Exhibit 10.(u)
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Agreement") dated as of July 24, 2002, between SILICON VALLEY BANK, a
California chartered bank, with its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and with a loan production office located
at One ▇▇▇▇▇▇ Executive Park, Suite 200, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, doing business under the name "Silicon Valley East"
("Bank") and LTX CORPORATION, a Massachusetts corporation with its chief
executive office located at LTX Park at University Avenue, Westwood,
Massachusetts 02090 ("Borrower"), provides the terms on which Bank shall lend to
Borrower and Borrower shall repay Bank. The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document. Capitalized terms in this Agreement
shall have the meanings set forth in Section 13.
2 LOAN AND TERMS OF PAYMENT
2.1 Promise to Pay. Borrower hereby unconditionally promises to pay
Bank the unpaid principal amount of all Credit Extensions and interest on the
unpaid principal amount of the Credit Extensions as and when due in accordance
with this Agreement.
2.1.1 Revolving Advances.
(a) Availability. Bank shall make Advances not exceeding (i) the
Committed Revolving Line minus (ii) the amount of all outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit), minus (iii) the FX
Reserve, and minus (iv) the aggregate outstanding Advances hereunder. Amounts
borrowed under this Section may be repaid and reborrowed during the term of this
Agreement.
(b) Borrowing Procedure. To obtain an Advance, Borrower must notify
Bank by facsimile or telephone by 3:00 p.m. Eastern time on the Business Day the
Advance is to be made. If such notification is by telephone, Borrower must
promptly confirm the notification by delivering to Bank a completed
Payment/Advance Form in the form attached as Exhibit B. Bank shall credit
Advances to Borrower's deposit account. Bank may make Advances under this
Agreement based on instructions from a Responsible Officer or his or her
designee or without instructions if the Advances are necessary to meet
Obligations which have become due. Bank may rely on any telephone notice given
by a person whom Bank believes is a Responsible Officer or designee. Borrower
shall indemnify Bank for any loss Bank suffers due to such reliance.
(c) Termination; Repayment. The Committed Revolving Line terminates
on the Revolving Maturity Date, when the principal amount of all Advances and
the unpaid interest thereon, shall be immediately due and payable.
2.1.2 Letters of Credit.
(a) Bank shall issue or have issued Letters of Credit for Borrower's
account not exceeding (i) the Committed Revolving Line minus (ii) the
outstanding principal balance of any Advances, minus (iii) the amount of all
Letters of Credit (including drawn but unreimbursed Letters of Credit), plus an
amount equal to any Letter of Credit Reserves. The face amount of outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit and any
Letter of Credit Reserve) may not exceed $10,000,000.00. Each Letter of Credit
shall have an expiry date no later than 180 days after the Revolving Maturity
Date provided Borrower's Letter of Credit reimbursement obligation shall be
secured by cash on terms acceptable to Bank on and after (i) the Revolving
Maturity Date if the term of this Agreement is not extended by Bank, or (ii) the
occurrence of an Event of Default hereunder. All 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 standard Application and Letter of Credit Agreement. Borrower
agrees to execute any further documentation in connection with the Letters of
Credit as Bank may reasonably request.
(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, protect, 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.
(c) 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.
(d) Upon the issuance of any letter of credit payable in a currency
other than United States Dollars, Bank shall create a reserve (the "Letter of
Credit Reserve") under the Committed Revolving 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 Revolving 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 Sublimit. If there is availability under the
Committed Revolving Line, then Borrower may enter in foreign exchange forward
contracts with the Bank under which Borrower commits to purchase from or sell to
Bank a set amount of foreign currency more than one business day after the
contract date (the "FX Forward Contract"). Bank shall subtract 10% of each
outstanding FX Forward Contract from the foreign exchange sublimit which is a
maximum of $5,000,000 (the "FX Reserve"). The total FX Forward Contracts at any
one time may not exceed 10 times the amount of the FX Reserve. Bank may
terminate the FX Forward Contracts if an Event of Default occurs.
2.1.4 Term Loan.
(a) Bank shall advance, on behalf of Borrower, an amount equal to
the Term Loan, on or before ten (10) days from the Closing Date.
(b) Borrower shall pay (a) forty-eight (48) equal installments of
principal each in the amount of $104,166.67 plus (b) monthly payments of
interest (the "Term Loan Payment"). Each Term Loan Payment is payable on the
Payment Date of each month during the term of the Term Loan. Borrower's final
Term Loan Payment, due on Term Loan Maturity Date, shall include all outstanding
Term Loan principal and accrued interest.
2.1.5 Undisbursed Credit Extensions. The Bank's obligation to lend the
undisbursed portion of the Credit Extensions shall terminate if there has been a
material adverse change in the general affairs, management, results of
operation, condition (financial or otherwise) or the prospects of Borrower,
whether or not arising from transactions in the ordinary course of business, or
there has been any material adverse deviation by Borrower from the most recent
business plan of Borrower presented to and accepted by Bank prior to the
execution of this Agreement.
2.2 Interest Rate; Payments.
(a) Interest Rate. The principal amounts outstanding hereunder,
including all amounts outstanding under the Committed Revolving Line and the
Term Loan, shall accrue interest at a per annum rate equal to the Bank's Prime
Rate. After an Event of Default, Obligations shall bear interest at three
percent (3.0%) above the rate effective immediately before the Event of Default.
The applicable interest rate hereunder shall increase or decrease when the Prime
Rate changes. Interest is computed on the basis of a 360 day year for the actual
number of days elapsed.
2
(b) Payments. Interest is payable on the Payment Date of each month.
