EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT") dated as of the
Effective Date is entered into between SILICON VALLEY BANK, a California
corporation ("BANK"), and the following borrowers (jointly and severally,
"BORROWER"): SYSVIEW TECHNOLOGY, INC., a Delaware corporation ("Parent"), and
SYSCAN, INC., a California corporation ("Syscan"); and provides the terms on
which Bank shall lend to Borrower and Borrower shall repay Bank. The parties
agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed
following GAAP. Calculations and determinations must be made following GAAP.
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in Section 13. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meaning provided by the Code to the
extent such terms are defined therein.
2 LOAN AND TERMS OF PAYMENT
2.1 PROMISE TO PAY. Borrower hereby unconditionally promises to pay
Bank the outstanding principal amount of all Credit Extensions and accrued and
unpaid interest thereon as and when due in accordance with this Agreement.
2.1.1 REVOLVING ADVANCES.
(a) AVAILABILITY. Subject to the terms and conditions of this Agreement and to
deduction of Reserves, Bank shall make Advances not exceeding the Availability
Amount; provided that (i) Advances with respect to Eligible Accounts of Fry's
Electronics may not exceed 5% of total Advances, and (ii) Advances with respect
to Eligible Foreign Accounts may not exceed 25% of total Advances. Amounts
borrowed hereunder may be repaid and, prior to the Revolving Line Maturity Date,
reborrowed, subject to the applicable terms and conditions precedent herein.
(b) TERMINATION; REPAYMENT. The Revolving Line terminates on
the Revolving Line Maturity Date, when the principal amount of all Advances, the
unpaid interest thereon, and all other Obligations relating to the Revolving
Line shall be immediately due and payable.
2.1.2 LETTERS OF CREDIT SUBLIMIT.
(a) Subject to the Overall Sublimit in Section 2.1.5 below, as
part of the Revolving Line, Bank shall issue or have issued Letters of Credit
for Borrower's account, provided that, after giving effect to such Letters of
Credit: (1) the total of the amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit), plus an amount equal to
the Letter of Credit Reserves shall not exceed $1,000,000; and (2) the total of
the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit), plus an amount equal to the Letter of Credit
Reserves, plus the FX Reserve, plus amounts used for Cash Management Services,
and plus the outstanding principal balance of any Advances (including any
amounts used for Cash Management Services) shall not exceed the lesser of (i)
the Maximum Dollar Amount, or (ii) the Borrowing Base. The aggregate amounts
utilized hereunder shall at all times reduce the amount otherwise available for
Advances under the Revolving Line. If, on the Revolving Line Maturity Date,
there are any outstanding Letters of Credit, then on such date Borrower shall
provide to Bank cash collateral in an amount equal to 105% of the face amount of
all such Letters of Credit plus all interest, fees, and costs due or to become
due in connection therewith (as estimated by Bank in its good faith business
judgment), to secure all of the Obligations relating to said Letters of Credit.
All Letters of Credit shall be in form and substance acceptable to Bank in its
sole discretion and shall be subject to the terms and conditions of Bank's
standard Application and Letter of Credit Agreement (the "LETTER OF CREDIT
APPLICATION"). Borrower agrees to execute any further documentation in
connection with the Letters of Credit as Bank may reasonably request. Borrower
further agrees to be bound by the regulations and interpretations of the issuer
of any Letters of Credit guarantied by Bank and opened for Borrower's account or
by Bank's interpretations of any Letter of Credit issued by Bank for Borrower's
account, and Borrower understands and agrees that Bank shall not be liable for
any error, negligence, or mistake, whether of omission or commission, in
following Borrower's instructions or those contained in the Letters of Credit or
any modifications, amendments, or supplements thereto.
(b) The obligation of Borrower to immediately reimburse Bank
for drawings made under Letters of Credit shall be absolute, unconditional, and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, such Letters of Credit, and the Letter of Credit Application.
(c) Borrower may request that Bank issue a Letter of Credit
payable in a Foreign Currency. If a demand for payment is made under any such
Letter of Credit, Bank shall treat such demand as an Advance to Borrower of the
equivalent of the amount thereof (plus fees and charges in connection therewith
such as wire, cable, SWIFT or similar charges) in Dollars at the then-prevailing
rate of exchange in San Francisco, California, for sales of the Foreign Currency
for transfer to the country issuing such Foreign Currency.
(d) To guard against fluctuations in currency exchange rates,
upon the issuance of any Letter of Credit payable in a Foreign Currency, Bank
shall create a reserve (the "LETTER OF CREDIT RESERVE") under the Revolving Line
in an amount equal to ten percent (10%) of the face amount of such Letter of
Credit. The amount of the Letter of Credit Reserve may be adjusted by Bank from
time to time to account for fluctuations in the exchange rate. The availability
of funds under the Revolving Line shall be reduced by the amount of such Letter
of Credit Reserve for as long as such Letter of Credit remains outstanding.
2.1.3 FOREIGN EXCHANGE SUBLIMIT. Subject to the Overall Sublimit in
Section 2.1.5 below, as part of the Revolving Line, Borrower may enter into
foreign exchange contracts with Bank under which Borrower commits to purchase
from or sell to Bank a specific amount of Foreign Currency (each, a "FX FORWARD
CONTRACT") on a specified date (the "SETTLEMENT DATE"); provided that, after
giving effect to such FX Forward Contracts and the FX Reserve applicable
thereto, the total of the amount of all outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit), plus an amount equal to the Letter of
Credit Reserves, plus the FX Reserve, plus amounts used for Cash Management
Services, and plus the outstanding principal balance of any Advances (including
any amounts used for Cash Management Services) shall not exceed the lesser of
(i) the Maximum Dollar Amount, or (ii) the Borrowing Base. FX Forward Contracts
shall have a Settlement Date of at least one (1) FX Business Day after the
contract date and shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract in a maximum aggregate amount equal to
$1,000,000 (the "FX RESERVE"). The aggregate amount of FX Forward Contracts at
any one time may not exceed ten (10) times the amount of the FX Reserve.
2.1.4 CASH MANAGEMENT SERVICES SUBLIMIT. Subject to the Overall
Sublimit in Section 2.1.5 below, Borrower may use up to $1,000,000 of the
Revolving Line for Bank's cash management services which may include merchant
services, direct deposit of payroll, business credit card, and check cashing
services identified in Bank's various cash management services agreements
(collectively, the "CASH MANAGEMENT SERVICES"), provided that, after giving
effect to such utilization, the total of the amount of all outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit), plus an amount
equal to the Letter of Credit Reserves, plus the FX Reserve, plus amounts
utilized for Cash Management Services, and plus the outstanding principal
balance of any Advances (including any amounts used for Cash Management
Services) shall not exceed the lesser of (i) the Maximum Dollar Amount, or (ii)
the Borrowing Base. Any amounts used by Borrower for Cash Management Services
will be treated as Advances under the Revolving Line, will accrue interest at
the interest rate applicable to Advances, and will reduce the amount otherwise
available for Credit Extensions thereunder.
2.1.5 OVERALL AGGREGATE SUBLIMIT. In no event shall the total amount of
(i) outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve), and (ii) the FX Reserve, and (iii) the
amount of the Revolving Line utilized for Cash Management Services, at any time
exceed $1,000,000 in the aggregate (the "Overall Sublimit").
2.2 OVERADVANCES. If at any time or for any reason the total of all
outstanding Advances and all other monetary Obligations exceeds the Availability
Amount (an "OVERADVANCE"), Borrower shall immediately pay the amount of the
excess in cash to Bank, without notice or demand. Without limiting Borrower's
obligation to repay to Bank the amount of any Overadvance, Borrower agrees to
pay Bank interest on the outstanding amount of any Overadvance, on demand, at
the Default Rate, commencing five days after such Overadvance is incurred.
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2.3 PAYMENT OF INTEREST ON THE CREDIT EXTENSIONS.
(a) INTEREST RATE; ADVANCES. Subject to Section 2.3(b), the
amounts outstanding under the Revolving Line shall accrue interest at a per
annum rate equal to the following: (i) with respect to Accounts Advances, one
and one-quarter percentage points above the Prime Rate (provided that the
interest rate in effect on any day with respect to Accounts Advances shall not
be less than 9% per annum); and (ii) with respect to Inventory Advances, two and
one-quarter percentage points above the Prime Rate (provided that the interest
rate in effect on any day with respect to Inventory Advances shall not be less
than 10% per annum). Interest shall be payable monthly.
(b) DEFAULT RATE. Immediately upon the occurrence and during
the continuance of an Event of Default, Obligations shall bear interest at a
rate per annum which is five percentage points above the rate which is otherwise
applicable to the Obligations (the "DEFAULT RATE"). Payment or acceptance of the
increased interest rate provided in this Section 2.3(b) is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of
Default or otherwise prejudice or limit any rights or remedies of Bank.
(c) ADJUSTMENT TO INTEREST RATE. Changes to the interest rate
of any Credit Extension based on changes to the Prime Rate shall be effective on
the effective date of any change to the Prime Rate and to the extent of any such
change.
(d) 360-DAY YEAR. Interest shall be computed on the basis of a
360-day year for the actual number of days elapsed.
(e) DEBIT OF ACCOUNTS. Bank may debit any of Borrower's
deposit accounts, including the Designated Deposit Account, for principal and
interest payments or any other amounts Borrower owes Bank when due. These debits
shall not constitute a set-off.
(f) PAYMENT; INTEREST COMPUTATION; FLOAT CHARGE. Interest is
payable monthly on the last calendar day of each month. In computing interest on
the Obligations, all Payments received after 12:00 noon Pacific time on any day
shall be deemed received on the next Business Day. In addition, so long as any
principal or interest with respect to any Credit Extension remains outstanding,
Bank shall be entitled to charge Borrower a "float" charge in an amount equal to
three (3) Business Days interest, at the interest rate applicable to the
Advances, on all Payments received by Bank. The float charge for each month
shall be payable on the last day of the month. Bank shall not, however, be
required to credit Borrower's account for the amount of any item of payment
which is unsatisfactory to Bank in its good faith business judgment, and Bank
may charge Borrower's Designated Deposit Account for the amount of any item of
payment which is returned to Bank unpaid.
2.4 FEES. Borrower shall pay to Bank:
(a) COMMITMENT FEE. A fully earned, non-refundable commitment
fee of $15,000, on the Effective Date, plus $15,000 on the earlier of the first
anniversary of the date of this Agreement or any earlier termination of this
Agreement; and
(b) LETTER OF CREDIT FEE. Bank's customary fees and expenses
for the issuance or renewal of Letters of Credit; and
(c) TERMINATION FEE. Subject to the terms of Section 4.1, a
termination fee; and
(d) COLLATERAL MONITORING FEE. A monthly collateral monitoring
fee of $750, payable in arrears on the last day of each month (prorated for any
partial month at the beginning and upon termination of this Agreement); and
(e) SUCCESS FEE. A success fee (the "Success Fee") in the
amount of $100,000, which shall be payable upon the occurrence of any of the
following (a "Sale Transaction") within ten years after the Effective Date:
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(i) any reorganization, consolidation, or merger of
a Borrower where the holders of the Borrower's
securities before the transaction beneficially
own less than 50% of the outstanding voting
securities of the surviving entity after the
transaction; or
(ii) a sale or other transfer of all or more than 75%
of the assets of any Borrower in any single
transaction or series of related transactions;
or
(iii) a change in the ownership of more than 50% of
the capital stock of any Borrower in any single
transaction or series of related transactions;
or
(iv) acquisition of control of any Borrower by any
other Person;
provided that neither the Specified Stock Buyback
referred to in Section 7.7(b)(iv) nor a sale under
Section 7.1(d) shall be deemed to be a Sale
Transaction.
