EXHIBIT 10.4
AMENDED AND RESTATED CREDIT AGREEMENT,
DATED AS OF JUNE 18, 1996,
BY AND BETWEEN
SILICON VALLEY BANK
AND
LIGHTBRIDGE, INC.
TABLE OF CONTENTS
1. DEFINITIONS AND CONSTRUCTION................... 1
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1.1 Definitions............................... 1
1.2 Accounting Terms.......................... 9
2. LOAN AND TERMS OF PAYMENT...................... 9
2.1 Advances.................................. 9
2.1.1 Existing Indebtedness.................... 9
2.2 Equipment Advances........................ 10
2.3 Overadvances.............................. 10
2.4 Interest Rates, Payments and Calculations. 10
2.5 Crediting Payments........................ 11
2.6 Fees...................................... 11
2.7 Additional Cost........................... 12
2.8 Term...................................... 12
3. CONDITIONS OF LOAN............................. 12
3.1 Conditions Precedent to Initial Loan...... 13
3.2 Conditions Precedent to all Advances...... 13
4. SECURITY....................................... 13
4.1 Continuation of Security Interest......... 13
4.2 Delivery of Additional Documentation
Required................................. 14
5. REPRESENTATIONS AND WARRANTIES................. 14
5.1 Due Organization and Qualification........ 14
5.2 Due Authorization: No Conflict............ 14
5.3 No Prior Encumbrances..................... 14
5.4 Bona Fide Eligible Accounts............... 14
5.5 Merchantable Inventory.................... 14
5.6 Name: Location of Chief Executive Office.. 14
5.7 Litigation................................ 14
5.8 No Material Adverse Change in Financial
Statements............................... 15
5.9 Solvency.................................. 15
5.10 Regulatory Compliance..................... 15
5.11 Environmental Condition................... 15
5.12 Taxes..................................... 15
5.13 Subsidiaries.............................. 16
5.14 Government................................ 16
5.15 Full Disclosure........................... 16
6. AFFIRMATIVE COVENANTS.......................... 16
6.1 Good Standing............................. 16
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6.2 Government Compliance..................... 16
6.3 Financial Statements, Reports,
Certificates............................. 16
6.4 Inventory; Returns........................ 17
6.5 Taxes..................................... 17
6.6 Insurance................................. 17
6.7 Principal Depository...................... 18
6.8 Quick Ratio............................... 18
6.9 Tangible Net Worth........................ 18
6.10 Debt-Net Worth Ratio...................... 18
6.11 Liquidity................................. 18
6.12 Minimum Debt Service...................... 18
6.13 Profitability............................. 18
6.14 Registration of Intellectual Property
Rights................................... 18
6.15 Further Assurances........................ 19
7. NEGATIVE COVENANTS............................. 19
7.1 Dispositions.............................. 19
7.2 Change in Business........................ 19
7.3 Mergers or Acquisitions................... 19
7.4 Indebtedness.............................. 19
7.5 Encumbrances.............................. 19
7.6 Distributions............................. 19
7.7 Investments............................... 20
7.8 Transactions with Affiliates.............. 20
7.9 Subordinated Debt......................... 20
7.10 Inventory................................. 20
7.11 Compliance................................ 20
8. EVENTS OF DEFAULT.............................. 20
8.1 Payment Default........................... 20
8.2 Covenant Default.......................... 20
8.3 Material Adverse Developments............. 21
8.4 Attachment................................ 21
8.5 Insolvency................................ 22
8.6 Other Agreements.......................... 22
8.7 Subordinated Debt......................... 22
8.8 Judgments................................. 22
8.9 ERISA..................................... 22
8.10 Misrepresentations........................ 22
9. BANKS RIGHTS AND REMEDIES...................... 22
9.1 Rights and Remedies....................... 23
9.2 Power of Attorney......................... 23
9.3 Bank Expenses............................. 23
9.4 Remedies Cumulative....................... 24
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9.5 Demand; Protest........................... 24
10. NOTICES........................................ 24
11. CHOICE OF LAW AND VENUE: JURY TRIAL WAIVER..... 25
12. GENERAL PROVISIONS............................. 25
12.1 Successors and Assigns.................... 25
12.2 Indemnification........................... 26
12.3 Time of Essence........................... 26
12.4 Severability of Provisions................ 26
12.5 Amendments in Writing; Integration........ 26
12.6 Counterparts.............................. 26
12.7 Survival.................................. 26
12.8 Confidentiality........................... 26
12.9 Countersignature.......................... 27
SCHEDULE Schedule of Exceptions
EXHIBIT A Loan Payment/Advance Telephone Request Form
EXHIBIT B Borrowing Base Certificate
EXHIBIT C Compliance Certificate
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This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is dated as of the 18
day of June, 1996, by SILICON VALLEY BANK, a California-chartered bank ("Bank"),
with its principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054
and with a loan production office located at Wellesley Office Park, 40 William
Street, Suite 350, Wellesley, MA 02181, doing business under the name "Silicon
Valley East", and LIGHTBRIDGE, INC. (formerly known as Credit Technologies,
Inc.), a Delaware corporation ("Borrower").
RECITALS
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WHEREAS, Borrower and Bank have previously executed a Credit Agreement,
dated as of October 5, 1994, amending and restating a certain Commitment Letter
dated as of April 1, 1992, as amended by a First Amendment thereto dated as of
April 5, 1993, and a Second Amendment thereto dated as of June 5, 1994
(hereinafter, the "Existing Agreement");
WHEREAS, pursuant to a Security Agreement dated as of April 1, 1992, as
amended by a First Amendment to Security Agreement dated as of October 5, 1994,
Borrower granted to Bank a continuing security interest in and to certain
Collateral to secure Borrower's obligations to Bank;
WHEREAS, Borrower and Bank wish to amend the Existing Agreement to increase
the working capital line of credit from $2,000,000 to $4,000,000 and to permit
certain other borrowings;
WHEREAS, Borrower and Bank wish to amend the Existing Agreement in certain
other respects;
NOW, THEREFORE, in furtherance of the foregoing, and in consideration of
the mutual promises and agreements of the parties which are set forth herein,
the parties hereto hereby agree that , subject to the satisfaction of the terms
and conditions set forth herein, the Existing Agreement shall be amended and
restated in its entirety to read as follows:
1. DEFINITIONS AND CONSTRUCTION
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1.1 Definitions. - As used in this Agreement, the following terms shall
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have the following definitions:
"Accounts" means all presently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods (including, without limitation, the licensing
of software and other technology) or the rendering of services by Borrower,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower and Borrower's Books relating to any of the foregoing.