Bank may debit any of Borrower's deposit accounts including Account Number
__________ for principal and interest payments or any amounts Borrower owes
Bank. Bank shall promptly notify Borrower when it debits Borrower's accounts.
These debits are not a set-off. Payments received after 12:00 noon Eastern time
are considered received at the opening of business on the next Business Day.
When a payment is due on a day that is not a Business Day, the payment is due
the next Business Day and additional fees or interest, as applicable, shall
continue to accrue.
2.3 Fees. Borrower shall pay to Bank:
(a) Revolving Facility Fee. A fully earned, non-refundable facility
fee of $70,312.00 due on the Closing Date;
(b) Letter of Credit Fee. The Borrower shall pay the Bank's
customary fees and expenses for the issuance of Letters of Credit, including,
without limitation, a Letter of Credit Fee of forty basis points (0.40%) per
annum of the face amount of each Letter of Credit issued, upon the issuance or
renewal of such Letter of Credit by the Bank; and
(c) Bank Expenses. All Bank Expenses (including reasonable
attorneys' fees and expenses incurred through and after the Closing Date) when
due.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension 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 Clerk of Borrower with respect to articles,
bylaws, incumbency and resolutions authorizing the execution and delivery of
this Agreement;
(c) payment of the fees and Bank Expenses then due specified in
Section 2.4 hereof;
(d) Certificate of Good Standing/Legal Existence; and
(e) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. Bank's
obligations to make each Credit Extension, including the initial Credit
Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 shall be
materially true on the date of the Payment/Advance Form and on the effective
date of each Credit Extension and no Event of Default shall have occurred and be
continuing, or result from the Credit Extension. Each Credit Extension is
Borrower's representation and warranty on that date that the representations and
warranties in Section 5 remain true.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants Bank, to
secure the payment and performance in full of all of the Obligations and the
performance of each of Borrower's duties under the Loan Documents, a
3
continuing security interest in, and pledges and assigns to the Bank, the
Collateral, wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof. Borrower warrants and represents
that the security interest granted herein shall be a first priority security
interest in the Collateral. Bank may place a "hold" on any deposit account
pledged as Collateral.
Except as noted on the Perfection Certificate, Borrower is not a party to, nor
is bound by, any license or other agreement with respect to which the Borrower
is the licensee that prohibits or otherwise restricts Borrower from granting a
security interest in Borrower's interest in such license or agreement or any
other property. Without prior consent from Bank, Borrower shall not enter into,
or become bound by, any such license or agreement which is reasonably likely to
have a material impact on Borrower's business or financial condition. Borrower
shall take such steps as Bank requests to obtain the consent of, or waiver by,
any person whose consent or waiver is necessary for all such licenses or
contract rights to be deemed "Collateral" and for Bank to have a security
interest in it that might otherwise be restricted or prohibited by law or by the
terms of any such license or agreement, whether now existing or entered into in
the future.
Borrower agrees that any disposition of the Collateral in violation of this
Agreement, by either the Borrower or any other Person, shall be deemed to
violate the rights of the Bank under the Code. If the Agreement is terminated,
Bank's lien and security interest in the Collateral shall continue until
Borrower fully satisfies its Obligations. If Borrower shall at any time, acquire
a commercial tort claim, Borrower shall promptly notify Bank in a writing signed
by Borrower of the brief details thereof and grant to Bank in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
Bank.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Authorization. Borrower and each Subsidiary is
duly existing and in good standing in its state of formation and qualified and
licensed to do business in, and in good standing in, any state in which the
conduct of its business or its ownership of property requires that it be
qualified except where the failure to do so could not reasonably be expected to
cause a Material Adverse Change. In connection with this Agreement, the Borrower
delivered to the Bank a certificate signed by the Borrower and entitled
"Perfection Certificate". The Borrower represents and warrants to the Bank that:
(a) the Borrower's exact legal name is that indicated on the Perfection
Certificate and on the signature page hereof; and (b) the Borrower is an
organization of the type, and is organized in the jurisdiction, set forth in the
Perfection Certificate; and (c) the Perfection Certificate accurately sets forth
the Borrower's organizational identification number or accurately states that
the Borrower has none; and (d) the Perfection Certificate accurately sets forth
the Borrower's place of business, or, if more than one, its chief executive
office as well as the Borrower's mailing address if different, and (e) all other
information set forth on the Perfection Certificate pertaining to the Borrower
is accurate and complete. If the Borrower does not now have an organizational
identification number, but later obtains one, Borrower shall forthwith notify
the Bank of such organizational identification number.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's organizational documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which or by
which it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.
5.2 Collateral. Borrower has good title to the Collateral, free of
Liens except Permitted Liens. Borrower has no deposit account, other than the
deposit accounts with Bank and deposit accounts described in the Perfection
Certificate delivered to the Bank in connection herewith. The Accounts are bona
fide, existing obligations, and the service or property has been performed or
delivered to the account debtor or its agent for immediate shipment to and
unconditional acceptance by the account debtor. The Collateral is not in the
possession of any third party bailee (such as a warehouse); provided, however,
Borrower may keep up to $15,000,000 of Inventory with a third party bailee. In
the event that Borrower, after the date hereof, intends to store or otherwise
deliver any portion of the Collateral to a bailee, then Borrower will first
receive the written consent of Bank and such bailee must acknowledge in writing
that
4
the bailee is holding such Collateral for the benefit of Bank. All Inventory is
in all material respects of good and marketable quality, free from material
defects.