The obligation of the Borrower to pay the Success Fee shall survive any
repayment of the Advances and other Credit Extensions and termination of this
Agreement, notwithstanding any other provision in this Agreement to the
contrary. Nothing herein shall imply Bank's consent to any Sale Transaction. For
purposes of the foregoing, "control" of a Person means possession, directly or
indirectly, of the power to direct or cause the direction of management or
policies of such Person (whether through ownership of voting securities or
partnership or other ownership interests, by contract or otherwise), provided
that, in any event, any Person who owns directly or indirectly 50% or more of
the securities having ordinary voting power for the election of the members of
the board of directors or other governing body of a corporation or 50% or more
of the partnership or other ownership interests of any other Person will be
deemed to control such corporation, partnership or other Person.
(f) BANK EXPENSES. All Bank Expenses (including reasonable
attorneys' fees and expenses, and expenses for documentation and negotiation of
this Agreement) incurred through and after the Effective Date, 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
Borrower shall consent to or have delivered, in form and substance satisfactory
to Bank, such documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate, including, without limitation:
(a) duly executed original signatures to the Loan Documents to
which it is a party, including a Cross-Corporate Guaranty executed by Borrower;
(b) Parent's Operating Documents and a good standing
certificate with respect to Parent certified by the Secretaries of State of the
State of Delaware and California as of a date no earlier than thirty (30) days
prior to the Effective Date;
(c) Syscan's Operating Documents and a good standing
certificate with respect to Syscan certified by the Secretary of State of the
State of California as of a date no earlier than thirty (30) days prior to the
Effective Date;
(d) duly executed original signatures to the completed
Borrowing Resolutions for Borrower;
(e) a Payment Agreement from Cathay Bank;
(f) evidence that (i) the Liens securing Indebtedness owed by
Borrower to Cathay Bank will be terminated and (ii) the documents and/or filings
evidencing the perfection of such Liens, including without limitation any
financing statements and/or control agreements, have or will, concurrently with
the initial Credit Extension, be terminated.
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(g) certified copies, dated as of a recent date, of financing
statement searches, as Bank shall request, accompanied by written evidence
(including any UCC termination statements) that the Liens indicated in any such
financing statements either constitute Permitted Liens or have been or, in
connection with the initial Credit Extension, will be terminated or released;
(h) the Perfection Certificate(s) executed by Borrower;
(i) a landlord's consent executed by Linda A. Filice in favor
of Bank;
(j) a Warehouse Acknowledgement executed by CTS Advantage
Logistics in favor of Bank;
(k) the insurance policies and/or endorsements required
pursuant to Section 6.5 hereof; and
(l) payment of the fees and Bank Expenses then due as
specified in Section 2.4 hereof.
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) except as otherwise provided in Section 3.4, timely
receipt of an executed Transaction Report;
(b) the representations and warranties in Section 5 shall be
true in all material respects on the date of the Payment/Advance Form and on the
Funding Date of each Credit Extension; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, and no Default or Event of Default shall have occurred and be
continuing or result from the Credit Extension. Each Credit Extension is
Borrower's representation and warranty on that date that the representations and
warranties in Section 5 remain true in all material respects; provided, however,
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date; and
(c) in Bank's sole discretion, there has not been a Material
Adverse Change.
3.3 COVENANT TO DELIVER.
Borrower agrees to deliver to Bank each item required to be delivered
to Bank under this Agreement as a condition to any Credit Extension. Borrower
expressly agrees that the extension of a Credit Extension prior to the receipt
by Bank of any such item shall not constitute a waiver by Bank of Borrower's
obligation to deliver such item, and any such extension in the absence of a
required item shall be in Bank's sole discretion.
3.4 PROCEDURES FOR BORROWING. Subject to the prior satisfaction of all
other applicable conditions to the making of an Advance set forth in this
Agreement, to obtain an Advance, Borrower shall notify Bank (which notice shall
be irrevocable) by electronic mail, facsimile, or telephone by 12:00 noon
Pacific time on the Funding Date of the Advance. Together with such
notification, Borrower must promptly deliver to Bank by electronic mail or
facsimile a completed Transaction Report executed by a Responsible Officer or
his or her designee. Bank shall credit Advances to the Designated 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.
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4 CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants Bank, to secure
the payment and performance in full of all of the Obligations, a continuing
security interest in, and pledges to Bank, the Collateral, wherever located,
whether now owned or hereafter acquired or arising, and all proceeds and
products thereof. Borrower represents, warrants, and covenants that the security
interest granted herein is and shall at all times continue to be a first
priority perfected security interest in the Collateral (subject only to
Permitted Liens that may have superior priority to Bank's Lien under this
Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall
promptly notify Bank in a writing signed by Borrower of the general details
thereof and grant to Bank in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance reasonably satisfactory to Bank.
If this Agreement is terminated, Bank's Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations) are
repaid in full in cash. Upon payment in full in cash of the Obligations (other
than inchoate indemnity obligations) and at such time as Bank's obligation to
make Credit Extensions has terminated, Bank shall, at Borrower's sole cost and
expense, release its Liens in the Collateral and all rights therein shall revert
to Borrower.
4.2 AUTHORIZATION TO FILE FINANCING STATEMENTS. Borrower hereby
authorizes Bank to file financing statements, without notice to Borrower, with
all appropriate jurisdictions to perfect or protect Bank's interest or rights
hereunder, including a notice that any disposition of the Collateral, by either
Borrower or any other Person, shall be deemed to violate the rights of Bank
under the Code.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION. Borrower is duly existing and
in good standing in their respective jurisdictions of formation and are
qualified and licensed to do business and are in good standing in any
jurisdiction in which the conduct of their business or their ownership of
property requires that they be qualified except where the failure to do so could
not reasonably be expected to have a Material Adverse Change. In connection with
this Agreement, Borrower has delivered to Bank a completed certificate signed by
Borrower, entitled "Perfection Certificate". Borrower represents and warrants to
Bank that (a) Borrower's exact legal name is that indicated on the Perfection
Certificate and on the signature page hereof; (b) Borrower is an organization of
the type and is organized in the jurisdiction set forth in the Perfection
Certificate; (c) the Perfection Certificate accurately sets forth Borrower's
organizational identification number or accurately states that Borrower has
none; (d) the Perfection Certificate accurately sets forth Borrower's place of
business, or, if more than one, its chief executive office as well as Borrower's
mailing address (if different than its chief executive office); (e) Borrower
(and each of its predecessors) has not, in the past five (5) years, changed its
jurisdiction of formation, organizational structure or type, or any
organizational number assigned by its jurisdiction; and (f) all other
information set forth on the Perfection Certificate pertaining to Borrower and
each of its Subsidiaries is accurate and complete (it being understood and
agreed that Borrower may from time to time update certain information in the
Perfection Certificate after the Effective Date to the extent permitted by one
or more specific provisions in this Agreement). If Borrower is not now a
Registered Organization but later becomes one, Borrower shall promptly notify
Bank of such occurrence and provide Bank with Borrower's organizational
identification number.
The execution, delivery and performance by Borrower of the Loan
Documents to which it is a party have been duly authorized, and do not (i)
conflict with any of Borrower's organizational documents, (ii) contravene,
conflict with, constitute a default under or violate any material Requirement of
Law, (iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any its Subsidiaries or any of their property or assets may be
bound or affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in
full force and effect or (v) constitute an event of default under any material
agreement by which Borrower is bound. Borrower is not in default under any
agreement to which it is a party or by which it is bound in which the default
could reasonably be expected to cause a Material Adverse Change.
5.2 COLLATERAL. Borrower has good title to the Collateral, free of
Liens except Permitted Liens. Borrower has no deposit account other than the
deposit accounts with Bank.
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The Collateral is not in the possession of any third party bailee (such
as a warehouse), except as set forth on Schedule 1 hereto. Except as hereafter
disclosed to Bank in writing by Borrower, none of the components of the
Collateral shall be maintained at locations other than as provided in the
Perfection Certificate. In the event that Borrower, after the date hereof,
intends to store or otherwise deliver any portion of the Collateral to a bailee,
then Borrower will first receive the written consent of Bank and such bailee
must acknowledge in writing that the bailee is holding such Collateral for the
benefit of Bank.
All Inventory is in all material respects of good and marketable
quality, free from material defects.
Borrower is the sole owner of its intellectual property, except for
non-exclusive licenses granted to its customers in the ordinary course of
business. Each patent is valid and enforceable and no part of the Intellectual
Property has been judged invalid or unenforceable, in whole or in part, and to
the best of Borrower's knowledge, no claim has been made that any part of the
Intellectual Property violates the rights of any third party except to the
extent such claim could not reasonably be expected to cause a Material Adverse
Change.
Except as noted on the Perfection Certificate, Borrower is not a party
to, nor is bound by, any material license or other agreement with respect to
which Borrower is the licensee (other than with respect to over-the-counter
software that is commercially available to the public) (a) that prohibits or
otherwise restricts Borrower from granting a security interest in Borrower's
interest in such license or agreement or any other property, or (b) for which a
default under or termination of could interfere with the Bank's right to sell
any Collateral. Borrower shall provide written notice to Bank within thirty days
of entering or becoming bound by any such license or agreement (other than
over-the-counter software that is commercially available to the public).
Borrower shall take such steps as Bank requests to obtain the consent of, or
waiver by, any person whose consent or waiver is necessary for (x) all such
licenses or agreements to be deemed "Collateral" and for Bank to have a security
interest in the same that might otherwise be restricted or prohibited by law or
by the terms of any such license or agreement, whether now existing or entered
into in the future, and (y) Bank to have the ability in the event of a
liquidation of any Collateral to dispose of such Collateral in accordance with
Bank's rights and remedies under this Agreement and the other Loan Documents.
5.3 ACCOUNTS RECEIVABLE.
(a) For each Account with respect to which Advances are
requested, on the date each Advance is requested and made, such Account shall be
an Eligible Account, set forth in Section 13 below.
(b) All statements made and all unpaid balances appearing in
all invoices, instruments and other documents evidencing the Accounts are and
shall be true and correct and all such invoices, instruments and other
documents, and all of Borrower's Books are genuine and in all respects what they
purport to be. All sales and other transactions underlying or giving rise to
each Account shall comply in all material respects with all applicable laws and
governmental rules and regulations. Borrower has and will have no knowledge of
any actual or imminent Insolvency Proceeding of any Account Debtor whose
accounts are shown as Eligible Accounts in any Transaction Report. To the best
of Borrower's knowledge, all signatures and endorsements on all documents,
instruments, and agreements relating to all Accounts are and will be genuine,
and all such documents, instruments and agreements are and will be legally
enforceable in accordance with their terms.
5.4 LITIGATION. There are no actions or proceedings pending or, to the
knowledge of the Responsible Officers, threatened in writing by or against
Borrower or any of its Subsidiaries involving more than $250,000.
5.5 NO MATERIAL DEVIATION IN FINANCIAL STATEMENTS. All consolidated
financial statements for Borrower and any of its Subsidiaries 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.