"Advance" or "Advances" means an Advance under the Committed Revolving
Line.
"Affiliate" means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Agreement" means this Amended and Restated Credit Agreement, as amended,
supplemented or modified from time to time in accordance with its terms.
"Bank Expenses" means all: reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
and Bank's reasonable attorneys' fees and expenses incurred in amending,
enforcing or defending the Loan Documents, whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records including:
ledgers; records concerning Borrower's assets or liabilities, the Collateral,
business operations or financial condition; and all computer programs, or tape
files, and the equipment, containing such information.
"Borrowing Base" has the meaning set forth in Section 2.1 hereof
"Business Day" means any day that is not a Saturday, Sunday, or other day
on which banks in the State of California are authorized or required to close.
"Closing Date" means the date of this Agreement.
"Code" means the Massachusetts Uniform Commercial Code.
"Collateral" has the meaning given that term in the Security Agreement.
"Committed Revolving Line" means Four Million Dollars ($4,000,000).
"Committed Equipment Line" means Two Million Dollars ($2,000,000).
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation"
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shall not include endorsements for collection or deposit in the ordinary course
of business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith; provided, however, that such amount
shall not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with Borrower, are treated as a single employer under Section
414 of the IRC.
"Current Assets" means, as of any applicable date, all amounts that should,
in accordance with GAAP, be included as current assets on the consolidated
balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding Advances and
the current portion of any Equipment Advances made under this Agreement,
including all Indebtedness that is payable upon demand or within one year from
the date of determination thereof unless such Indebtedness is renewable or
extendable at the option of Borrower or any Subsidiary to a date more than one
year from the date of determination, but excluding Subordinated Debt.
"Daily Balance" means the amount of the Obligations owed at the end of a
given day.
"Eligible Accounts" means those Accounts that arise in the ordinary course
of Borrower's business that comply with all of Borrower's representations and
warranties to Bank set forth in Section 5.4; provided, that standards of
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eligibility may be fixed and revised from time to time by Bank in Bank's
reasonable judgment and upon notification thereof to Borrower in accordance with
the provisions hereof. Unless otherwise agreed to by Bank, Eligible Accounts
shall not include the following:
(a) Accounts that the account debtor has failed to pay within ninety (90)
days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent (50%) of
whose Accounts the account debtor has failed to pay within ninety (90) days of
invoice date;
(c) Accounts with respect to which the account debtor is an officer,
employee, or agent of Borrower;
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(d) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval bill and hold, or other terms
by reason of which the payment by the account debtor may be conditional;
(e) Accounts with respect to which the account debtor is an Affiliate
(other than by virtue of being directly or indirectly under common ownership or
control with Borrower) of Borrower;
(f) Accounts with respect to which the account debtor does not have its
principal place of business in the United States, and Accounts arising from
products shipped to or services provided to branches or offices located in the
United States of any account debtor that does not have its principal place of
business in the United States;
(g) Accounts with respect to which the account debtor is a federal state,
local governmental entity or any department, agency, or instrumentality thereof;
(h) Accounts with respect to which Borrower is liable to the account debtor
for goods sold or services rendered by the account debtor to Borrower, but only
to the extent of any amounts owing to the account debtor against amounts owed to
Borrower;
(i) Accounts with respect to an account debtor, including Subsidiaries and
Affiliates, whose total obligations to Borrower exceed forty percent (40%) of
all Accounts, to the extent such obligations exceed the aforementioned
percentage, except as approved in writing by Bank;
(j) Accounts with respect to which the account debtor disputes liability or
makes any claim with respect thereto as to which Bank believes, in its sole
discretion, that there may be a basis for dispute (but only to the extent of the
amount subject to such dispute or claim), or is subject to any Insolvency
Proceeding, or becomes insolvent, or goes out of business; or
(k) Accounts the collection of which Bank reasonably determines to be
doubtful.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"Equipment Advance" or "Equipment Advances" means an Equipment Advance
under the Committed Equipment Line.
"Equipment Availability End Date" has the meaning set forth in Section
2.2(a) hereof.
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"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"Existing Agreement" has the meaning set forth in the Recitals to this
Agreement.
"GAAP" means generally accepted accounting principles as in effect from
time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including, without limitation,
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against any
person or entity under any provision of the United States Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law, including assignments
for the benefit of creditors, formal or informal moratoria, compositions,
extension generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Inventory" means all present and future inventory in which Borrower has
any interest, including merchandise, raw materials, parts, supplies, packing,
and shipping materials, work in process and finished products intended for sale
or lease or to be furnished under a contract of service, of every kind and
description now or at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above, and Borrower's Books relating to any of
the foregoing.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loans" means, collectively, the Advances and the Equipment Advances; and
"Loan" means any Advance or Equipment Advance.
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"Loan Documents" means, collectively, this Agreement, any note or notes
executed by Borrower, and any other agreement entered into between Borrower and
Bank in connection with this Agreement, all as amended or extended from time to
time.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which Borrower or any
member of the Controlled Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the
Controlled Group during such five year period.
"Negotiable Collateral" means all of Borrower's present and future letters
of credit of which it is a beneficiary, notes, drafts, instruments, securities,
documents of title, and chattel paper, and Borrower's Books relating to any of
the foregoing.
"Obligations" means all debt, principal interest, Bank Expenses and other
amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.
"Payment Date" means the last calendar day of each month.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding, to any or all of its functions under ERISA.
"Periodic Payments" means all installments or similar recurring payments
that Borrower may now or hereafter become obligated to pay to Bank pursuant to
the terms and provisions of any instrument, or agreement now or hereafter in
existence between Borrower and Bank.
