EXHIBIT 10.21
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated as of March
19, 2004, between SILICON VALLEY BANK, a California chartered bank, with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054
and with a loan production office located at One Newton Executive Park, Suite
200, 2221 Washington Street, Newton, Massachusetts 02462, doing business under
the name "Silicon Valley East" ("Bank") and APPLIX, INC., a Massachusetts
corporation ("Borrower"), provides the terms on which Bank shall lend to
Borrower and Borrower shall repay Bank. The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
The term "financial statements" includes the notes and schedules, all
of which shall be prepared in accordance with GAAP. The terms "including" and
"includes" always mean "including (or includes) without limitation," in this or
any Loan Document. Capitalized terms in this Agreement shall have the meanings
set forth in Section 13.
2 LOAN AND TERMS OF PAYMENT
2.1 PROMISE TO PAY. Borrower hereby unconditionally promises to
pay Bank the unpaid principal amount of all Credit Extensions and interest on
the unpaid principal amount of the Credit Extensions as and when due in
accordance with this Agreement.
2.1.1 REVOLVING ADVANCES.
(a) Availability. Bank shall make Advances not exceeding
(i) the lesser of (A) the Revolving Line or (B) the Borrowing Base minus (ii)
the amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) which are not otherwise separately cash secured,
in form and substance acceptable to Bank, minus (iii) the FX Reserve (if any),
and minus (iv) the aggregate outstanding Advances hereunder (including any Cash
Management Services). Amounts borrowed under this Section may be repaid and
reborrowed during the term of this Agreement.
(b) Borrowing Procedure. To obtain an Advance, Borrower
must notify Bank by facsimile or telephone by 3:00 p.m. Eastern time on the
Business Day the Advance is to be made. If such notification is by telephone,
Borrower must promptly confirm the notification by delivering to Bank a
completed Payment/Advance Form in the form attached as EXHIBIT B. Bank shall
credit Advances to Borrower's deposit account, unless other arrangements are
mutually agreed upon by and between the Bank and the Borrower. Bank may make
Advances under this Agreement based on instructions from a Responsible Officer
or his or her designee or without instructions if the Advances are necessary to
meet Obligations which have become due. Bank may rely on any telephone notice
given by a person whom Bank believes is a Responsible Officer or designee.
Borrower shall indemnify Bank for any loss Bank suffers due to such reliance.
(c) Interest Rate. The principal amounts outstanding
under the Revolving Line shall accrue interest at a per annum rate equal to the
Prime Rate plus one percent (1.0%).
(d) Termination; Repayment. The Revolving Line terminates
on the Revolving Maturity Date, when the principal amount of all Advances and
the unpaid interest thereon, shall be immediately due and payable.
2.1.2 LETTERS OF CREDIT SUBLIMIT.
(a) Bank shall issue or have issued Letters of Credit for
Borrower's account not exceeding (i) the lesser of the Revolving Line or the
Borrowing Base minus (ii) the outstanding principal balance of any Advances
(including any Cash Management Services), minus (iii) the amount of all Letters
of Credit (including drawn but unreimbursed Letters of Credit) which are not
otherwise separately cash secured, in form and substance acceptable to Bank,
plus an amount equal to any Letter of Credit Reserves. The face amount of
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve) may not exceed Two Million
Dollars ($2,000,000.00). Each Letter of Credit shall have an expiry date no
later than 364 days after the Revolving Maturity Date provided Borrower's Letter
of Credit reimbursement obligation shall be secured by cash or cash equivalents
on terms acceptable to Bank on and after (i) the Maturity Date of the Revolving
Line if the Maturity Date of the Revolving Line is not extended by Bank, or (ii)
the occurrence of an Event of Default hereunder. All Letters of Credit shall be,
in form and substance, acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank's form of standard Application and
Letter of Credit Agreement. Borrower agrees to execute any further documentation
in connection with the Letters of Credit as Bank may reasonably request.
(b) The obligation of Borrower to immediately reimburse
Bank for drawings made under Letters of Credit shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend, protect, and hold Bank harmless from any loss,
cost, expense or liability, including, without limitation, reasonable attorneys'
fees, arising out of or in connection with any Letters of Credit, except for
losses caused by Bank's gross negligence or willful misconduct.
(c) Borrower may request that Bank issue a Letter of
Credit payable in a currency other than United States Dollars. If a demand for
payment is made under any such Letter of Credit, Bank shall treat such demand as
an Advance to Borrower of the equivalent of the amount thereof (plus cable
charges) in United States currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other currency for cable transfer
to the country of which it is the currency.
(d) Upon the issuance of any letter of credit payable in
a currency other than United States Dollars, Bank shall create a reserve (the
"Letter of Credit Reserve") under the Revolving Line for letters of credit
against fluctuations in currency exchange rates, in an amount equal to ten
percent (10%) of the face amount of such letter of credit, which reserve shall
be proportionately reduced and returned to Borrower after the available funds
have been either partially or totally drawn under such Letter of Credit and
repaid by Borrower to Bank. The amount of such reserve may be amended by Bank
from time to time to account for fluctuations in the exchange rate. The
availability of funds under the Revolving Line shall be reduced by the amount of
such reserve for so long as such letter of credit remains outstanding.
2.1.3 FOREIGN EXCHANGE SUBLIMIT. If there is availability under the
Revolving Line and the Borrowing Base, then Borrower may enter into foreign
exchange forward contracts with the Bank under which Borrower commits to
purchase from or sell to Bank a set amount of foreign currency more than one
business day after the contract date (the "FX Forward Contract"). Bank shall
subtract 10% of each outstanding FX Forward Contract from the foreign exchange
sublimit, which sublimit is a maximum of Two Million Dollars ($2,000,000.00)
(the "FX Reserve"). The total FX Forward Contracts at any one time may not
exceed 10 times the amount of the FX Reserve. Bank may terminate the FX Forward
Contracts if an Event of Default occurs.
2.1.4 CASH MANAGEMENT SERVICES SUBLIMIT. Borrower may allocate up to
Two Million Dollars ($2,000,000.00) for the Bank's Cash Management Services,
which may include merchant services, direct deposit of payroll, business credit
card, and check cashing services identified in the various cash management
services agreements related to such Cash Management Services (the "Cash
Management Services"). Such aggregate amounts utilized under the Cash Management
Services Sublimit shall at all times reduce the amount otherwise available for
Credit Extensions under the Revolving Line. Any amounts Bank pays on behalf of
Borrower or any amounts that are not paid by Borrower for any Cash Management
Services will be treated as Advances under the Revolving Line and will accrue
interest at the interest rate applicable to Advances. It is further agreed that
Borrower may use Cash Management Services from other institutions in the event
that Borrower shall determine that Bank's fees and expenses therefore are not
competitive.
