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Exhibit 10.16
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
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1. ACCOUNTING AND OTHER TERMS...............................................................................1
2. LOAN AND TERMS OF PAYMENT................................................................................1
2.1 Credit Extensions...............................................................................1
2.2 Overadvances....................................................................................3
2.3 Interest Rate, Payments.........................................................................3
2.4 Fees............................................................................................4
3. CONDITIONS OF LOANS......................................................................................4
3.1 Conditions Precedent to Initial Credit Extension................................................4
3.2 Conditions Precedent to all Credit Extensions...................................................4
4. CREATION OF SECURITY INTEREST............................................................................4
4.1 Grant of Security Interest......................................................................4
5. REPRESENTATIONS AND WARRANTIES...........................................................................4
5.1 Due Organization and Authorization..............................................................4
5.2 Collateral......................................................................................5
5.3 Litigation......................................................................................5
5.4 No Material Adverse Change in Financial Statements..............................................5
5.5 Solvency........................................................................................5
5.6 Regulatory Compliance...........................................................................5
5.7 Subsidiaries....................................................................................5
5.8 Full Disclosure.................................................................................5
6. AFFIRMATIVE COVENANTS....................................................................................6
6.1 Government Compliance...........................................................................6
6.2 Financial Statements, Reports, Certificates.....................................................6
6.3 Taxes...........................................................................................6
6.4 Insurance.......................................................................................6
6.5 Primary Accounts................................................................................7
6.6 Financial Covenants.............................................................................7
6.7 Further Assurances..............................................................................7
7. NEGATIVE COVENANTS.......................................................................................7
7.1 Dispositions....................................................................................7
7.2 Changes in Business, Ownership, Management or Business Locations................................7
7.3 Mergers or Acquisitions.........................................................................8
7.4 Indebtedness....................................................................................8
7.5 Encumbrance.....................................................................................8
7.6 Distributions; Investments......................................................................8
7.7 Transactions with Affiliates....................................................................8
7.8 Subordinated Debt...............................................................................8
7.9 Compliance......................................................................................8
8. EVENTS OF DEFAULT........................................................................................8
8.1 Payment Default.................................................................................9
8.2 Covenant Default................................................................................9
8.3 Material Adverse Change.........................................................................9
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TABLE OF CONTENTS
(continued)
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8.4 Attachment......................................................................................9
8.5 Insolvency......................................................................................9
8.6 Other Agreements................................................................................9
8.7 Judgments.......................................................................................9
8.8 Misrepresentations.............................................................................10
9. BANK'S RIGHTS AND REMEDIES..............................................................................10
9.1 Rights and Remedies............................................................................10
9.2 Power of Attorney..............................................................................10
9.3 Bank Expenses..................................................................................10
9.4 Bank's Liability for Collateral................................................................11
9.5 Remedies Cumulative............................................................................11
9.6 Demand Waiver..................................................................................11
10. NOTICES.................................................................................................11
11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER..............................................................11
12. GENERAL PROVISIONS......................................................................................11
12.1 Successors and Assigns.........................................................................11
12.2 Indemnification................................................................................12
12.3 Time of Essence................................................................................12
12.4 Severability of Provision......................................................................12
12.5 Amendments in Writing, Integration.............................................................12
12.6 Counterparts...................................................................................12
12.7 Survival.......................................................................................12
12.8 Confidentiality................................................................................12
12.9 Effect of Amendment and Restatement............................................................12
13. DEFINITIONS.............................................................................................13
13.1 Definitions....................................................................................13
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THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is dated December
24, 1997, between SILICON VALLEY BANK ("Bank"), whose address is ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and HARMONIC LIGHTWAVES, INC. ("Borrower"), whose
address is ▇▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
RECITALS
A. Bank and Borrower are parties to that certain Business Loan
Agreement and Promissory Note each dated August 26, 1993, as amended
(collectively, the "Original Agreement").
B. Borrower and Bank desire in this Agreement to set forth their
agreement with respect to a working capital loan and to amend and restate in its
entirety without novation the Original Agreement in accordance with the
provisions herein.
AGREEMENT
The parties agree as follows:
1. ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement will be construed
following GAAP Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document. This Agreement shall be construed to
impart upon Bank a duty to act reasonably at all times.
2. LOAN AND TERMS OF PAYMENT
2.1 CREDIT EXTENSIONS.
Borrower will pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions
as set forth below in this Section 2.
2.1.1 REVOLVING ADVANCES.
(a) Bank will make Advances not exceeding (i) the lesser of (A) the
Committed Revolving Line or (B) the Borrowing Base, minus (ii) the amount of all
outstanding letters of credit (including drawn but unreimbursed letters of
credit), and minus (iii) the Foreign Exchange Reserve. Advances may be repaid
and reborrowed during the term of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 3:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit A. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances and other amounts due under this Agreement are
immediately payable.
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2.1.2 LETTERS OF CREDIT.
Bank will issue or have issued letters of credit for Borrower's account
not exceeding (i) the lesser of the Committed Revolving Line or the Borrowing
Base minus (ii) the outstanding principal balance of the Advances minus the
Foreign Exchange Reserve; however, the face amount of outstanding letters of
credit (including drawn but unreimbursed letters of credit and any Letter of
Credit Reserve) may not exceed $4,000,000. Each letter of credit will have an
expiration date of no later than 180 days after the Revolving Maturity Date, but
Borrower's reimbursement obligation will be secured by cash on terms acceptable
to Bank at any time after the Revolving Maturity Date if the term of this
Agreement is not extended by Bank.
2.1.3 FOREIGN EXCHANGE CONTRACT; FOREIGN EXCHANGE SETTLEMENTS.
Borrower may enter foreign exchange contracts (the "Exchange
Contracts") not exceeding an aggregate amount of $4,000,000 (the "Contract
Limit"), under which Bank will sell to or purchase from Borrower foreign
currency on a spot or future basis. Borrower may not request any Exchange
Contracts if it is out of compliance with any provision of this Agreement.
Exchange Contracts must provide for delivery of settlement on or before the
Revolving Maturity Date. The amount available under the Committed Revolving Line
is reduced by the following (the "Foreign Exchange Reserve") on any given day
(the "Determination Date"): (i) on all outstanding Exchange Contracts on which
delivery is to be effected or settlement allowed more than two business days
after 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.
Bank may terminate the Exchange Contracts if (a) an Event of Default
has occurred and is continuing or (b) there is not sufficient availability under
the Committed Revolving Line and Borrower does not have available funds in its
deposit account for the Foreign Exchange Reserve. If Bank terminates the
Exchange Contracts, Borrower will reimburse Bank for all fees, costs and
expenses in connection with the Exchange Contracts.
Borrower may not permit the total of all Exchange Contracts on which
delivery is to be effected and settlement allowed in any two business day period
to be more than $4,000,000 (the "Settlement Limit") nor may Borrower permit the
total of all Exchange Contracts outstanding at any one time, to exceed the
Contract Limit. However, the amount which may be settled in any 2 business day
period may be increased above the Settlement Limit up to, but not above the
Contract Limit if:
(i) there is sufficient availability under the Committed Revolving Line
in the amount of the Foreign Exchange Reserve for each Determination
Date, provided that Bank in advance shall reserve the full amount of
the Foreign Exchange Reserve against the Committed Revolving Line; or
(ii) there is insufficient availability under the Committed Revolving
Line for settlements within any 2 business day period, but Bank: (A)
verifies good funds overseas before crediting Borrower's deposit
account (if Borrower sells foreign currency); or (B) debits Borrower's
deposit account before delivering foreign currency overseas (if
Borrower purchases foreign currency).