"Permitted Indebtedness" mean:
(a) Indebtedness of Borrower in favor of Bank;
(b) Indebtedness existing on the Closing Date and disclosed in the
Schedule;
(c) Subordinated Debt; and
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(d) Indebtedness to trade creditors incurred in the ordinary course of
business.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the Schedule; and
(b) (i) marketable direct obligations issued or unconditionally guaranteed
by the United States of America or any agency or any State thereof maturing
within one (1) year from the date of acquisition thereof, (ii) commercial paper
maturing no more than one (1) year from the date of creation thereof and
currently having the highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc., and (iii) certificates of
deposit maturing no more than one (1) year from the date of investment therein
issued by Bank.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the Schedule;
(b) Liens in favor of Bank, including, without limitation, Liens arising
under this Agreement or the other Loan Documents;
(c) Liens for taxes, fees, assessments or other governmental charges or
levies, either not delinquent or being contested in good faith by appropriate
proceedings, provided the same have no priority over any of Bank's security
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interests;
(d) Liens (1) upon or in any equipment acquired or held by Borrower or any
of its Subsidiaries to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment, or (ii) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so
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acquired and improvements thereon, and the proceeds of such equipment;
(e) Liens incurred in connection with the extension, renewal or refinancing
of the indebtedness secured by Liens of the type described in clauses (a)
through (d) above, provided that any extension, renewal or replacement Lien
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shall be limited to the property encumbered by the existing Lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase.
"Person" means any individual sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
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"Plan" means any employee pension benefit plan which is covered by Title IV
of ERISA or subject to minimum funding standards under Section 412 of the IRC
and is either (a) maintained by Borrower or any member of the Controlled Group
for employees of Borrower or any member of the Controlled Group or (b)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
Borrower or any member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.
"Present Unpaid Amount" means the presently outstanding amount of advances
made by Bank to Borrower under the Existing Agreement, which as of the date
hereof is $1,500,000.
"Prime Rate" means the variable rate of interest, per annum, most recently
announced by Bank, as its "prime rate," whether or not such announced rate is
the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount thereof shall be
determined, the consolidated cash, cash-equivalents, accounts receivable and
investments, with maturities not to exceed 90 days, of Borrower determined in
accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer, the Chief
Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" means June 5, 1997.
"Schedule" means the schedule of exceptions attached hereto.
"Security Agreement" has the meaning set forth in Section 4.1 hereof.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (1) any general
partnership interest or (ii) more than 50% of the stock of which by the terms
thereof ordinary voting power to elect the Board of Directors, managers or
trustees of the entity shall, at the time as of which any determination is being
made, be owned by Borrower, either directly or through an Affiliate.
"Tangible Net Worth" means at any date as of which the amount thereof shall
be determined, the consolidated total assets of Borrower and its Subsidiaries
minus, without duplication, (i) the sum of any amounts attributable to (a)
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goodwill, (b) intangible items such as unamortized debt discount and expense,
patents, trade and service marks and names, copyrights
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and research and development expenses except prepaid expenses, and (c) all
reserves not already deducted from assets, and (ii) Total Liabilities.
===
"Total Liabilities" means at any date as of which the amount thereof shall
be determined, all obligations that should, in accordance with GAAP be
classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness, but specifically excluding Subordinated
Debt.
"Trademarks Assignment" has the meaning set forth in Section 4.1 hereof.
1.2 Accounting Terms. All accounting terms not specifically defined herein
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shall be construed in accordance with GAAP and all calculations made hereunder
shall be made in accordance with GAAP. When used herein, the terms "financial
statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
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2.1 Advances. Subject to and upon the terms and conditions of this
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Agreement, Bank agrees to make Advances to Borrower in an aggregate amount not
to exceed the Committed Revolving Line or the Borrowing Base, whichever is less.
For purposes of this Agreement, "Borrowing Base" shall mean an amount equal to
eighty percent (80%) of Eligible Accounts. Subject to the terms and conditions
of this Agreement, amounts borrowed pursuant to this Section 2.1 may be repaid
and reborrowed at any time during the term of this Agreement.
Whenever Borrower desires an Advance, Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m Pacific time, on the
Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit A hereto. Bank is authorized to make Advances under this Agreement,
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based upon instructions received from a Responsible Officer, or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank shall be entitled to
rely on any telephonic notice given by a person who Bank reasonably believes to
be a Responsible Officer, and Borrower shall indemnify and hold Bank harmless
for any damages or loss suffered by Bank as a result of such reliance. Bank
will credit the amount of Advances made under this Section 2.1 to Borrower's
deposit account.
The Committed Revolving Line shall terminate on the Revolving Maturity
Date, at which time all Advances under this Section 2. 1, all accrued and unpaid
interest thereon and other amounts due under this Agreement (except as otherwise
expressly specified herein) shall be immediately due and payable.
2.1.1 Existing Indebtedness. Borrower acknowledges that, pursuant to the
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Existing Agreement, Bank has made certain advances to Borrower, the current
outstanding amount of which is equal to the Present Unpaid Amount. Borrower and
Bank agree that such
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Present Unpaid Amount shall hereafter constitute Advances made pursuant to this
Agreement, and the obligations of Borrower with respect to such Advances shall
be governed by the terms and conditions of this Agreement and the note executed
in connection herewith.
2.2 Equipment Advances.
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(a) At any time from the date hereof through December 31, 1996 (the
"Equipment Availability End Date"), Borrower may from time to time request
advances (each an "Equipment Advance" and collectively, the "Equipment
Advances") from Bank in an aggregate amount not to exceed the Committed
Equipment Line. To evidence the Equipment Advance or Equipment Advances,
Borrower shall deliver to Bank, at the time of each Equipment Advance request,
an invoice for the equipment to be purchased. The Equipment Advances shall be
used only to purchase equipment, and shall not exceed One Hundred Percent (100%)
of the invoice amount of such equipment approved from time to time by Bank,
excluding taxes, shipping, warranty charges, freight discounts and installation
expense. Borrower may, however, use Equipment Advances aggregating up to Five
Hundred Thousand Dollars ($500,000.00) to purchase software.
(b) Interest shall accrue from the date of each Equipment Advance at the
rate specified in Section in Section 2.4(a), and shall be payable monthly for
each month through the month in which the Equipment Availability End Date falls.
Any Equipment Advance or Equipment Advances that are outstanding on the
Equipment Availability End Date will be payable in thirty consecutive equal
monthly installments of principal, plus interest, beginning January 31, 1997,
and on the Payment Date of each month thereafter until the entire principal
balance shall have been paid in full.