2.1.5 EQUIPMENT ADVANCES.
(a) Availability. Through March 18, 2005 (the "Equipment
Availability End Date"), Bank shall make advances ("Equipment Advance" and,
collectively, "Equipment Advances") not exceeding the Equipment Line. The
Equipment Advances may only be used to finance Eligible Equipment purchased no
more than 90 days before the date of each Equipment Advance and no Equipment
Advance may exceed 100% of the equipment invoice for such Equipment Advance,
excluding taxes, shipping, warranty charges, freight discounts and
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installation expense relating to such Equipment, unless such expenses constitute
Other Equipment. After repayment, Equipment Advances may not be reborrowed.
(b) Interest. Interest accrues from the date of each
Equipment Advance at a per annum rate equal to the Prime Rate, plus one and
one-half of one percent (1.5%).
(c) Principal and Interest Payments On Payment Dates.
Each Equipment Advance is payable in (a) thirty-six consecutive equal monthly
installments of principal, plus (b) monthly payments of accrued interest,
beginning on the first Business Day of the month following the month in which
the Funding Date occurs with respect to such Equipment Advance and continuing
thereafter on the first day of each successive calendar month (each a "Payment
Date"). All unpaid principal and accrued interest is due and payable in full on
the last Payment Date with respect to such Equipment Advance. Payments received
after 2:00 p.m. Eastern time are considered received at the opening of business
on the next Business Day.
(d) To obtain an Equipment Advance, Borrower must notify
Bank (the notice is irrevocable, provided however, if the request is dishonored
by Bank, the notice shall be deemed terminated) by facsimile no later than 3:00
p.m. Eastern time one (1) Business Day before the day on which the Equipment
Advance is to be made. The notice in the form of EXHIBIT B (Payment/Advance
Form) must be signed by a Responsible Officer or designee and include a copy of
the invoice for the Equipment to be so financed.
2.1.6 UNDISBURSED CREDIT EXTENSIONS. The Bank's obligation to lend
the undisbursed portion of the Obligations shall terminate if, in Bank's sole
discretion, there has been a Material Adverse Change; or there has been any
material adverse deviation by Borrower from the most recent business plan of
Borrower presented to and accepted by Bank prior to the execution of this
Agreement.
2.2 OVERADVANCES. If Borrower's Obligations under Section 2.1.1
2.1.2, 2.1.3, and 2.1.4 exceed the lesser of either (i) the Revolving Line or
(ii) the Borrowing Base, Borrower must immediately pay in cash to Bank the
excess.
2.3 INTEREST GENERALLY; DEFAULT RATE; PAYMENTS.
(a) Interest Generally; Default Rate. After an Event of
Default, Obligations shall bear interest at four percent (4.0%) above the rate
effective immediately before the Event of Default. The applicable interest rate
hereunder shall increase or decrease when the Prime Rate changes. Interest is
computed on the basis of a 360 day year for the actual number of days elapsed.
(b) Payments. Interest is payable on the Payment Date of
each month. Payments received after 2:00 p.m. Eastern time are considered
received at the opening of business on the next Business Day. When a payment is
due on a day that is not a Business Day, the payment is due the next Business
Day and additional fees or interest, as applicable, as expressly provided in
this Agreement, shall continue to accrue.
(c) Debit of Accounts. Bank may debit any of Borrower's
deposit accounts including Account Number __________ for principal and interest
payments when due, or any other amounts Borrower owes Bank, after written notice
thereof. Bank shall promptly notify Borrower when it debits Borrower's accounts.
These debits shall not constitute a set-off.
2.4 FEES. Borrower shall pay to Bank:
(a) Commitment Fee. A fully earned, non-refundable
commitment fee of Fifteen Thousand Dollars ($15,000.00) for the Revolving Line
and Equipment Line due on the Closing Date; and
(b) Letter of Credit Fee. The Borrower shall pay the
Bank's customary fees and expenses for the issuance of Letters of Credit,
including, without limitation, a Letter of Credit Fee of one percent (1.0%) per
annum of the face amount of each Letter of Credit issued, upon the issuance or
renewal of such Letter of Credit by the Bank; provided that in the event of a
renewal of a Letter of Credit, the Letter of Credit Fee shall be equal to the
product of (i) one percent (1.0%) of the amount then available for draws
thereunder (as of the renewal date)
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multiplied by (ii) a fraction equal to the number of calendar days from the
renewal date up to and including the date of the expiration of said Letter of
Credit, divided by 360; and
(c) Unused Revolving Line Facility Fee: As compensation
for the Bank's maintenance of sufficient funds available for such purpose, the
Bank shall have earned a Revolving Line Facility Fee (so referred to herein),
which fee shall be paid quarterly, in arrears, on a calendar year basis, in an
aggregate amount equal to one quarter of one percent (0.25%) of the average
unused portion of the Revolving Line, as determined by the Bank. The Borrower
shall not be entitled to any credit, rebate or repayment of any Revolving Line
Facility Fee previously earned by the Bank pursuant to this Section
notwithstanding any termination of the within Agreement, or suspension or
termination of the Bank's obligation to make loans and advances hereunder;
(d) Bank Expenses. All Bank Expenses (including
reasonable attorneys' fees and expenses) incurred through and after the Closing
Date (as set forth in writing), when due.
3 CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The Bank's
obligation to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with
respect to articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of this Agreement;
(c) a Negative Pledge Agreement covering Intellectual
Property;
(d) Perfection Certificate(s) by Borrower ;
(e) landlord's waiver;
(f) a legal opinion of Borrower's counsel, in form and
substance acceptable to Bank;
(g) financing statements (Forms UCC-1);
(h) Account Control Agreement/ Investment Account Control
Agreement
(i) insurance certificate;
(j) payment of the fees and Bank Expenses then due
specified in Section 2.4 hereof;
(k) Certificate of Foreign Qualification (if applicable);
(l) Certificate of Good Standing/Legal Existence; and
(m) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. Bank's
obligations to make each Credit Extension, including the initial Credit
Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 shall
be materially true on the date of the Payment/Advance Form and on the effective
date of each Credit Extension and no Event of Default shall have
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occurred and be continuing, or result from the Credit Extension. Each Credit
Extension is Borrower's representation and warranty on that date that the
representations and warranties in Section 5 remain true.
4 CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants Bank, to
secure the payment and performance in full of all of the Obligations and the
performance of each of Borrower's duties under the Loan Documents, a continuing
security interest in, and pledges to the Bank, the Collateral, wherever located,
whether now owned or hereafter acquired or arising, and all proceeds and
products thereof. Borrower warrants and represents that the security interest
granted herein shall be a first priority security interest in the Collateral.
Upon the occurrence and during the continuance of an Event of Default, Bank may
place a "hold" on any deposit account pledged as Collateral.
Except as noted on the Perfection Certificate, Borrower is not a party to, nor
is bound by, any material license or other agreement with respect to which the
Borrower is the licensee that prohibits or otherwise restricts Borrower from
granting a security interest in Borrower's interest in such license or agreement
or any other property. Borrower shall not enter into, or become bound by, any
such license or agreement which is reasonably likely to have a material impact
on Borrower's business or financial condition, unless Borrower provides Bank
with written notice within thirty (30) Business Days after entering into such
agreement. Borrower shall take such steps as Bank requests to obtain the consent
of, or waiver by, any person whose consent or waiver is necessary for all such
licenses or contract rights to be deemed "Collateral" and for Bank to have a
security interest in it that might otherwise be restricted or prohibited by law
or by the terms of any such license or agreement, whether now existing or
entered into in the future.