If Borrower purchases foreign currency, Borrower in advance must
instruct Bank either to treat the settlement as an advance under the Committed
Revolving Line, or to debit Borrower's account for the amount settled.
Borrower will execute all Bank's standard applications and agreements
in connection with the Exchange Contracts which are consistent with the terms of
this Agreement and pay all Bank's standard fees and charges.
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2.1.4 EQUIPMENT ADVANCES.
(a) Through December 23, 1998 (the "Equipment Availability End Date"),
Bank will make advances ("Equipment Advance" and, collectively, "Equipment
Advances") not exceeding the Committed Equipment Line. The Equipment Advances
may only be used to finance Equipment purchased on or after 90 days before the
date of this Agreement and may not exceed one hundred percent (100%) of the
equipment invoice excluding taxes, shipping, warranty charges, freight discounts
and installation expense. Software and used Equipment may constitute up to 25%
of the Committed Equipment Line. Each Equipment Advance must be for a minimum of
$50,000. Notwithstanding the foregoing, $500,000 under the Committed Equipment
Line shall be available to finance the purchase of Foreign Equipment. No invoice
will be required for such purpose.
(b) Interest accrues from the date of each Equipment Advance at the
rate in Section 2.3((a)) and is payable monthly until the Equipment Availability
End Date occurs. Equipment Advances outstanding on June 23, 1998 (the "First
Term Date"), are payable in 36 equal monthly installments of principal, plus
accrued interest, beginning on July 23, 1998 and all subsequent payments of
principal plus interest are due on the same day of each month after that.
Additionally, Equipment Advances outstanding on the Equipment Availability End
Date (the "Second Term Date") are payable in 36 equal monthly installments of
principal plus accrued interest, beginning on the twenty-third (23rd) day of the
month following the Equipment Availability End Date. The final payment for all
Equipment Advances will be due on December 23, 2001 (the "Equipment Loan
Maturity Date"). Equipment Advances when repaid may not be reborrowed.
(c) To obtain an Equipment Advance, Borrower must notify Bank (the
notice is irrevocable) by facsimile no later than 3:00 p.m. Pacific time 1
Business Day before the day on which the Equipment Advance is to be made. The
notice in the form of Exhibit B (Payment/Advance Form) must be signed by a
Responsible Officer or designee and include a copy of the invoice for the
Equipment being financed.
2.2 OVERADVANCES.
If Borrower's Obligations under Section 2.1.1, 2.1.2 and 2.1.3.exceed
the lesser of either (i) the Committed Revolving Line or (ii) the Borrowing
Base, Borrower must immediately pay Bank the excess.
2.3 INTEREST RATE, PAYMENTS.
(a) Interest Rate. (1) Advances accrue interest on the outstanding
principal balance at a per annum rate equal to (i) the Prime Rate or (ii) 2
percentage points above the LIBOR Rate as described in Exhibit D; and (2)
Equipment Advances accrue interest on the outstanding principal balance at a per
annum rate equal to 0.5 percentage points above the Prime Rate. At the First
Term Date and the Second Term Date, Borrower may elect a fixed rate on the then
outstanding Equipment Advances equal to the Treasury Rate then in effect. If
Borrower elects such fixed rate option, the Prepayment Fee will apply. After an
Event of Default, Obligations accrue interest at 5 percent above the rate
effective immediately before the Event of Default. The interest rate increases
or decreases when the Prime Rate changes. Interest is computed on a 360 day year
for the actual number of days elapsed.
(b) Payments. Interest due on the Committed Revolving Line is payable
on the 23rd day of each month. Interest due on the Equipment Advances is payable
on the 23rd day 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 under this Agreement or any
other Loan Document. Bank will notify Borrower when it debits Borrower's
accounts. These debits are not a set-off. Payments received after 12:00 noon
Pacific time are considered received at the opening of business on the next
Business Day. When a payment is due on a day that is not a Business Day, the
payment is due the next Business Day and additional fees or interest accrue.
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2.4 FEES.
Borrower will pay:
(a) Facility Fee. A fully earned, non-refundable Facility Fee of
$18,000 for the Committed Revolving Line and $10,000 for the Committed Equipment
Line due on the Closing Date; and
(b) Bank Expenses. All Bank Expenses (including reasonable attorneys'
fees and expenses) incurred through and after the date of this Agreement, are
payable when due.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.
Bank's obligation to make the initial Credit Extension is subject to
the condition precedent that it receive the agreements, documents and fees it
requires.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.
Bank's obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section must 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 may have occurred and be continuing, or
result from the Credit Extension. Each Credit Extension is Borrower's
representation and warranty on that date that the representations and warranties
of Section remain true.
(c) As a condition to each Equipment Advance, Borrower will deliver to
Bank an executed UCC Financing Statement against the Equipment purchased from
proceeds of such Equipment Advance and any and all other documentation required
to perfect Bank's interest in the Collateral.
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations under Section
2.1.4 entitled "Equipment Advances" and performance of each of Borrower's duties
under the Loan Documents. Subject to Permitted Liens, any security interest will
be a first priority security interest in the Collateral. Borrower will execute
any and all documents, including UCC Financing Statements, to perfect Bank's
interest in the Collateral.
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.
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The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it is
bound in which the default could cause a Material Adverse Change.
5.2 COLLATERAL.
Borrower has good title to the Collateral, free of Liens, except
Permitted Liens.
5.3 LITIGATION.
Except as shown in the Schedule, there are no actions or proceedings
pending or, to Borrower's knowledge, 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 ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 SOLVENCY.
The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.
5.6 REGULATORY COMPLIANCE.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations G, 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 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 taxes, except those being contested in good faith
with adequate reserves under GAAP. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all government authorities that are necessary to
continue its business as currently conducted, except where the failure to do so
could not reasonably be expected to cause a Material Adverse Change.
5.7 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 FULL DISCLOSURE.
No 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 misleading (it being
recognized by Bank that the projections
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and forecasts provided by Borrower are not to be viewed as facts and that actual
results during the period or periods covered by any such projections and
forecasts may differ from the projected or forecasted results).
6. AFFIRMATIVE COVENANTS
Borrower will do all of the following:
6.1 GOVERNMENT COMPLIANCE.
Borrower will maintain its and all Subsidiaries' legal existence and
good standing in its jurisdiction of formation and maintain qualification in
each jurisdiction in which the failure to so qualify could have a material
adverse effect on Borrower's business or operations. Borrower will comply, and
have each Subsidiary comply, with all laws, ordinances and regulations to which
it is subject, noncompliance with which could have a material adverse effect on
Borrower's business or operations or cause a Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) as soon as available, but no
later than 45 days after the last day of each quarter, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during the period, in a form and certified by a Responsible Officer
acceptable to Bank; (ii) within 5 days of filing, copies of all statements,
reports and notices made available to Borrower's security holders or to any
holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission; (iii) 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 $100,000 or more;
and (iv) budgets, sales projections, operating plans or other financial
information Bank requests.
(b) Within 45 days after the last day of each quarter, Borrower will
deliver to Bank with the quarterly financial statements a Compliance Certificate
signed by a Responsible Officer in the form of Exhibit B.