(c) When Borrower desires to obtain an Equipment Advance, Borrower shall
notify Bank (which notice shall be irrevocable) by facsimile transmission to be
received no later than 3:00 p.m. Pacific time one (1) Business Day before the
day on which the Equipment Advance is to be made. Such notice shall be
substantially in the form of Exhibit A. The notice shall be signed by a
Responsible Officer and include a copy of the invoice for the Equipment to be
financed.
2.3 Overadvances. If, at any time or for any reason, (a) the outstanding
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principal amount of Advances hereunder exceeds the lesser of (i) the Committed
Revolving Line or (ii) the Borrowing Base, and/or (b) the outstanding principal
amount of Equipment Advances exceeds the Committed Equipment Line, Borrower
shall immediately pay to Bank, in cash, the amount of such excess.
2.4 Interest Rates, Payments and Calculations.
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(a) Interest Rate. Except as set forth in Section 2.4(b), (i) each Advance
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shall bear interest, on the average Daily Balance, at a rate equal to one-
quarter of one percentage point (0.250%) above the Prime Rate, and (ii) each
Equipment Advance shall bear
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interest, on the average Daily Balance, at a rate equal to three-quarters of one
percentage point (0.750%) above the Prime Rate.
(b) Default Rate. All Obligations shall bear interest, from and after the
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occurrence of an Event of Default, at a rate equal to five percentage points
(5.000%) above the interest rate applicable immediately prior to the occurrence
of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on the Payment
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Date of each month during the term hereof. Borrower hereby authorizes Bank to
debit any accounts with Bank, including, without limitation, Account Number
700195970 for payments of principal and interest due on the Obligations and any
other amounts owing by Borrower to Bank. Bank will notify Borrower of all
debits which Bank makes against Borrower's accounts. Any such debits against
Borrower's accounts in no way shall be deemed a set-off. Any interest not paid
when due shall be compounded by becoming a part of the Obligations, and such
interest shall thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to time
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hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m on the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under
the Loan Documents shall be computed on the basis of a three hundred sixty (360)
day year for the actual number of days elapsed.
2.5 Crediting Payments. Prior to the occurrence of an Event of Default,
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Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment shall be immediately applied to conditionally
reduce Obligations, but shall not be considered a payment on account unless such
payment is of immediately available federal funds or unless and until such check
or other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any wire transfer or payment received
by Bank after 12:00 noon Pacific time shall be deemed to have been received by
Bank as of the opening of business on the immediately following Business Day.
Whenever any payment to Bank under the Loan Documents would otherwise be due
(except by reason of acceleration) on a date that is not a Business Day, such
payment shall instead be due on the next Business Day, and additional fees or
interest, as the case may be, shall accrue and be payable for the period of such
extension.
2.6 Fees. Borrower shall pay to Bank the following:
-----
(a) Facility Fees. Facility Fees equal to one-quarter of one percentage
--------------
point of the Committed Revolving Line or Ten Thousand Dollars ($10,000), in the
case of the Committed Revolving Line, and Two Thousand Five Hundred Dollars
($2,500), in the case of the Committed Equipment Line, which fees shall be due
on the Closing Date and shall be fully earned and non-refundable;
-11-
(b) Financial Examination and Appraisal Fees. Bank's customary fees and
----------------------------------------
out-of-pocket expenses for Bank's audits of Borrower's Accounts, and for each
appraisal of Collateral and financial analysis and examination of Borrower
performed from time to time by Bank or its agents;
(c) Bank Expenses. Upon demand from Bank, including, without limitations
-------------
upon the date hereof, all Bank Expenses incurred through the date hereof,
including reasonable attorneys' fees and expenses, and, after the date hereof,
all Bank Expenses, including reasonable attorneys' fees and expenses, as and
when they become due.
2.7 Additional Cost. In case any law, regulation, treaty or official
----------------
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of principal or
interest or any other amounts payable hereunder by Borrower or otherwise with
respect to the transactions contemplated hereby (except for taxes on the overall
net income of Bank imposed by the United States of America or any political
subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance, reserve,
special deposit or similar requirement against assets held by, or deposits in or
for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its performance
under this Agreement, and the result of any of the foregoing is to increase the
cost to Bank, reduce the income receivable by Bank or impose any expense upon
Bank with respect to any loans, Bank shall notify Borrower thereof. Borrower
agrees to pay to Bank the amount of such increase in cost, reduction in income
or additional expense as and when such cost, reduction or expense is incurred or
determined upon presentation by Bank of a statement of the amount and setting
forth Bank's calculation thereof, all in reasonable detail, which statement
shall be deemed true and correct absent manifest error.
2.8 Term. Except as otherwise set forth herein, this Agreement shall
-----
become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect until all Obligations are paid in full.
Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Loans under this Agreement immediately and without notice
upon the occurrence and during the continuance of an Event of Default.
Notwithstanding termination, Bank's Lien on the Collateral shall remain in
effect for so long as any Obligations are outstanding.
3. CONDITIONS OF LOAN
------------------
-12-
3.1 Conditions Precedent to Initial Loan. The obligation of Bank to make
-------------------------------------
the initial Loan is subject to the condition precedent that Bank shall have
received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to incumbency
and resolutions authorizing the execution and delivery of this Agreement;
(c) an opinion of Borrower's counsel;
(d) insurance certificate;
(e) payment of the fees and Bank Expenses then due specified in Section
2.6 hereof; and
(f) such other documents, and completion of such other matters, as Bank
may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Loans. The obligation of Bank to make
----------------------------------
each Loan, including the initial Loan, is further subject to the following
conditions:
(a) timely receipt by Bank of the Payment/Advance Form as provided in
Section 2.1 or 2.2, as applicable; and
(b) the representations and warranties contained in Section 5 shall be true
and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Loan as though made at
and as of each such date, and no Event of Default shall have occurred and be
continuing, or would result from such Loan. The making of each Loan shall be
deemed to be a representation and warranty by Borrower on the date of such Loan
as to the accuracy of the facts referred to in this Section 3.2(b).