5.3 Litigation. Except as shown in the Perfection Certificate, there
are no actions or proceedings pending or, to the knowledge of Borrower's
Responsible Officers, threatened by or against Borrower or any Subsidiary in
which an adverse decision could reasonably be expected to cause a Material
Adverse Change.
5.4 No Material Deviation in Financial Statements. All consolidated
financial statements for Borrower and any Subsidiary delivered to Bank fairly
present in all material respects Borrower's consolidated financial condition and
Borrower's consolidated results of operations. There has not been any material
deterioration in Borrower's consolidated financial condition since the date of
the most recent financial statements submitted to Bank.
5.5 Solvency. Borrower is able to pay its debts (including trade debts)
as they mature.
5.6 Regulatory Compliance. Borrower is not an "investment company" or a
company "controlled" by an "investment company" under the Investment Company
Act. Borrower is not engaged as one of its important activities in extending
credit for margin stock (under Regulations T and U of the Federal Reserve Board
of Governors). Borrower has complied in all material respects with the Federal
Fair Labor Standards Act. Borrower has not violated any laws, ordinances or
rules, the violation of which could reasonably be expected to cause a Material
Adverse Change. None of Borrower's or any Subsidiary's properties or assets has
been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge,
by previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Borrower and each Subsidiary has
timely filed all required tax returns and paid, or made adequate provision to
pay, all material taxes, except those being contested in good faith with
adequate reserves under GAAP. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all government authorities that are necessary to
continue its business as currently conducted except where the failure to make
such declarations, notices or filings would not reasonably be expected to cause
a Material Adverse Change.
5.7 Subsidiaries. Except as disclosed in the Perfection Certificate,
Borrower does not own any stock, partnership interest or other equity securities
except for Permitted Investments.
5.8 Full Disclosure. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained in the certificates or
statements not misleading.
6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 Government Compliance. Borrower shall maintain its and all
Subsidiaries' legal existence and good standing in its jurisdiction of formation
and maintain qualification in each jurisdiction in which the failure to so
qualify would reasonably be expected to have a material adverse effect on
Borrower's business or operations. borrower shall comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, noncompliance with which could have a material adverse effect on
Borrower's business or operations or be expected to cause a Material Adverse
Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower shall deliver to Bank: (i) as soon as available, but
no later than forty five (45) days after the last day of each quarter, a company
prepared consolidated balance sheet and income statement covering Borrower's
consolidated operations during the period, in a form acceptable to Bank and
certified by a Responsible Officer: (ii) as soon as available, but no later than
ninety (90) days after the end of Borrower's fiscal year, audited consolidated
financial statements prepared under GAAP, consistently applied, together with an
unqualified opinion on
5
the financial statements from an independent certified public accounting firm
acceptable to Bank; (iii) within five (5) days of filing, copies of all
statements, reports and notices made available to Borrower's security holders or
to any holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K
filed with the Securities and Exchange Commission; (iv) a prompt report of any
legal actions pending or threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any Subsidiary of Five Hundred
Thousand Dollars ($500,000.00) or more; and (v) budgets, sales projections,
operating plans or other financial information Bank requests.
(b) Together with the quarterly and annual financial statements to be
delivered hereunder, Borrower shall deliver to Bank a Compliance
Certificate signed by a Responsible Officer in the form of Exhibit C.
6.3 Inventory. Borrower shall keep all Inventory in good and marketable
condition, free from material defects. Returns and allowances between Borrower
and its account debtors shall follow Borrower's customary practices as they
exist at the Closing Date.
6.4 Taxes. Borrower shall make, and cause each Subsidiary to make, timely
payment of all material federal, state, and local taxes or assessments (other
than taxes and assessments which Borrower is contesting in good faith, with
adequate reserves maintained in accordance with GAAP) and will deliver to Bank,
on demand, appropriate certificates attesting to such payments.
6.5 Insurance. Borrower shall keep its business and the Collateral insured
for risks and in amounts, standard for Borrower's industry, and as Bank may
reasonably request in Bank's reasonable discretion. Insurance policies shall be
in a form, with companies, and in amounts that are satisfactory to Bank. All
property policies shall have a lender's loss payable endorsement showing Bank as
an additional loss payee and all liability policies shall show the Bank as an
additional insured and all policies shall provide that the insurer must give
Bank at least twenty (20) days notice before canceling its policy. At Bank's
request, Borrower shall deliver certified copies of policies and evidence of all
premium payments. Proceeds payable under any policy shall, at Bank's option, be
payable to Bank on account of the Obligations. If Borrower fails to obtain
insurance as required under Section 6.5 or to pay any amount or furnish any
required proof of payment to third persons and the Bank, Bank may make all or
part of such payment or obtain such insurance policies required in Section 6.5,
and take any action under the policies Bank deems prudent.
6.6 Operating Account. Borrower shall have an operating account with Bank.
6.7 Financial Covenants. Borrower shall maintain as of the last day of each
quarter:
(a) Quick Ratio. A ratio of Quick Assets to Current Liabilities of at
least 1.50 to 1.0.
(b) Tangible Net Worth. A Tangible Net Worth of at least (i) Four
Hundred Million Dollars ($400,000,000.00) plus (ii) seventy five percent
(75%) of the sum of (A) the Borrower's net income earned, as determined in
accordance with GAAP, consistently applied, for each quarter and (B) all
net proceeds received by the Borrower as the result of any (1) issuance of
equity by the Borrower or (2) additional Subordinated Debt incurred by the
Borrower.
6.8 Further Assurances. Borrower shall execute any further instruments and
take further action as Bank reasonably requests to perfect or continue Bank's
security interest in the Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without the Bank's prior written
consent which shall not be unreasonably withheld.