If this Agreement is terminated, Bank's lien and security interest in the
Collateral shall continue until Borrower fully satisfies its Obligations. If
Borrower shall at any time, acquire as a plaintiff a commercial tort claim, in
an amount of Fifty Thousand Dollars ($50,000.00), in the aggregate, Borrower
shall promptly notify Bank in a writing signed by Borrower of the brief details
thereof and grant to Bank in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance satisfactory to Bank.
4.2 AUTHORIZATION TO FILE FINANCING STATEMENTS. Borrower hereby
authorizes Bank to file financing statements, without notice to Borrower, with
all appropriate jurisdictions in order to perfect or protect Bank's interest or
rights hereunder, including a notice that any disposition of the Collateral
(other than in accordance with Section 7.1), by either the Borrower or any other
Person, shall be deemed to violate the rights of the Bank under the Code.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION. Borrower and each
Subsidiary is duly existing and in good standing in its state of formation and
qualified and licensed to do business in, and in good standing in, any state in
which the conduct of its business or its ownership of property requires that it
be qualified except where the failure to do so could not reasonably be expected
to cause a Material Adverse Change. In connection with this Agreement, the
Borrower has delivered to the Bank a certificate signed by the Borrower and
entitled "Perfection Certificate." The Borrower represents and warrants to the
Bank that: (a) the Borrower's exact legal name is that indicated on the
Perfection Certificate and on the signature page hereof; and (b) the Borrower is
an organization of the type, and is organized in the jurisdiction, set forth in
the Perfection Certificate; and (c) the Perfection Certificate accurately sets
forth the Borrower's organizational identification number or accurately states
that the Borrower has none; and (d) the Perfection Certificate accurately sets
forth the Borrower's place of business, or, if more than one, its chief
executive office as well as the Borrower's mailing address if different, and (e)
all other information set forth on the Perfection Certificate pertaining to the
Borrower is accurate and complete. If the Borrower does not now have an
organizational identification number, but later obtains one, Borrower shall
forthwith notify the Bank of such organizational identification number.
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The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's organizational documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which or by
which it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.
5.2 COLLATERAL. Borrower has good title to the Collateral, free of
Liens except Permitted Liens. Borrower has no deposit account, other than the
deposit accounts with Bank and deposit accounts described in the Perfection
Certificate delivered to the Bank in connection herewith. The Accounts are bona
fide, existing obligations, and the service or property has been performed or
delivered to the account debtor or its agent for immediate shipment to and
unconditional acceptance by the account debtor. Except as described in the
Perfection Certificate, the Collateral is not in the possession of any third
party bailee (such as a warehouse). Except as hereafter disclosed to the Bank in
writing by Borrower, none of the components of the Collateral shall be
maintained at locations other than as provided in the Perfection Certificate. In
the event that Borrower, after the date hereof, intends to store or otherwise
deliver any portion of the Collateral to a new or different bailee, then
Borrower will first receive the written consent of Bank and such bailee must
acknowledge in writing that the bailee is holding such Collateral for the
benefit of Bank. Borrower has no knowledge of any actual or imminent Insolvency
Proceeding of any account debtor whose accounts are an Eligible Account in any
Borrowing Base Certificate. All Inventory is in all material respects of good
and marketable quality, free from material defects.
5.3 LITIGATION. Except as shown in the Perfection Certificate,
there are no actions or proceedings pending or, to the knowledge of Borrower's
Responsible Officers, threatened by or against Borrower or any Domestic
Subsidiary in which an adverse decision could reasonably be expected to cause a
Material Adverse Change.
5.4 NO MATERIAL DEVIATION IN FINANCIAL STATEMENTS. All
consolidated financial statements for Borrower and any Domestic Subsidiary
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 SOLVENCY. The fair salable value of Borrower's assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; and Borrower is able to pay its debts (including trade debts) as
they mature.
5.6 REGULATORY COMPLIANCE. Borrower is not an "investment company"
or a company "controlled" by an "investment company" under the Investment
Company Act. Borrower is not engaged as one of its important activities in
extending credit for margin stock (under Regulations T and U of the Federal
Reserve Board of Governors). Borrower has complied in all material respects with
the Federal Fair Labor Standards Act. Borrower has not violated any laws,
ordinances or rules, the violation of which could reasonably be expected to
cause a Material Adverse Change. None of Borrower's or any Domestic Subsidiary's
properties or assets has been used by Borrower or any Domestic Subsidiary or, to
the best of Borrower's knowledge, by previous Persons, in disposing, producing,
storing, treating, or transporting any hazardous substance other than legally.
Borrower and each Domestic Subsidiary has timely filed all required tax returns
and paid, or made adequate provision to pay, all material taxes, except those
being contested in good faith with adequate reserves under GAAP. Borrower and
each Domestic Subsidiary has obtained all consents, approvals and authorizations
of, made all declarations or filings with, and given all notices to, all
government authorities that are necessary to continue its business as currently
conducted except where the failure to make such declarations, notices or filings
would not reasonably be expected to cause a Material Adverse Change.
5.7 SUBSIDIARIES. Borrower does not own any stock, partnership
interest or other equity securities except for Permitted Investments, or as is
otherwise disclosed on the Perfection Certificate.
5.8 FULL DISCLOSURE. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank
taken together with all such written certificates and written statements given
to Bank contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed
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as facts and that actual results during the period or periods covered by such
projections and forecasts may differ from the projected or forecasted results).
6 AFFIRMATIVE COVENANTS
Until Borrower satisfies all Obligations under this Agreement and Bank
has no obligation to lend hereunder, Borrower shall do all of the following:
6.1 GOVERNMENT COMPLIANCE. Borrower shall maintain its and all
Domestic Subsidiaries' legal existence and good standing in its jurisdiction of
formation and maintain qualification in each jurisdiction in which the failure
to so qualify would reasonably be expected to have a material adverse effect on
Borrower's business or operations. Borrower shall comply, and have each Domestic
Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, noncompliance with which could have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower shall deliver to Bank: (i) as soon as
available, but no later than thirty (30) days after the last day of each month,
a company prepared consolidated balance sheet and income statement covering
Borrower's consolidated operations during the immediately preceding month
certified by a Responsible Officer and in a form reasonably acceptable to Bank;
(ii) as soon as available, but no later than one hundred twenty (120) days after
the last day of Borrower's fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm reasonably acceptable to Bank; (iii) within five (5)
Business Days of filing, copies of all statements, reports and notices made
available to Borrower's security holders or to any holders of Subordinated Debt
and all reports on Form 10-K, 10-Q and 8-K filed with the Securities and
Exchange Commission; (iv) a prompt report of any legal actions pending or
threatened against Borrower or any Subsidiary that is reasonably likely to
result in damages or costs to Borrower or any Domestic Subsidiary of One Hundred
Thousand Dollars ($100,000.00) or more; and (v) annually, and as revised, Board
approved quarterly financial and operating plans and (vi) other financial
information reasonably requested by Bank.