4. SECURITY
--------
4.1 Continuation of Security Interest. This Agreement and the other Loan
----------------------------------
Documents and all Obligations of Borrower to Bank arising hereunder or
thereunder shall continue to be secured under the terms of (i) that certain
Security Agreement dated as of April 1, 1992, as amended by a First Amendment
thereto dated October 5, 1994 (the "Security Agreement"), pursuant to which
Borrower has granted to Bank a continuing security interest in and to all of
Borrower's assets, whether presently existing or hereafter arising or acquired,
and (ii) that certain Collateral Assignment of Trademarks dated as of October 5,
1994 (the "Trademarks Assignment"), pursuant to which Borrower has collaterally
assigned to Bank all of Borrower's right, title and interest in, to and under
all trademarks, trademark licenses and certain related assets, whether presently
existing or hereafter arising or acquired.
-13-
4.2 Delivery of Additional Documentation Required. Borrower shall from
---------------------------------------------
time to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interest in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
5. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary is a
-----------------------------------
corporation duly existing and in good standing under the laws of its state of
incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified.
5.2 Due Authorization: No Conflict. The execution, delivery, and
-------------------------------
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Certificate of Incorporation or Bylaws, nor
will they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible title to
----------------------
the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
----------------------------
existing obligations. The property giving rise to such Eligible Accounts has
been delivered to the account debtor or to the account debtor's agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor that is included in any Borrowing Base Certificate as an
Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects of
-----------------------
good and marketable quality, free from all material defects.
5.6 Name: Location of Chief Executive Office. Except as disclosed in the
-----------------------------------------
Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 11 hereof.
5.7 Litigation. Except as set forth in the Schedule, there are no actions
-----------
or proceedings pending by or against Borrower or any Subsidiary before any court
or administrative agency in which an adverse decision could have a Material
Adverse Effect or a material adverse
-14-
effect on Borrower's interest or Bank's security interest in the Collateral.
Borrower does not have knowledge of any such pending or threatened actions or
proceedings.
5.8 No Material Adverse Change in Financial Statements. All consolidated
---------------------------------------------------
financial statements related to Borrower and any Subsidiary that have been
delivered by Borrower to Bank fairly present in all material respects Borrower's
consolidated financial condition as of the date thereof and Borrower's
consolidated results of operations for the period then ended. There has not
been a material adverse change in the consolidated financial condition of
Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.9 Solvency. Borrower is solvent and able to pay its debts (including
---------
trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has met the
----------------------
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended. Borrower is not
engaged principally, or as one of the important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.11 Environmental Condition. None of Borrower's or any Subsidiary's
------------------------
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency concerning any action or
omission by Borrower or any Subsidiary resulting in the releasing, or otherwise
disposing of hazardous waste or hazardous substances into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or caused to be filed
------
all tax returns required to be filed, and has paid, or has made adequate
provision for the payment of, all taxes reflected therein.
-15-
5.13 Subsidiaries. Borrower does not own any stock, partnership
-------------
interest or other equity securities of any Person, except for Permitted
Investments.
5.14 Government. Borrower and each Subsidiary has obtained all consents,
-----------
approvals and authorizations of, made all declarations or filings with, and
given all notices to, all governmental authorities that are necessary for the
continued operation of Borrower's business as currently conducted.
5.15 Full Disclosure. No representation, warranty or other statement made
----------------
by Borrower in any certificate or written statement furnished to Bank contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
any Loan hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
--------------
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
----------------------
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall deliver
--------------------------------------------
to Bank: (a) as soon as available, but in any event within thirty (30) days
after the end of each mouth, a company prepared consolidated balance sheet and
income statement covering Borrower's consolidated operations during such period,
certified by an officer of Borrower reasonably acceptable to Bank; (b) as soon
as available, but in any event within one hundred twenty (120) days after the
end of Borrower's fiscal year, audited consolidated financial statements of
Borrower prepared in accordance with GAAP, consistently applied, together with
an unqualified opinion on such financial statements of an independent certified
public accounting firm reasonably acceptable to Bank; (c) within five (5) days
of filing, copies of all statements, reports and notices sent or made available
generally by Borrower to its security holders or to any holders of Subordinated
Debt and all reports on Form 10-K, 10-Q and 8-K filed with the
-16-
Securities and Exchange Commission; (d) promptly upon receipt of notice thereof,
a report of any legal actions pending or threatened against Borrower or any
Subsidiary that could result in damages or costs to Borrower or any Subsidiary
of One Hundred Thousand Dollars ($100,000) or more in the aggregate; and (e)
such budgets, sales projections, operating plans or other financial information
as Bank may reasonably request from time to time.
Within twenty-five (25) days after the last day of each month, Borrower
shall deliver to Bank a Borrowing Base Certificate signed by a Responsible
Officer in substantially the form of Exhibit B hereto, together with aged
---------
listings of accounts receivable and accounts payable.
Within thirty (30) days after the last day of each month, Borrower shall
deliver to Bank with the monthly financial statements a Compliance Certificate
signed by a Responsible Officer in substantially the form of Exhibit C hereto.
---------
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense; provided that such audits will be conducted no
more often than every twelve (12) months unless an Event of Default has occurred
and is continuing.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
-------------------
marketable condition, free from any material defects. Returns and allowances,
if any, as between Borrower and its account debtors shall be on the same basis
and in accordance with the usual customary practices of Borrower, as they exist
at the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to make,
------
due and timely payment or deposit of all material federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrower will make, and will cause each Subsidiary to make,
timely payment or deposit of all material tax payments and withholding taxes
required of it by applicable laws, including, but not limited to, those laws
concerning, F.I.C.A., F.U.T.A, state disability, and local, state, and federal
income taxes, and will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrower or a Subsidiary has made such payments or
deposits; provided that Borrower or a Subsidiary need not make any payment if
the amount or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by
Borrower.
6.6 Insurance.
----------
(a) Borrower, at its expense, shall keep the Collateral insured against
loss or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as ordinarily insured against by other owners in
similar businesses conducted in the
-17-
locations where Borrower's business is conducted on the date hereof. Borrower
shall also maintain insurance relating to Borrower's ownership and use of the
Collateral in amounts and of a type that are customary to businesses similar to
Borrower's.
(b) All such policies of insurance shall be in such form with such
companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days' notice to Bank before canceling its policy for any reason. Borrower
shall deliver to Bank certified copies of such policies of insurance and
evidence of the payments of all premiums therefor. All proceeds payable under
any such policy shall, at the option of Bank, be payable to Bank to be applied
on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
---------------------
depository and operating accounts with Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last day of each
------------
calendar month, a ratio of Quick Assets to Current Liabilities of at least 1.5
to 1.O.