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, except for Transfers (i) of Inventory
in the
6
ordinary course of business; (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; or (iii) of worn-out or obsolete Equipment.
7.2 Changes in Business, Ownership, Management or Business Locations.
Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses currently engaged in by Borrower or reasonably related thereto,
or have a material change in its senior management. Borrower shall not, without
at least thirty (30) days prior written notice to Bank: (i) relocate its chief
executive office, or add any new offices or business locations (unless such new
offices or business locations contain less than Fifty Thousand Dollars
($50,000.00) in Borrower's assets or property), or (ii) change its jurisdiction
of organization, or (iii) change its organizational structure or type, or (iv)
change its legal name, or (v) change any organizational number (if any) assigned
by its jurisdiction of organization.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person . Notwithstanding the foregoing, the
Borrower's Subsidiaries may merge or consolidate with other Subsidiaries of the
Borrower, provided that a Subsidiary of Borrower is the surviving legal entity.
7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness,
or permit any Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance. Create, incur, or allow any Lien on any of its property,
or assign or convey any right to receive income, including the sale of any
Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein. The Collateral may also be subject to Permitted Liens.
7.6 Distributions; Investments. (i) Directly or indirectly acquire or own
any Person, or make any Investment in any Person, other than Permitted
Investments, or permit any of its Subsidiaries to do so; or (ii) pay any
dividends or make any distribution or payment or (iii) redeem, retire or
purchase any capital stock, except for repurchases of stock from former
employees or directors of Borrower under the terms of applicable repurchase
agreements in an aggregate amount not to exceed $50,000.00 in the aggregate in
any fiscal year, provided that no Event of Default has occurred, is continuing
or would exist after giving effect to the repurchases.
7.7 Transactions with Affiliates. Directly or indirectly enter or permit
any material transaction with any Affiliate, except transactions that are in the
ordinary course of Borrower's business, upon fair and reasonable terms that are
no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-affiliated Person.
7.8 Subordinated Debt. Make or permit any payment on any Subordinated Debt,
except under the terms of the Subordinated Debt, or amend any provision in any
document relating to the Subordinated Debt, without Bank's prior written
consent.
7.9 Ratification of Negative Pledge Agreement. Borrower hereby ratifies,
confirms and reaffirms, all and singular, the terms and conditions of a certain
Negative Pledge Agreement dated as of April 21, 2001 between Borrower and Bank
regarding Borrower's Intellectual Property, and acknowledges, confirms and
agrees that said Negative Pledge Agreement shall remain in full force and effect
and all terms thereof are specifically incorporated herein by reference.
7.10 Compliance. Become an "investment company" or a company controlled by
an "investment company", under the Investment Company Act of 1940 or undertake
as one of its important activities extending credit to purchase or carry margin
stock, or use the proceeds of any Credit Extension for that purpose; fail to
meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change, or permit any of its Subsidiaries to do so.
7
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 Payment Default. Borrower fails to pay any of the Obligations within
three (3) days after their due date. During the additional period the failure to
cure the default is not an Event of Default (but no Credit Extension shall be
made during the cure period);
8.2 Covenant Default. Borrower does not perform any obligation in Section 6
or violates any covenant in Section 7 or does not perform or observe any other
material term, condition or covenant in this Agreement, any Loan Documents, or
in any agreement between Borrower and Bank and as to any default under a term,
condition or covenant that can be cured, has not cured the default within ten
(10) days after it occurs, or if the default cannot be cured within ten (10)
days or cannot be cured after Borrower's attempts in the ten (10) day period,
and the default may be cured within a reasonable time, then Borrower shall have
additional time, (of not more than thirty (30) days) to attempt to cure the
default. Grace periods provided under this section shall not apply, among other
things, to financial covenants or any other covenants that are required to be
satisfied, completed or tested by a date certain. During the additional period
the failure to cure the default is not an Event of Default (but no Credit
Extensions shall be made during the cure period);
8.3 Material Adverse Change. A Material Adverse Change occurs;
8.4 AR Purchase Agreement. A default occurs under the AR Purchase
Agreement;
8.5 Attachment. (i) Any material portion of Borrower's assets is attached,
seized, levied on, or comes into possession of a trustee or receiver and the
attachment, seizure or levy is not removed in ten (10) days; (ii) the service of
process upon the Borrower seeking to attach, by trustee or similar process any
funds of the Borrower on deposit with the Bank; (iii) Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business; (iv) a judgment or other claim becomes a Lien on a material portion of
Borrower's assets; or (v) a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within ten (10)
days after Borrower receives notice. These are not Events of Default if stayed
or if a bond is posted pending contest by Borrower (but no Credit Extensions
shall be made during the cure period);
8.6 Insolvency. (i) Borrower becomes insolvent; (ii) Borrower begins an
Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun against
Borrower and not dismissed or stayed within forty-five (45) days (but no Credit
Extensions shall be made before any Insolvency Proceeding is dismissed);
8.7 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 Five Hundred Thousand Dollars
($500,000.00) or that could result in a Material Adverse Change;
8.8 Judgments. If a final judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least Two Hundred Fifty
Thousand Dollars ($250,000.00) shall be rendered against Borrower and shall
remain unsatisfied and unstayed for a period of thirty (30) days (provided that
no Credit Extensions will be made prior to the satisfaction or stay of such
judgment);
8.9 Misrepresentations. If Borrower or any Person acting for Borrower makes
any material misrepresentation or material misstatement now or later in any
warranty or representation in this Agreement or in any writing delivered to Bank
or to induce Bank to enter this Agreement or any Loan Document.