(c) At such times as the aggregate outstanding Advances under the
Committed Revolving Line exceed $5,000,000, Borrower will deliver to Bank a
Borrowing Base Certificate signed by a Responsible Officer in the form of
Exhibit C, with aged listings of accounts receivable and accounts payable,
within 20 days after the last day of each month.
(d) Bank has the right to audit Borrower's Accounts at Borrower's
expense, but the audits will be conducted no more often than every six months
unless an Event of Default has occurred and is continuing.
6.3 TAXES.
Borrower will make, and cause each Subsidiary to make, timely payment
of all material federal, state, and local taxes or assessments and will deliver
to Bank, on demand, appropriate certificates attesting to the payment.
6.4 INSURANCE.
Borrower will keep its business and the Collateral insured for risks
and in amounts, as Bank reasonably requests. Insurance policies will be in a
form, with companies, and in amounts that are reasonably satisfactory to Bank.
All property policies will have a lender's loss payable endorsement showing Bank
as an additional loss payee and all liability policies will show the Bank as an
additional insured and provide that the insurer must give Bank at least 20 days
notice before canceling its policy. At Bank's request, Borrower will deliver
certified copies of policies and evidence of all premium payments. Proceeds
payable under any casualty policy will, at Borrower's option if no Event of
Default has occurred and is continuing, be payable to Borrower to replace the
property subject to the claim.
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If an Event of Default has occurred and is continuing, then at Bank's option,
proceeds will be payable to Bank on account of the Obligations.
6.5 PRIMARY ACCOUNTS.
Borrower will maintain its primary depository and operating accounts
with Bank.
6.6 FINANCIAL COVENANTS.
Borrower will maintain as of the last day of each quarter:
(i) DEBT/TANGIBLE NET WORTH RATIO. A ratio of Total Liabilities less
Subordinated Debt to Tangible Net Worth plus Subordinated Debt of not more than
0.75 to 1.00.
(ii) TANGIBLE NET WORTH. A Tangible Net Worth of at least $48,000,000
plus 75% of quarterly profits (excluding losses) beginning October 1, 1997 plus
100% of net new equity.
(iii) QUICK RATIO. A ratio of Quick Assets to Current Liabilities of at
least 2.00 to 1.00.
(iv) PROFITABILITY. Borrower will be profitable each quarter, except
that Borrower may suffer a one quarterly loss in each fiscal year not to exceed
$500,000, provided, however that Bank shall allow a loss of greater than
$500,000 for the fiscal quarter ending March 31, 1998 as a result of Borrower's
acquisition of New Media Communications, Ltd.
(v) DEBT SERVICE COVERAGE. A ratio of net income plus depreciation,
amortization and interest expense, less unfunded capital expenditures, divided
by interest expense and scheduled principal payments, all calculated on a
quarterly basis, of at least 1.50 to 1.00.
6.7 FURTHER ASSURANCES.
Borrower will execute any further instruments and take further action
as Bank reasonably requests to perfect or continue Bank's security interest in
the Collateral or to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower will not do any of the following:
7.1 DISPOSITIONS.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, other than Transfers (i) of Inventory in the ordinary
course of business, (ii) of non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the ordinary course
of business, or (iii) of worn-out or obsolete Equipment, and (iv) other
Transfers which in the aggregate do not exceed $100,000 in any fiscal year.
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 ownership of greater than 40%.
Borrower will not, without at least 30 days prior written notice, relocate its
chief executive office or add any new offices or business locations.
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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, except if no Event of Default has occurred and is
continuing or would exist after giving effect to the action (i) transactions
that do not in the aggregate exceed $10,000,000 with a maximum of $5,000,000 in
cash allowed to be used for such transactions, or (ii) a Subsidiary may merge or
consolidate into another Subsidiary or into Borrower. Notwithstanding the terms
and conditions contained in this Section, Bank consents to Borrower's
acquisition of New Media Communications, Ltd.
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 subject only to Permitted Liens.
7.6 DISTRIBUTIONS; INVESTMENTS.
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. Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock.
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, on terms less favorable to Borrower than would be obtained in an arm's
length transaction with a non-affiliated Person.
7.8 SUBORDINATED DEBT.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.
7.9 COMPLIANCE.
Become an "investment company" or a company controlled by an
"investment company," under the Investment Company Act of 1940 or undertake as
one of its important activities extending credit to purchase or carry margin
stock, or use the proceeds of any Advance 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 have a material adverse effect on Borrower's business or operations or
cause a Material Adverse Change, or permit any of its Subsidiaries to do so.
8. EVENTS OF DEFAULT
Any one of the following is an Event of Default:
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8.1 PAYMENT DEFAULT.
If Borrower fails to pay any of the Obligations;
8.2 COVENANT DEFAULT.
If 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 10
days after it occurs, or if the default cannot be cured within 10 days or cannot
be cured after Borrower's attempts within 10 day period, and the default may be
cured within a reasonable time, then Borrower has an additional period (of not
more than 30 days) to attempt to cure the default. During the additional time,
the failure to cure the default is not an Event of Default (but no Credit
Extensions will be made during the cure period);
8.3 MATERIAL ADVERSE CHANGE.
(i) If there occurs a material impairment in the perfection or priority
of the Bank's security interest in the Collateral or in the value of such
Collateral which is not covered by adequate insurance or (ii) if the Bank
determines, based upon information available to it and in the exercise of its
reasonable judgment, that there is a reasonable likelihood that Borrower will
fail to comply with one or more of the financial covenants set forth in Section
during the next succeeding financial reporting period.
8.4 ATTACHMENT.
If any material portion of Borrower's assets is attached, seized,
levied on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period);
8.5 INSOLVENCY.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);
8.6 OTHER AGREEMENTS.
If there is a default in any agreement between Borrower and a third
party that gives the third party the right to accelerate any Indebtedness
exceeding $100,000;
8.7 JUDGMENTS.
If a money judgment(s) in the aggregate of at least $100,000 is
rendered against Borrower and is unsatisfied and unstayed for 30 days (but no
Credit Extensions will be made before the judgment is stayed or satisfied); or
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8.8 MISREPRESENTATIONS.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and continues Bank may, without notice
or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an
Event of Default described in Section occurs all Obligations are immediately due
and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral; and
(g) Dispose of the Collateral according to the Code.
9.2 POWER OF ATTORNEY.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) make, settle, and
adjust all claims under Borrower's insurance policies; and (ii) transfer the
Collateral into the name of Bank or a third party as the Code permits. Bank may
exercise the power of attorney to sign Borrower's name on any documents
necessary to perfect or continue the perfection of any security interest
regardless of whether an Event of Default has occurred. Bank's appointment as
Borrower's attorney in fact, and all of Bank's rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.
9.3 BANK EXPENSES.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons Bank may make all or part of the payment or obtain
insurance policies required in Section , and take any action under the policies
Bank reasonably deems prudent. Any reasonable amounts paid by Bank are Bank
Expenses and immediately due and payable, bearing interest at the then
applicable rate and secured by the Collateral. No
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payments by Bank are deemed an agreement to make similar payments in the future
or Bank's waiver of any Event of Default.
9.4 BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices and section 9-207 of
the Code it is not liable for: (a) the safekeeping of the Collateral; (b) any
loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or
other person.
Borrower bears all risk of loss, damage or destruction of the Collateral.