6.9 Tangible Net Worth. Borrower shall maintain, as of the last day of
-------------------
each fiscal quarter, a Tangible Net Worth of not less than eighty percent (80%)
of aggregate net invested capital received from and after the date of this
Agreement.
6.10 Debt-Net Worth Ratio. Borrower shall maintain, as of the last day of
---------------------
each calendar month, a ratio of Total Liabilities to Tangible Net Worth of not
more than 1.0 to 1.0.
6.11 Liquidity. Borrower shall maintain, as of the last day of each
----------
calendar month, (1) unrestricted cash (and equivalents), plus (ii) Eligible
Accounts, minus (iii) outstanding Loans, of not less than two hundred percent
(200%) of Equipment Advances outstanding. The Liquidity covenant set forth in
this Section 6.11 shall continue in effect only until such time as Borrower
initially satisfies the Minimum Debt Service covenant set forth in Section 6.12.
6.12 Minimum Debt Service. Borrower shall maintain, as of the end of each
---------------------
fiscal quarter, a Debt Service ratio of at least 1.25 to 1.00. "Debt Service"
is defined as net after tax earnings plus interest, depreciation and
amortization, divided by total interest plus current portion of long term debt
and current portion of capitalized lease obligations.
6.13 Profitability. Borrower shall have minimum net income of One Dollar
--------------
($1.00) for each fiscal quarter.
6.14 Registration of Intellectual Property Rights. Borrower shall
---------------------------------------------
register or cause to be registered with the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, intellectual
property rights developed or acquired by Borrower
-18-
from time to time in connection with any product prior to the sale or licensing
of such product to any third party. Borrower shall execute and deliver such
additional instruments and documents from time to time as Bank shall reasonably
request to perfect Bank's security interest in such intellectual property
rights.
6.15 Further Assurances. At any time and from time to time Borrower shall
-------------------
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until payment in full of the outstanding Obligations or for so
long as Bank may have any commitment to make any Loans, Borrower will not do any
of the following:
7.1 Dispositions. Convey, sell lease, transfer or otherwise dispose of
-------------
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than: (i) Transfers of Inventory
in the ordinary course of business; (ii) Transfers of non-exclusive licenses and
similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any of its
-------------------
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a material change in Borrower's ownership,
management or directors. Borrower will not, without thirty (30) days' prior
written notification to Bank, relocate its chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
------------------------
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
-------------
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien with
-------------
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution or
--------------
payment on account of or in redemption, retirement or purchase of any capital
stock.
-19-
7.7 Investments. Directly or indirectly acquire or own, or make any
------------
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
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 nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any Subordinated
------------------
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any provision
contained in any documentation relating to the Subordinated Debt without Bank's
prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman, or
----------
similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 11
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" or a company "controlled"
-----------
by an "investment company," within the meaning of the Investment Company Act of
1940, as amended, or become principally engaged in, or undertake as one of its
important activities, the business of extending credit for the purpose of
purchasing or carrying margin stock, or use the proceeds of any Advance for such
purpose. Fail to meet the minimum funding requirements of ERISA, permit a
"Reportable Event" or "Prohibited Transaction", as defined in ERISA, to occur,
fail to comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral or permit any of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay, when due, any of the
----------------
Obligations;
8.2 Covenant Default.
-----------------
-20-
(a) If Borrower fails to perform any obligation under Sections 6.7, 6.8,
6.9, 6.10, 6.11, 6.12 or 6.13 or violates any of the covenants contained in
Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep, or observe any other
material term, provision, condition, covenant, or agreement contained in this
Agreement or in any of the other Loan Documents and as to any default under such
other term, provision, condition, covenant or agreement that can be cured, has
failed to cure such default within ten (10) days after Borrower receives notice
thereof or any officer of Borrower becomes aware thereof, provided, however,
that if the default cannot by its nature be cured within the ten (10) day period
or cannot after diligent attempts by Borrower be cured within such ten (10) day
period, and such default is likely to be cured within a reasonable time, then
Borrower shall have an additional reasonable period (which shall not in any case
exceed thirty (30) days) to attempt to cure such default, and within such
reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Loans will be required to be made
during such cure period), or
(c) If a default occurs under any other present or future agreement between
Borrower and Bank, and such default has not been expressly waived in writing,
permits the acceleration of debt issued or otherwise created pursuant thereto,
or if any such debt is declared due and payable prior to the stated maturity
thereof or is not paid in full at the stated maturity thereof;
8.3 Material Adverse Developments. If (i) there occurs a material
------------------------------
impairment of the perfection or priority of the Bank's security interest in the
Collateral or of the value of such Collateral which is not covered by adequate
insurance or (ii) the Bank determines, based upon information available to it
and in the exercise of its reasonable judgment, that there is a reasonable
likelihood that Borrower will fail to comply with one or more of the financial
covenants set forth on Section 6 during the next succeeding financial reporting
period;
8.4 Attachment. If any material portion of Borrower's assets is attached,
-----------
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or, any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Loans will be required to be made during such cure period);
-21-
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
-----------
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within ten (10) days (provided
that no Loans will be made prior to the dismissal of such Insolvency
Proceeding);
8.6 Other Agreements. If there is a default in any agreement to which
-----------------
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) in the aggregate or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
------------------
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money in an
----------
amount, individually or in the aggregate, of at least Fifty Thousand Dollars
($50,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of ten (10) days (provided that no Loans will be made
prior to the satisfaction or stay of such judgment);
8.9 ERISA. If Borrower or any member of the Controlled Group fails to pay
------
when due an amount or amounts aggregating in excess of $100,000 which it is
obligated to pay to the PBGC or to a Plan under Title IV of ERISA; or a notice
of intent to terminate a Plan or Plans having aggregate Unfunded Liabilities in
excess of $100,000 shall be filed under Title IV of ERISA by Borrower or any
member of the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any such Plan or
Plans or a proceeding shall be instituted by a fiduciary of any such Plan or
Plans against Borrower or any member of the Controlled Group to enforce Sections
515 or 4219(c)(5) of ERISA; or a condition exist by reason of which the PBGC
would be entitled to obtain a decree adjudicating that any such Plan or Plans
must be terminated; or there shall occur a complete or partial withdrawal from,
or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect
to, one or more Multiemployer Plans which could cause Borrower or one or more
members of the Controlled Group to incur a current payment obligation in excess
of $100,000; or
8.10 Misrepresentations. If any material misrepresentation or material
------------------
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
--------------------------
-22-
9.1 Rights and Remedies. Upon the occurrence and during the continuance of
--------------------
an Event of Default, Bank may, at its election, without notice of its election
and without demand, do any one or more of the following, all of which are
authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by any of
the other Loan Documents, or otherwise, immediately due and payable (provided
that upon the occurrence of an Event of Default described in Section 8.5 all
Obligations shall become immediately due and payable without any action by
Bank);
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement or under any other agreement between Borrower and
Bank;
(c) Without notice to or demand upon Borrower, make such payments and do
such acts as Bank considers necessary or reasonable to protect its security
interest in the Collateral;
(d) Exercise all of its rights and remedies available to it hereunder,
under the other Loan Documents (including, without limitation, the Security
Agreement and the Trademarks Assignment), at law and in equity;
(e) Without notice to Borrower set off and apply to the Obligations any and
all (i) balances and deposits of Borrower held by Bank, or (ii) indebtedness at
any time owing to or for the credit or the account of Borrower held by Bank.