9 BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. When an Event of Default occurs and continues Bank
may, without notice or demand, do any or all of the following:
8
(a) Declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.6 occurs all Obligations are
immediately due and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and
Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower
shall assemble the Collateral if Bank requests and make it available as
Bank designates. Bank may enter premises where the Collateral is located,
take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or
superior to its security interest and pay all expenses incurred. Borrower
grants Bank a license to enter and occupy any of its premises, without
charge, to exercise any of Bank's rights or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral; and
(g) Dispose of the Collateral according to the Code.
9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, to be effective upon the occurrence and during the
continuance of an Event of Default, to: (i) endorse Borrower's name on any
checks or other forms of payment or security; (ii) sign Borrower's name on any
invoice or ▇▇▇▇ of lading for any Account or drafts against account debtors;
(iii) settle and adjust disputes and claims about the Accounts directly with
account debtors, for amounts and on terms Bank determines reasonable; (iv) make,
settle, and adjust all claims under Borrower's insurance policies; and (v)
transfer the Collateral into the name of Bank or a third party as the Code
permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign
Borrower's name on any documents necessary to perfect or continue the perfection
of any security interest regardless of whether an Event of Default has occurred
until all Obligations have been satisfied in full and Bank is under no further
obligation to make Credit Extensions hereunder. Bank's foregoing appointment as
Borrower's attorney in fact, and all of Bank's rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.
9.3 Accounts Collection. In the event that an Event of Default occurs and
is continuing, Bank may notify any Person owing Borrower money of Bank's
security interest in the funds and verify and/or collect the amount of the
Account. After the occurrence of an Event of Default, any amounts received by
Borrower shall be held in trust by Borrower for Bank, and, if requested by Bank,
Borrower shall immediately deliver such receipts to Bank in the form received
from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. Any amounts paid by Bank as provided herein are Bank
Expenses and are immediately due and payable, and shall bear interest at the
then applicable rate and be secured by the Collateral. No payments by Bank shall
be deemed an agreement to make similar payments in the future or Bank's waiver
of any Event of Default.
9.5 Bank's Liability for Collateral. So long as the Bank complies with
reasonable banking practices regarding the safekeeping of collateral, the Bank
shall not be liable or responsible for: (a) the safekeeping of the Collateral;
(b) any loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or
9
default of any carrier, warehouseman, bailee, or other person. Borrower bears
all risk of loss, damage or destruction of the Collateral.
9.6 Remedies Cumulative. Bank's rights and remedies under this Agreement,
the Loan Documents, and all other agreements are cumulative. Bank has all rights
and remedies provided under the Code, by law, or in equity. Bank's exercise of
one right or remedy is not an election, and Bank's waiver of any Event of
Default is not a continuing waiver. Bank's delay is not a waiver, election, or
acquiescence. No waiver hereunder shall be effective unless signed by Bank and
then is only effective for the specific instance and purpose for which it was
given.
9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
10 NOTICES
All notices or demands by any party to this Agreement or any other related
agreement must be in writing and be personally delivered or sent by an overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile at the addresses listed below. Either Bank or Borrower may
change its notice address by giving the other written notice.
If to Borrower: LTX Corporation
LTX Corporation at ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: LTX Corporation
LTX Corporation at ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
If to Bank: Silicon Valley Bank
One Newton Executive Park, Suite 200
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Massachusetts law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Massachusetts; provided, however, that if for
any reason Bank cannot avail itself of such courts in the Commonwealth of
Massachusetts, Borrower accepts jurisdiction of the courts and venue in Santa
▇▇▇▇▇ County, California. NOTWITHSTANDING THE FOREGOING, THE BANK SHALL HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE
10
BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK
DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO
OTHERWISE ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement binds and is for the benefit of
the successors and permitted assigns of each party. Borrower may not assign this
Agreement or any rights or Obligations under it without Bank's prior written
consent which may be granted or withheld in Bank's discretion. Bank has the
right, without the consent of or notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits under this Agreement, the Loan Documents
or any related agreement.
12.2 Indemnification. Borrower hereby indemnifies, defends and holds the
Bank and its officers, employees and agents harmless against: (a) all
obligations, demands, claims, and liabilities asserted by any other party in
connection with the transactions contemplated by the Loan Documents; and (b) all
losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and Borrower (including reasonable
attorneys' fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.
12.3 Right of Set-Off. Borrower and any guarantor hereby grant to Bank, a
lien, security interest and right of setoff as security for all Obligations to
Bank, whether now existing or hereafter arising upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of the Bank or in
transit to any of them. At any time after the occurrence and during the
continuance of an Event of Default, without demand or notice, Bank may set off
the same or any part thereof and apply the same to any liability or obligation
of Borrower and any guarantor even though unmatured and regardless of the
adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO
REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER
OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.4 Time of Essence. Time is of the essence for the performance of all
Obligations in this Agreement.
12.5 Severability of Provision. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
12.6 Amended and Restated Agreement. This Agreement shall amend and restate
in its entirety a certain Loan and Security Agreement dated as of October 1,
1999 between Borrower and Bank, as amended by a certain Loan Modification
Agreement dated October 30, 2000, as further amended by a certain Second Loan
Modification Agreement dated December 29, 2000, as further amended by a certain
Third Loan Modification Agreement dated April 21, 2001, as further amended by a
certain Loan Modification Agreement dated April 17, 2002.
12.7 Amendments in Writing; Integration. All amendments to this Agreement
must be in writing signed by both Bank and Borrower. This Agreement and the Loan
Documents represent the entire agreement about this subject matter, and
supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents.