(b) Within thirty (30) days after the last day of each
month, Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in the form of EXHIBIT C, with aged listings of accounts
receivable (by invoice date).
(c) Borrower shall deliver to Bank with the monthly and
annual financial statements a Compliance Certificate signed by a Responsible
Officer in the form of EXHIBIT D.
(d) Allow Bank to audit Borrower's Accounts at Borrower's
expense. Such audits shall be conducted no more often than once every twelve
(12) months unless an Event of Default has occurred and is continuing.
6.3 INVENTORY; RETURNS. Borrower shall keep all Inventory in good
and marketable condition, free from material defects. Returns and allowances
between Borrower and its account debtors shall follow Borrower's customary
practices as they exist at the Closing Date. Borrower must promptly notify Bank
of all returns, recoveries, disputes and claims that involve more than Fifty
Thousand Dollars ($50,000.00).
6.4 TAXES. Borrower shall make, and cause each Domestic Subsidiary
to make, timely payment of all material federal, state, and local taxes or
assessments (other than taxes and assessments which Borrower or its Domestic
Subsidiaries are contesting in good faith, with adequate reserves maintained in
accordance with GAAP) and will deliver to Bank, on demand, appropriate
certificates attesting to such payments.
6.5 INSURANCE. Borrower shall keep its business and the Collateral
insured for risks and in amounts, standard for Borrower's industry and as Bank
may reasonably request. Insurance policies shall be in a form, with companies,
and in amounts that are reasonably satisfactory to Bank. All property policies
shall have a lender's loss payable endorsement showing Bank as an additional
loss payee and all liability policies shall show the Bank as an additional
insured and all policies shall provide that the insurer must give Bank at least
twenty (20) days notice
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before canceling its policy. At Bank's request, Borrower shall deliver certified
copies of policies and evidence of all premium payments. Proceeds payable under
any policy shall, at Bank's option, be payable to Bank on account of the
Obligations. Notwithstanding the foregoing, so long as no Event of Default has
occurred and is continuing, Borrower shall have the option of applying the
proceeds of any casualty policy up to $250,000.00, in the aggregate, toward the
replacement or repair of destroyed or damaged property; provided that (i) any
such replaced or repaired property (a) shall be of equal or like value as the
replaced or repaired Collateral and (b) shall be deemed Collateral in which Bank
has been granted a first priority security interest and (ii) after the
occurrence and during the continuation of an Event of Default all proceeds
payable under such casualty policy shall, at the option of the Bank, be payable
to Bank on account of the Obligations, provided that Bank shall promptly pay
over to Borrower that amount of said proceeds that is in excess of the
Obligations due. If Borrower fails to obtain insurance as required under Section
6.5 or to pay any amount or furnish any required proof of payment to third
persons and the Bank, Bank may make all or part of such payment or obtain such
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent.
6.6 ACCOUNTS.
(a) In order to permit the Bank to monitor the Borrower's
financial performance and condition, Borrower, and all Borrower's Domestic
Subsidiaries, shall maintain Borrower's, and such Domestic Subsidiaries, primary
operating, and securities accounts with Bank. In addition, Borrower shall
maintain all of its bank accounts with Bank, to the extent that Bank provides
competitive pricing and investment options satisfactory to Borrower.
(b) Borrower shall identify to Bank, in writing, any bank
or securities account opened by Borrower with any institution other than Bank.
In addition, for each such account that the Borrower or any Guarantor at any
time opens or maintains, Borrower shall, at the Bank's request and option,
pursuant to an agreement in form and substance acceptable to the Bank, cause the
depository bank or securities intermediary to agree that such account is the
collateral of the Bank pursuant to the terms hereunder. The provisions of this
Section 6.6 shall not apply to deposit accounts exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the benefit
of the Borrower's employees.
6.7 FINANCIAL COVENANTS.
Borrower shall maintain at all times, to be tested as of the last day
of each month, unless otherwise noted:
(a) ADJUSTED QUICK RATIO. Borrower shall maintain, as of
the last day of each month, a ratio of Quick Assets to Current
Liabilities minus Deferred Revenue of at least: (i) 1.25 to 1.0 for the
months ending January 31, 2004, February 29, 2004, March 31, 2004,
April 30, 2004, May 31, 2004, June 30, 2004, July 31, 2004, August 31,
2004, and September 30, 2004; and (ii) 1.5 to 1.0 for the month ending
October 31, 2004, and for each month thereafter.
(b) EBITDA. Borrower shall have: (i) Quarterly EBITDA
losses not to exceed: (A) Two Million Five Hundred Thousand Dollars
($2,500,000.00) for the quarter which ended December 31, 2003, and (B)
Three Hundred Fifty Thousand Dollars ($350,000.00) for the quarter
ending March 31, 2004; and (ii) quarterly positive EBITDA of at least:
(A) One Hundred Thousand Dollars ($100,000.00) for the quarters ending
June 30, 2004 and September 30, 2004; (B) Two Hundred Fifty Thousand
Dollars ($250,000.00) for the quarter ending December 31, 2004; (C) One
Hundred Thousand Dollars ($100,000.00) for the quarter ending March 31,
2005; and (D) eighty-five (85%) percent of the Borrower's board of
director's approved operating plan for Borrower for each quarter
thereafter.
6.8 FURTHER ASSURANCES. Borrower shall execute any further
instruments and take further action as Bank reasonably requests to perfect or
continue Bank's security interest in the Collateral or to effect the purposes of
this Agreement.
7 NEGATIVE COVENANTS
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Until Borrower satisfies all Obligations under this Agreement and Bank
has no obligation to lend hereunder, Borrower shall not do any of the following
without the Bank's prior written consent which shall not be unreasonably
withheld.
7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise
dispose of (collectively a "Transfer"), or permit any of its Domestic
Subsidiaries to Transfer, all or any part of its business or property, except
for Transfers (i) of Inventory in the ordinary course of business; (ii) of
licenses or sublicenses and similar arrangements for the use of the property of
Borrower or its Subsidiaries in the ordinary course of business; or (iii) of
worn-out or obsolete Equipment.
7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS
LOCATIONS. Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto, or have a material change in its ownership (other than by the sale of
Borrower's equity securities in a public offering or to venture capital
investors so long as Borrower identifies to Bank the venture capital investors
prior to the closing of the investment), or management. Borrower shall not,
without at least thirty (30) days prior written notice to Bank: (i) relocate its
chief executive office, or add any new offices or business locations, including
warehouses (unless such new offices or business locations contain less than One
Hundred Thousand Dollars ($100,000.00) in Borrower's assets or property), or
(ii) change its jurisdiction of organization, or (iii) change its organizational
structure or type, or (iv) change its legal name, or (v) change any
organizational number (if any) assigned by its jurisdiction of organization.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any
of its Domestic Subsidiaries to merge or consolidate, with any other Person, or
acquire, or permit any of its Domestic Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person. A
Subsidiary may merge or consolidate into another Subsidiary or into Borrower.