9.5 REMEDIES CUMULATIVE.
Bank's rights and remedies under this Agreement, the Loan Documents,
and all other agreements are cumulative. Bank has all rights and remedies
provided under the Code, by law, or in equity. Bank's exercise of one right or
remedy is not an election, and Bank's waiver of any Event of Default is not a
continuing waiver. Bank's delay is not a waiver, election, or acquiescence. No
waiver is effective unless signed by Bank and then is only effective for the
specific instance and purpose for which it was given.
9.6 DEMAND WAIVER.
Borrower waives demand, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
10. NOTICES
All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses set forth at the beginning of
this Agreement. A Party may change its notice address by giving the other Party
written notice.
11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
California law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Santa ▇▇▇▇▇ County, California.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12. GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.
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12.2 INDEMNIFICATION.
Borrower will indemnify, defend and hold harmless Bank and its
officers, employees, and agents against: (a) all obligations, demands, claims,
and liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or 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 TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Agreement must be in writing. This Agreement
represents the entire agreement about this subject matter, and supersedes prior
negotiations or agreements. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter of this Agreement merge into this Agreement and the Loan
Documents.
12.6 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 SURVIVAL.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8 CONFIDENTIALITY.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the Loans, (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 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.
12.9 EFFECT OF AMENDMENT AND RESTATEMENT.
This Agreement is intended to and does completely amend and restate,
without novation, the Original Agreement. All credit extensions or loans
outstanding under the Original Agreement are and shall continue to be
outstanding under this Agreement. All security interests granted under the
Original Agreement are hereby confirmed and ratified and shall continue to
secure all Obligations under this Agreement.
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13. DEFINITIONS
13.1 DEFINITIONS.
In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"ADVANCE" or "ADVANCES" is a loan advance under the Committed Revolving
Line.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"BANK EXPENSES" are all reasonable 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.
"BORROWING BASE" means, when Advances exceed $5,000,000, then (i) 80%
of Eligible Accounts plus (ii) 80% of Pre-Approved Eligible Foreign Accounts
plus (iii) 100% of Eligible Foreign Accounts as determined by Bank from
Borrower's most recent Borrowing Base Certificate.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.
"CAPITALIZED PRODUCT DEVELOPMENT COSTS" are all costs associated with
the development of Borrower's product, including, but not limited to software,
that are not recorded as an expense and have been classified as an asset
account.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the California Uniform Commercial Code.
"COLLATERAL" is the Equipment purchased by Borrower, excluding Foreign
Equipment, from Equipment Advance proceeds.
"COMMITTED EQUIPMENT LINE" is a Credit Extension of up to $3,000,000.
"COMMITTED REVOLVING LINE" is a Credit Extension of up to $12,000,000.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest
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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, Equipment Advance, letter of
credit, Exchange Contract, or any other extension of credit by Bank for
Borrower's benefit.
"CURRENT LIABILITIES" is, 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 Credit
Extensions 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 extendible at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5.2;
but Bank may change eligibility standards by giving Borrower 30 days prior
written notice. Unless Bank agrees otherwise in writing, Eligible Accounts will
not include:
(a) Accounts that the account debtor has not paid within 90 days of
invoice date;
(b) Accounts for an account debtor, 50% or more of whose Accounts have
not been paid within 90 days of invoice date;
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, for the amounts that exceed
that percentage, unless Bank approves in writing;
(e) Accounts for which the account debtor does not have its principal
place of business in the United States (other than Eligible Foreign Accounts and
Pre-Approved Eligible Foreign Accounts);
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality;
(g) Accounts for which Borrower owes the account debtor, but only up to
the amount owed (sometimes called "contra" accounts, accounts payable, customer
deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on approval, ▇▇▇▇
and hold, or other terms if account debtor's payment may be conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes
any claim and Bank believes there may be a basis for dispute (but only up to the
disputed or claimed amount), or if the Account Debtor is subject to an
Insolvency Proceeding, or becomes insolvent, or goes out of business;
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
"ELIGIBLE FOREIGN ACCOUNTS" are Accounts for which the account debtor
does not have its principal place of business in the United States but are
supported by letter(s) of credit acceptable to Bank.
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"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, software, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"EQUIPMENT ADVANCE" is defined in Section 2.1.4.
"EQUIPMENT AVAILABILITY END DATE" is defined in Section 2.1.4.
"EQUIPMENT MATURITY DATE" is defined in Section 2.1.4.
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"EXCHANGE CONTRACT" is defined in Section 2.1.3.
"FOREIGN EQUIPMENT" is (i) Equipment used for Borrower's foreign
subsidiaries' purposes and (ii) is not a part of Borrower's Collateral.
Equipment Advances to purchase Foreign Equipment shall be under the Committed
Equipment Line.
"GAAP" is generally accepted accounting principles.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"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.
"LIBOR" is defined in Exhibit "D".
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes
or guaranties executed by Borrower or Guarantor, 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 defined in Section 8.3.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit and
Exchange Contracts and including interest accruing after Insolvency Proceedings
begin and debts, liabilities, or obligations of Borrower assigned to Bank.
"ORIGINAL AGREEMENT" has the meaning set forth in recital paragraph A.
"PERMITTED INDEBTEDNESS" is:
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(a) Borrower's indebtedness to Bank under this Agreement or any other
Loan Document;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors and with respect to surety bonds
and similar obligations incurred in the ordinary course of business;
(e) Indebtedness secured by Permitted Liens.
(f) Indebtedness of Borrower to any Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of Borrower (provided
that the primary obligations are not prohibited hereby), and Indebtedness of any
Subsidiary to any other Subsidiary and Contingent Obligations of any Subsidiary
with respect to obligations of any other Subsidiary (provided that the primary
obligations are not prohibited hereby);
(g) Other Indebtedness not otherwise permitted by Section 7.4 not
exceeding One Hundred Thousand Dollars ($100,000) in the aggregate outstanding
at any time; and
(h) Extensions, refinancings, modifications, amendments and
restatements of any of items of Permitted Indebtedness (a) through (f) 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 Schedule 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, and (iv) any
Investments permitted by Borrower's investment policy, as amended from time to
time, provided that such investment policy (any such amendment thereto) has been
approved by Bank;
(c) Investments consisting of the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business;
(d) Investments accepted in connection with Transfers permitted by
Section 7.1;
(e) Investments of Subsidiaries in or to other Subsidiaries or Borrower
and Investments by Borrower in Subsidiaries not to exceed 10% of Tangible Net
Worth;
(f) Investments consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plans or agreements approved by Borrower's Board of
Directors;
(g) Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business;
(h) Investments consisting of notes receivable of, or prepaid royalties
and other credit extensions, to customers and suppliers who are not Affiliates,
in the ordinary course of business; provided that this paragraph (h) shall not
apply to Investments of Borrower in any Subsidiary;
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(i) Deposit accounts of Borrower in which Bank has a Lien prior to any
other lien; and
(j) Other Investments not otherwise permitted by Section 7.7 not
exceeding One Hundred Thousand Dollars ($100,000) in the aggregate outstanding
at any time.