9.2 Power of Attorney. Effective only upon the occurrence and during the
------------------
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide advances hereunder is terminated.
9.3 Bank Expenses. If Borrower fails to pay any amounts or furnish any
-------------
required proof of payment due to third persons or entities, as required under
the terms of this Agreement,
-23-
then Bank may do any or all of the following: (a) make payment of the same or
any part thereof; (b) set up such reserves under the Committed Revolving Line as
Bank deems necessary to protect Bank from the exposure created by such failure;
or (c) obtain and maintain insurance policies of the type discussed in Section
6.6 of this Agreement, and take any action with respect to such policies as Bank
deems prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.4 Remedies Cumulative. Bank's rights and remedies under this Agreement,
--------------------
the Loan Documents, and all other agreements shall be cumulative. Bank shall
have all other rights and remedies not inconsistent herewith as provided under
the Code, by law or in equity. No exercise by Bank of one right or remedy shall
be deemed an election, and no waiver by Bank of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it. No waiver by Bank shall
be effective unless made in a written document signed on behalf of Bank and then
shall be effective only in the specific instance and for the specific purpose
for which it was given.
9.5 Demand; Protest. Borrower waives demand, protest, notice of protest,
----------------
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
-------
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower Lightbridge, Inc.
281 Winter Street
Waltham MA 02154
Attn: William G. Brown, Chief Financial
Officer
FAX: (617) 890-2681
-24-
If to Bank Silicon Valley East,
a Division of Silicon Valley Bank
40 William Street, Suite 350
Wellesley, MA 02181
Attn: Pamela J. Lowe, Vice President
FAX: (617) 431-9906
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE: JURY TRIAL WAIVER
------------------------------------------
This Agreement shall be governed by, and contained in accordance with, the
internal laws of The Commonwealth of Massachusetts, without regard to principles
of conflicts of law. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN
ANY ACTION, SUIT OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY
REASON OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT
AVAIL ITSELF OF nm COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER ACCEPTS
JURISDICTION OF THE COURTS AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA.
BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL,
12. GENERAL PROVISIONS
------------------
12.1 Successors and Assigns. This Agreement shall bind and inure to the
-----------------------
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
-------- -------
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell transfer, negotiate, or
gant participation in all or any part of, or any interest in, Bank's obligation
rights and benefits hereunder.
-25-
12.2 Indemnification. Borrower shall defend, indemnity and hold harmless
----------------
Bank and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by this Agreement; and (b) all
losses or Bank Expenses in any way suffered, incurred, or paid by Bank as a
result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including, without limitation, reasonable attorneys fees and
expenses), except for losses caused by Bank's gross negligence or willful
misconduct.
12.3 Time of Essence. Time is of the essence for the performance of all
----------------
obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement shall
---------------------------
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
12.5 Amendments in Writing; Integration. This Agreement cannot be amended
-----------------------------------
or terminated orally. All prior agreements, understandings, representations,
warranties, and negotiations between the parties hereto with respect to the
subject matter of this Agreement, if any, are merged into this Agreement and the
Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
-------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in this
---------
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding. The obligations of Borrower to indemnify Bank with respect
to the expenses, damages, losses, costs and liabilities described in Section
12.2 shall survive until all applicable statute of limitations periods with
respect to actions that may be brought against Bank have run, provided that so
long as the obligations set forth in the first sentence of this Section 12.7
have been satisfied, and Bank has no commitment to make any Loans or to make any
other loans to Borrower, Bank shall release all security interests granted
hereunder and redeliver all Collateral held by it in accordance with applicable
law.
12.8 Confidentiality. In handling any confidential information Bank shall
----------------
exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Loans, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower, (iii) as required by law, regulations, rule or order,
-26-
subpoena, judicial order or similar order and (iv) as may be required in
connection with the examination, audit or similar investigation of Bank.
Confidential information hereunder shall not include information that either:
(a) is in the public domain or in the knowledge or possession of Bank when
disclosed to Bank, or becomes part of the public domain after disclosure to Bank
through no fault of Bank; or (b) is disclosed to Bank by a third party, provided
Bank does not have actual knowledge that such third party is prohibited from
disclosing such information.
12.9 Countersignature. This Agreement shall become effective only when it
-----------------
shall have been executed by Borrower and Bank (provided, however, in no event
shall this Agreement become effective until signed by an officer of Bank in
California).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
LIGHTBRIDGE, INC.
By: /s/ William G. Brown
-----------------------------
Name: William G. Brown
--------------------------
Title: CEO/VP Finance
-------------------------
SILICON VALLEY BANK, doing business
as SILICON VALLEY EAST
By: /s/ Pamela J. Lowe
-----------------------------
Name: Pamela J. Lowe
---------------------------
Title: Vice President
--------------------------
SILICON VALLEY BANK
By:_____________________________
Name:___________________________
Title:__________________________
(signed in Santa Clara County, California)
-27-
LIGHTBRIDGE, INC.