7.4 INDEBTEDNESS. Create, incur, assume, or be liable for any
Indebtedness, or permit any Domestic Subsidiary to do so, other than Permitted
Indebtedness.
7.5 ENCUMBRANCE. Create, incur, or allow any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein. The Collateral may also be subject to Permitted Liens.
7.6 DISTRIBUTIONS; INVESTMENTS. (i) Directly or indirectly acquire
or own any Person, or make any Investment in any Person, other than Permitted
Investments, or permit any of its Domestic Subsidiaries to do so; or (ii) pay
any dividends or make any distribution or payment or redeem, retire or purchase
any capital stock, except for repurchases of stock from former employees or
directors of Borrower under the terms of applicable repurchase agreements in an
aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000.00),
in the aggregate in any fiscal year, provided that no Event of Default has
occurred, is continuing or would exist after giving effect to the repurchases.
7.7 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower,
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a non-affiliated Person.
7.8 SUBORDINATED DEBT. Make or permit any payment on any
Subordinated Debt, except under the terms of the Subordinated Debt, or amend any
material provision in any document relating to the Subordinated Debt, without
Bank's prior written consent.
7.9 COMPLIANCE. Become an "investment company" or a company
controlled by an "investment company", under the Investment Company Act of 1940
or undertake as one of its important activities extending credit to purchase or
carry margin stock, or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if
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the violation could reasonably be expected to have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change, or permit any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT. Borrower fails to pay any of the Obligations
within three (3) Business Days after their due date. During such three (3)
Business Day period the failure to cure the default shall not constitute an
Event of Default (but no Credit Extension shall be made during such period);
8.2 COVENANT DEFAULT. Borrower fails or neglects to perform any
obligation in Section 6 or violates any covenant in Section 7 or fails or
neglects to perform, keep, or observe any other material term, provision,
condition, covenant or agreement contained in this Agreement, any Loan
Documents, or in any present or future agreement between Borrower and Bank and
as to any default under such other material term, provision, condition, covenant
or agreement that can be cured, has failed to cure the default within ten (10)
Business Days after the occurrence thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) Business Day period or
cannot after diligent attempts by Borrower be cured within such ten (10)
Business Day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional period (which shall not in any case
exceed thirty (30) days) to attempt to cure such default, and within such
reasonable time period the failure to cure the default shall not be deemed an
Event of Default (but no Credit Extensions shall be made during such cure
period). Grace periods provided under this section shall not apply, to financial
covenants or any other covenants that are required to be satisfied, completed or
tested by a date certain.
8.3 MATERIAL ADVERSE CHANGE. A Material Adverse Change occurs;
8.4 ATTACHMENT. (i) Any material portion of Borrower's assets is
attached, seized, levied on, or comes into possession of a trustee or receiver
and the attachment, seizure or levy is not removed in ten (10) days; (ii) the
service of process upon the Borrower seeking to attach, by trustee or similar
process, any funds of the Borrower on deposit with the Bank, or any entity under
control of Bank (including a subsidiary); (iii) Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business; (iv) a judgment or other claim becomes a Lien on a material portion of
Borrower's assets; or (v) a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within ten (10)
days after Borrower receives notice. These are not Events of Default if stayed
or if a bond is posted or other satisfactory arrangements, in the Bank's sole
discretion, are entered into in connection with any such lien, attachment or
assessment pending contest by Borrower (but no Credit Extensions shall be made
during the cure period);
8.5 INSOLVENCY. (i) Borrower becomes insolvent; (ii) Borrower
begins an Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun
against Borrower and not dismissed or stayed within forty-five (45) days (but no
Credit Extensions shall be made before any Insolvency Proceeding is dismissed);
8.6 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) or that is reasonably likely to result in a Material Adverse
Change;
8.7 JUDGMENTS. If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least Two Hundred Thousand
Dollars ($200,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of thirty (30) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment);
8.8 MISREPRESENTATIONS. If Borrower or any Person acting for
Borrower makes any material misrepresentation or material misstatement now or
later in any warranty or representation in this Agreement or in any writing
delivered to Bank or to induce Bank to enter this Agreement or any Loan
Document.
9 BANK'S RIGHTS AND REMEDIES
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9.1 RIGHTS AND REMEDIES. When an Event of Default occurs and
continues Bank may, without notice or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable
(but if an Event of Default described in Section 8.5 occurs all Obligations are
immediately due and payable without any action by Bank);
(b) Stop advancing money or extending credit for
Borrower's benefit under this Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with
account debtors for amounts, on terms and in any order that Bank considers
advisable and notify any Person owing Borrower money of Bank's security interest
in such funds and verify the amount of such account. Borrower shall collect all
payments in trust for Bank and, if requested by Bank, immediately deliver the
payments to Bank in the form received from the account debtor, with proper
endorsements for deposit;
(d) Make any payments and do any acts it considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower shall assemble the Collateral if Bank requests and make it available as
Bank designates. Subject to the rights of third parties, Bank may enter premises
where the Collateral is located, take and maintain possession of any part of the
Collateral, and pay, purchase, contest, or compromise any Lien which appears to
be prior or superior to its security interest and pay all expenses incurred.
Subject to the rights of third parties, Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;
(e) Apply to the Obligations any (i) balances and
deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for
the credit or the account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell the Collateral. Subject
to the rights of third parties, Bank is hereby granted a non-exclusive,
royalty-free license or other right to use, without charge, Borrower's labels,
patents, copyrights, mask works, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank's
exercise of its rights under this Section, Borrower's rights under all licenses
and all franchise agreements inure to Bank's benefit, but only for the sole
purpose of the satisfaction of all of the due and outstanding Obligations; and
(g) Place a "hold" on any account maintained with Bank
and/or deliver a notice of exclusive control, any entitlement order, or other
directions or instructions pursuant to any control agreement or similar
agreements providing control of any Collateral.
(h) Dispose of the Collateral according to the Code.
9.2 POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank
as its lawful attorney-in-fact, to be effective upon the occurrence and during
the continuance of an Event of Default, to: (i) endorse Borrower's name on any
checks or other forms of payment or security; (ii) sign Borrower's name on any
invoice or bill of lading for any Account or drafts against account debtors;
(iii) settle and adjust disputes and claims about the Accounts directly with
account debtors, for amounts and on terms Bank determines reasonable; (iv) make,
settle, and adjust all claims under Borrower's insurance policies; and (v)
transfer the Collateral into the name of Bank or a third party as the Code
permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign
Borrower's name on any documents necessary to perfect or continue the perfection
of any security interest regardless of whether an Event of Default has occurred
until all Obligations have been satisfied in full and Bank is under no further
obligation to make Credit Extensions hereunder. Bank's foregoing appointment as
Borrower's attorney in fact, and all of Bank's rights and powers, coupled with
an interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank's obligation to provide Credit Extensions terminates.