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) 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 and any interest or title of a lessor,
licensor or under any lease or license;
(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;
(f) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.7;
(g) Statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics and materialmen and other Liens imposed by law incurred in the
ordinary course of business securing obligations that are not yet delinquent or
are being contested in good faith and for which appropriate reserves have been
made in accordance with GAAP;
(h) Easements, reservations, rights-of-way, restrictions, minor defects
or irregularities in title and other similar charges or encumbrances affecting
real property not constituting a Material Adverse Change;
(i) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payments of customs duties in connection with the
importation of goods; and
(j) Liens on insurance proceeds in favor of insurance companies granted
solely as security for financed premiums.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"PRE-APPROVED ELIGIBLE FOREIGN ACCOUNTS" are Accounts for which the
account debtor does not have its principal place of business in the United
States but are pre-approved, in writing, by Bank on a case by case basis.
"PREPAYMENT FEE" is a fee on any portion of the Obligations with a
fixed interest rate (the "Fixed Obligations") paid before the payment due date.
"Base Interest Rate" means Bank's initial cost of funding the Fixed Obligations.
The Prepayment Fee is calculated as follows: First, Bank determines a "Current
Market Rate" based on what the Bank would receive if it loaned the amount on the
prepayment date in a wholesale funding market matching maturity, principal
amount and principal and interest payment dates (the aggregate payments received
are
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the "Current Market Rate Amount"). Bank may select any wholesale funding market
rate as the Current Market Rate. Second, Bank will take the prepayment amount
and calculate the present value of each principal and interest payment which,
without prepayment, the Bank would have received during the term of the Fixed
Obligations using the Base Interest Rate. The sum of the present value
calculations is the "▇▇▇▇ to Market Amount." Third, the Bank will subtract the
▇▇▇▇ to Market Amount from the Current Market Rate Amount. Any amount greater
than zero is the Prepayment Fee.
"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 12 months or less determined according to GAAP.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"REVOLVING MATURITY DATE" is December 23, 1998.
"SCHEDULE" is any attached schedule of exceptions.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (and identified as subordinated by Borrower and Bank).
"SUBSIDIARY" is for any Person, or any other business entity of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, Copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities plus Subordinated Debt.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.
"TREASURY RATE" is the Treasury Yield Percentage plus 350 basis points.
Treasury Yield Percentage is the average weekly yield (of the week ending
figures) in the most recent Federal Reserve Statistical Release on actively
traded U.S. Treasury obligations of similar maturity to the principal being
repaid or if a Statistical Release is not published, the arithmetic average (to
the nearest .01%) of the per annum yields to maturity for each Business Day
during the week (ending at least two Business Days before the determination is
made) of all actively traded marketable United States Treasury fixed interest
rate securities with a constant maturity of, or not more than 30 days longer or
shorter than the average life of the principal and interest payments that are
being prepaid (excluding securities that can be surrendered at face value to pay
Federal estate tax, or which provide for tax benefits to the holder).
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BORROWER:
HARMONIC LIGHTWAVES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Title: Chief Financial Officer
BANK:
SILICON VALLEY BANK
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Title: /s/ Assistant Vice President
-----------------------------
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EXHIBIT A
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:______________________________
FAX#: (▇▇▇) ▇▇▇-▇▇▇▇ TIME:______________________________
FROM: Harmonic Lightwaves, Inc.
__________________________________________________________________________
CLIENT NAME (BORROWER)
REQUESTED BY:__________________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:__________________________________________________________
PHONE NUMBER:__________________________________________________________________
FROM ACCOUNT # ________________________ TO ACCOUNT #____________________
REQUESTED TRANSACTION TYPE REQUESTED DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $__________________________________
PRINCIPAL PAYMENT (ONLY) $__________________________________
INTEREST PAYMENT (ONLY) $__________________________________
PRINCIPAL AND INTEREST (PAYMENT) $__________________________________
OTHER INSTRUCTIONS:___________________________________________________________
_______________________________________________________________________________
All Borrower's representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone request for and Advance confirmed by this Borrowing Certificate; but
those representations and warranties expressly referring to another date shall
be true, correct and complete in all material respects as of that 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)
1
24
EXHIBIT B
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FROM: HARMONIC LIGHTWAVES, INC.
The undersigned authorized officer of Harmonic Lightwaves, Inc.
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 statements + CC Quarterly within 45 days Yes No
10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No
A/R, A/P Agings + BBC Monthly within 20 days* Yes No
*Only when outstanding balance under Committed Revolving Line is greater than $5,000,000
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
Maintain on a QUARTERLY Basis:
Minimum Quick Ratio 2.00:1.00 _____:1.00 Yes No
Minimum Debt Service 1.50:1.00 _____:1.00 Yes No
Minimum Tangible Net Worth $48,000,000** $________ Yes No
Maximum Debt/Tangible Net Worth 0.75:1.00 _____:1.00 Yes No
**plus 75% of quarterly profits (excluding losses) beginning October 1, 1997 plus 100% of net new equity.
Profitability: Quarterly $_________ Yes No
Losses not to exceed: $500,000 for one fiscal quarter in a Yes No
fiscal year, provided, however that
Bank shall allow a loss of greater than
$500,000 for the fiscal quarter ending
March 31, 1998 as a result of Borrower's
acquisition of New Media Communications,
Ltd.
Maintain on a Quarterly Basis
Minimum Debt Service Coverage*** 1.50:1.00 _____:1.00 Yes No
***For calculation purposes Debt Service Coverage is net income plus depreciation, amortization and interest expense,
less unfunded capital expenditures, divided by interest expense and scheduled principal payments, all calculated on a
quarterly basis.
25
BANK USE ONLY
Received by:___________________________________________________________________
AUTHORIZED SIGNER
Date:__________________________________________________________________________
Verified:______________________________________________________________________
AUTHORIZED SIGNER
Date:__________________________________________________________________________
Compliance Status: Yes No
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
Harmonic Lightwaves, Inc.
_______________________________________________________________________________
SIGNATURE
_______________________________________________________________________________
TITLE
_______________________________________________________________________________
DATE
26
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: HARMONIC LIGHTWAVES, INC. Lender: SILICON VALLEY BANK
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Commitment Amount: $12,000,000
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ______ $_________
2. Additions (please explain on reverse) $_________
3. TOTAL ACCOUNTS RECEIVABLE $_________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $________
5. Balance of 50% over 90 day accounts $________
6. Credit Balances over 90 day $________
7. Concentration Limits $________
8. Foreign Accounts $________
9. Governmental Accounts $________
10. Contra Accounts $________
11. Promotion or Demo Accounts $________
12 Intercompany/Employee Accounts $________
13. Other (please explain on reverse) $________
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_________
15. Eligible Accounts (#3 minus #14) $_________
16. LOAN VALUE OF ACCOUNTS (80% of #15) $_________
PRE-APPROVED FOREIGN ACCOUNTS RECEIVABLE DEDUCTIONS
17. Accounts Receivable Book Value as of _____ $________
18. Additions (please explain on reverse) $________
19. TOTAL FOREIGN ACCOUNTS RECEIVABLE $_________
a. Amounts over 90 days due $________
b. Balance of 50% over 90 day accounts $________
c. Concentration Limits $________
d. Governmental Accounts $________
e. Contra Accounts $________
f. Promotion of Demo Accounts $________
g. Intercompany/Employee Accounts $________
h. Other (please explain on reverse) $________
20. TOTAL FOREIGN ACCOUNTS RECEIVABLE
DEDUCTIONS $________
21. Eligible Accounts (#19 minus #20) $_________
22. LOAN VALUE OF FOREIGN ACCOUNTS (80% OF #21) $_________
LC BACKED FOREIGN ACCOUNTS
23. Total LC Backed Foreign Accounts $________
24. LOAN VALUE OF LC BACKED FOREIGN
ACCOUNTS (100% OF #23) $________
BALANCES
25. Maximum Loan Amount $________
26. Total Funds Available
27
[Lesser of #25 or (#16 plus #22 plus #24)] $________
27. Present balance owing on Line of Credit $________
28. Outstanding under Sublimits (LC or FX) $________
29. RESERVE POSITION (#26 minus #27 and #28) $________
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Amended and Restated Loan and Security
Agreement between the undersigned and Silicon Valley Bank.