11
12.8 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, constitute
one Agreement.
12.9 Survival. All covenants, representations and warranties made in this
Agreement continue in full force while any Obligations remain outstanding. The
obligation of Borrower in Section 12.2 to indemnify Bank shall survive until the
statute of limitations with respect to such claim or cause of action shall have
run.
12.10 Confidentiality. In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (i) to Bank's
subsidiaries or affiliates in connection with their business with Borrower; (ii)
to prospective transferees or purchasers of any interest in the Credit
Extensions (provided, however, Bank shall use commercially reasonable efforts in
obtaining such prospective transferee's or purchaser's agreement to the terms of
this provision); (iii) as required by law, regulation, subpoena, or other order,
(iv) as required in connection with Bank's examination or audit; and (v) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (a) is in the public
domain or in Bank's possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (b) is disclosed to Bank by a third
party, if Bank does not know that the third party is prohibited from disclosing
the information.
13 DEFINITIONS
13.1 Definitions.
"Accounts" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.
"Advance" or "Advances" is a loan advance (or advances) under the Committed
Revolving Line.
"Affiliate" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"A/R Purchase Agreement" means that certain Non-Recourse Receivables
Purchase Agreement by and between Bank and Borrower dated as of January 31,
2002, as amended to date, whereby the Bank has agreed to make advances not to
exceed $15,000,000.00 for factoring of certain of Borrower's accounts
receivable.
"Bank Expenses" are all audit fees and expenses and reasonable costs or
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"Borrower's Books" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.
"Business Day" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
"Closing Date" is the date of this Agreement.
"Code" is the Uniform Commercial Code as adopted in Massachusetts, as
amended and as may be amended and in effect from time to time.
12
"Collateral" is any and all properties, rights and assets of the Borrower
granted by the Borrower to Bank or arising under the Code, now, or in the
future, in which the Borrower obtains an interest, or the power to transfer
rights, including, without limitation, the property described on Exhibit A.
"Committed Revolving Line" is an Advance or Advances of up to Twenty
Million Dollars ($20,000,000.00).
"Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"Credit Extension" is each Advance, Letter of Credit, Term Loan, Exchange
Contract or any other extension of credit by Bank for Borrower's benefit.
"Current Liabilities" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year, which shall include, without
limitation, all obligations and liabilities of Borrower to Bank.
"Equipment" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"GAAP" is generally accepted accounting principles.
"Indebtedness" is (a) indebtedness for borrowed money or the deferred price
of property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"Insolvency Proceeding" is any proceeding by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Intellectual Property" is any copyright rights, copyright applications,
copyright registrations and like protections in each work of authorship and
derivative work, whether published or unpublished, now owned or later acquired;
any patents, trademarks, service marks and applications therefor; any trade
secret rights, including any rights to unpatented inventions, now owned or
hereafter acquired.
"Inventory" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"Investment" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
13
"Letter of Credit" means a letter of credit or similar undertaking issued
by Bank pursuant to Section 2.1.2.
"Letter of Credit Reserve" has the meaning set forth in Section 2.1.2.
"Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Documents" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower and any other present or future agreement
between Borrower and/or for the benefit of Bank in connection with this
Agreement, all as amended, extended or restated.
"Material Adverse Change " is: (i) A material impairment in the perfection
or priority of Bank's security interest in the Collateral or in the value of
such Collateral; (ii) a material adverse change in the business, operations, or
condition (financial or otherwise) of the Borrower; or (iii) a material
impairment of the prospect of repayment of any portion of the Obligations; or
(iv) Bank determines, based upon information available to it and in its
reasonable judgment, that there is a reasonable likelihood that Borrower shall
fail to comply with one or more of the financial covenants in Section 6 during
the next succeeding financial reporting period.
"Obligations" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit,
obligations and liabilities under the AR Purchase Agreement, cash management
services, and foreign exchange contracts, if any, and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"Payment Date" is the first day of each month.
"Permitted Indebtedness" is:
(a) Borrower's indebtedness to Bank under this Agreement or the Loan
Documents;
(b) Indebtedness existing on the Closing Date and shown on the
Perfection Certificate;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business;
(e) Indebtedness secured by Permitted Liens (including, without
limitation, indebtedness arising out of capital lease transaction incurred
in the ordinary course of Borrower's business); and
(f) Extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (e) above,
provided that the principal amount thereof is not increased or the terms
thereof are not modified to impose more burdensome terms upon Borrower or
its Subsidiary, as the case may be.
"Permitted Investments" are:
(a) Investments shown on the Perfection Certificate and existing on
the Closing Date;
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within
1 year from its acquisition, (ii) commercial paper maturing no more than 1
year after its creation and having the highest rating from either Standard
& Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., (iii) Bank's
certificates of deposit issued maturing no more than 1 year after issue
(iv) money market accounts, or (v) certificates of deposit, eurodollar time
deposits, commercial paper or any other obligations of (A) the Bank, or (B)
any other bank or trust company organized or licensed to conduct a banking
business under the laws of the United States or any State thereof which has
(or which is a subsidiary
14
of a bank holding company which has) publicly traded debt securities rated
A or higher by Standard & Poors Corporation or A-2 or higher by ▇▇▇▇▇'▇
Investors Service, Inc.; and
(c) Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of Borrower.