5.6 SOLVENCY. Borrower is able to pay its debts (including trade
debts) as they mature.
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5.7 REGULATORY COMPLIANCE. Borrower is not an "investment company" or a
company "controlled" by an "investment company" under the Investment Company
Act. Borrower is not engaged as one of its important activities in extending
credit for margin stock (under Regulations T and U of the Federal Reserve Board
of Governors). Borrower has complied in all material respects with the Federal
Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a
"holding company" or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company" as each term is defined and used in the Public
Utility Holding Company Act of 2005. Borrower has not violated any laws,
ordinances or rules, the violation of which could reasonably be expected to
cause a Material Adverse Change. None of Borrower's or any of its Subsidiaries'
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 of its Subsidiaries have 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 their respective
businesses as currently conducted.
5.8 SUBSIDIARIES; INVESTMENTS. Borrower does not have any Subsidiaries,
other than Borrowers hereunder, and does not own any stock, partnership interest
or other equity securities in any other Person, except for Permitted
Investments.
5.9 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
timely filed all required tax returns and reports, and Borrower has timely paid
all foreign, federal, state and local taxes, assessments, deposits and
contributions owed by Borrower. Borrower may defer payment of any contested
taxes, provided that Borrower (a) in good faith contests its obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (b) notifies Bank in writing of the commencement of, and any material
development in, the proceedings, (c) posts bonds or takes any other steps
required to prevent the governmental authority levying such contested taxes from
obtaining a Lien upon any of the Collateral that is other than a "Permitted
Lien". Borrower is unaware of any claims or adjustments proposed for any of
Borrower's prior tax years which could result in additional taxes becoming due
and payable by Borrower. Borrower has paid all amounts necessary to fund all
present pension, profit sharing and deferred compensation plans in accordance
with their terms, and Borrower has not withdrawn from participation in, and has
not permitted partial or complete termination of, or permitted the occurrence of
any other event with respect to, any such plan which could reasonably be
expected to result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or its successors or any other governmental
agency.
5.10 USE OF PROCEEDS. Except as otherwise permitted by Section
7.7(b)(iv), Borrower shall use the proceeds of the Credit Extensions solely as
working capital, and to fund its general business requirements and not for
personal, family, household or agricultural purposes.
5.11 FULL DISCLOSURE. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank, as
of the date such representation, warranty, or other statement was made, taken
together with all such written certificates and written statements given to
Bank, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results).
6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 GOVERNMENT COMPLIANCE. Maintain its and all its Subsidiaries' legal
existence and good standing in their respective jurisdictions of formation and
maintain qualification in each jurisdiction in which the failure to so qualify
would reasonably be expected to cause a Material Adverse Change. Borrower shall
comply, and have each Subsidiary comply, with all laws, ordinances and
regulations to which it is subject, noncompliance with which could reasonably be
expected to cause a Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower shall provide Bank with the following:
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(i) a Transaction Report (and any schedules related
thereto) weekly (so long as there are any
outstanding Credit Extensions) and at the time
of each request for an Advance;
(ii) within twenty (20) days after the end of each
month,
(A) monthly accounts receivable agings,
aged by invoice date,
(B) monthly accounts payable agings,
aged by invoice date, and
outstanding or held check registers,
if any,
(C) monthly reconciliations of accounts
receivable agings (aged by invoice
date), transaction reports, and
general ledger,
(D) monthly perpetual inventory reports
for Inventory valued on a first-in,
first-out basis at the lower of cost
or market (in accordance with GAAP)
or such other inventory reports as
are requested by Bank in its good
faith business judgment;
(iii) as soon as available, and in any event within
thirty (30) days after the end of each month,
monthly unaudited financial statements;
(iv) within thirty (30) days after the end of each
month a monthly Compliance Certificate signed
by a Responsible Officer, certifying that as of
the end of such month, Borrower was in full
compliance with all of the terms and conditions
of this Agreement, and setting forth
calculations showing compliance with the
financial covenants set forth in this Agreement
and such other information as Bank shall
reasonably request, including, without
limitation, a statement that at the end of such
month there were no held checks;
(v) within thirty (30) days following the end of
each fiscal year of Borrower, (A) annual
operating budgets (including income statements,
balance sheets and cash flow statements, by
month) for the upcoming fiscal year of
Borrower, and (B) annual financial projections
for the following fiscal year (on a quarterly
basis) as approved by Borrower's board of
directors, together with any related business
forecasts used in the preparation of such
annual financial projections; and
(vi) as soon as available, and in any event within
180 days following the end of Borrower's fiscal
year, annual financial statements certified by,
and with an unqualified opinion of, independent
certified public accountants acceptable to
Bank.
(b) At all times that Borrower is subject to the reporting
requirements under the Securities Exchange Act of 1934, as amended, within five
(5) days after filing, all reports on Form 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission or a link thereto on Borrower's or another
website on the Internet.
(c) Prompt written notice of (i) any material change in the
composition of the intellectual property, (ii) the registration of any
copyright, including any subsequent ownership right of Borrower in or to any
copyright, patent or trademark not previously disclosed to Bank in writing, or
(iii) Borrower's knowledge of an event that materially adversely affects the
value of the intellectual property.
6.3 ACCOUNTS RECEIVABLE.
(a) SCHEDULES AND DOCUMENTS RELATING TO ACCOUNTS. Borrower
shall deliver to Bank transaction reports and schedules of collections, as
provided in Section 6.2, on Bank's standard forms; provided, however, that
Borrower's failure to execute and deliver the same shall not affect or limit
Bank's Lien and other rights in all of Borrower's Accounts, nor shall Bank's
failure to advance or lend against a specific Account affect or limit Bank's
Lien and other rights therein. If requested by Bank, Borrower shall furnish Bank
with copies (or, at Bank's request, originals) of all contracts, orders,
invoices, and other similar documents, and all shipping instructions, delivery
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receipts, bills of lading, and other evidence of delivery, for any goods the
sale or disposition of which gave rise to such Accounts. In addition, Borrower
shall deliver to Bank, on its request, the originals of all instruments, chattel
paper, security agreements, guarantees and other documents and property
evidencing or securing any Accounts, in the same form as received, with all
necessary endorsements, and copies of all credit memos.
(b) DISPUTES. Borrower shall promptly notify Bank of all
disputes or claims relating to Accounts. Borrower may forgive (completely or
partially), compromise, or settle any Account for less than payment in full, or
agree to do any of the foregoing so long as (i) Borrower does so in good faith,
in a commercially reasonable manner, in the ordinary course of business, in
arm's-length transactions, and reports the same to Bank in the regular reports
provided to Bank; and (ii) no Default or Event of Default has occurred and is
continuing; and (iii) after taking into account all such discounts, settlements
and forgiveness, the total outstanding Advances will not exceed the lesser of
the Revolving Line or the Borrowing Base.
(c) COLLECTION OF ACCOUNTS. Borrower shall have the right to
collect all Accounts, unless and until a Default or an Event of Default has
occurred and is continuing. Whether or not an Event of Default has occurred and
is continuing, Borrower shall hold all payments on, and proceeds of, Accounts in
trust for Bank, and Borrower shall immediately deliver all such payments and
proceeds to Bank in their original form, duly endorsed, to be applied to the
Obligations pursuant to the terms of Section 9.4 hereof, by depositing the same
into a lockbox account, or such other "blocked account" as Bank may specify,
pursuant to a blocked account agreement in such form as Bank may specify in its
good faith business judgment.
(d) RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower, Borrower
shall promptly (i) determine the reason for such return, (ii) issue a credit
memorandum to the Account Debtor in the appropriate amount, and (iii) provide a
copy of such credit memorandum to Bank, upon request from Bank. In the event any
attempted return occurs after the occurrence and during the continuance of any
Event of Default, Borrower shall hold the returned Inventory in trust for Bank,
and immediately notify Bank of the return of the Inventory.
(e) VERIFICATION. Bank may, from time to time, verify directly
with the respective Account Debtors the validity, amount and other matters
relating to the Accounts, either in the name of Borrower or Bank or such other
name as Bank may choose.
(f) NO LIABILITY. Bank shall not be responsible or liable for
any shortage or discrepancy in, damage to, or loss or destruction of, any goods,
the sale or other disposition of which gives rise to an Account, or for any
error, act, omission, or delay of any kind occurring in the settlement, failure
to settle, collection or failure to collect any Account, or for settling any
Account in good faith for less than the full amount thereof, nor shall Bank be
deemed to be responsible for any of Borrower's obligations under any contract or
agreement giving rise to an Account. Nothing herein shall, however, relieve Bank
from liability for its own gross negligence or willful misconduct.
6.4 REMITTANCE OF PROCEEDS. Except as otherwise provided in Section
6.3(c), deliver, in kind, all proceeds arising from the disposition of any
Collateral to Bank in the original form in which received by Borrower not later
than the following Business Day after receipt by Borrower, to be applied to the
Obligations pursuant to the terms of Section 9.4 hereof; provided that, if no
Default or Event of Default has occurred and is continuing, Borrower shall not
be obligated to remit to Bank the proceeds of the sale of worn out or obsolete
Equipment disposed of by Borrower in good faith in an arm's length transaction
for an aggregate purchase price of $25,000 or less (for all such transactions in
any fiscal year). Borrower agrees that it will not commingle proceeds of
Collateral with any of Borrower's other funds or property, but will hold such
proceeds separate and apart from such other funds and property and in an express
trust for Bank. Nothing in this Section limits the restrictions on disposition
of Collateral set forth elsewhere in this Agreement.
6.5 TAXES; PENSIONS. Timely file all required tax returns and reports
and timely pay all foreign, federal, state and local taxes, assessments,
deposits and contributions owed by Borrower except for deferred payment of any
taxes contested pursuant to the terms of Section 5.9 hereof, and pay all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms.
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6.6 ACCESS TO COLLATERAL; BOOKS AND RECORDS. At reasonable times, on
one (1) Business Day's notice (provided no notice is required if an Event of
Default has occurred and is continuing), Bank, or its agents, shall have the
right to inspect the Collateral and the right to audit and copy Borrower's
Books, which inspections and audits shall be conducted twice per fiscal year, or
more frequently as conditions may warrant in Bank's good faith business
judgment. The foregoing inspections and audits shall be at Borrower's expense,
and the charge therefor shall be $750 per person per day (or such higher amount
as shall represent Bank's then-current standard charge for the same), plus
reasonable out-of-pocket expenses. In the event Borrower and Bank schedule an
audit more than ten (10) days in advance, and Borrower cancels or seeks to
reschedules the audit with less than ten (10) days written notice to Bank, then
(without limiting any of Bank's rights or remedies), Borrower shall pay Bank a
fee of $1,000 plus any out-of-pocket expenses incurred by Bank to compensate
Bank for the anticipated costs and expenses of the cancellation or rescheduling.
