for Inventory sold in the
ordinary course of business, (ii) Inventory located with contract manufacturers,
and (iii) except for such other locations as Bank may (i) approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" controlled by
an "investment company" with the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the
Federal Fair Labor Standards Act or violate any law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event
of Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay the principal
of, or any interest on, any Advances when due and payable; or fails to pay any
portion of any other Obligations not constituting such principal or interest,
including without limitation Bank Expenses, within thirty (30) days of receipt
by Borrower of an invoice for such other Obligations;
8.2 Covenant Default. If Borrower fails to perform any
obligation under Sections 6.7, 6.8 or 6.9 or violates any of the covenants
contained in Article 7 of this Agreement, or 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) days after Borrower
receives notice thereof or any officer of Borrower becomes aware thereof;
provided, however, that if the default cannot by its nature be cured within the
ten (10) day period or cannot after diligent attempts by Borrower be cured
within such ten (10) day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed thirty (30) days) to attempt to cure such default,
and within such reasonable time period the failure to have cured such default
shall not be deemed an Event of Default (provided that no Advances will be
required to be made during such cure period);
8.3 Material Adverse Change. If there occurs a material
adverse change in Borrower's business or financial condition, or if there is a
material impairment of the prospect of
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repayment of any portion of the Obligations or 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, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any trustee, receiver or person acting in a
similar capacity and such attachment, seizure, writ or distress warrant or levy
has not been removed, discharged or rescinded within ten (10) days, or if
Borrower is enjoined, restrained, or in any way prevented by court order from
continuing to conduct all or any material part of its business affairs, or if a
judgment or other claim becomes a lien or encumbrance upon any material portion
of Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
is commenced against borrower and is not dismissed or stayed within ten (10)
days (provided that no Advances with be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement
to which Borrower is a party with a third party or parties resulting in a right
by such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on
account of Subordinated Debt, except to the extent such payment is allowed under
any subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least Fifty Thousand
Dollars ($50,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
9.1.1 Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default
described in Section 8.5 all Obligations shall become immediately due and
payable without any action by Bank);
9.1.2 Cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
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9.1.3 Demand that Borrower (i) deposit cash with Bank
in an amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such Letters
of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii)
pay in advance all Letters of Credit fees scheduled to be paid or payable over
the remaining term of the Letters of Credit;
9.1.4 Settle or adjust disputes and claims directly
with account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
9.1.5 Without notice to or demand upon Borrower, make
such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
is security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's owned premises, Borrower hereby grants Bank a
license to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of Bank's rights or remedies provided
herein, at law, in equity, or otherwise;
9.1.6 Without notice to Borrower set off and apply to
the Obligations any and all (i) balances and deposits of Borrower held by Bank,
or (ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
9.1.7 Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. In connection with Bank's exercise of its rights
under this Section 9.1, Borrower's rights under all licenses and all franchise
agreements shall inure to Bank's benefit;
9.1.8 Sell the Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrower's premises)
as Bank determines is commercially reasonable, and apply any proceeds to the
Obligations in whatever manner or order Bank deems appropriate;
9.1.9 Bank may credit bid and purchase at any public
sale; and
9.1.10 Any deficiency that exists after disposition of
the Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence
and during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
▇▇▇▇ of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide advances hereunder is terminated.
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9.3 Accounts Collection. At any time from the date of this
Agreement, Bank may notify any Person owing funds to Borrower of Bank's security
interest in such funds and verify the amount of such Account. Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Revolving Facility as Bank deems necessary to protect Bank
from the exposure created by such failure; or (c) obtain and maintain insurance
policies of the type discussed in Section 6.6 of this Agreement, and take any
action with respect to such policies as Bank deems prudent. Any amounts so paid
or deposited by Bank shall constitute Bank Expenses, shall be immediately due
and payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank
complies with reasonable banking practices, Bank shall not in any way or manner
be liable or responsible for: (a) the safekeeping of the Collateral; (b) any
loss or damage thereto occurring or arising in any manner or fashion from any
cause; (c) any diminution in the value thereof: or (d) any act or default of any
carrier, warehouseman, bailee, forwarding agency; or other person whomsoever.
