EXHIBIT 10.27
PHOENIX TECHNOLOGIES LTD.
LOAN AGREEMENT
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TABLE OF CONTENTS
PAGE
1. DEFINITIONS AND CONSTRUCTION............................................ 1
1.1 Definitions........................................................ 1
1.2 Accounting Terms................................................... 5
2. LOAN AND TERMS OF PAYMENT............................................... 5
2.1 Advances........................................................... 5
2.2 LIBOR Option....................................................... 7
2.3 Interest Rates, Payments, and Calculations......................... 7
2.4 Crediting Payments................................................. 8
2.5 Fees............................................................... 8
2.6 Additional Costs................................................... 8
2.7 Term............................................................... 8
3. CONDITIONS OF LOANS..................................................... 9
3.1 Conditions Precedent to Initial Advance............................ 9
3.2 Conditions Precedent to all Advances............................... 9
4. REPRESENTATIONS AND WARRANTIES.......................................... 9
4.1 Due Organization and Qualification................................. 9
4.2 Due Authorization; No Conflict..................................... 9
4.3 Name; Location of Chief Executive Office........................... 10
4.4 Litigation......................................................... 10
4.5 No Material Adverse Change in Financial Statements................. 10
4.6 Solvency........................................................... 10
4.7 Regulatory Compliance.............................................. 10
4.8 Environmental Condition............................................ 10
4.9 Taxes.............................................................. 10
4.10 Subsidiaries....................................................... 10
4.11 Government Consents................................................ 10
4.12 Full Disclosure.................................................... 11
5. AFFIRMATIVE COVENANTS................................................... 11
5.1 Good Standing...................................................... 11
5.2 Government Compliance.............................................. 11
5.3 Financial Statements, Reports, Certificates........................ 11
5.4 Taxes.............................................................. 11
5.5 Insurance.......................................................... 12
5.6 Primary Operating Account.......................................... 12
5.7 Quick Ratio........................................................ 12
5.8 Debt-Net Worth Ratio............................................... 12
5.9 Tangible Net Worth................................................. 12
5.10 Profitability...................................................... 12
5.11 Further Assurances................................................. 12
6. NEGATIVE COVENANTS...................................................... 12
6.1 Dispositions....................................................... 12
6.2 Change in Business................................................. 12
6.3 Mergers or Acquisitions............................................ 12
6.4 Indebtedness....................................................... 13
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6.5 Encumbrances....................................................... 13
6.6 Distributions...................................................... 13
6.7 Investments........................................................ 13
6.8 Transactions with Affiliates....................................... 13
6.9 Subordinated Debt.................................................. 13
6.10 Compliance......................................................... 13
7. EVENTS OF DEFAULT....................................................... 13
7.1 Payment Default.................................................... 13
7.2 Covenant Default................................................... 13
7.3 Material Adverse Change............................................ 14
7.4 Attachment......................................................... 14
7.5 Insolvency......................................................... 14
7.6 Other Agreements................................................... 14
7.7 Subordinated Debt.................................................. 14
7.8 Judgments.......................................................... 14
7.9 Misrepresentations................................................. 14
8. BANK'S RIGHTS AND REMEDIES.............................................. 14
8.1 Rights and Remedies................................................ 14
8.2 Bank Expenses...................................................... 15
8.3 Remedies Cumulative................................................ 15
8.4 Demand; Protest.................................................... 15
9. NOTICES................................................................. 15
10. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.............................. 16
11. GENERAL PROVISIONS...................................................... 16
11.1 Successors and Assigns............................................. 16
11.2 Indemnification.................................................... 16
11.3 Time of Essence.................................................... 16
11.4 Severability of Provisions......................................... 17
11.5 Amendments in Writing, Integration................................. 17
11.6 Counterparts....................................................... 17
11.7 Survival........................................................... 17
11.8 Confidentiality.................................................... 17
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This LOAN AGREEMENT is entered into as of February 29, 1996, by and between
SILICON VALLEY BANK ("Bank") and PHOENIX TECHNOLOGIES LTD. ("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:
DEFINITIONS AND CONSTRUCTION
DEFINITIONS. As used in this Agreement, the following terms
shall have the following definitions:
"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 the
preparation, negotiation, administration, and enforcement of the Loan Documents,
and Bank's reasonable attorneys' fees and expenses incurred in amending,
enforcing or defending the Loan Documents, whether or not suit is brought.
"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.
"Committed Line" means Ten Million Dollars ($10,000,000).
"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 the 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.
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"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, 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.
"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, 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.
"LIBOR Supplement" means that certain LIBOR Supplement to
Agreement between Borrower and Bank of even date herewith.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
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"Loan Documents" means, collectively, this Agreement, the LIBOR
Supplement, 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 February 28, 1997.