"Permitted Liens" are:
(a) Liens existing on the Closing Date and shown on the Perfection
Certificate or arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for
which Borrower maintains adequate reserves on its Books, if they have no
priority over any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the
Equipment, or (ii) existing on equipment when acquired, if the Lien is
confined to the property and improvements and the proceeds of the
equipment;
(d) Leases or subleases and licenses or sublicenses granted in the
ordinary course of Borrower's business, if the leases, subleases, licenses
and sublicenses permit granting Bank a security interest; and
(e) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the
indebtedness may not increase. "Person" is any individual, sole
proprietorship, partnership, limited liability company, joint venture,
company, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, firm, joint stock company, estate,
entity or government agency.
"Prime Rate" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.
"Quick Assets" is, on any date, the Borrower's consolidated, unrestricted
cash, cash equivalents, net billed accounts receivable and investments with
maturities of fewer than 12 months determined according to GAAP.
"Responsible Officer" is each of the Chief Executive Officer, President,
Chief Financial Officer and Controller of Borrower.
"Revolving Maturity Date" is 364 days from the Closing Date.
"Subordinated Debt" is debt incurred by Borrower subordinated to Borrower's
debt to Bank (pursuant to a subordination agreement entered into between (or the
benefit of) the Bank, the Borrower and the subordinated creditor), on terms
acceptable to Bank.
"Subsidiary" is any Person, corporation, partnership, limited liability
company, joint venture, or any other business entity of which more than 50% of
the voting stock or other equity interests is owned or controlled, directly or
indirectly, by the Person or one or more Affiliates of the Person.
"Tangible Net Worth" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus (i) any amounts attributable to (a)
goodwill, (b) intangible items including unamortized debt discount and expense,
patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, minus (ii) Total Liabilities, plus (iii) Subordinated
Debt.
"Term Loan" a loan of Five Million Dollars $5,000,000.00.
15
"Term Loan Maturity Date" is July 24, 2006.
"Total Liabilities" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion of Subordinated Debt permitted by Bank to
be paid by Borrower, but excluding all other Subordinated Debt.
[signature page follows]
16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first above written.
BORROWER:
LTX CORPORATION
By_________________________________________
Name:______________________________________
Title:_______________________________________
BANK:
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By_________________________________________
Name:______________________________________
Title:_______________________________________
SILICON VALLEY BANK
By_________________________________________
Name:______________________________________
Title:_________________________________________
(Signed in Santa ▇▇▇▇▇ County, California)
17
EXHIBIT A
The Collateral consists of all right, title and interest of Borrower in and
to the following:
All goods, equipment, inventory, contract rights or rights to payment of
money, license agreements, franchise agreements, general intangibles (including
payment intangibles), accounts (including health-care receivables), documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), commercial tort claims,
securities, and all other investment property supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
The Collateral does not include:
1. Any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work,
whether published or unpublished, now owned or later acquired; any
patents, trademarks, service marks and applications therefor; any
trade secret rights, including any rights to unpatented inventions,
now owned or hereafter acquired. Notwithstanding the foregoing, the
Collateral shall include all accounts, license and royalty fees and
other revenues, proceeds, or income arising out of or relating to any
of the foregoing intellectual property. To the extent a court of
competent jurisdiction holds that a security interest in any
Intellectual Property is necessary to have a security interest in any
accounts, license and royalty fees and other revenues, proceeds, or
income arising out of or relating to any of the foregoing Intellectual
Property, then the Collateral shall, effective as of the Closing Date,
include the Intellectual Property, to the extent necessary to permit
perfection of the Bank's security interest in such accounts, license
and royalty fees and other revenues, proceeds, or income arising out
of or relating to any of the Intellectual Property.
2. Account Number LGP1 maintained by State Street Bank and Trust as
custodian, which account has been pledged to Citizens Bank of
Massachusetts.
18
EXHIBIT B
Loan Payment/Advance Request Form
DEADLINE FOR SAME DAY PROCESSING IS 3:00 E.S.T.
Fax To: (▇▇▇) ▇▇▇-▇▇▇▇ Date:____________________________
LOAN PAYMENT:
Sample documents Client Name (Borrower)
________________________________________________________________________________
From Account #___________________________ To Account #__________________________
(Deposit Account #) (Loan Account #)
Principal $____________________ and/or Interest $_______________________________
All Borrower's representation and warranties in the Amended and Restated Loan
and Security Agreement are true, correct and complete in all material respects
to on the date of the telephone transfer request for and advance, but those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of the date:
Authorized Signature:_____________________________Phone Number:_________________
________________________________________________________________________________
LOAN ADVANCE:
Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.
From Account #___________________________ To Account #_________________________
(Loan Account #) (Deposit Account #)
Amount of Advance $______________________
All Borrower's representation and warranties in the Amended and Restated Loan
and Security Agreement are true, correct and complete in all material respects
to on the date of the telephone transfer request for and advance, but those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of the date:
Authorized Signature:____________________________Phone Number:__________________
________________________________________________________________________________
OUTGOING WIRE REQUEST
Complete only if all or a portion of funds from the loan advance above are to be
wired.
Deadline for same day processing is 3:00pm, E.S.T.
Beneficiary Name:_______________________________ Amount of Wire: $_____________
Beneficiary Bank:_______________________________ Account Number: _____________
City and Sate:___________________________________
Beneficiary Bank Beneficiary Bank Code
Transit (ABA) #: __ __ __ __ __ __ __ __ (Swift, Sort, Chip, etc.):
(For International Wire Only)
Intermediary Bank:_______________________________Transit (ABA) #:_______________
For Further Credit to:__________________________________________________________
Special Instruction:____________________________________________________________
By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).