6.7 INSURANCE. Keep its business and the Collateral insured for risks
and in amounts standard for companies in Borrower's industry and location and as
Bank may reasonably request. Insurance policies shall be in a form, with
companies, and in amounts that are satisfactory to Bank. All property policies
shall have a lender's loss payable endorsement showing Bank as an additional
lender loss payee and waive subrogation against Bank, and all liability policies
shall show, or have endorsements showing, Bank as an additional insured. All
policies (or the loss payable and additional insured endorsements) shall provide
that the insurer must give Bank at least twenty (20) days notice before
canceling, amending, or declining to renew its policy. At Bank's request,
Borrower shall deliver certified copies of policies and evidence of all premium
payments. Proceeds payable under any policy shall, at Bank's option, be payable
to Bank on account of the Obligations. Notwithstanding the foregoing, (a) so
long as no Event of Default has occurred and is continuing, Borrower shall have
the option of applying the proceeds of any casualty policy up to $50,000, in the
aggregate, toward the replacement or repair of destroyed or damaged property;
provided that any such replaced or repaired property (i) shall be of equal or
like value as the replaced or repaired Collateral and (ii) shall be deemed
Collateral in which Bank has been granted a first priority security interest,
and (b) after the occurrence and during the continuance of an Event of Default,
all proceeds payable under such casualty policy shall, at the option of Bank, be
payable to Bank on account of the Obligations. If Borrower fails to obtain
insurance as required under this Section 6.7 or to pay any amount or furnish any
required proof of payment to third persons and Bank, Bank may make all or part
of such payment or obtain such insurance policies required in this Section 6.7,
and take any action under the policies Bank deems prudent.
6.8 OPERATING ACCOUNTS. Maintain all of its and its Subsidiaries'
primary depository and operating accounts and securities accounts with Bank and
Bank's affiliates.
6.9 FINANCIAL COVENANTS.
Borrower shall maintain at all times, to be tested as of the
last day of each month, unless otherwise noted, on a consolidated basis:
(a) TANGIBLE NET WORTH. A Tangible Net Worth of at least
$1,700,000 ("MINIMUM TANGIBLE NET WORTH"), plus (i) 50% of all consideration
received after the date hereof for equity securities and subordinated debt of
the Borrower (other than the New Subordinated Loan), plus (ii) 50% of the
Borrower's net income (excluding any change in fair value of derivative
instruments relating to Borrower's outstanding preferred stock) in each fiscal
quarter ending after the date hereof. Increases in the Minimum Tangible Net
Worth based on consideration received for equity securities and subordinated
debt of the Borrower shall be effective as of the end of the month in which such
consideration is received, and shall continue effective thereafter. Increases in
the Minimum Tangible Net Worth based on net income shall be effective on the
last day of the fiscal quarter in which said net income is realized, and shall
continue effective thereafter. In no event shall the Minimum Tangible Net Worth
be decreased.
6.10 INTELLECTUAL PROPERTY RIGHTS. Borrower shall: (a) protect, defend
and maintain the validity and enforceability of its intellectual property; (b)
promptly advise Bank in writing of material infringements of its intellectual
property; and (c) not allow any intellectual property material to Borrower's
business to be abandoned, forfeited or dedicated to the public without Bank's
written consent. If Borrower (i) obtains any patent, registered trademark or
servicemark, registered copyright, registered mask work, or any pending
application for any of the foregoing, whether as owner, licensee or otherwise,
or (ii) applies for any patent or the registration of any trademark or
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servicemark, then Borrower shall immediately provide written notice thereof to
Bank and shall execute such intellectual property security agreements and other
documents and take such other actions as Bank shall request in its good faith
business judgment to perfect and maintain a first priority perfected security
interest in favor of Bank in such property. If Borrower decides to register any
copyrights or mask works in the United States Copyright Office, Borrower shall:
(x) provide Bank with at least fifteen (15) days prior written notice of
Borrower's intent to register such copyrights or mask works together with a copy
of the application it intends to file with the United States Copyright Office
(excluding exhibits thereto); (y) execute an intellectual property security
agreement and such other documents and take such other actions as Bank may
request in its good faith business judgment to perfect and maintain a first
priority perfected security interest in favor of Bank in the copyrights or mask
works intended to be registered with the United States Copyright Office; and (z)
record such intellectual property security agreement with the United States
Copyright Office contemporaneously with filing the copyright or mask work
application(s) with the United States Copyright Office. Borrower shall promptly
provide to Bank copies of all applications that it files for patents or for the
registration of trademarks, servicemarks, copyrights or mask works, together
with evidence of the recording of the intellectual property security agreement
necessary for Bank to perfect and maintain a first priority perfected security
interest in such property.
6.11 LITIGATION COOPERATION. From the date hereof and continuing
through the termination of this Agreement, make available to Bank, without
expense to Bank, Borrower and its officers, employees and agents and Borrower's
books and records, to the extent that Bank may deem them reasonably necessary to
prosecute or defend any third-party suit or proceeding instituted by or against
Bank with respect to any Collateral or relating to Borrower.
6.12 FURTHER ASSURANCES. Borrower shall execute any further instruments
and take further action as Bank reasonably requests to perfect or continue
Bank's Lien in the Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without Bank's prior written
consent:
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, except for (a) Transfers of Inventory
in the ordinary course of business; (b) Transfers of worn-out or obsolete
Equipment; and (c) Transfers consisting of Permitted Liens and Permitted
Investments; and (d) sale of Borrower's HD display division or its assets in a
good-faith arm's-length transaction.
7.2 CHANGES IN BUSINESS, MANAGEMENT, OWNERSHIP, OR BUSINESS LOCATIONS.
(a) Engage in or permit any of its Subsidiaries to engage in
any business other than the businesses currently engaged in by Borrower and such
Subsidiary, as applicable, or reasonably related thereto;
(b) liquidate or dissolve; or
(c) [intentionally omitted]; or
(d) without at least thirty (30) days prior written notice to
Bank: (1) add any new offices or business locations, including warehouses
(unless such new offices or business locations contain assets and property of
Borrower with an aggregate value of less than $10,000), (2) change its
jurisdiction of organization, (3) change its organizational structure or type,
(4) change its legal name, or (5) change its organizational number (if any)
assigned by its jurisdiction of organization; or
(e) Parent shall cease to own 100% of all issued and
outstanding shares of stock of Syscan.
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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 that a Subsidiary of
Borrower may merge or consolidate into another Subsidiary of Borrower or into
Borrower.
7.4 INDEBTEDNESS. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness; provided that, if the New Subordinated Loan has not been made
within 90 days after the Effective Date, the New Subordinated Loan shall be
subject to the prior written consent of the Bank.
7.5 ENCUMBRANCE. Create, incur, allow, or suffer any Lien on any of its
property or assets, 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, or enter into any agreement,
document, instrument or other arrangement (except with or in favor of Bank) with
any Person which directly or indirectly prohibits or has the effect of
prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging,
granting a security interest in or upon, or encumbering any of Borrower's or any
Subsidiary's intellectual property, except as is otherwise permitted in Section
7.1 hereof and the definition of "Permitted Lien" herein.
7.6 MAINTENANCE OF COLLATERAL ACCOUNTS. Maintain any Collateral Account
except pursuant to the terms of Section 6.8.(b) hereof.
7.7 INVESTMENTS; DISTRIBUTIONS. (a) Directly or indirectly make any
Investment other than Permitted Investments, or permit any of its Subsidiaries
to do so; or (b) pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock, provided that
(i) Borrower may convert any of its convertible securities
into other securities pursuant to the terms of such convertible securities or
otherwise in exchange thereof,
(ii) Borrower may pay dividends solely in common stock and may
redeem, retire or purchase capital stock solely with common stock;
(iii) Borrower may repurchase the stock of former employees or
consultants pursuant to stock repurchase agreements so long as no Default or
Event of Default has occurred at the time of such repurchase and would not exist
after giving effect to such repurchase, provided such repurchase does not exceed
in the aggregate of $50,000 per fiscal year; and
(iv) Borrower may consummate a repurchase of up to 8,000,000
shares of its common stock for a purchase price of not more than $2,000,000 (of
which not more than $500,000 shall be from the proceeds of Advances and
$1,500,000 shall be from the proceeds of the New Subordinated Loan) (the
"Specified Stock Buyback"), provided (A) the documentation relating to the same
is reasonably acceptable to Bank, (B) Bank receives an opinion of counsel
reasonably acceptable to Bank confirming that such repurchase is in accordance
with all Requirements of Law, and (C) the lenders of the New Subordinated Loan
enter into a Subordination Agreement with Bank in form and substance acceptable
to Bank.
7.8 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower, except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-affiliated Person.
7.9 SUBORDINATED DEBT. (a) Make or permit any payment on any
Subordinated Debt, except under the terms of the subordination, intercreditor,
or other similar agreement to which such Subordinated Debt is subject, or (b)
amend any provision in any document relating to the Subordinated Debt which
would increase the amount thereof or the amount of any permitted payments
thereunder or adversely affect the subordination thereof to Obligations owed to
Bank.
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7.10 COMPLIANCE. Become an "investment company" or a company controlled
by an "investment company", under the Investment Company Act of 1940 or
undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so; withdraw or permit
any Subsidiary to withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
present pension, profit sharing and deferred compensation plan which could
reasonably be expected to result in any liability of Borrower, including any
liability to the Pension Benefit Guaranty Corporation or its successors or any
other governmental agency.
8 EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an
"EVENT OF DEFAULT") under this Agreement:
8.1 PAYMENT DEFAULT. Borrower fails to (a) make any payment of
principal or interest on any Credit Extension on its due date, or (b) pay any
other Obligations within three (3) Business Days after such Obligations are due
and payable. During the cure period, the failure to cure the payment default is
not an Event of Default (but no Credit Extension will be made during the cure
period);
8.2 COVENANT DEFAULT.
(a) Borrower fails or neglects to perform any obligation in
Sections 6.2, 6.3, 6.4, 6.6, 6.8, or 6.9, or violates any covenant in Section 7;
or
(b) Borrower fails or neglects to perform, keep, or observe
any other term, provision, condition, covenant or agreement contained in this
Agreement or any Loan Documents, and as to any default (other than those
specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within
ten (10) days after the occurrence thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional period (which shall not in any case exceed thirty (30)
days) to attempt to cure such default, and within such reasonable time period
the failure to cure the default shall not be deemed an Event of Default (but no
Credit Extensions shall be made during such cure period). Grace periods provided
under this section shall not apply, among other things, to financial covenants
or any other covenants set forth in subsection (a) above;
8.3 MATERIAL ADVERSE CHANGE. A Material Adverse Change occurs;
8.4 ATTACHMENT. ATTACHMENT. (a) Any material portion of Borrower's
assets is attached, seized, levied on, or comes into possession of a trustee or
receiver; (b) the service of process seeking to attach, by trustee or similar
process, any funds of Borrower or of any entity under control of Borrower
(including a Subsidiary) on deposit with Bank or any Bank Affiliate; (c)
Borrower is enjoined, restrained, or prevented by court order from conducting
any material part of its business; or (d) a notice of lien, levy, or assessment
is filed against any of Borrower's assets by any government agency, and the same
under clauses (a) through (d) hereof are not, within ten (10) days after the
occurrence thereof, discharged or stayed (whether through the posting of a bond
or otherwise); provided, however, no Credit Extensions shall be made during any
ten (10) day cure period;
8.5 INSOLVENCY. (a) Borrower is unable to pay its debts (including
trade debts) as they become due or otherwise becomes insolvent; (b) Borrower
begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun
against Borrower and not dismissed or stayed within thirty (30) days (but no
Credit Extensions shall be made while of any of the conditions described in
clause (a) exist and/or until any Insolvency Proceeding is dismissed);
8.6 OTHER AGREEMENTS. There is a default in any agreement to which
Borrower or any Guarantor is a party with a third party or parties resulting in
a right by such third party or parties, whether or not exercised, to accelerate
the maturity of any Indebtedness in an amount in excess of $50,000 or that could
result in a Material Adverse Change with respect to Borrower's or any Guarantor;
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provided, however, that the Event of Default under this Section 8.6 caused by
the occurrence of a default under such other agreement shall be cured or waived
for purposes of this Agreement upon Bank receiving written notice from the party
asserting such default of such cure or waiver of the default under such other
agreement, if at the time of such cure or waiver under such other agreement (a)
Bank has not declared an Event of Default under this Agreement and/or exercised
any rights with respect thereto; (b) any such cure or waiver does not result in
an Event of Default under any other provision of this Agreement or any Loan
Document; and (c) in connection with any such cure or waiver under such other
agreement, the terms of any agreement with such third party are not modified or
amended in any manner which would in the good faith judgment of Bank be
materially less advantageous to Borrower or any Guarantor;
8.7 JUDGMENTS. One or more judgments, orders, or decrees for the
payment of money in an amount, individually or in the aggregate, of $50,000 or
more (not covered by independent third-party insurance as to which liability has
been accepted by such insurance carrier) shall be rendered against Borrower and
shall remain unsatisfied, unvacated, or unstayed for a period of ten (10) days
after the entry thereof (provided that no Credit Extensions will be made prior
to the satisfaction, vacation, or stay of such judgment, order, or decree);
8.8 MISREPRESENTATIONS. Borrower or any Person acting for Borrower
makes any representation, warranty, or other statement now or later in this
Agreement, any Loan Document or in any writing delivered to Bank or to induce
Bank to enter this Agreement or any Loan Document, and such representation,
warranty, or other statement is incorrect in any material respect when made; or
8.9 SUBORDINATED DEBT. A default or breach occurs under any agreement
between Borrower and any creditor of Borrower that signed a subordination,
intercreditor, or other similar agreement with Bank and such default or breach
has not been cured within any cure period provided in such agreement (not to
exceed ten (10) days), provided, however, no Credit Extensions shall be made
during any such cure period; or any creditor that has signed such an agreement
with Bank breaches any terms of such agreement.