9.3 ACCOUNTS NOTIFICATION/COLLECTION. In the event that an Event
of Default occurs and is continuing, Bank may notify any Person owing Borrower
money of Bank's security interest in the funds and verify and/or collect the
amount of the Account. After the occurrence and during the continuance of any
Event of Default, any
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amounts received by Borrower shall be held in trust by Borrower for Bank, and,
if requested by Bank, Borrower shall immediately deliver such receipts to Bank
in the form received from the account debtor, with proper endorsements for
deposit.
9.4 BANK EXPENSES. Any amounts paid by Bank as provided herein are
Bank Expenses and are immediately due and payable after notice by Bank to
Borrower, and shall bear interest at the then applicable rate and be secured by
the Collateral. No payments by Bank shall be deemed an agreement to make similar
payments in the future or Bank's waiver of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL. So long as the Bank complies
with reasonable banking practices and all applicable laws and regulations
regarding the safekeeping of collateral, the Bank shall not be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
to the Collateral; (c) any diminution in the value of the Collateral; or (d) any
act or default of any carrier, warehouseman, bailee, or other Person. Subject to
the foregoing, Borrower bears all risk of loss, damage or destruction of the
Collateral.
9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements are cumulative. Bank has
all rights and remedies provided under the Code, by law, or in equity. Bank's
exercise of one right or remedy is not an election, and Bank's waiver of any
Event of Default is not a continuing waiver. Bank's delay is not a waiver,
election, or acquiescence. No waiver hereunder shall be effective unless signed
by Bank and then is only effective for the specific instance and purpose for
which it was given.
9.7 DEMAND WAIVER. Except as otherwise expressly set forth herein
or as required by law, Borrower waives demand, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
10 NOTICES
All notices or demands by any party to this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile at the addresses listed below. Either Bank or
Borrower may change its notice address by giving the other party written notice.
If to Borrower: Applix, Inc.
289 Turnpike Road
Westboro, Massachusetts 01581
Attn Mr. Milton Alpern, CFO
Fax: (508) 616-0602
with a copy to: Donovan Hatem LLP
Two Seaport Lane
Boston, Massachusetts 02210
Attn: David L. Woronov, Esquire
Fax: (617) 406-4501
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If to Bank: Silicon Valley Bank
One Newton Executive Park, Suite 200
2221 Washington Street
Newton, Massachusetts 02462
Attn: Mr. Jonathan Gray
Fax: (617) 969-5973
with a copy to: Riemer & Braunstein LLP
Three Center Plaza
Boston, Massachusetts 02108
Attn: David A. Ephraim, Esquire
FAX: (617) 880-3456
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Massachusetts law governs the Loan Documents without regard to
principles of conflicts of law. Borrower and Bank each submit to the exclusive
jurisdiction of the State and Federal courts in Massachusetts; provided,
however, that if for any reason Bank cannot avail itself of such courts in the
Commonwealth of Massachusetts, Borrower accepts jurisdiction of the courts and
venue in Santa Clara County, California. NOTWITHSTANDING THE FOREGOING, THE BANK
SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR
ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS
REASONABLY NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO
OTHERWISE ENFORCE THE BANK'S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION THEREUNDER, INCLUDING CONTRACT, TORT, BREACH OF DUTY
AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO
ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. This Agreement binds and is for the
benefit of the successors and permitted assigns of each party. Borrower may not
assign this Agreement or any rights or Obligations under it without Bank's prior
written consent which may be granted or withheld in Bank's discretion. Bank has
the right, without the consent of or prior notice to Borrower (Bank shall
provide prompt subsequent notice), to sell, transfer, negotiate, or grant
participation in all or any part of, or any interest in, Bank's obligations,
rights and benefits under this Agreement, the Loan Documents or any related
agreement.
12.2 INDEMNIFICATION. Borrower hereby indemnifies, defends and
holds the Bank and its officers, employees and agents harmless against: (a) all
obligations, demands, claims, and liabilities asserted by any other party in
connection with the transactions contemplated by the Loan Documents; and (b) all
losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and Borrower (including reasonable
attorneys' fees and expenses), except for losses caused by Bank's gross
negligence or willful misconduct.
12.3 RIGHT OF SET-OFF. Borrower hereby grants to Bank, a lien,
security interest and right of setoff as security for all Obligations to Bank,
whether now existing or hereafter arising upon and against all deposits,
credits, collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of the Bank
(including a Bank subsidiary) or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower even though unmatured and regardless of
the adequacy of any other collateral securing the Obligations. ANY AND ALL
RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY
OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF
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WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER, ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.4 TIME OF ESSENCE. Time is of the essence for the performance of
all Obligations in this Agreement.
12.5 SEVERABILITY OF PROVISION. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
12.6 AMENDMENTS IN WRITING; INTEGRATION. All amendments to this
Agreement must be in writing signed by both Bank and Borrower. This Agreement
and the Loan Documents represent the entire agreement about this subject matter,
and supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents.
12.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, constitute
one Agreement.
12.8 SURVIVAL. All covenants, representations and warranties made
in this Agreement continue in full force while any Obligations remain
outstanding. The obligation of Borrower in Section 12.2 to indemnify Bank shall
survive until the statute of limitations with respect to such claim or cause of
action shall have run.
12.9 CONFIDENTIALITY. In handling any confidential information,
Bank shall exercise the same degree of care that it exercises for its own
proprietary information, but disclosure of information may be made: (i) to
Bank's subsidiaries or affiliates in connection with their business with
Borrower; (ii) to prospective transferees or purchasers of any interest in the
Credit Extensions (provided, however, Bank shall use commercially reasonable
efforts in obtaining such prospective transferee's or purchaser's agreement to
the terms of this provision); (iii) as required by law, regulation, subpoena, or
other order, (iv) as required in connection with Bank's examination or audit;
and (v) as Bank reasonably considers appropriate in exercising remedies under
this Agreement. Confidential information does not include information that
either: (a) is in the public domain or in Bank's possession when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank; or (b) is
disclosed to Bank by a third party, if Bank does not know that the third party
is prohibited from disclosing the information.
13 DEFINITIONS
13.1 DEFINITIONS. In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing, as such definition may be amended from time to time according to the
Code.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Revolving Line.
"AFFILIATE" is a Person that owns or controls directly or indirectly
the Person, any Person that controls or is controlled by or is under common
control with the Person, and each of that Person's senior executive officers,
directors, partners and, for any Person that is a limited liability company,
that Person's managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs or
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
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"BORROWER'S BOOKS" are all Borrower's material books and records
including ledgers, records regarding Borrower's material assets or liabilities,
the Collateral, business operations or financial condition and all computer
programs or discs or any equipment containing such information.
"BORROWING BASE" is eighty percent (80.%) of Eligible Accounts, as
determined by Bank from Borrower's most recent Borrowing Base Certificate;
provided, however, that Bank may lower the percentage of the Borrowing Base
after performing an audit of Borrower's Accounts.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.