COMMENTS
BANK USE ONLY
REC'D BY:__________________________
AUTH. SIGNER
DATE:_____________________________
VERIFIED:___________________________
AUTH. SIGNER
DATE:_____________________________
HARMONIC LIGHTWAVES, INC.
BY:____________________________________
AUTHORIZED SIGNER
28
EXHIBIT D
LIBOR SUPPLEMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This LIBOR Supplement to Amended and Restated Loan and Security
Agreement (the "Supplement") is a supplement to the Amended and Restated Loan
and Security Agreement, dated December 24, 1997 (the "Loan Agreement"), between
Silicon Valley Bank ("Bank" and sometimes referred to as "Lender") and Harmonic
Lightwaves, Inc. ("Borrower"), and forms a part of and is incorporated into the
Loan Agreement.
1. Definitions
"Business Day" means a day of the year (a) that is not a Saturday,
Sunday or other day on which banks in the State of California or the City of
London are authorized or required to close and (b) on which dealings are carried
on in the interbank market in which Bank customarily participates.
"Interest Period" means for each LIBOR Rate Loan, a period of
approximately one, two or three months as the Borrower may elect, provided that
the last day of an Interest Period for a LIBOR Rate Loan shall be determined in
accordance with the practices of the LIBOR interbank market as from time to time
in effect, provided, further, in all cases such period shall expire not later
than the applicable Maturity Date.
"Interest Rate" shall mean as to :(a) Prime Rate Loans, a rate equal to
the Prime Rate; (b) LIBOR Rate Loans, a rate of 2.00% per annum in excess of the
LIBOR Rate (based on the LIBOR Rate applicable for the Interest Period selected
by the Borrower).
"LIBOR Base Rate" means, for any Interest Period for a LIBOR Rate Loan,
the rate of interest per annum determined by Bank to be the per annum rate of
interest as which deposits in United States Dollars are offered to Bank in the
London interbank market in which Bank customarily participates at 11:00 a.m.
(local time in such interbank market) two (2) Business Days before the first day
of such Interest Period for a period approximately equal to such Interest Period
and in an amount approximately equal to the amount of such Loan.
"LIBOR Rate" shall mean, for any Interest Period for a LIBOR Rate Loan,
a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%)
equal to (i) the LIBOR Base Rate for such Interest Period divided by (ii) 1
minus the Reserve Requirement for such Interest Period.
"LIBOR Rate Loans" means any Loans made or a portion thereof on which
interest is payable based on the LIBOR Rate in accordance with the terms hereof.
"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. The interest rate applicable to the
Prime Rate Loans shall change on each date there is a change in the Prime Rate.
"Prime Rate Loans" means any Loans made or a portion thereof on which
Interest is payable based on the Prime Rate in accordance with the terms hereof.
"Regulatory Change" means, with respect to Bank, any change on or after
the date of this Loan Agreement in the United States federal, state or foreign
laws or regulations, including Regulation D, or the adoption or making on or
after such date of any interpretations, directives or requests applying to a
class of lenders including Bank of or under any United States federal or state,
or any foreign, laws or regulations (whether or not having a force of law) by
any court or government or monetary authority charged with the interpretation or
administration thereof.
"Reserve Requirement" means, for any Interest Period, the average
maximum rate at which reserves (including any marginal, supplemental or
emergency reserves) are required to be maintained during such Interest Period
under Regulation D against "Eurocurrency Liabilities" (as such term is used in
Regulation D) by member banks of the Federal Reserve System. Without limiting
the effect of the foregoing, the Reserve Requirement shall
29
reflect any other reserves required to be maintained by Bank by reason of any
Regulatory Change against (i) any category of liabilities which includes
deposits by reference to which the LIBOR Rate is to be determined as provided in
the definition of "LIBOR Base Rate" or (ii) any category of extensions of credit
or other assets which include Loans.
2. Requests for Loans; Confirmation of Initial Loans: Each LIBOR Rate
Loan shall be made upon the irrevocable written request of Borrower received by
Bank not later than 11:00 a.m. (Santa Clara, California time) on the Business
Day three (3) Business days prior to the date such Loan is to be made. Each such
notice shall specify the date such Loan is to be made, which day shall be a
Business Day; the amount of such Loan, the Interest Period for such Loan, and
comply with such other requirements as Bank determines are reasonable or
desirable in connection therewith.
Each written request for a LIBOR Rate Loan shall be in the form of a
LIBOR Rate Loan Borrowing Certificate as set forth on the LIBOR Rate Loan
Borrowing Certificate, which shall be duly executed by the Borrower.
Each Prime Rate Loan shall be made upon the irrevocable written request
of Borrower received by Bank not later than 3:00 p.m. (Santa Clara, California
time) on the Business Day on which such Loan is to be made. Each such notice
shall specify the date such Loan is to be made, day shall be a Business Day and
the amount of such Loan, and comply with such other requirements as Bank
determines are reasonable or desirable in connection therewith.
3. Conversion/Continuation of Loans.
(a) Borrower may from time to time submit in writing a request that
Prime Rate Loans be converted to LIBOR Rate Loans or that any existing LIBOR
Rate Loans continue for an additional Interest Period. Such request shall
specify the amount of the Prime Rate Loans which will constitute LIBOR Rate
Loans (subject to the limits set forth below) and the Interest Period to be
applicable to such LIBOR Rate Loans. Each written request for a conversion to a
LIBOR Rate Loan or a continuation of a LIBOR Rate Loan shall be substantially in
the form of a LIBOR Rate Conversion/Continuation Certificate as set forth on
LIBOR Rate Conversion/Continuation Certificate, which shall be duly executed by
the Borrower. Subject to the terms and conditions contained herein, three (3)
Business Days after Bank's receipt of such a request from Borrower, such Prime
Rate Loans shall be converted to LIBOR Rate Loans or such LIBOR Rate Loans shall
continue, as the case may be provided that:
(i) no Event of Default or event which with notice or passage of time
or both would constitute an Event of Default exists;
(ii) no party thereto shall have sent any notice of termination of this
Supplement or of the Loan Agreement;
(iii) Borrower shall have complied with such customary procedures as
Bank has established from time to time for Borrower's requests for LIBOR Rate
Loans;
(iv) the amount of a LIBOR Rate Loan shall be $500,000.00 or such
greater amount which is an integral multiple of $50,000; and
(v) Bank shall have determined that the Interest Period or LIBOR Rate
is available to Bank which can be readily determined as of the date of the
request for such LIBOR Rate Loan.
Any request by Borrower to convert Prime Rate Loans to LIBOR Rate Loans
or continue any existing LIBOR Rate Loans shall be irrevocable. Notwithstanding
anything to the contrary contained herein, Bank shall not be required to
purchase United States Dollar deposits in the London interbank market or other
applicable LIBOR Rate market to fund any LIBOR Rate Loans, but the provisions
hereof shall be deemed to apply as if Bank had purchased such deposits to fund
the LIBOR Rate Loans.
