IMPERIAL BANK
- --------------------------------------------------------------------------------
Emerging Growth Industries, Southwest Regional Office
8911 Capital Texas Highway, Suite 2310 - Austin, Texas 78759 -
Tel: (512) 349-2333 - Fax: (512) 349-2888
December 9, 1999
Mr. John McGovern
Silicon Laboratories
4635 Boston Lane
Austin, TX 78735
Dear John,
We are pleased to provide this commitment letter for the proposed bank
financing that Imperial Bank ("Bank") is willing to extend to Silicon
Laboratories, Inc. ("Borrower"). This commitment to lend is subject to
execution of a definitive written agreement and documentation for the
transaction described in this letter. The terms of the financing are as
follows:
A. CREDIT FACILITY
1) Existing $1,000,000 equipment term loan.
2) Existing $1,500,000 equipment term loan.
3) Existing $453,600 letter of credit.
4) Existing $3,000,000 revolving line of credit, with a $500,000
sub-limit for letters of credit.
5) A New $2,000,000 term loan, with a $1,000,000 sub-limit for
documented software and a $1,000,000 sub-limit for documented
leasehold improvements.
6) A New $2,000,000 term loan for capital equipment purchases.
B. TERMS
1) Currently being amortized.
2) Currently being amortized.
3) Facility in place.
4) Interest payable monthly with principal and accrued interest due
at maturity.
5) 6 month interest-only period, thereafter, the outstanding balance
of the facility to be amortized over 36 months.
6) 9 month interest-only period, thereafter, the outstanding balance
of the facility to be amortized over 36 months.
C. MATURITY
1) 3/28/01
2) 1/29/02
3) 9/7/99
4) 6/24/00
5) 42 months from the date of documents.
6) 45 months from the date of documents.
D. PRICING
1) Imperial Bank's Prime Rate.
2) Imperial Bank's Prime Rate.
3) Imperial Bank's Prime Rate.
4) Imperial Bank's Prime Rate.
5) Imperial Bank's Prime Rate.
6) Imperial Bank's Prime Rate.
E. FACILITY FEES
5) $2,500
6) $1,250
F. LEGAL FEES
$500
G. WARRANT (EXISTING)
2) 3.0% of the commitment
3) 5.0% of the commitment
H. ADVANCE RATE
5) SOFTWARE: 100% advance rate against all approved software invoices
less than 90 days old, excluding sales tax and freight charges,
up to $1,000,000. LEASEHOLD IMPROVEMENTS: 100% advance rate
against all documented leasehold improvements, up to $1,000,000.
6) EQUIPMENT: 100% advance rate against all approved equipment invoices,
for new equipment purchased within 90 days or less of the advance
request, excluding sales tax and freight charges.
I. COLLATERAL:
A UCC-1 filing on all assets of Borrower, excluding Intellectual
Property, with the Bank in first position. A negative pledge on
intellectual property will be required.
J. FINANCIAL COVENANTS
(i) Borrower to maintain a monthly minimum Quick Ratio(1) of at least
1.50:1.00.
(ii) Borrower to maintain a minimum Debt Service Coverage Ratio(2) of
1.50:1.00.
(1) Quick Ratio defined as: Cash plus A/R divided by Current
Liabilities.
(2) Debt service coverage ratio defined as EBIT plus
depreciation and amortization (MOST RECENT THREE MONTH PERIOD
ANNUALIZED) divided by current maturities of long term debt.
K. REPORTING REQUIREMENTS
(i) Monthly internal prepared financial statements prepared
according to generally accepted accounting principles within 25
days after month end with signed compliance certificate.
(ii) Monthly accounts receivable and accounts payable agings with
borrowing base certificate due within 25 days of month-end.
(iii) Unqualified audit of annual financial statements within 90 days
after fiscal year end.
(iv) Bank will have the right to conduct annual collateral records
audit, with results satisfactory to Bank.
L. OTHER
(i) Borrower to maintain primary operating and depository accounts
with Bank.
(ii) Purchase money security interest and leases are allowed with
notification to Bank.
(iii) Borrower to provide property and casualty insurance with the
Bank as "Lenders Loss Payable"
(iv) Borrower to pay for all other costs associated with the closing
of the transaction (UCC search fees, filing fees, etc.)
M. EXPIRATION
Unless Borrower accepts this commitment letter on or before December 17,
1999 this commitment letter will expire and be of no further effect.
This letter is provided solely for your information and is delivered to you
with the understanding that neither it nor its substance shall be disclosed
to any third person, except those who are in confidential relationship with
you, or where the same is required by law.
IF THE PROPOSED TERMS SET FORTH ABOVE ARE ACCEPTABLE TO YOU, PLEASE SO
INDICATE BY SIGNING AND RETURNING THE ORIGINAL OF THIS LETTER TO US, ALONG
WITH THE $4,250 IN FEES REFERRED TO ABOVE. Upon return of this letter and
receipt of payment, the Bank will prepare drafts of definitive loan documents
for your review. If you and the Bank do not enter into definitive loan
documents, the Bank will refund to you the amount of the loan fee payment
less the amount of the Bank's expenses for the foregoing.
This letter is intended to set forth the proposed terms of the credit
facility currently under discussion between us. Except for your obligation to
pay the Bank's expenses described above, this letter and our other
communications and negotiations regarding the proposed loan do not constitute
an agreement or an offer and do not create any legal rights benefiting, or
obligations binding on, either of us. It is intended that all legal rights
and obligations of the Bank and you would be set forth in the signed
definitive loan documents.
On behalf of the Senior Management of the Bank, we are delighted to propose
making this credit facility available to Silicon Laboratories, Inc. and look
forward to a long and mutually rewarding relationship. Please don't hesitate
to call if you have any questions, we can be reached at (512) 349-2333.
Sincerely,
/s/ Chris Jacomino /s/ Tony Schell
Chris Jacomino Tony Schell
Commercial Loan Officer Senior Vice President
Emerging Growth Division Emerging Growth Division
Southwest Regional Office Southwest Regional Office
ACCEPTED AND AGREED TO:
SILICON LABORATORIES, INC.
By: /s/ John McGovern
-------------------------------
Title: Chief Financial Officer
-------------------------------
Date: December 10, 1999
-------------------------------
With return of this letter, please provide us with the following information:
Tax I.D. #: 74-2793174
----------
Names and Title of Authorized Corporate Signers:
John McGovern Navdeep Sooch
---------------------------------- ------------------------------------
Name Name
Chief Financial Officer Chairman and Chief Executive Officer
---------------------------------- ------------------------------------
Title Title
---------------------------------- ------------------------------------
Name Name
---------------------------------- ------------------------------------
Title Title
Number needed to sign: 2
---
Who will execute docs: John McGovern
--------------------------------
Navdeep S. Sooch
--------------------------------
Name of Corporate Secretary: John McGovern
--------------------------------
Is Secretary an Authorized signer? Yes X No
--- ---
Are substantially [Illegible] all of the Company's assets located in the
state of Texas?
Yes X No
--- ---
Automatically Debit Account # 21-001-430 for interest payments each month.
-----------
Disburse loan advances to Account # 21-001-430 when advances are requested.
----------