"CASH MANAGEMENT SERVICES" are defined in Section 2.1.4.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the Uniform Commercial Code as adopted in Massachusetts, as
amended and as may be amended and in effect from time to time.
"COLLATERAL" is any and all properties, rights and assets of the
Borrower granted by the Borrower to Bank or arising under the Code, now, or in
the future, in which the Borrower obtains an interest, or the power to transfer
rights, including, without limitation, the property described on EXHIBIT A.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"CREDIT EXTENSION" is each Advance, Equipment Advance, Letter of
Credit, F/X Forward Contract, or any other extension of credit by Bank for
Borrower's benefit.
"CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year, plus, without duplication, all
obligations and liabilities of Borrower to Bank.
"DEFERRED REVENUE" is all amounts received in advance of performance
under contracts and not yet recognized as revenue.
"DOMESTIC SUBSIDIARIES" are all of the Borrower's Subsidiaries that are
incorporated within the United States.
"EBITDA" means earnings before interest, taxes, depreciation and
amortization in accordance with GAAP.
"ELIGIBLE ACCOUNTS" are billed Accounts in the ordinary course of
Borrower's business that meet all Borrower's representations and warranties in
Section 5.2; but Bank may change eligibility standards by giving Borrower
notice. Unless Bank agrees otherwise in writing, Eligible Accounts shall not
include:
(a) Accounts that the account debtor has not paid within
ninety (90) days of invoice date;
(b) Accounts for an account debtor, fifty percent (50%)
or more of whose Accounts have not been paid within ninety (90) days of
invoice date;
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(c) Credit balances over ninety (90) days from invoice
date;
(d) Accounts for an account debtor, including Affiliates,
whose total obligations to Borrower exceed thirty-five (35.0%) of all
Accounts, for the amounts that exceed that percentage, unless Bank
approves in writing;
(e) Accounts for which the account debtor does not have
its principal place of business in the United States;
(f) Accounts for which the account debtor is a federal,
state or local government entity or any department, agency, or
instrumentality thereof;
(g) Accounts for which Borrower owes the account debtor,
but only up to the amount owed (sometimes called "contra" accounts,
accounts payable, customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment,
or in which goods are consigned, sales guaranteed, sale or return, sale
on approval, bill and hold, or other terms if account debtor's payment
may be conditional;
(i) Accounts for which the account debtor is Borrower's
Affiliate, officer, employee, or agent;
(j) Accounts in which the account debtor disputes
liability or makes any claim and Bank believes there may be a basis for
dispute (but only up to the disputed or claimed amount), or if the
account debtor is subject to an Insolvency Proceeding, or becomes
insolvent, or goes out of business;
(k) Accounts for which Bank reasonably determines
collection to be doubtful after inquiry and consultation with Borrower.
"ELIGIBLE EQUIPMENT" is (a) general purpose computer equipment, office
equipment, test and laboratory equipment, furnishings, subject to the
limitations set forth herein, and (b) Other Equipment that complies with all of
Borrower's representations and warranties to Bank and which is acceptable to
Bank in all respects. The proceeds of the Equipment Advances shall be used to
finance new and used equipment.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"EQUIPMENT ADVANCE" is defined in Section 2.1.5.
"EQUIPMENT AVAILABILITY END DATE" is defined in Section 2.1.5.
"EQUIPMENT LINE" is an Equipment Advance or Equipment Advances in the
aggregate of up to One Million Dollars ($1,000,000.00).
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"FUNDING DATE" is any date on which an Equipment Advance is made to or
on account of Borrower.
"FX FORWARD CONTRACT" is defined in Section 2.1.3.
"FX RESERVE" is defined in Section 2.1.3.
"GAAP" is generally accepted accounting principles in the United
States.
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"GUARANTOR" is any present or future guarantor of the Obligations.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" is any proceeding by or against any Person
under the United States Bankruptcy Code, or any other bankruptcy or insolvency
law, including assignments for the benefit of creditors, compositions,
extensions generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INTELLECTUAL PROPERTY" is any copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, now owned or
later acquired; any patents, trademarks, service marks and applications
therefor; any trade secret rights, including any rights to unpatented
inventions, now owned or hereafter acquired.
"INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"LETTER OF CREDIT" means a letter of credit or similar undertaking
issued by Bank pursuant to Section 2.1.2.
"LETTER OF CREDIT RESERVE" has the meaning set forth in Section 2.1.2.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN AMOUNT" in respect of each Equipment Advance is the original
principal amount of such Equipment Advance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes
or guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement, all as amended, extended or restated.
"MATERIAL ADVERSE CHANGE " is: (i) A material impairment in the
perfection or priority of Bank's security interest in the Collateral or in the
value of such Collateral; (ii) a material adverse change in the business,
operations, or condition (financial or otherwise) of the Borrower; or (iii) a
material impairment of the prospect of repayment of any portion of the
Obligations ;or (iv) Bank determines, based upon information available to it and
in its reasonable judgment, that there is a substantial likelihood that Borrower
shall fail to comply with one or more of the financial covenants in Section 6
during the next succeeding financial reporting period.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including letters of credit, cash
management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"OTHER EQUIPMENT" is leasehold improvements, intangible property such
as computer software and software licenses, equipment specifically designed or
manufactured for Borrower, other intangible property, limited use property and
other similar property and soft costs approved by the Bank, including sales tax,
freight and installation expenses. Unless otherwise agreed to by Bank, not more
than 35% of the proceeds of the Equipment Line shall be used to finance Other
Equipment.
-17-
"PAYMENT DATE" is defined in Section 2.1.5(c).
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement
or the Loan Documents;
(b) Indebtedness existing on the Closing Date and shown
on the Perfection Certificate;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the
ordinary course of business; and
(e) Indebtedness secured by Permitted Liens;
(f) Borrower's indebtedness to its Subsidiaries up to an
amount not to exceed One Million Dollars ($1,000,000.00) in the
aggregate, during any fiscal year; and
(g) Extensions, refinancings, modifications, amendments
and restatements of any items of Permitted Indebtedness (a) through (f)
above, provided that the principal amount thereof is not increased or
the terms thereof are not modified to impose more burdensome terms upon
Borrower or its Subsidiary, as the case may be.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Perfection Certificate and
existing on the Closing Date;
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States or its agency or any
state maturing within 3 year from its acquisition, (ii) commercial
paper maturing no more than eighteen (18) months after its creation and
having ratings of no less than A or A-1, respectively from either
Standard & Poor's Corporation or Moody's Investors Service, Inc., (iii)
Bank's certificates of deposit issued maturing no more than 3 year
after issue, (iv) any other investments administered through the Bank;
and
(c) loans and other advances to Borrower's Subsidiaries
up to an amount not to exceed One Million Dollars ($1,000,000.00) in
the aggregate, during any fiscal year.