2nd Signature
Authorized Signature:__________________________(If Required):___________________
Print Name/Title:________________________Print Name/Title:______________________
Telephone # ____________________________Telephone #_____________________________
19
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: LTX CORPORATION
The undersigned authorized officer of LTX CORPORATION certifies that under
the terms and conditions of the Amended and Restated Loan and Security Agreement
between Borrower and Bank (the "Agreement"), (i) Borrower is in complete
compliance for the period ending _______________ with all required covenants
except as noted below and (ii) all representations and warranties in the
Agreement are true and correct in all material respects on this date. Attached
are the required documents supporting the certification. The Officer certifies
that these are prepared in accordance with Generally Accepted Accounting
Principles (GAAP) consistently applied from one period to the next except as
explained in an accompanying letter or footnotes. The Officer acknowledges that
no borrowings may be requested at any time or date of determination that
Borrower is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies"
column.
Reporting Covenant Required Complies
------------------ -------- --------
Quarterly financial Quarterly within 45 days Yes No
statements with ▇▇ ▇▇▇ within 90 days Yes No
Annual (CPA Audited)
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Minimum Quick Ratio 1.5:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $* $_______ Yes No
* See Section 6.7 of the Agreement
Comments Regarding Exceptions: See Attached
Bank Use Only
Sincerely, Received By:______________________
_____________________________________ AUTHORIZED SIGNER
SIGNATURE
Date:______________________________
_____________________________________
TITLE Verified:__________________________
AUTHORIZED SIGNER
_____________________________________
DATE Date:______________________________
20
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of October 17,
2002, effective as of July 31, 2002, by and between LTX Corporation (the
"Borrower") and Silicon Valley Bank, a California-chartered bank doing business
in Massachusetts under the name "Silicon Valley East" ("Bank").
1. DESCRIPTION OF EXISTING OBLIGATIONS: Among other Obligations which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, an Amended and Restated Loan and Security Agreement, dated July 24,
2002, as amended or modified from time to time, (the "Loan Agreement"). The Loan
Agreement provided for, among other things, a Committed Revolving Line in the
original principal amount of Twenty Million Dollars ($20,000,000) and a Term
Loan in the original principal amount of Five Million Dollars ($5,000,000).
Defined terms used but not otherwise defined herein shall have the same meanings
as set forth in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Obligations."
2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the
Collateral as described in the Loan Agreement.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Obligations shall be referred
to as the "Security Documents". Hereinafter, the Security Documents, together
with all other documents evidencing or securing the Obligations shall be
referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement.
1. Sub Section (a) under Section 2.1.4 entitled "Term Loan" is hereby
amended to read as follows:
(a) Bank shall advance on behalf of Borrower an amount equal to the
Term Loan, on or prior to January 31, 2003.
2. Sub Section (b) under Section 6.7 entitled "Financial Covenants"
is hereby amended to read as follows:
(b) Tangible Net Worth. Effective as of July 31, 2002 and for all
fiscal quarters thereafter, (i) A Tangible Net Worth of at least
Three Hundred Million Dollars ($300,000,000) which may decrease up
to a maximum of $40,000,000 in the event that Borrower repurchases
its convertible debentures or other securities. In such event,
Tangible Net Worth shall decrease on a dollar for dollar basis up to
an aggregate of $40,000,000 based on the actual amount repurchased
by the Borrower as of the end of each applicable quarter and
increase by (ii) 75% of the sum of (a) Borrowers net income earned
as determined in accordance with GAAP, consistently applied for each
quarter and (b) all net proceeds received by the Borrower as a
result of any (1) issuance of equity by the Borrower or (2)
additional Subordinated Debt incurred by the Borrower.
3. Notwithstanding anything to the contrary contained under Section 7
of the Loan Agreement, Bank hereby consents to Borrower's buyback in
an amount not to exceed $40,000,000 of convertible debentures or
other securities (the "Transaction"). Bank's consent to the
foregoing shall in no way shall be deemed as Bank's waiver to any
other term or condition under the Loan Agreement.
4. The following defined term under Section 13.1 entitled "Definitions"
is hereby amended to read as follows:
"Term Loan Maturity Date" is 48 months from the date of the Term Loan
advance, however not to exceed January 31, 2007.
3. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
4. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
defenses against paying the Obligations.
5. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents.
Except as expressly modified pursuant to this Loan Modification Agreement,
the terms of the Existing Loan Documents remain unchanged and in full force
and effect. Bank's agreement to modifications to the existing Obligations
pursuant to this Loan Modification Agreement in no way shall obligate Bank to
make any future modifications to the Obligations. Nothing in this Loan
Modification Agreement shall constitute a satisfaction of the Obligations. It
is the intention of Bank and Borrower to retain as liable parties all makers
and endorsers of Existing Loan Documents, unless the party is expressly
released by Bank in writing. Unless expressly released herein, no maker,
endorser, or guarantor will be released by virtue of this Loan Modification
Agreement. The terms of this Paragraph apply not only to this Loan
Modification Agreement, but also to all subsequent loan modification
agreements.
6. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
properties, unconditionally, the non-exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts
in any action, suit, or proceeding of any kind against it which arises out of
or by reason of this Loan Modification Agreement; provided, however, that if
for any reason Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa ▇▇▇▇▇ County, California.
7. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank (provided,
however, in no event shall this Loan Modification Agreement become effective
until signed by an officer of Bank in California).
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
LTX CORPORATION SILICON VALLEY BANK, doing
business as SILICON VALLEY EAST
By: By:
----------------------------- -------------------------------
Name: Name:
--------------------------- ----------------------------
Title: Title:
-------------------------- ----------------------------
SILICON VALLEY BANK
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
(Signed at Santa ▇▇▇▇▇ County, CA)
2