9 BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. If an Event of Default has occurred and is
continuing, Bank may, without notice or demand, do any or all of the following:
(a) declare all Obligations immediately due and payable (but
if an Event of Default described in Section 8.5 occurs all Obligations are
immediately due and payable without any action by Bank);
(b) stop advancing money or extending credit for Borrower's
benefit under this Agreement or under any other agreement between Borrower and
Bank;
(c) demand that Borrower (i) deposit cash with Bank in an
amount equal to the aggregate amount of any Letters of Credit remaining undrawn,
as collateral security for the repayment of any future drawings under such
Letters of Credit, and Borrower shall forthwith deposit and pay such amounts,
and (ii) pay in advance all Letter of Credit fees scheduled to be paid or
payable over the remaining term of any Letters of Credit;
(d) terminate any FX Forward Contracts;
(e) demand payment of, and collect any Accounts and General
Intangibles comprising Collateral, settle or adjust disputes and claims directly
with Account Debtors for amounts, on terms, and in any order that Bank considers
advisable, notify any Account Debtor or other Person owing Borrower money of
Bank's security interest in such funds, verify the amount of the same and
collect the same;
(f) make any payments and do any acts it considers necessary
or reasonable to protect the Collateral and/or its security interest in the
Collateral. Borrower shall assemble the Collateral if Bank requests and make it
available as Bank designates. Bank may enter premises where the Collateral is
located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior
to its security interest and pay all expenses incurred. Borrower grants Bank a
license to enter and occupy any of its premises, without charge, to exercise any
of Bank's rights or remedies;
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(g) 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;
(h) ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell the Collateral. Bank is hereby
granted a non-exclusive, royalty-free license or other right to use, without
charge, Borrower's labels, patents, copyrights, mask works, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
(i) place a "hold" on any account maintained with Bank and/or
deliver a notice of exclusive control, any entitlement order, or other
directions or instructions pursuant to any Control Agreement or similar
agreements providing control of any Collateral;
(j) demand and receive possession of Borrower's Books; and
(k) exercise all rights and remedies available to Bank under
the Loan Documents or at law or equity, including all remedies provided under
the Code (including disposal of the Collateral pursuant to the terms thereof).
9.2 POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower's name on any
checks or other forms of payment or security; (b) sign Borrower's name on any
invoice or bill of lading for any Account or drafts against Account Debtors; (c)
settle and adjust disputes and claims about the Accounts directly with Account
Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle,
and adjust all claims under Borrower's insurance policies; (e) pay, contest or
settle any Lien, charge, encumbrance, security interest, and adverse claim in or
to the Collateral, or any judgment based thereon, or otherwise take any action
to terminate or discharge the same; and (f) transfer the Collateral into the
name of Bank or a third party as the Code permits. Borrower hereby appoints Bank
as its lawful attorney-in-fact to sign Borrower's name on any documents
necessary to perfect or continue the perfection of Bank's security interest in
the Collateral regardless of whether an Event of Default has occurred until all
Obligations have been satisfied in full and Bank is under no further obligation
to make Credit Extensions hereunder. Bank's foregoing appointment as Borrower's
attorney in fact, and all of Bank's rights and powers, coupled with an interest,
are irrevocable until all Obligations have been fully repaid and performed and
Bank's obligation to provide Credit Extensions terminates.
9.3 PROTECTIVE PAYMENTS. If Borrower fails to obtain the insurance
called for by Section 6.7 or fails to pay any premium thereon or fails to pay
any other amount which Borrower is obligated to pay under this Agreement or any
other Loan Document, Bank may obtain such insurance or make such payment, and
all amounts so paid by Bank are Bank Expenses and immediately due and payable,
bearing interest at the then highest applicable rate, and secured by the
Collateral. Bank will make reasonable efforts to provide Borrower with notice of
Bank obtaining such insurance at the time it is obtained or within a reasonable
time thereafter. No payments by Bank are deemed an agreement to make similar
payments in the future or Bank's waiver of any Event of Default.
9.4 APPLICATION OF PAYMENTS AND PROCEEDS. Borrower shall have no right
to specify the order or the accounts to which Bank shall allocate or apply any
payments required to be made by Borrower to Bank or otherwise received by Bank
under this Agreement when any such allocation or application is not specified
elsewhere in this Agreement. If an Event of Default has occurred and is
continuing, Bank may apply any funds in its possession, whether from Borrower
account balances, payments, proceeds realized as the result of any collection of
Accounts or other disposition of the Collateral, or otherwise, to the
Obligations in such order as Bank shall determine in its sole discretion. Any
surplus shall be paid to Borrower by credit to the Designated Deposit Account or
to other Persons legally entitled thereto; Borrower shall remain liable to Bank
for any deficiency. If Bank, in its good faith business judgment, directly or
indirectly enters into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Bank shall have the option, exercisable at
any time, of either reducing the Obligations by the principal amount of the
purchase price or deferring the reduction of the Obligations until the actual
receipt by Bank of cash therefor.
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9.5 BANK'S LIABILITY FOR COLLATERAL. So long as Bank complies with
reasonable banking practices regarding the safekeeping of the Collateral in the
possession or under the control of Bank, Bank shall not be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other Person. Borrower bears
all risk of loss, damage or destruction of the Collateral.
9.6 NO WAIVER; REMEDIES CUMULATIVE. Bank's failure, at any time or
times, to require strict performance by Borrower of any provision of this
Agreement or any other Loan Document shall not waive, affect, or diminish any
right of Bank thereafter to demand strict performance and compliance herewith or
therewith. No waiver hereunder shall be effective unless signed by Bank and then
is only effective for the specific instance and purpose for which it is given.
Bank's rights and remedies under this Agreement and the other Loan Documents 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 in
exercising any remedy is not a waiver, election, or acquiescence.
9.7 DEMAND WAIVER. Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees held by Bank on which
Borrower is liable.
10 NOTICES
All notices, consents, requests, approvals, demands, or other
communication (collectively, "Communication"), other than Advance requests made
pursuant to Section 3.4, by any party to this Agreement or any other Loan
Document must be in writing and be delivered or sent by facsimile at the
addresses or facsimile numbers listed below. Bank or Borrower may change its
notice address by giving the other party written notice thereof. Each such
Communication shall be deemed to have been validly served, given, or delivered:
(a) upon the earlier of actual receipt and three (3) Business Days after deposit
in the U.S. mail, registered or certified mail, return receipt requested, with
proper postage prepaid; (b) upon transmission, when sent by facsimile
transmission (with such facsimile promptly confirmed by delivery of a copy by
personal delivery or United States mail as otherwise provided in this Section
10); (c) one (1) Business Day after deposit with a reputable overnight courier
with all charges prepaid; or (d) when delivered, if hand-delivered by messenger,
all of which shall be addressed to the party to be notified and sent to the
address or facsimile number indicated below. Advance requests made pursuant to
Section 3.4 must be in writing and may be in the form of electronic mail,
delivered to Bank by Borrower at the e-mail address of Bank provided below and
shall be deemed to have been validly served, given, or delivered when sent (with
such electronic mail promptly confirmed by delivery of a copy by personal
delivery or United States mail as otherwise provided in this Section 10). Bank
or Borrower may change its address, facsimile number, or electronic mail address
by giving the other party written notice thereof in accordance with the terms of
this Section 10.
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If to Borrower: Sysview Technology, Inc.
Syscan, Inc.
1772 Technology Dr.
San Jose, CA 95110
Attn: Mr. Bill Hawkins,
Chief Operating Officer
Fax: 408-490-2801
Email: 408-490-2801
If to Bank: Silicon Valley Bank
3003 Tasman Drive-Mail Sort HF160
Santa Clara, CA 95054
Attn: Ms. Minal Patel
Fax: 408-654-9589
Email: mpatel@svb.com
--------------
11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE.