"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 to
Bank in writing;
(c) Indebtedness secured by Permitted Liens;
(d) Capital leases or indebtedness incurred solely to purchase
equipment or to finance improvements on real property or leaseholds, in each
case which is secured in accordance with clause (c) of "Permitted Liens" below
and is not in excess of the lesser of the purchase price of such equipment or
the cost of such improvements, as the case may be, or the fair market value of
such equipment or the price of the contract for such improvements, as the case
may be, on the date of acquisition or the date of such contract, as the case may
be;
(e) Subordinated Debt; and
(f) Indebtedness to trade creditors incurred in the ordinary
course of business.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed to Bank
in writing; and
(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 of any corporation 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, eurodollar time deposits, commercial paper,
repurchase agreements or other obligations of the Bank or of any other bank
organized or licensed to conduct a banking business under the laws of the United
States or any State thereof having capital, surplus and undivided profits of not
less than One Hundred Million Dollars ($100,000,000) in each case maturing no
more than one (1) year from the date of investment therein issued by Bank;
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(c) Investments in stock or obligations issued to the Borrower
in settlement of claims against others by reason of an event of bankruptcy or a
composition or the readjustment of debt or a reorganization of any debtor of the
Borrower;
(d) Investments in Subsidiaries in an aggregate amount not to
exceed Five Million Dollars ($5,000,000) in any fiscal year of the Borrower;
(e) Investments consisting of loans or advances to officers and
employees of the Borrower and its Subsidiaries, not exceeding Two Hundred
Thousand Dollars ($200,000) in aggregate principal amount in any individual case
or One Million Dollars ($1,000,000) in aggregate principal amount at any one
time outstanding; and
(f) Investments consisting of repurchase of the common stock of
the Borrower in accordance with stock repurchase programs approved by Borrower's
Board of Directors from time to time and in compliance with all federal and
state securities laws.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed to Bank
in writing;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings;
(c) 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;
(d) Liens of carriers, warehousemen, mechanics, materialmen or
similar Liens imposed by law incurred in the ordinary course of business in
respect of obligations not overdue or being contested in good faith and by
proper proceedings;
(e) Liens in connection with workers' compensation,
unemployment, insurance and other types of social security, if incurred in the
ordinary course of business;
(f) Liens resulting from security deposits made in the ordinary
course of business;
(g) 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 the 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.
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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.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank,
which acceptance will not be unreasonably withheld or delayed (and identified as
Subordinated Debt by Borrower and Bank).
"Subsidiary" means any corporation, limited liability company,
trust or partnership in which the Borrower, either directly or through an
Affiliate, as of the time any determination is being made (i) owns any general
partnership interest or (ii) owns more than 50% of the ordinary voting power to
elect the Board of Directors, managers or trustees of the entity.
"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.
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.
LOAN AND TERMS OF PAYMENT
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 Committed Line minus the face amount of all outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit). 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 during the term of this
Agreement.
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 made. Each such notification shall
be promptly confirmed by a Payment/Advance Form in substantially the form of
EXHIBIT A hereto or a LIBOR Rate Advance Form as attached to the LIBOR
Supplement. Bank is authorized to make Advances under this Agreement or under
the LIBOR Supplement, 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.
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The Revolving Facility shall terminate on the Maturity Date, at which time
all Advances under this Section 2.1 and other amounts due under this Agreement
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 Committed Line minus
(ii) the then outstanding principal balance of the Advances and the face amount
of outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit); provided that the face amount of outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit) shall not in any case
exceed Ten Million Dollars ($10,000,000). Each such Letter of Credit shall have
an expiry date no later than the Maturity Date. 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.
(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 made 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 ten percent (10%) 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.
2.1.3 FOREIGN EXCHANGE CONTRACT; FOREIGN EXCHANGE
SETTLEMENTS.
(a) Subject to the terms of this Agreement, Borrower may
utilize up to Ten Million Dollars ($10,000,000) for foreign exchange contracts
(the "Exchange Contracts"), pursuant to which Bank shall sell to or purchase
from Borrower foreign currency on a spot or future basis. All Exchange
Contracts must provide for delivery of settlement on or before the Maturity
Date. The limit available at any time shall be reduced by the following amounts
(the "Foreign Exchange Reserve") on each day (the "Determination Date"): (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 foreign Exchange Reserve for 100% of the
gross amount of any Exchange Contract, 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
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Committed Line and Borrower does not have available funds in its bank account
to satisfy the Foreign 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 Ten Million Dollars ($10,000,000)
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 Ten Million
Dollars ($10,000,000).
(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.
LIBOR OPTION. Borrower shall be entitled to request Advances in
accordance with the LIBOR Supplement, which shall govern all LIBOR Advances, as
defined therein.