All risk of loss, damage or destruction of the Collateral shall be borne by
Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Bank shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No exercise by Bank
of one right or remedy shall be deemed an election, and no waiver by Bank of any
Event of Default on Borrower's part shall be deemed a continuing waiver. No
delay by Bank shall constitute a waiver, election, or acquiescence by it. No
waiver by Bank shall be effective unless made in a written document signed on
behalf of Bank and then shall be effective only in the specific instance and for
the specific purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment;
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
If to Borrower: First Virtual Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇▇
FAX: (___) ________________
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If to Bank: Silicon Valley Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
▇▇▇▇▇, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of each
of the parties; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have 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 hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and
hold harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement, and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation 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 set forth in this Agreement.
12.4 Severabitity of Provisions. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement
cannot be amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
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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, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.
12.7 Survival. All covenants, representations and warranties
made in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 Confidentially. In handling any confidential information
Bank shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower, (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order, (iv) as may be required in
connection with the examination, audit or similar investigation of Bank and (v)
as Bank may determine in connection with the enforcement of any remedies
hereunder. Confidential information hereunder shall not include information that
either: (a) is in the public domain or in the knowledge or possession of Bank
when disclosed to Bank or becomes part of the public domain after disclosure to
Bank through no fault of Bank; or (b) is disclosed to Bank by a third party,
provided Bank does not have actual knowledge that such third party is prohibited
from disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
FIRST VIRTUAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: COO/CEO
SILICON VALLEY BANK
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
Title: VP
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EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles (including
motor vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including,
without limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing way of the above, and
Borrower's Books relating to any of the foregoing;
(c) All general intangibles now owned or hereafter acquired,
including, without limitation, leases, license agreements, franchise agreements,
purchase orders, income tax refunds, payments of insurance and rights to payment
of any kind, but excluding Borrower's rights in patents, copyrights, trademarks
and other forms of intellectual property.
(d) All now existing and hereafter arising accounts, contract
rights, royalties, license rights and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods, the licensing of technology
or the rendering of services by Borrower, whether or not earned by performance,
and any and all credit insurance, guaranties, and other security therefor, as
well as all merchandise returned to or reclaimed by Borrower and Borrower's
Books relating to any of the foregoing;
(e) All cash, deposit accounts, securities, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
(f) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.
22
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EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE: _______________
FAX#: (▇▇▇) ▇▇▇-▇▇▇▇ TIME: _______________
FROM:___________________________________________________________________________
CLIENT NAME (BORROWER)
REQUESTED BY:___________________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:___________________________________________________________
PHONE NUMBER:___________________________________________________________________
FROM ACCOUNT #_______________ TO ACCOUNT #_______________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $__________________________
PRINCIPAL PAYMENT (ONLY) $__________________________
INTEREST PAYMENT (ONLY) $__________________________
PRINCIPAL AND INTEREST (PAYMENT) $__________________________
OTHER INSTRUCTIONS:_____________________________________________________________
All representations and warranties of Borrower stated in the Loan
Agreement are true, correct and complete in all material respects as of the date
of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
-------------------------- -----------------------------
Authorized Requester Phone #
-------------------------- -----------------------------
Received By (Bank) Phone #
--------------------------------------------
Authorized Signature (Bank)