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 Clara County, California; provided,
however, that nothing in this Agreement shall be deemed to operate to preclude
Bank from bringing suit or taking other legal action in any other jurisdiction
to realize on the Collateral or any other security for the Obligations, or to
enforce a judgment or other court order in favor of Bank. Borrower expressly
submits and consents in advance to such jurisdiction in any action or suit
commenced in any such court, and Borrower hereby waives any objection that it
may have based upon lack of personal jurisdiction, improper venue, or forum non
conveniens and hereby consents to the granting of such legal or equitable relief
as is deemed appropriate by such court. Borrower hereby waives personal service
of the summons, complaints, and other process issued in such action or suit and
agrees that service of such summons, complaints, and other process may be made
by registered or certified mail addressed to Borrower at the address set forth
in Section 10 of this Agreement and that service so made shall be deemed
completed upon the earlier to occur of Borrower's actual receipt thereof or
three (3) days after deposit in the U.S. mails, proper postage prepaid.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR
RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED
UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A
MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY
HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES' AGREEMENT TO WAIVE THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY, IF THE ABOVE WAIVER OF THE RIGHT TO A TRIAL
BY JURY IS NOT ENFORCEABLE, THE PARTIES HERETO AGREE THAT ANY AND ALL DISPUTES
OR CONTROVERSIES OF ANY NATURE BETWEEN THEM ARISING AT ANY TIME SHALL BE DECIDED
BY A REFERENCE TO A PRIVATE JUDGE, MUTUALLY SELECTED BY THE PARTIES (OR, IF THEY
CANNOT AGREE, BY THE PRESIDING JUDGE OF THE SANTA CLARA COUNTY, CALIFORNIA
SUPERIOR COURT) APPOINTED IN ACCORDANCE WITH CALIFORNIA CODE OF CIVIL PROCEDURE
SECTION 638 (OR PURSUANT TO COMPARABLE PROVISIONS OF FEDERAL LAW IF THE DISPUTE
FALLS WITHIN THE EXCLUSIVE JURISDICTION OF THE FEDERAL COURTS), SITTING WITHOUT
A JURY, IN SANTA CLARA COUNTY, CALIFORNIA; AND THE PARTIES HEREBY SUBMIT TO THE
JURISDICTION OF SUCH COURT. THE REFERENCE PROCEEDINGS SHALL BE CONDUCTED
PURSUANT TO AND IN ACCORDANCE WITH THE PROVISIONS OF CALIFORNIA CODE OF CIVIL
PROCEDURE SS.SS. 638 THROUGH 645.1, INCLUSIVE. THE PRIVATE JUDGE SHALL HAVE THE
POWER, AMONG OTHERS, TO GRANT PROVISIONAL RELIEF, INCLUDING WITHOUT LIMITATION,
ENTERING TEMPORARY RESTRAINING ORDERS, ISSUING PRELIMINARY AND PERMANENT
INJUNCTIONS AND APPOINTING RECEIVERS. ALL SUCH PROCEEDINGS SHALL BE CLOSED TO
THE PUBLIC AND CONFIDENTIAL AND ALL RECORDS RELATING THERETO SHALL BE
PERMANENTLY SEALED. IF DURING THE COURSE OF ANY DISPUTE, A PARTY DESIRES TO SEEK
PROVISIONAL RELIEF, BUT A JUDGE HAS NOT BEEN APPOINTED AT THAT POINT PURSUANT TO
THE JUDICIAL REFERENCE PROCEDURES, THEN SUCH PARTY MAY APPLY TO THE SANTA CLARA
COUNTY, CALIFORNIA SUPERIOR COURT FOR SUCH RELIEF. THE PROCEEDING BEFORE THE
PRIVATE JUDGE SHALL BE CONDUCTED IN THE SAME MANNER AS IT WOULD BE BEFORE A
COURT UNDER THE RULES OF EVIDENCE APPLICABLE TO JUDICIAL PROCEEDINGS. THE
PARTIES SHALL BE ENTITLED TO DISCOVERY WHICH SHALL BE CONDUCTED IN THE SAME
MANNER AS IT WOULD BE BEFORE A COURT UNDER THE RULES OF DISCOVERY APPLICABLE TO
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JUDICIAL PROCEEDINGS. THE PRIVATE JUDGE SHALL OVERSEE DISCOVERY AND MAY ENFORCE
ALL DISCOVERY RULES AND ORDER APPLICABLE TO JUDICIAL PROCEEDINGS IN THE SAME
MANNER AS A TRIAL COURT JUDGE. THE PARTIES AGREE THAT THE SELECTED OR APPOINTED
PRIVATE JUDGE SHALL HAVE THE POWER TO DECIDE ALL ISSUES IN THE ACTION OR
PROCEEDING, WHETHER OF FACT OR OF LAW, AND SHALL REPORT A STATEMENT OF DECISION
THEREON PURSUANT TO THE CALIFORNIA CODE OF CIVIL PROCEDURE SS. 644(A). NOTHING
IN THIS PARAGRAPH SHALL LIMIT THE RIGHT OF ANY PARTY AT ANY TIME TO EXERCISE
SELF-HELP REMEDIES, FORECLOSE AGAINST COLLATERAL, OR OBTAIN PROVISIONAL
REMEDIES. THE PRIVATE JUDGE SHALL ALSO DETERMINE ALL ISSUES RELATING TO THE
APPLICABILITY, INTERPRETATION, AND ENFORCEABILITY OF THIS PARAGRAPH.
12 GENERAL PROVISIONS
12.1 TERMINATION PRIOR TO REVOLVING LINE MATURITY DATE. This Agreement
may be terminated prior to the Revolving Line Maturity Date by Borrower,
effective three (3) Business Days after written notice of termination is given
to Bank. Notwithstanding any such termination, Bank's lien and security interest
in the Collateral and all of Bank's rights and remedies under this Agreement
shall continue until Borrower fully satisfies its Obligations. If such
termination is at Borrower's election or at Bank's election due to the
occurrence and continuance of an Event of Default, Borrower shall pay to Bank,
in addition to the payment of any other expenses or fees then-owing, a
termination fee in an amount equal to 1% of the Maximum Dollar Amount if
termination occurs on or before the Revolving Line Maturity Date; provided that
no termination fee shall be charged if (i) the credit facility hereunder is
replaced with a new facility from another division of Silicon Valley Bank or
(ii) the termination is in connection or contemporaneous with a Sales
Transaction.
12.2 SUCCESSORS AND ASSIGNS. This Agreement binds and is for the
benefit of the successors and permitted assigns of each party. Borrower may not
assign this Agreement or any rights or obligations under it without Bank's prior
written consent (which may be granted or withheld in Bank's discretion). Bank
has the right, without the consent of or notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights, and benefits under this Agreement and the other Loan
Documents.
12.3 INDEMNIFICATION. Borrower agrees to indemnify, defend and hold
Bank and its directors, officers, employees, agents, attorneys, or any other
Person affiliated with or representing Bank harmless against: (a) all
obligations, demands, claims, and liabilities (collectively, "Claims") 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 arising from transactions between Bank and Borrower (including
reasonable attorneys' fees and expenses), except for Claims and/or losses
directly caused by Bank's gross negligence or willful misconduct.
12.4 TIME OF ESSENCE. Time is of the essence for the performance of all
Obligations in this Agreement.
12.5 SEVERABILITY OF PROVISIONS. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
12.6 AMENDMENTS IN WRITING; INTEGRATION. All amendments to this
Agreement must be in writing and signed by both Bank and Borrower. This
Agreement and the Loan Documents represent the entire agreement about this
subject matter and supersede prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement and the Loan
Documents merge into this Agreement and the Loan Documents.
12.7 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.
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12.8 SURVIVAL. All covenants, representations and warranties made in
this Agreement continue in full force until this Agreement has terminated
pursuant to its terms and all Obligations (other than inchoate indemnity
obligations and any other obligations which, by their terms, are to survive the
termination of this Agreement) have been satisfied. The obligation of Borrower
in Section 12.2 to indemnify Bank shall survive until the statute of limitations
with respect to all claims and causes of action with respect to which indemnity
is given to Bank shall have run.
12.9 CONFIDENTIALITY. In handling any confidential information, Bank
shall exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank's
Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Bank shall use
commercially reasonable efforts to obtain such prospective transferee's or
purchaser's agreement to the terms of this provision); (c) as required by law,
regulation, subpoena, or other order; (d) to Bank's regulators or as otherwise
required in connection with Bank's examination or audit; and (e) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (i) 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 (ii) is disclosed to Bank by a third
party, if Bank does not know that the third party is prohibited from disclosing
the information.
12.10 ATTORNEYS' FEES, COSTS AND EXPENSES. In any action or proceeding
between Borrower and Bank arising out of or relating to the Loan Documents, the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
other costs and expenses incurred, in addition to any other relief to which it
may be entitled.
13 DEFINITIONS
13.1 DEFINITIONS. As used in this Agreement, the following terms have
the following meanings:
"ACCOUNT" is any "account" as defined in the Code with such additions
to such term as may hereafter be made, and includes, without limitation, all
accounts receivable and other sums owing to Borrower.
"ACCOUNT DEBTOR" is any "account debtor" as defined in the Code with
such additions to such term as may hereafter be made.
"ADVANCE" or "ADVANCES" means an advance (or advances) under the
Revolving Line.
"AFFILIATE" of any 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.
"AGREEMENT" is defined in the preamble hereof.
"AVAILABILITY AMOUNT" is (a) the lesser of (i) the Revolving Line or
(ii) or the Borrowing Base minus (b) the amount of all outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit) and minus an amount
equal to the Letter of Credit Reserve, minus (c) the FX Reserve, minus (d) any
amounts used for Cash Management Services, and minus (e) the outstanding
principal balance of any Advances.
"BANK" is defined in the preamble hereof.
"BANK EXPENSES" are all audit fees and expenses, costs, and expenses
(including reasonable attorneys' fees and expenses) for preparing, negotiating,
amending, administering, defending and enforcing the Loan Documents (including,
without limitation, those incurred in connection with appeals or Insolvency
Proceedings) or otherwise incurred with respect to Borrower.
"BORROWER" is defined in the preamble hereof.
"BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, federal and state tax returns, records regarding Borrower's assets or
liabilities, the Collateral, business operations or financial condition, and all
computer programs or storage or any equipment containing such information.
-20-
"BORROWING BASE" means
(a) 80% of Eligible Accounts, plus
(b) the lesser of:
(i) 40% of the value of Borrower's Eligible Inventory
(valued at the lower of cost or wholesale fair market
value); or
(ii) $500,000; or
(iii) 33% of total Credit Extensions (including
Advances, Letter of Credits, FX Forward Contracts,
and amounts utilized for Cash Management Services);
as determined by Bank from Borrower's most recent Transaction Report;
provided, however, that Bank may decrease the foregoing percentages in
its good faith business judgment based on events, conditions,
contingencies, or risks which, as determined by Bank, may adversely
affect Collateral. Advances utilizing clause (a) of the definition of
"Borrowing Base" above are referred to herein as "ACCOUNTS ADVANCES"
and Advances utilizing clause (b) of the definition of "Borrowing Base"
above are referred to herein as "INVENTORY ADVANCES".
"BORROWING RESOLUTIONS" are, with respect to any Person, those
resolutions adopted by such Person's Board of Directors and delivered by such
Person to Bank approving the Loan Documents to which such Person is a party and
the transactions contemplated thereby, together with a certificate executed by
its secretary on behalf of such Person certifying that (a) such Person has the
authority to execute, deliver, and perform its obligations under each of the
Loan Documents to which it is a party, (b) sets forth the resolutions then in
full force and effect authorizing and ratifying the execution, delivery, and
performance by such Person of the Loan Documents to which it is a party, (c) the
names of the Persons authorized to execute the Loan Documents on behalf of such
Person, together with a sample of the true signatures of such Persons, and (d)
that Bank may conclusively rely on such certificate unless and until such Person
shall have delivered to Bank a further certificate canceling or amending such
prior certificate.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which Bank is closed.
"CASH EQUIVALENTS" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor's Ratings
Group or Moody's Investors Service, Inc., (c) Bank's certificates of deposit
issued maturing no more than one (1) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this
definition.
"CASH MANAGEMENT SERVICES" is defined in Section 2.1.4.
"CODE" is the Uniform Commercial Code, as the same may, from time to
time, be enacted and in effect in the State of California; provided, that, to
the extent that the Code is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles or Divisions
of the Code, the definition of such term contained in Article or Division 9
shall govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection, or priority of, or
remedies with respect to, Bank's Lien on any Collateral is governed by the
Uniform Commercial Code in effect in a jurisdiction other than the State of
California, the term "CODE" shall mean the Uniform Commercial Code as enacted
and in effect in such other jurisdiction solely for purposes on the provisions
thereof relating to such attachment, perfection, priority, or remedies and for
purposes of definitions relating to such provisions.