INTEREST RATES, PAYMENTS, AND CALCULATIONS.
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
the Prime Rate or the rate specified in the LIBOR Supplement.
DEFAULT RATE. All 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.
PAYMENTS. Interest hereunder shall be due and payable on
the twenty-seventh calendar day of each month during the term hereof. Bank
shall, at its option, charge such interest, all Bank Expenses, and all Periodic
Payments when due and payable against any of Borrower's deposit accounts, or as
an Advance against the Committed Line in which case such Advance 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.
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.
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 an 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 3:00 p.m. 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
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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.
FEES. Borrower shall pay to Bank the following:
FACILITY FEE. A Facility Fee equal to Four Thousand Five
Hundred Dollars ($4,500), which fee shall be due on the Closing Date and shall
be fully earned and nonrefundable;
BANK EXPENSES. Upon the date hereof, all Bank Expenses
incurred through the Closing Date, including reasonable attorneys' fees and
expenses up to Two Thousand Dollars ($2,000), incurred in connection with the
preparation and negotiation of this Agreement, and after the date hereof, all
Bank Expenses upon delivery to Borrower of an invoice therefor.
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:
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);
imposes, modifies or deems 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
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 with 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 the same relate to Obligations under this Agreement, 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.
TERM. This Agreement shall become effective on the Closing Date
and, subject to Section 11.7, 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.
CONDITIONS OF LOANS
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:
this Agreement;
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a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
the LIBOR Supplement;
payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof; and
such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.
CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of Bank to
make each Advance, including the initial Advance, is further subject to the
following conditions:
timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
the representations and warranties contained in Section 4
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 though 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).
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
DUE ORGANIZATION AND QUALIFICATION. Borrower and each Subsidiary
is a 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, except where the failure to be so
qualified could not reasonably be expected to have a Material Adverse Effect.
DUE AUTHORIZATION; NO CONFLICT. The execution, delivery, and
performance of the Loan Documents are within 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.
NAME; LOCATION OF CHIEF EXECUTIVE OFFICE. 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.
LITIGATION. 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. Borrower does
not have knowledge of any such pending or threatened actions or proceedings.
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
9
Borrower's consolidated results of operations for the period then ended. There
has not 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.
SOLVENCY. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.
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.
ENVIRONMENTAL CONDITION. None of Borrower's or any Subsidiary's
properties or assets has ever been used by Borrower or any Subsidiary or, to
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 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.
TAXES. Borrower and each Subsidiary have timely filed or caused
to be timely filed all tax returns required to be filed, and have paid, or have
made adequate provision for the payment of, all taxes reflected therein.
SUBSIDIARIES. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
GOVERNMENT CONSENTS. Borrower and each Subsidiary have 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 their respective businesses as currently
conducted.
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.
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:
10
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.
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.
FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall
deliver to Bank: (a) as soon as available, but in any event within fifty (50)
days after the end of each fiscal quarter, 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 ninety-five (95) 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 Ernst & Young, L.L.P. or
another 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 Borrower
reasonably expects could result in damages or costs to Borrower or any
Subsidiary of Five Hundred Thousand Dollars ($500,000) or more; and (e) such
budgets, sales projections, operating plans or other financial information as
Bank may reasonably request from time to time.
Borrower shall deliver to Bank, within thirty (30) days of the last day of
each fiscal quarter, a Compliance Certificate signed by a Responsible Officer in
substantially the form of EXHIBIT B hereto.
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 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.
INSURANCE. Borrower, at its expense, shall keep its business
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.
PRIMARY OPERATING ACCOUNT. Borrower shall maintain its primary
operating account with Bank.
11
QUICK RATIO. Borrower shall maintain, as of the last day of each
fiscal quarter, a ratio of Quick Assets to Current Liabilities (excluding
deferred revenues) of at least 1.75 to 1.0.
DEBT-NET WORTH RATIO. Borrower shall maintain, as of the last
day of each fiscal quarter, a ratio of Total Liabilities (excluding deferred
revenues) less Subordinated Debt to Tangible Net Worth plus Subordinated Debt of
not more than 0.75 to 1.0.
TANGIBLE NET WORTH. Borrower shall maintain, as of the last day
of each fiscal quarter, a Tangible Net Worth of not less than Thirty-two Million
Dollars ($32,000,000).
PROFITABILITY. Borrower shall not suffer a loss from operations
in any fiscal quarter in excess of Five Hundred Thousand Dollars ($500,000).
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.
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:
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 exclusive or
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;
(iv) Transfers (whether in any one transaction or series of related
transactions) of assets with a book value at the time of such transaction of
less than Two Hundred Thousand Dollars ($200,000).