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EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: First Virtual Corporation Lender: Silicon Valley Bank
Commitment Amount: $1,000,000
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of $__________
2. Additions (please explain on reverse) $__________
3. TOTAL ACCOUNTS RECEIVABLE $__________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $
5. Balance of 50% over 90 day accounts $_____________
6. Concentration Limits $_____________
A Foreign Account in excess of
$250,000 of Eligible Foreign Accounts $_____________
8. Governmental Accounts $_____________
9. Contra Accounts $_____________
10. Promotion or Demo Accounts $_____________
11. Intercompany/Employee Accounts $_____________
12. Other (please explain on reverse) $_____________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_____________
14. Eligible Accounts (#3 minus #13) $_____________
15 LOAN VALUE OF ACCOUNTS (75% of #14) $_____________
BALANCES
16. Maximum Loan Amount $__________
17. Total Funds Available (Lesser of #15 or #16) $__________
18. Present balance owing on Line of Credit $__________
19. Outstanding under Sublimits ( ) $__________
20. RESERVE POSITION (#17 minus #18 and #19) $__________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS:
FIRST VIRTUAL CORPORATION BANK USE ONLY
Rec'd By:__________
Auth. Signer
Date:______________
Verified:__________
Auth. Signer
Date:______________
By:_____________________ ___________________
Authorized Signer
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EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: First Virtual Corporation
The undersigned authorized officer of First Virtual Corporation hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending____________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof Attached herewith are the required documents supporting
the above certification. The Officer further certifies that, to the best of his
knowledge, these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) and are consistently applied from one period to the next
except as explained in an accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ ------- --------
Financial statements Monthly within 30 days (1) Yes No
Annual (CPA Audited) FYE within 120 days Yes No
A/R & A/P Agings Monthly within 15 days (2) Yes No
A/R Audit Initial and Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio 1.0:1.0/1.25:1.0 (3) ____:1.0 Yes No
Minimum Tangible Net Worth $625,000/$1,000,000 (3) $_______ Yes No
Maximum Debt/Tangible Net Worth 2.25:1.0 _____:1.0 Yes No
(1) Quarterly when outstandings <$500,000
(2) When Advances are outstanding
(3) On and after 12/31/96
COMMENT REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
Received by:__________________
AUTHORIZED SIGNER
Sincerely,
Date:_________________________
_______________________
SIGNATURE Verified:_____________________
AUTHORIZED SIGNER
_______________________
TITLE Date:_________________________
_______________________ Compliance Status: Yes No
DATE
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AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
This Amendment to Loan and Security Agreement is entered into as of
April 11, 1997, by and between SILICON VALLEY BANK ("Bank") and FIRST VIRTUAL
CORPORATION ("Borrower").
RECITALS
Borrower and Bank are parties to that certain Loan and Security
Agreement dated as of July 3, 1996, as amended (the "Agreement"). The parties
desire to amend the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. The definition of "Committed Line" under Section 1.1 is amended
to read "Three Million Dollars ($3,000,000)." The definition of "Maturity Date"
under Section 1.1 is amended to read "April 10, 2001". A new defined term is
added to Section 1.1, as follows: "Revolving Maturity Date" means "April 10,
1998".
2. The first paragraph of Section 2.1 is amended to read as
follows:
2.1 Advances. Subject to and upon the terms and conditions
of this Agreement, Bank agrees to make Advances to Borrower in an aggregate
amount not to exceed the lesser of (i) the Committed Line minus the face amount
of all outstanding Letters of Credit (including drawn but unreimbursed Letters
of Credit) minus the Exchange Reserve minus the aggregate outstanding Equipment
Advances or (ii) the Borrowing Base minus the face amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit) minus the
Exchange Reserve minus the aggregate outstanding Equipment Advances. For
purposes of this Agreement, "Borrowing Base" shall mean an amount equal to (i)
eighty percent (80%) of Eligible Accounts, including accounts owing by account
debtors that do not have their principal place of business in the United States
but that are otherwise Eligible Accounts in an aggregate amount not to exceed
the lesser of Five Hundred Thousand Dollars ($500,000) or twenty-five percent
(25%) of the Borrowing Base plus (ii) fifty percent (50%) of the book value of
Borrower's Inventory that is approved by Bank (not to exceed $250,000 or
twenty-five percent (25%) of "Backlog", as defined below.) "Backlog" means the
backlog reported by Borrower and accepted by Bank from time to time. Subject to
the terms and conditions of this Agreement, amounts borrowed pursuant to this
Section 2.1 may be repaid and reborrowed at any time prior to the Revolving
Maturity Date.
3. The last paragraph of Section 2.1 is amended to read as follows:
The Revolving Facility shall terminate on the Revolving Maturity
Date, at which time all Advances under this Section 2.1 shall be
immediately due and payable.