30
(b) Any LIBOR Rate Loans shall automatically convert to Prime Rate
Loans upon the last day of the applicable Interest Period, unless Bank has
received and approved a complete and proper request to continue such LIBOR Rate
Loans at least three (3) Business Days prior to such last day in accordance with
the terms hereof. Any LIBOR Rate Loans shall, at Bank's option, convert to Prime
Rate Loans in the event that (i) an Event of Default, or event which with the
notice or passage of time or both would constitute an Event of Default, shall
exist, (ii) this Supplement or the Loan Agreement shall terminate, or (iii) the
aggregate principal amount of the Prime Rate Loans which have previously been
converted to LIBOR Rate Loans, or the aggregate principal amount of existing
LIBOR Rate Loans continued, as the case may be, at the beginning of an Interest
Period shall at any time during such Interest Period exceed either (A) the
aggregate principal amount of the Loans then outstanding or (B) the Loans then
available to Borrower hereunder. Borrower agrees to pay to Bank, upon demand by
Bank (or Bank may, at its option, charge Borrower's loan account) any amounts
required to compensate Bank for any loss (including loss of anticipated
profits), cost or expense incurred by such person, as a result of the conversion
of LIBOR Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(c) On all Loans, Interest shall be payable by Borrower to Bank monthly
in arrears not later than the twenty-third (23rd) day of each calendar month at
the applicable Interest Rate.
4. Additional Requirements/Provisions Regarding LIBOR Rate Loans; Etc.
(a) If for any reason (including voluntary or mandatory prepayment or
acceleration), Bank receives all or part of the principal amount of a LIBOR Rate
Loan prior to the last day of the Interest Period for such Loan, Borrower shall
immediately notify Borrower's account officer at Bank and, on demand by Bank,
pay Bank the amount (if any) by which (i) the additional interest which would
have been payable on the amount so received had it not been received until the
last day of such Interest Period exceeds (ii) the interest which would have been
recoverable by Bank by placing the amount so received on deposit in the
certificate of deposit markets or the offshore currency interbank markets or
United States Treasury investment products, as the case may be, for a period
starting on the date on which it was so received and ending on the last day of
such Interest Period at the interest rate determined by Bank in its reasonable
discretion. Bank's determination as to such amount shall be conclusive absent
manifest error.
(b) Borrower shall pay to Bank, upon demand by Bank, from time to time
such amounts as Bank may determine to be necessary to compensate it for any
costs incurred by Bank that Bank determines are attributable to its making or
maintaining of any amount receivable by Bank hereunder in respect of any Loans
relating thereto (such increases in costs and reductions in amounts receivable
being herein called "Additional Costs"), in each case resulting from any
Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to
Bank under this Supplement in respect of any Loans (other than changes with
affect taxes measured by or imposed on the overall net income of Bank by the
jurisdiction in which such Bank has its principal office); or
(ii) imposes or modifies any reserve, special deposit or
similar requirements relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of Bank (including any Loans or any
deposits referred to in the definition of "LIBOR Base Rate"); or
(iii) imposes any other condition affecting this Supplement
(or any of such extensions of credit or liabilities).
Bank will notify Borrower of any event occurring after the date of the Loan
Agreement which will entitle Bank to compensation pursuant to this section as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation. Bank will furnish Borrower with a statement setting
forth the basis and amount of each request by Bank for compensation under this
Section 4. Determinations and allocations by Bank for purposes of this Section 4
of the effect of any Regulatory Change on its costs of maintaining its
obligations to make Loans or of making or maintaining Loans or on amounts
receivable by it in respect of Loans, and of the additional amounts required to
compensate Bank in respect of any Additional Costs, shall be conclusive absent
manifest error.
31
(c) Borrower shall pay to Bank, upon the request of Bank, such amount
or amounts as shall be sufficient (in the sole good faith opinion of such Bank)
to compensate it for any loss, costs or expense incurred by it as a result of
any failure by Borrower to borrow a Loan on the date for such borrowing
specified in the relevant notice of borrowing hereunder.
(d) If Bank shall determine that the adoption or implementation of any
applicable law, rule, regulation or treaty regarding capital adequacy, or any
change herein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank (or its
applicable lending office) with any respect or directive regarding capital
adequacy (whether or not having the force of law) or any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on capital of Bank or any person or entity controlling Bank (a "Parent")
as a consequence of its obligations hereunder to a level below that which Bank
(or its Parent) could have achieved but for such adoption, change or compliance
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by Bank to be material, then from time to time, within 15 days
after demand by Bank, Borrower shall pay to Bank such additional amount or
amounts as will compensate Bank for such reduction. A statement of Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive absent manifest error.
(e) If at any time Bank, in its sole and absolute discretion,
determines that: (i) the amount of the LIBOR Rate Loans for periods equal to the
corresponding Interest Periods are not available to Bank in the offshore
currency interbank markets, (ii) the LIBOR Rate does not accurately reflect the
cost to Bank of lending the LIBOR Rate Loan, then Bank shall promptly give
notice thereof to Borrower, and upon the giving of such notice Bank's obligation
to make the LIBOR Rate Loans shall terminate, unless Bank and the Borrower agree
in writing to a different interest rate applicable to LIBOR Rate Loans. If it
shall become unlawful for Bank to continue to fund or maintain any Loans, or to
perform its obligations hereunder, upon demand by Bank, Borrower shall repay the
Loans in full with accrued interest thereon and all other amounts payable by
Borrower hereunder (including, without limitation, any amount payable in
connection with such prepayment pursuant to Section 4(a)).
32
LIBOR RATE LOAN BORROWING CERTIFICATE
The undersigned hereby certifies as follows:
I, __________________________, am the duly elected and acting
_____________________ of Harmonic Lightwaves, Inc. ("Borrower").
This certificate is delivered pursuant to Section 2 of that certain
LIBOR Supplement together with the Amended and Restated Loan and Security
Agreement, dated December 24, 1997 ("Loan Agreement"), between Borrower and
Silicon Valley Bank ("Bank"). The terms used in this Borrowing Certificate which
are defined in the Loan Agreement have the same meaning herein as ascribed to
them therein.
Borrower hereby requests on _______________, 19__, a LIBOR Rate Loan
(the "Loan") as follows:
(a) The date on which the Loan is to be made is _____________,
19__.
(b) The amount of the Loan is to be ______________
($_____________), for an Interest Period of ________ month(s).
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 this request for a loan; 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.
IN WITNESS WHEREOF, this Borrowing Base Certificate is executed by the
undersigned as of this _______ day of ____________, 19__.
HARMONIC LIGHTWAVES, INC.
By:________________________________
Title:_____________________________
FOR INTERNAL BANK USE ONLY
-------------------------------------------------------------------------------------------------------
LIBOR Pricing Date LIBOR Rate LIBOR Rate Variance Maturity Date
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
33
LIBOR RATE CONVERSION/CONTINUATION CERTIFICATE
The undersigned hereby certifies as follows:
I, ________________________, am the duly elected and acting
___________________ of Harmonic Lightwaves, Inc. ("Borrower").
This certificate is delivered pursuant to Section 2 of that certain
LIBOR Supplement together with the Amended and Restated Loan and Security
Agreement, dated December 24, 1997 ("Loan Agreement"), between Borrower and
Silicon Valley Bank ("Bank"). The terms used in this LIBOR Rate
Conversion/Continuation Certificate which are defined in the Loan Agreement have
the same meaning herein as ascribed to them therein.