"COLLATERAL" is any and all properties, rights and assets of Borrower
described on EXHIBIT A.
"COLLATERAL ACCOUNT" is any Deposit Account, Securities Account, or
Commodity Account.
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"COMMODITY ACCOUNT" is any "commodity account" as defined in the Code
with such additions to such term as may hereafter be made.
"COMMUNICATION" is defined in Section 10.
"COMPLIANCE CERTIFICATE" is that certain certificate in the form
attached hereto as EXHIBIT B.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (a) 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; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.
"CONTROL AGREEMENT" is any control agreement entered into among the
depository institution at which Borrower maintains a Deposit Account or the
securities intermediary or commodity intermediary at which Borrower maintains a
Securities Account or a Commodity account, Borrower, and Bank pursuant to which
Bank obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.
"CREDIT EXTENSION" is any Advance, Letter of Credit, FX Forward
Contract, amount utilized for Cash Management Services, or any other extension
of credit by Bank for Borrower's benefit.
"DEFAULT" means any event which with notice or passage of time or
both, would constitute an Event of Default.
"DEFAULT RATE" is defined in Section 2.3(b).
"DEFERRED REVENUE" is all amounts received or invoiced in advance of
performance under contracts and not yet recognized as revenue.
"DEPOSIT ACCOUNT" is any "deposit account" as defined in the Code with
such additions to such term as may hereafter be made.
"DESIGNATED DEPOSIT ACCOUNT" is Borrower's deposit account, account
number 3300571249, maintained with Bank.
"DOLLARS," "DOLLARS" and "$" each mean lawful money of the United
States.
"EFFECTIVE DATE" is the date Bank executes this Agreement and as
indicated on the signature page hereof.
"ELIGIBLE ACCOUNTS" means Accounts which arise in the ordinary course
of Borrower's business that meet all Borrower's representations and warranties
in Section 5.3. Bank reserves the right at any time and from time to time after
the Effective Date, to adjust any of the criteria set forth below and to
establish new criteria in its good faith business judgment. Unless Bank agrees
otherwise in writing, Eligible Accounts shall not include:
(a) Accounts for which the Account Debtor has not been invoiced;
(b) Accounts that the Account Debtor has not paid within ninety (90)
days of invoice date;
(c) Accounts owing from an Account Debtor, fifty percent (50%) or more
of whose Accounts have not been paid within ninety (90) days of invoice date;
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(d) Credit balances over ninety (90) days from invoice date;
(e) Accounts owing from an Account Debtor, including Affiliates, to the
extent the total obligations to Borrower from such Account Debtor exceed
twenty-five (25%) of all Accounts, unless Bank approves in writing;
(f) Accounts owing from an Account Debtor which does not have its
principal place of business in the United States, except for Eligible Foreign
Accounts;
(g) Accounts owing from an Account Debtor which is a federal, state or
local government entity or any department, agency, or instrumentality thereof,
except for Accounts of the United States if Borrower has assigned its payment
rights to Bank and the assignment has been acknowledged under the Federal
Assignment of Claims Act of 1940, as amended;
(h) Accounts owing from an Account Debtor to the extent that Borrower
is indebted or obligated in any manner to the Account Debtor (as creditor,
lessor, supplier or otherwise - sometimes called "contra" accounts, accounts
payable, customer deposits or credit accounts), with the exception of customary
credits, adjustments and/or discounts given to an Account Debtor by Borrower in
the ordinary course of its business;
(i) Accounts for demonstration or promotional equipment, or in which
goods are consigned, or sold on a "sale guaranteed", "sale or return", "sale on
approval", "bill and hold", or other terms if Account Debtor's payment may be
conditional;
(j) Accounts for which the Account Debtor is Borrower's Affiliate,
officer, employee, or agent;
(k) Accounts in which the Account Debtor disputes liability or makes
any claim (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;
(l) Accounts owing from an Account Debtor with respect to which
Borrower has received Deferred Revenue (but only to the extent of such Deferred
Revenue);
(m) Accounts for which Bank in its good faith business judgment
determines collection to be doubtful; and
(n) other Accounts Bank deems ineligible in the exercise of its good
faith business judgment.
"ELIGIBLE FOREIGN ACCOUNTS" means Accounts arising in the ordinary
course of Borrower's business from an Account Debtor that does not have its
principal place of business in the United States but are otherwise Eligible
Accounts that are (a) supported by letter(s) of credit acceptable to Bank in its
discretion; or (b) that Bank approves in writing.
"ELIGIBLE INVENTORY" means, at any time, the aggregate of Borrower's
Inventory that (a) consists of finished domestic goods, in good, new, and
salable condition, which is not perishable, returned, consigned, obsolete, not
sellable, damaged, or defective, and is not comprised of demonstrative or custom
inventory, works in progress, packaging or shipping materials, or supplies; (b)
meets all applicable governmental standards; (c) has been manufactured in
compliance with the Fair Labor Standards Act; (d) is not subject to any Liens,
except the first priority Liens granted or in favor of Bank under this Agreement
or any of the other Loan Documents; (e) is located at Borrower's principal place
of business (or any location permitted under Section 7.2); provided that any
Inventory located in the possession of a bailee is subject to a Bailee Agreement
in favor of Bank in form and substance acceptable to Bank; and (f) is otherwise
acceptable to Bank in its good faith business judgment.
"EQUIPMENT" is all "equipment" as defined in the Code with such
additions to such term as may hereafter be made, and includes without limitation
all machinery, fixtures, goods, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing.
"ERISA" is the Employee Retirement Income Security Act of 1974, and its
regulations.
-23-
"EVENT OF DEFAULT" is defined in Section 8.
"FOREIGN CURRENCY" means lawful money of a country other than the
United States.
"FUNDING DATE" is any date on which a Credit Extension is made to or
on account of Borrower which shall be a Business Day.
"FX BUSINESS DAY" is any day when (a) Bank's Foreign Exchange
Department is conducting its normal business and (b) the Foreign Currency being
purchased or sold by Borrower is available to Bank from the entity from which
Bank shall buy or sell such Foreign Currency.
"FX FORWARD CONTRACT" is defined in Section 2.1.3.
"FX RESERVE" is defined in Section 2.1.3.
"GAAP" is generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"GENERAL INTANGIBLES" is all "general intangibles" as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation, all copyright rights,
copyright applications, copyright registrations and like protections in each
work of authorship and derivative work, whether published or unpublished, any
patents, trademarks, service marks and, to the extent permitted under applicable
law, any applications therefor, whether registered or not, any trade secret
rights, including any rights to unpatented inventions, payment intangibles,
royalties, contract rights, goodwill, franchise agreements, purchase orders,
customer lists, route lists, telephone numbers, domain names, claims, income and
other tax refunds, security and other deposits, options to purchase or sell real
or personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.
"GOVERNMENTAL APPROVAL" is any consent, authorization, approval, order,
license, franchise, permit, certificate, accreditation, registration, filing or
notice, of, issued by, from or to, or other act by or in respect of, any
Governmental Authority.
"GOVERNMENTAL AUTHORITY" is any nation or government, any state or
other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" is any proceeding by or against any Person
under the United States Bankruptcy Code, or any other bankruptcy or insolvency
law, including assignments for the benefit of creditors, compositions,
extensions generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INVENTORY" is all "inventory" as defined in the Code in effect on the
date hereof with such additions to such term as may hereafter be made, and
includes without limitation all merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products, including
without limitation such inventory as is temporarily out of Borrower's custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.
-24-
"INVESTMENT" is any beneficial ownership interest in any Person
(including stock, partnership interest or other securities), and any loan,
advance or capital contribution to any Person.
"IP AGREEMENT" is that certain Intellectual Property Security
Agreement executed and delivered by Borrower to Bank dated as of even date
herewith.
"LETTER OF CREDIT" means a standby letter of credit issued by Bank or
another institution based upon an application, guarantee, indemnity or similar
agreement on the part of Bank as set forth in Section 2.1.2.
"LETTER OF CREDIT APPLICATION" is defined in Section 2.1.2(a).
"LETTER OF CREDIT RESERVE" has the meaning set forth in Section
2.1.2(d).
"LIEN" is a claim, mortgage, deed of trust, levy, charge, pledge,
security interest or other encumbrance of any kind, whether voluntarily incurred
or arising by operation of law or otherwise against any property.
"LOAN DOCUMENTS" any note, or notes or guaranties executed by
Borrower, and any other present or future agreement between Borrower and/or for
the benefit of Bank in connection with this Agreement, all as amended, restated,
or otherwise modified.
"MATERIAL ADVERSE CHANGE" is (a) a material impairment in the
perfection or priority of Bank's Lien in the Collateral or in the value of such
Collateral; (b) a material adverse change in the business, operations, or
condition (financial or otherwise) of Borrower; or (c) a material impairment of
the prospect of repayment of any portion of the Obligations or (d) Bank
determines, based upon information available to it and in its reasonable
judgment, that there is a reasonable likelihood that Borrower shall fail to
comply with one or more of the financial covenants in Section 6 during the next
succeeding financial reporting period.
"MAXIMUM DOLLAR AMOUNT" is $2,000,000; provided that, if no Default or
Event of Default has occurred and is continuing, the Maximum Dollar Amount shall
be raised to $3,000,000, on the later of (i) 90 days after the Effective Date,
or (ii) the date Bank receives confirmation reasonably satisfactory to it that
the New Subordinated Loan has been made and the unpaid principal balance of the
New Subordinated Loan has been reduced to $1,000,000.
"NEW SUBORDINATED LOAN" is a loan to Borrower from an institutional
lender acceptable to Bank in its good faith business judgment, in the total
amount of $1,500,000, which constitutes "Subordinated Debt" of Borrower as
defined herein, which is on terms acceptable to Bank in its good faith business
judgment, and which is for the purpose of funding the Specified Stock Buyback.
"OBLIGATIONS" are Borrower's obligation to pay when due any debts,
principal, interest, Bank Expenses and other amounts Borrower owes Bank now or
later, whether under this Agreement, the Loan Documents, or otherwise,
including, without limitation, all obligations relating to letters of credit
(including reimbursement obligations for drawn and undrawn letters of credit),
cash management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and the performance of Borrower's
duties under the Loan Documents.
"OPERATING DOCUMENTS" are, for any Person, such Person's formation
documents, as certified with the Secretary of State of such Person's state of
formation on a date that is no earlier than 30 days prior to the Effective Date,
and, (a) if such Person is a corporation, its bylaws in current form, (b) if
such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its
partnership agreement (or similar agreement), each of the foregoing with all
current amendments or modifications thereto.
"PERFECTION CERTIFICATE" is defined in Section 5.1.
"PERMITTED INDEBTEDNESS" is:
-25-
(a) Borrower's Indebtedness to Bank under this Agreement and the other
Loan Documents;
(b) Indebtedness existing on the Effective Date and shown on the
Perfection Certificate;
(c) Subordinated Debt;
(d) unsecured Indebtedness to trade creditors incurred in the ordinary
course of business;
(e) Indebtedness incurred as a result of endorsing negotiable
instruments received in the ordinary course of business;
(f) Indebtedness secured by Permitted Liens;
(g) extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (g) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Perfection Certificate and existing on the
Effective Date;
(b) Cash Equivalents;
(c) Investments consisting of the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
Borrower;
(d) Investments consisting of deposit accounts in which Bank has a
perfected security interest;
(e) Investments accepted in connection with Transfers permitted by
Section 7.1;
(f) Investments of Subsidiaries in or to other Subsidiaries or Borrower
and Investments by Borrower in Subsidiaries not to exceed $100,000 in the
aggregate in any fiscal year;
(g) 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;
(h) 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; and
(i) 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 shall not apply
to Investments of Borrower in any Subsidiary.