4. Section 2.1.4 is added to the Agreement, as follows:
2.1.4 Equipment Advances
(a) At any time from April 11, 1997 through April
10, 1998 (the "Equipment Availability Date"), Borrower may from time to
time request advances (each an "Equipment Advance" and, collectively,
the "Equipment Advances") from Bank in an aggregate principal amount not
to exceed the lesser of be Committed Line or the Borrowing Base, in
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each case minus the face amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit) minus the Exchange
Reserve minus the aggregate outstanding Advances; provided the aggregate
Equipment Advances shall not exceed $1,000,000. The Equipment Advances
shall be used to purchase Equipment approved from time to time by Bank
(which shall in any case have been purchased not less than 120 days
prior to the date of this Amendment) and shall not exceed One Hundred
Percent (100%) of the cost of such Equipment, excluding installation
expense, freight discounts, warranty charges, taxes and other soft
costs. Not more than twenty percent (20%) of any Equipment Advance may
be used to finance software licenses.
(b) Interest shall accrue from the date of each
Equipment Advance at a floating rate equal to the Prime Rate plus
One-half Percent (0.50%) per annum, and shall be payable an the last day
of each month from the date of such Equipment Advance through the
Equipment Availability Date. Subject to compliance with Sections 6.8 and
6.11, the Equipment Advance or Equipment Advances that are outstanding
on the Equipment Availability Date will be payable in thirty-six (36)
equal monthly installments of principal, plus accrued interest, on the
third day of each month beginning on May 10, 1998. The entire principal
balance and all accrued but unpaid interest shall be due and payable on
the Maturity Date.
(c) When Borrower desires to obtain an Equipment
Advance, Borrower shall notify Bank (which notice shall be irrevocable)
by facsimile transmission received no later than 3:00 p.m. California
time one (1) Business Day before the day on which the Equipment Advance
is to be made. Such notice shall be in substantially the form of Exhibit
B. The notice shall be signed by a Responsible Officer and include a
copy of the invoice for the Equipment to be financed.
5. Section 2.3(a) is amended to read as follows:
(a) Interest Rate. Except as set forth in Section
2.3(b), any Advances or Equipment Advances shall bear interest, on the
average Daily Balance, at a rate equal to one-half (0.5) percentage
point above the Prime Rate.
6. Sections 6.7, 6.8 and 6.9 are amended, and Sections 6.10 and
6.11 are added, to read as follows:
6.7 Quick Ratio. Borrower shall maintain as of the last day
of each month a ratio of Quick Assets to Current Liabilities, excluding deferred
revenue, of at least 1.0 to 1.0.
6.8 Debt-Tangible Net Worth. Borrower shall maintain as of
the last day of each month a ratio of Total Liabilities, excluding deferred
revenue, to Tangible Net Worth of not more than 2.0 to 1.0; provided that, as a
condition to requesting an Equipment Advance and at all times when an Equipment
Advance is outstanding, Borrower shall maintain, as of the last day of each
month, a ratio of Total Liabilities, excluding deferred revenue, to Tangible Net
Worth of not more than 1.5 to 1.0.
6.9 Tangible Net Worth. Borrower shall maintain as of the
last day of each month a Tangible Net Worth of not less than One Million Five
Hundred Thousand Dollars ($1,500,000).
6.10 Profitability. Borrower shall not suffer a loss in
excess of $500,000 for the fiscal quarter ending March 31, 1997 or a loss in
excess of $150,000 for the fiscal quarter ending June 30, 1997. Borrower shall
be profitable for each fiscal quarter thereafter.
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6.11 Minimum Liquidity/Debt Service Coverage. Subject to the
remainder of this Section, Borrower shall maintain, as of the last day of each
calendar month, a ratio of (a) the sum of (i) cash and cash equivalents plus
(ii) the amount then available to be borrowed (and not yet borrowed) under the
Revolving Facility to (b) outstanding Equipment Advances of at least 2.0 to 1.0.
Notwithstanding the foregoing, from and after the time Borrower achieves a
Debt-Service Coverage for three consecutive calendar months of at least 1.5 to
1.0, Borrower shall not be subject to the minimum Liquidity set forth above.
"Debt Service Coverage" means a ratio of (a) the sum of earnings after tax plus
interest and non-cash expenses (i.e., depreciation and amortization) divided by
(b) the sum of (i) current portion of long term debt and capitalized leases plus
(ii) interest, measured on a rolling three month basis. Notwithstanding the
foregoing, Borrower's failure to comply with this Section 6.11 or with the
second clause of Section 6.8 shall not be an Event of Default, but shall cause
the Equipment Advances that would otherwise be due on the amortized basis set
forth in Section 2.1.4 to be deemed "Advances" under Section 2.1 subject to the
Borrowing Base and to Section 2.2.