Schedule of Exceptions
----------------------
Permitted Investments
- ---------------------
The Borrower owns 50% of the capital stock of BGX, Inc., a Delaware
corporation. BGX, Inc. is currently inactive.
Permitted Indebtedness
- ----------------------
The Borrower has borrowed an aggregate of $2,100,000 pursuant to the terms
of a Subordinated Note and Warrant Purchase Agreement dated as of August 29,
1994 among the Borrower and the persons listed on the Schedule of Purchasers
thereto.
Master Lease Agreements between Comdisco, Inc. as lessor and the Borrower
as lessee. The leases provide for an aggregate of $1,500,000.00 in computer
hardware lines of credit.
The Borrower rents its office space from independent landlords. Currently
under lease is approximately 90,000 square feet of space, with an annual lease
payment of $1,502,745. Leases expire between 1999 and 2001.
Litigation
- ----------
Mohammad Kammoun, a former employee of the Borrower, has filed a charge of
religious/national origin discrimination with the Massachusetts Commission
Against Discrimination and the Equal Employment Opportunity Commission arising
out of the termination of his employment in October 1994. The Borrower has
submitted a position statement and an investigative conference was held by the
MCAD on January 10, 1995. The Borrower is awaiting an initial determination
from the MCAD as to whether there is probable cause to support Mr. Kammoun's
charge.
Use of other names
- ------------------
In 1994, the Borrower changed its name from "Credit Technologies, Inc."
to "Lightbridge, Inc."
EXHIBIT A
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
FAX#: (408) TIME:
FROM: ______________________________________________________________________
BORROWER'S NAME
FROM: ______________________________________________________________________
AUTHORIZED SIGNER'S NAME
____________________________________________________________________________
AUTHORIZED SIGNATURE
PHONE: _____________________________________________________________________
FROM ACCOUNT #___________________________ TO ACCOUNT #_____________________
=========================================================================
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
- ---------------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $____________________
PRINCIPAL PAYMENT (ONLY) $____________________
INTEREST PAYMENT (ONLY) $____________________
PRINCIPAL AND INTEREST (PAYMENT) $____________________
OTHER INSTRUCTIONS:
========================================================================
All representations and warranties of Borrower stated in the Amended and
Restated Credit Agreement dated as of June __, 1996, by and between Borrower and
Silicon Valley Bank are true, correct and complete in all material respects as
of the date of the telephone request for the Advance/Equipment Advance confirmed
by this Borrowing Certificate; provided, however, that those representations
and warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date.
============================================================================
BANK USE ONLY
TELEPHONE REQUEST
- ----------------------------------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
- ---------------------------------------- ---------------------------------
Authorized Requester Phone #
- ---------------------------------------- ---------------------------------
Received by (Bank) Phone #
___________________________________
Authorized Signature (Bank)
============================================================================
-2-
EXHIBIT B
BORROWING BASE CERTIFICATE
Borrower: Lightbridge, Inc.
Bank: Silicon Valley Bank
Commitment Amount: $4,000,000
================================================================================
ACCOUNTS RECEIVABLE:
1. Accounts Receivable Book Value as of______ $______
2. Additions (please explain on reverse) $______
3. TOTAL ACCOUNTS RECEIVABLE $______
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $______
5. Balance of 50% over 90 day accounts $______
6. Concentration Limits $______
7. Foreign Accounts $______
8. Government Accounts $______
9. Contra Accounts $______
10. Promotion or Demo Accounts $______
11. Intercompany/Employee Accounts $______
12. Other (please explain on reverse) $______
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $______
14. Eligible Accounts (#3 minus #13) $______
15. LOAN VALUE OF ACCOUNTS (80% OF #14) $______
INVENTORY
16. Inventory Value as of $ N/A
17. LOAN VALUE OF INVENTORY (__% OF # 16) $ N/A
BALANCES
18. Maximum Loan Amount $______
19. Total Funds Available [Lesser of #18 or
(#15 plus #17)] $______
20. Present balance owing on Line of Credit $______
21. Outstanding under Sublimits
(Letters of Credit) $______
22. RESERVE POSITION (#19 minus #2O and #21) $______
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Amended and
Restated Credit Agreement dated as of June ____, 1996 between the undersigned
and Silicon Valley Bank.
COMMENT:
- -------------------------------
By:____________________________
Authorized Signer
BANK USE ONLY
Received by:____________________
Authorized Signer
Date:___________________________
Verified:_______________________
Authorized Signer
Date:___________________________
-2-
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK ("Bank")
FROM: LIGHTBRIDGE, INC. ("Borrower")
The undersigned authorized officer of Lightbridge, Inc. hereby certifies
that in accordance with the terms and conditions of the Amended and Restated
Credit Agreement dated as of June ___, 1996 between Borrower and Bank (the
"Agreement"), (i) Borrower is in complete compliance for the period ending
___________ with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and
correct in all material respects as of the date hereof. Attached herewith are
the required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes. The Officer
expressly acknowledges that no borrowings may be requested by the Borrower at
any time or date of determination that Borrower is not in compliance with any of
the terms of the Agreement, and that such compliance is determined not just at
the date this certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies"
column.
Reporting Covenant Required Complies
- ----------------------------------- ---------------------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 120 days Yes No
A/R & A/P Agings Monthly within 25 days Yes No
Borrowing Base Certificate Monthly within 25 days Yes No
A/R Audit Annual Yes No
Financial Covenant Required Actual Complies
- ----------------------------------- ------------------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio 1.5:1.0 ____:1.0 Yes No
Maximum Debt/Tangible Net Worth 1.0:1.0 ____:1.0 Yes No
Minimum Liquidity $______ $_______ Yes No
Maintain on a Quarterly Basis:
Minimum Tangible Net Worth $______ $_______ Yes No
Minimum Profitability $1.00 ____:1.0 Yes No
Minimum Debt Service 1.25:1.0 ____:1.0 Yes No
Comments Regarding Exceptions: See Attached
Sincerely,
- --------------------------------
Signature
Title:__________________________
Date:___________________________
BANK USE ONLY
Received by:________________________
Authorized Signer
Date:_______________________________
Verified:___________________________
Authorized Signer
Date:_______________________________
Compliance Status: Yes No