"PERMITTED LIENS" are:
(a) Liens existing on the Effective Date and shown on the Perfection
Certificate or arising under this Agreement and the 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, PROVIDED that no notice of
any such Lien has been filed or recorded under the Internal Revenue Code of
1986, as amended, and the Treasury Regulations adopted thereunder;
-26-
(c) purchase money Liens (i) on Equipment acquired or held by Borrower
incurred for financing the acquisition of the Equipment securing no more than
$250,000 in the aggregate amount outstanding, or (ii) existing on Equipment when
acquired, IF the Lien is confined to the property and improvements and the
proceeds of the Equipment;
(d) Liens of carriers, warehousemen, suppliers, or other Persons that
are possessory in nature arising in the ordinary course of business so long as
such Liens attach only to Inventory, and which have no priority over Bank's
security interest, are not delinquent or remain payable without penalty or which
are being contested in good faith and by appropriate proceedings which
proceedings have the effect of preventing the forfeiture or sale of the property
subject thereto;
(e) Liens to secure payment of workers' compensation, employment
insurance, old-age pensions, social security and other like obligations incurred
in the ordinary course of business (other than Liens imposed by ERISA),
provided, they have no priority over any of Bank's Liens;
(f) 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;
(g) leases or subleases of real property granted in the ordinary course
of business, and leases, subleases, non-exclusive licenses or sublicenses of
property (other than real property or intellectual property) granted in the
ordinary course of Borrower's business, IF the leases, subleases, licenses and
sublicenses do not prohibit granting Bank a security interest;
(h) non-exclusive license of intellectual property granted to third
parties in the ordinary course of business;
(i) Liens arising from attachments or judgments, orders, or decrees in
circumstances not constituting an Event of Default under Sections 8.4 and 8.7;
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.
"REGISTERED ORGANIZATION" is any "registered organization" as defined
in the Code with such additions to such term as may hereafter be made.
"REQUIREMENT OF LAW" is as to any Person, the organizational or
governing documents of such Person, and any law (statutory or common), treaty,
rule or regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"RESERVES" means, as of any date of determination, such amounts as Bank
may from time to time establish and revise in its good faith business judgment,
reducing the amount of Advances and other financial accommodations which would
otherwise be available to Borrower (a) to reflect events, conditions,
contingencies or risks which, as determined by Bank in its good faith business
judgment, do or may adversely affect (i) the Collateral or any other property
which is security for the Obligations or its value (including without limitation
any increase in delinquencies of Accounts), (ii) the assets, business or
prospects of Borrower or any Guarantor, or (iii) the security interests and
other rights of Bank in the Collateral (including the enforceability, perfection
and priority thereof); or (b) to reflect Bank's good faith belief that any
collateral report or financial information furnished by or on behalf of Borrower
or any Guarantor to Bank is or may have been incomplete, inaccurate or
misleading in any material respect; or (c) in respect of any state of facts
which Bank determines in good faith constitutes an Event of Default or may, with
notice or passage of time or both, constitute an Event of Default.
-27-
"RESPONSIBLE OFFICER" is any of the Chief Executive Officer,
President, Chief Financial Officer and Controller of Borrower.
"REVOLVING LINE" is an Advance or Advances in an aggregate amount of up
to the MAXIMUM DOLLAR AMOUNT outstanding at any time.
"REVOLVING LINE MATURITY DATE" is the second anniversary of the date of
this Agreement.
"SECURITIES ACCOUNT" is any "securities account" as defined in the
Code with such additions to such term as may hereafter be made.
"SETTLEMENT DATE" is defined in Section 2.1.3.
"SUBORDINATED DEBT" is indebtedness incurred by Borrower subordinated
to all of Borrower's now or hereafter indebtedness to Bank (pursuant to a
subordination, intercreditor, or other similar agreement in form and substance
satisfactory to Bank entered into between Bank and the other creditor), on terms
acceptable to Bank.
"SUBSIDIARY" means, with respect to any Person, any Person of which
more than 50.0% of the voting stock or other equity interests (in the case of
Persons other than corporations) is owned or controlled directly or indirectly
by such Person or one or more of Affiliates of such Person.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries MINUS (a) any amounts attributable to (i)
goodwill, (ii) intangible items including unamortized debt discount and expense,
patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, (iii) notes, accounts receivable
and other obligations owing to Borrower from its officers or other Affiliates,
and (iv) reserves not already deducted from assets, MINUS (b) Total Liabilities
(as defined below), PLUS (c) 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 of Subordinated Debt permitted
by Bank to be paid by Borrower, but excluding all other Subordinated Debt, and
excluding non-cash liabilities, accrued dividends on Series A 5% cumulative
convertible stock, and liability under derivative contracts relating to
Borrower's outstanding preferred stock (to the extent the foregoing have been
included in liabilities on Borrower's consolidated balance sheet).
"TRANSACTION REPORT" is that certain report of transactions and
schedule of collections in the form attached hereto as Exhibit C.
"TRANSFER" is defined in Section 7.1.
[Signature page follows.]
-28-
[Signature page to Loan and Security Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the Effective Date.
BORROWER:
SYSVIEW TECHNOLOGY, INC.
By /S/ WILLIAM HAWKINS
- ------------------------------
Name: William Hawkins
- ------------------------------
Title: COO/CFO
- ------------------------------
BORROWER:
SYSCAN, INC.
By /S/ WILLIAM HAWKINS
- ------------------------------
Name: William Hawkins
- ------------------------------
Title: COO/CFO
- ------------------------------
BANK:
SILICON VALLEY BANK
By /S/ MINAL PATEL
- ------------------------------
Name: Minal Patel
- ------------------------------
Title: Relationship Manager
- ------------------------------
Effective Date: SEPTEMBER 13, 2007
EXHIBITS
A "Collateral"
B Compliance Certificate
C Transaction Report
SCHEDULES
1 Collateral in Possession of Bailees
[Signature page to Loan and Security Agreement]
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest in and to
the following personal property:
All goods, Accounts (including health-care receivables), Equipment,
Inventory, contract rights or rights to payment of money, leases, license
agreements, franchise agreements, General Intangibles, commercial tort claims,
documents, instruments (including any promissory notes), chattel paper (whether
tangible or electronic), cash, deposit accounts, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located;
[and]
all Borrower's Books relating to the foregoing, and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
EXHIBIT B
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK Date:
----------------------------
FROM:
-----------------------------------
The undersigned authorized officer of ____________________ ("Borrower")
certifies that under the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the "Agreement"), (1) Borrower is in complete
compliance for the period ending _______________ with all required covenants
except as noted below, (2) there are no Events of Default, (3) all
representations and warranties in the Agreement are true and correct in all
material respects on this date except as noted below; provided, however, that
such materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date, (4) Borrower, and each of its
Subsidiaries, has timely filed all required tax returns and reports, and
Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower except as otherwise
permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no
Liens have been levied or claims made against Borrower [or any of its
Subsidiaries] relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Bank. Attached are the
required documents supporting the certification. The undersigned certifies that
these are prepared in accordance with GAAP consistently applied from one period
to the next except as explained in an accompanying letter or footnotes. The
undersigned 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. Capitalized terms used but not otherwise defined
herein shall have the meanings given them in the Agreement.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
- ----------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------- ---------------------------------------- ---------------------
REPORTING COVENANT REQUIRED COMPLIES
- ------------------------------------------------------------- ---------------------------------------- ---------------------
- ------------------------------------------------------------- ---------------------------------------- ---------------------
- ------------------------------------------------------------- ---------------------------------------- ---------------------
- ------------------------------------------------------------- ---------------------------------------- ---------------------
Monthly financial statements with Monthly within 30 days Yes No
Compliance Certificate
- ------------------------------------------------------------- ---------------------------------------- ---------------------
- ------------------------------------------------------------- ---------------------------------------- ---------------------
Annual financial statement (CPA Audited) + CC FYE within 180 days Yes No
- ------------------------------------------------------------- ---------------------------------------- ---------------------
- ------------------------------------------------------------- ---------------------------------------- ---------------------
10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No
- ------------------------------------------------------------- ---------------------------------------- ---------------------
- ------------------------------------------------------------- ---------------------------------------- ---------------------
Transaction Reports Weekly Yes No
- ------------------------------------------------------------- ---------------------------------------- ---------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
The following intellectual property was registered after the Effective Date (if no registrations, state "None")
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------- --------------- --------------- ----------------------
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
- --------------------------------------------------------------------- --------------- --------------- ----------------------
- --------------------------------------------------------------------- --------------- --------------- ----------------------
- --------------------------------------------------------------------- --------------- --------------- ----------------------
- --------------------------------------------------------------------- --------------- --------------- ----------------------
Maintain on a MONTHLY Basis:
- --------------------------------------------------------------------- --------------- --------------- ----------------------
- --------------------------------------------------------------------- --------------- --------------- ----------------------
Minimum Tangible Net Worth $_______ $_______ Yes No
- --------------------------------------------------------------------- --------------- --------------- ----------------------
The following financial covenant analys[is][es] and information set
forth in Schedule 1 attached hereto are true and accurate as of the date of this
Certificate.
The following are the exceptions with respect to the certification
above: (If no exceptions exist, state "No exceptions to note.")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Sysview Technology, Inc. BANK USE ONLY
Received by: _____________________
By: AUTHORIZED SIGNER
----------------------------------
Name: Date: ___________________________
--------------------------------
Title:
Verified: ________________________
AUTHORIZED SIGNER
Date: _________________________
Compliance Status: Yes No
SCHEDULE 1 TO COMPLIANCE CERTIFICATE
FINANCIAL COVENANTS OF BORROWER
In the event of a conflict between this Schedule and the Loan Agreement, the
terms of the Loan Agreement shall govern.
Dated: ____________________
TANGIBLE NET WORTH (Section 6.9(a))
Required: $___________
Actual:
A. Aggregate value of total assets of Borrower and its Subsidiaries $
--------
B. Aggregate value of goodwill of Borrower and its Subsidiaries $
--------
C. Aggregate value of intangible assets of Borrower and its
Subsidiaries $
--------
D. Aggregate value of investments of Borrower and its
Subsidiaries consisting of minority $
--------
investments in companies which investments are not publicly-traded
E. Aggregate value of any reserves not already deducted from assets $
--------
F. Aggregate value of liabilities of Borrower and its Subsidiaries
(including all Indebtedness) and current portion of Subordinated Debt
permitted by Bank to be paid by Borrower (but no other Subordinated
Debt) $
--------
G. Aggregate value of Indebtedness of Borrower subordinated to
Borrower's Indebtedness to Bank $
--------
H. Tangible Net Worth (line A minus line B minus line C minus line
D minus line E minus line F plus line G) $
--------
Is line H equal to or greater than $__________?
No, not in compliance Yes, in compliance
--------- --------
EXHIBIT C
Transaction Report
[EXCEL spreadsheet to be provided separately]
SCHEDULE 1
Collateral in Possession of Bailees
CTS Advantage Logistics