7. The Borrowing Base Certificate and Compliance Certificate to be
delivered after the date of this Amendment shall be in substantially the form of
Exhibit C and Exhibit D, respectively.
8. Unless otherwise defined, all capitalized terms in this
Amendment shall be as defined in the Agreement. Except as amended, the Agreement
remains in full force and effect.
9. Borrower represents and warrants that the Representations and
Warranties contained in the Agreement are true and correct as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.
10. This Amendment may be executed in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one instrument.
11. As a condition to the effectiveness of this Amendment, Borrower
shall pay a Facility Fee in an amount equal to Seven Thousand Five Hundred
Dollars ($7,500), payable upon the date hereof, plus all Bank Expenses incurred
in connection with the preparation of this Amendment, and shall deliver to Bank
a warrant to purchase stock in a form reasonably acceptable to Bank.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the first date above written.
FIRST VIRTUAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: COO/CFO
SILICON VALLEY BANK
By: /s/ ▇. ▇▇▇▇▇▇
Title: SVP
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EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: First Virtual Corporation Lender: Silicon Valley Bank
Commitment Amount: $3,000,000
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of _____ $ ________
2. Additions (please explain on reverse) $ ________
3. TOTAL ACCOUNTS RECEIVABLE $ ________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $ ________
5. Balance of 50% over 90 day accounts $ ________
6. Concentration Limits $ ________
7. Foreign Accounts $ ________
8. Governmental Accounts $ ________
9. Contra Accounts $ ________
10. Promotion or Demo Accounts $ ________
11. Intercompany/Employee Accounts $ ________
12. Other (please explain on reverse) $ ________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $ ________
14. Eligible Accounts (#3 minus #13) $ ________
15. LOAN VALUE OF ACCOUNTS (80% of #14) $ ________
INVENTORY
16. Inventory Book Value as of ___________ $ ________
17. Loan Value Of Inventory (lesser of 25% of #16 or $250,000) $ ________
18. Backlog $ ________
19. Loan Value of Backlog (25% of #18) $ ________
20. LOAN VALUE OF INVENTORY AND BACKLOG (lesser of #17 or #19) $ ________
BALANCES
21. Maximum Loan Amount $3,000,000
22. Total Funds Available [Lesser of #21 or (#15 plus #20)] $ ________
23. Present balance owing on Line of Credit $ ________
24. Outstanding under Sublimits ( ) $ ________
25. RESERVE POSITION (#22 minus #23 and #24) $ ________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS: BANK USE ONLY
Rec'd By: ____________
Auth. Signer
FIRST VIRTUAL CORPORATION
Date: ________________
Verified: ____________
Auth. Signer
By: _____________________________ Date: ________________
Authorized Signer ______________________
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EXHIBIT D
FORM OF COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: FIRST VIRTUAL CORPORATION
The undersigned authorized officer of FIRST VIRTUAL CORPORATION hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending _____________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 150 days Yes No
A/R & A/P Agings Monthly within 15 days (1) Yes No
A/R Audit Initial and Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain and on a Monthly Basis:
Minimum Quick Ratio 1.0:1.0 ____:1.0 Yes No
Liquidity (2) 2.0:1.0 ____:1.0 Yes No
Tangible Net Worth $1,500,000 $ ______ Yes No
Debt/Tangible Net Worth 2.0:1.0 (4) ____:1.0 Yes No
Maintain on a Quarterly Basis:
Profitability $1 (3) Yes No
COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
(1) Only when Obligations outstanding Received by: ___________
(2) Converts to Debt Service Coverage Ratio of AUTHORIZED SIGNER
1.5 to 1.0 upon terms specified in Loan Agreement
(3) Loss at 3/31/97 < $500,000; loss at 6/30/97 < $150,000 Date: __________________
(4) Reduces to 1.5:1.0 when Equipment Advance(s) outstanding Verified: ______________
AUTHORIZED SIGNER
Sincerely, Date: _________________
______________________ Compliance Status: Yes No
SIGNATURE
______________________
TITLE
______________________
DATE
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