Borrower hereby requests on _____________, 19__ a LIBOR Rate Loan (the
"Loan") as follows:
(a) ______ (i) A rate conversion of an existing Prime Rate Loan from a
Prime Rate Loan to a LIBOR Rate Loan; or
_______ (ii) A continuation of an existing LIBOR Rate Loan as a LIBOR
Rate Loan;
[Check (i) or (ii) above]
(b) The date on which the Loan is to be made is _______, 19__.
(c) The amount of the Loan is to be ________________ ($____________),
for an Interest Period of ______________ month(s).
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 this request for a loan; 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.
IN WITNESS WHEREOF, this LIBOR Rate Conversion/Continuation Certificate
is executed by the undersigned as of this _______ day or _______, 19__.
HARMONIC LIGHTWAVES, INC.
By:________________________________
Title:_____________________________
FOR INTERNAL BANK USE ONLY
-------------------------------------------------------------------------------------------------------
LIBOR Pricing Date LIBOR Rate LIBOR Rate Variance Maturity Date
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
34
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: Harmonic Lightwaves, Inc. Bank: Silicon Valley Bank
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $12,000,000 and a Variable Rate, Equipment Line of Credit of a
principal amount of up to $3,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Short term working
capital and purchase of equipment.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line Equipment Line
-------------- --------------
Amount paid to Borrower directly: $___________ $____________
Undisbursed Funds $___________ $____________
Principal $12,000,000 $3,000,000
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Prepaid Finance Charges Paid in Cash: $__________
$28,000 Loan Fee
$_____ Accounts Receivables Audit
Other Charges Paid in Cash: $__________
$100 UCC Filing Fees
$TBD Outside Counsel Fees and Expenses (Estimate)
Total Charges Paid in Cash $__________
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered __________________ the amount of any loan payment.
If the funds in the account are insufficient to cover any payment, Bank shall
not be obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF DECEMBER 24, 1997.
BORROWER:
Harmonic Lightwaves, Inc.
____________________________________
Authorized Officer
35
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: Harmonic Lightwaves, Inc. BANK: Silicon Valley Bank
INSURANCE REQUIREMENTS. Harmonic Lightwaves, Inc. ("Grantor")
understands that insurance coverage is required in connection with the extending
of a loan or the providing of other financial accommodations to Grantor by Bank.
These requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be canceled or diminished without a
minimum of twenty (20) days' prior written notice to
Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of December 24, 1997, or earlier. Grantor acknowledges and agrees
that if Grantor fails to provide any required insurance or fails to continue
such insurance in force, Bank may do so at Grantor's expense as provided in the
Loan and Security Agreement. The cost of such insurance, at the option of Bank,
shall be payable on demand or shall be added to the indebtedness as provided in
the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED DECEMBER
24, 1997.
GRANTOR:
Harmonic Lightwaves, Inc.
x_____________________________
Authorized Officer
FOR BANK USE ONLY
36
INSURANCE VERIFICATION
DATE:__________________________ PHONE:___________________
AGENT'S NAME:__________________________________________________________________
INSURANCE COMPANY:_____________________________________________________________
POLICY NUMBER:_________________________________________________________________
EFFECTIVE DATES:_______________________________________________________________
COMMENTS:______________________________________________________________________
37
[SILICON VALLEY BANK LOGO]
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: HARMONIC LIGHTWAVES, INC.
LOAN OFFICER: ▇▇▇▇▇ ▇▇▇▇▇▇
DATE: DECEMBER 24, 1997
REVOLVING LOAN FEE $18,000.00
EQUIPMENT LINE LOAN FEE 10,000.00
CREDIT REPORT 35.00
TOTAL FEE DUE $28,035.00
PLEASE INDICATE THE METHOD OF PAYMENT:
{ } A CHECK FOR THE TOTAL AMOUNT IS ATTACHED.
{ } DEBIT DDA # __________________ FOR THE TOTAL AMOUNT.
{ } LOAN PROCEEDS
BORROWER:
BY:________________________________________________
(AUTHORIZED SIGNER)
___________________________________________________
SILICON VALLEY BANK (DATE)
ACCOUNT OFFICER'S SIGNATURE
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CORPORATE BORROWING RESOLUTION
BORROWER: HARMONIC LIGHTWAVES, INC. BANK: SILICON VALLEY BANK
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▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
I, THE UNDERSIGNED SECRETARY OR ASSISTANT SECRETARY OF HARMONIC LIGHTWAVES, INC.
("BORROWER"), HEREBY CERTIFY that Borrower is a corporation duly organized and
existing under and by virtue of the laws of the State of Delaware.
I FURTHER CERTIFY that at a meeting of the Directors of Borrower (or by other
duly authorized corporate action in lieu of a meeting), duly called and held, at
which a quorum was present and voting, the following resolutions were adopted.
BE IT RESOLVED, that ANY ONE (1) of the following named officers, employees, or
agents of Borrower, whose actual signatures are shown below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
______________________ __________________________ __________________________
______________________ __________________________ __________________________
______________________ __________________________ __________________________
______________________ __________________________ __________________________
acting for and on behalf of Borrower and as its act and deed be, and they hereby
are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers of
Borrower and Bank, such sum or sums of money as in their judgment
should be borrowed.
EXECUTE LOAN DOCUMENTS. To execute and deliver to Bank the loan
documents of Borrower, on Bank's forms, at such rates of interest and
on such terms as may be agreed upon, evidencing the sums of money so
borrowed or any indebtedness of Borrower to Bank, and also to execute
and deliver to Bank one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the
loan documents, or any portion of the loan documents.
GRANT SECURITY. To grant a security interest to Bank in any of
Borrower's assets, which security interest shall secure all of
Borrower's obligations to Bank.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness
payable to or belonging to Borrower or in which Borrower may have an
interest, and either to receive cash for the same or to cause such
proceeds to be credited to the account of Borrower with Bank, or to
cause such other disposition of the proceeds derived therefrom as they
may deem advisable.
LETTERS OF CREDIT. To execute letter of credit applications and other
related documents pertaining to Bank's issuance of letters of credit.
39
FOREIGN EXCHANGE CONTRACTS. To execute and deliver foreign exchange
contracts, either spot or forward, from time to time, in such amount
as, in the judgment of the officer or officers herein authorized.
ISSUE WARRANTS. To issue warrants to purchase Borrower's capital stock,
for such class, series and number, and on such terms, as an officer of
Borrower shall deem appropriate.
FURTHER ACTS. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances
thereunder, and in all cases, to do and perform such other acts and
things, to pay any and all fees and costs, and to execute and deliver
such other documents and agreements, including agreements waiving the
right to a trial by jury, as they may in their discretion deem
reasonably necessary or proper in order to carry into effect the
provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
Resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of Borrower's agreements or commitments in effect at the
time notice is given.
I FURTHER CERTIFY that the persons named above are principal officers of the
Borrower and occupy the positions set opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Borrower; and that
they are in full force and effect and have not been modified or revoked in any
manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on December 24, 1997 and attest
that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X ______________________________________________
*Secretary or Assistant Secretary
X ______________________________________________
*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.