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). Borrower will not, without thirty (30) days prior
written notification to Bank, relocate its chief executive office.
Notwithstanding any provision of this Agreement to the contrary, Borrower may
dissolve Phoenix Computer Products, Inc., Phoenix Computer Products Corporation
and Speed 4400 Limited, which are three wholly owned Subsidiaries that are not
conducting business as of the date hereof.
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 where the
aggregate consideration paid in any fiscal year of the mergers, consolidations
and acquisitions exceeds Ten Million Dollars ($10,000,000), other than Permitted
Investments.
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.
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 receivable, or permit any of
its Subsidiaries so to do, except for Permitted Liens.
12
DISTRIBUTIONS. Pay any dividends or make any other distribution
or payment on account of or in redemption, retirement or purchase of any capital
stock, other than Permitted Investments.
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.
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.
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.
COMPLIANCE. Become an "investment company" controlled by an
"investment company," within 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 permit any of its
Subsidiaries to do any of the foregoing.
EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
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;
COVENANT DEFAULT. If Borrower fails to perform any obligation
under Sections 5.8, 5.9, 5.10 or 5.11 or violates any of the covenants contained
in Article 6 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);
MATERIAL ADVERSE CHANGE. If there occurs a Material Adverse
Effect;
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
13
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);
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 will be made prior to the dismissal of such Insolvency
Proceeding);
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;
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;
JUDGMENTS. If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least Two Hundred Fifty
Thousand Dollars ($250,000) 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
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.
BANK'S RIGHTS AND REMEDIES
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:
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 7.5 all Obligations shall become immediately due and payable without any
action by Bank);
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; and
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.
14
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 5.6 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. 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.
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 applicable law. 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.
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.
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: Phoenix Technologies Ltd.
▇▇▇▇ ▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
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.
15
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.
GENERAL PROVISIONS
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.
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 this
Agreement or the transactions contemplated hereby (including without limitation
reasonable attorneys fees and expenses), except for losses caused by Bank's
gross negligence or willful misconduct. Bank shall give Borrower prompt notice
of the commencement of any proceeding which may give rise to indemnity pursuant
to this section. Borrower shall have the right to control the defense of any
such proceeding and to select the legal counsel to defend any such proceeding;
provided however, that if such legal counsel determines in good faith that a
conflict of interest exists then Banks shall be entitled to engage additional
legal counsel at Borrower's expense. Bank shall cooperate with Borrower in the
defense of any claim or proceeding. The Borrower will not settle any claim or
demand without the prior consent of the Bank, which will not be unreasonably
withheld or delayed.
TIME OF ESSENCE. Time is of the essence for the performance of
all obligations set forth in this Agreement.
SEVERABILITY 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.
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.
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
16
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement.
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 11.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
CONFIDENTIALITY. 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 Advances, 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, provided that Bank gives Borrower prior notice
of any disclosure in sufficient time such that Borrower may seek a protective
order restricting or prohibiting disclosure, (iv) as may be required in
connection with the examination, audit or similar investigation of Bank and
(v) as Bank may determine in exercising its remedies under this Agreement.
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.
PHOENIX TECHNOLOGIES LTD.
By:
------------------------------------
Title:
---------------------------------
SILICON VALLEY BANK
By:
------------------------------------
Title:
---------------------------------
17
EXHIBIT A
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., CALIFORNIA TIME
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 Loan
Payment/Advance Form; 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)
______________________________________________________________________________
18
EXHIBIT B
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: PHOENIX TECHNOLOGIES LTD.
The undersigned authorized officer of Phoenix Technologies Ltd. hereby
certifies that in accordance with the terms and conditions of the Loan
Agreement between Borrower and Bank (the "Agreement"), except as indicated in
an attachment hereto, (i) Borrower is in complete compliance for the period
ended ___________________ 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
Quarterly financial statements Quarterly within 50 days Yes No
Annual (CPA Audited) FYE within 95 days Yes
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
Maintain on a Quarterly Basis:
Minimum Quick Ratio* 1.75:1.0 _____:1.0 Yes
Minimum Tangible Net Worth $32,000,000 $________ Yes
Maximum Debt/Tangible Net
Worth* 0.75:1.0 _____:1.0 Yes
Profitability: Quarterly ** $________ Yes
* excluding deferred revenues
** no quarterly loss from operations may exceed $500,000
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__________________________________________
COMMENTS REGARDING EXCEPTIONS: BANK USE ONLY
See Attached.
Received by: _____________________________
AUTHORIZED SIGNER
Sincerely,
Date: ____________________________________
_____________________________
SIGNATURE Verified: ________________________________
AUTHORIZED SIGNER
_____________________________
TITLE Date: ____________________________________
_____________________________ Compliance Status: Yes No
DATE __________________________________________
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