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the
Perfection Certificate or arising under this Agreement or other Loan
Documents;
(b) Liens for taxes, fees, assessments or other
government charges or levies, either not delinquent or being contested
in good faith and for which Borrower maintains adequate reserves on its
Books, if they have no priority over any of Bank's security interests;
(c) Purchase money Liens and capitalized leases in an
amount not to exceed One Hundred Thousand Dollars ($100,000.00) in the
aggregate during any fiscal year: (i) on Equipment acquired or held by
Borrower incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to
the property and improvements and the proceeds of the equipment;
(d) Leases or subleases and non-exclusive licenses or
sublicenses granted in the ordinary course of Borrower's business, if
such lease, sublease, license and sublicense does not prohibit granting
Bank a security interest;
-18-
(e) Carriers', warehousemen's, mechanics', materialmen's
repairmen's or other like liens arising in the ordinary course of
business which are not overdue for a period of more than ninety (90)
days or which are being contested in good faith by appropriate
proceedings;
(f) Liens incurred in the extension, renewal or
refinancing of the indebtedness secured by Liens described in (a)
through (e), but any extension, renewal or replacement Lien must be
limited to the property encumbered by the existing Lien and the
principal amount of the indebtedness may not increase.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
"PRIME RATE" is the Bank's most recently announced "prime rate," even
if it is not Bank's lowest rate.
"QUICK ASSETS" is, on any date, the Borrower's consolidated,
unrestricted cash, unrestricted cash equivalents, and net billed accounts
receivable.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer,
President, Chief Financial Officer and Controller of Borrower.
"REVOLVING LINE" is an Advance or Advances of up to Two Million Dollars
($2,000,000.00).
"REVOLVING MATURITY DATE" is March 18th, 2005.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (pursuant to a subordination agreement entered into
between the Bank, the Borrower and the subordinated creditor), on terms
acceptable to Bank.
"SUBSIDIARY" is any Person, corporation, partnership, limited liability
company, joint venture, or any other business entity of which more than 50% of
the voting stock or other equity interests is owned or controlled, directly or
indirectly, by the Person or one or more Affiliates of the Person.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion of Subordinated Debt permitted by Bank to
be paid by Borrower, but excluding all other Subordinated Debt.
-19-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument under the laws of the Commonwealth of
Massachusetts as of the date first above written.
BORROWER:
APPLIX, INC.
By /s/ Milton A. Alpern
-----------------------------------------
Name: Milton A. Alpern
--------------------------------------
Title: CFO
---------------------------------------
BANK:
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By /s/ Michael D. Sinclair
-----------------------------------------
Name: Michael D. Sinclair
--------------------------------------
Title: Vice President
---------------------------------------
SILICON VALLEY BANK
By /s/ Karen Beraud
-----------------------------------------
Name: Karen Beraud
--------------------------------------
Title: Vice President
---------------------------------------
(Signed in Santa Clara County, California)
S-1
EXHIBIT A
The Collateral consists of all right, title and interest of Borrower in
and to the following:
All goods, equipment, inventory, contract rights or rights to payment
of money, license agreements, franchise agreements, general intangibles
(including payment intangibles), accounts (including health-care receivables),
documents, instruments (including any promissory notes), chattel paper (whether
tangible or electronic), cash, deposit accounts, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
commercial tort claims, securities, and all other investment property supporting
obligations, and financial assets, whether now owned or hereafter acquired,
wherever located; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
The Collateral does not include:
Any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work, whether
published or unpublished, now owned or later acquired; any patents, trademarks,
service marks and applications therefor; any trade secret rights, including any
rights to unpatented inventions, now owned or hereafter acquired.
Notwithstanding the foregoing, the Collateral shall include all accounts,
license and royalty fees and other revenues, proceeds, or income arising out of
or relating to any of the foregoing intellectual property. To the extent a court
of competent jurisdiction holds that a security interest in any Intellectual
Property is necessary to have a security interest in any accounts, license and
royalty fees and other revenues, proceeds, or income arising out of or relating
to any of the foregoing Intellectual Property, then the Collateral shall,
effective as of the Closing Date, include the Intellectual Property, to the
extent necessary to permit perfection of the Bank's security interest in such
accounts, license and royalty fees and other revenues, proceeds, or income
arising out of or relating to any of the Intellectual Property.
Exhibit A-1
Exhibit B-1
EXHIBIT B
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 E.S.T.
Fax To: (617) 969-5965 Date: _____________________
LOAN PAYMENT:
Sample documents Client Name (Borrower)
From Account #_____________________ To Account #___________________________
(Deposit Account #) (Loan Account #)
Principal $________________________ and/or Interest $______________________
All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone transfer request for an advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date:
AUTHORIZED SIGNATURE: _____________ Phone Number: _________________________
LOAN ADVANCE:
Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.
From Account #_____________________ To Account #___________________________
(Loan Account #) (Deposit Account #)
Amount of Advance $________________
All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone transfer request for an advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of such date:
AUTHORIZED SIGNATURE: _____________ Phone Number: _________________________
OUTGOING WIRE REQUEST
COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO BE
WIRED.
Deadline for same day processing is 3:00 pm, E.S.T.
Beneficiary Name: _________________ Amount of Wire: $______________________
Beneficiary Bank: _________________ Account Number: _______________________
City and State: ___________________
Beneficiary Bank
Transit (ABA) #: _ _ __ __ __ __ __ Beneficiary Bank Code (Swift, Sort,
Chip, etc.): __________________________
(FOR INTERNATIONAL WIRE ONLY)
Intermediary Bank: ________________ Transit (ABA) #: ______________________
For Further Credit to: _________________________________________________________
Special Instruction: ___________________________________________________________
By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).
Authorized Signature: _____________ 2(nd) Signature (If
Required): ____________________________
Print Name/Title: _________________ Print Name/Title: _____________________
Telephone # _______________________ Telephone # ___________________________
Exhibit B-2
Exhibit B-3
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: Applix, Inc.
Lender: Silicon Valley Bank
Commitment Amount: $ 2,000,000.00
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of __________ $__________
2. Additions (please explain on reverse) $__________
3. TOTAL ACCOUNTS RECEIVABLE $__________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $__________
5. Balance of 50% over 90 day accounts $__________
6. Credit balances over 90 days $__________
7. Concentration Limits $__________
8. Foreign Accounts $__________
9. Governmental Accounts $__________
10. Contra Accounts $__________
11. Promotion or Demo Accounts $__________
12. Intercompany/Employee Accounts $__________
13. Other (please explain on reverse) $__________
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $__________
15. Eligible Accounts (#3 minus #14) $__________
16. LOAN VALUE OF ACCOUNTS ( 80.0% of #15) $__________
BALANCES
17. Maximum Loan Amount $__________
18. Total Funds Available (Lesser of #16 and #17) $__________
19. Present balance owing on Line of Credit $__________
20. Outstanding under Sublimits (Cash Mgt, L/C, and FXContract) $__________
21. RESERVE POSITION (#18 minus #19 and #20) $__________
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.
BANK USE ONLY
Received by: _______________________
COMMENTS: AUTHORIZED SIGNER
Date: ____________________________
Verified: __________________________
By: ___________________________ AUTHORIZED SIGNER
Authorized Signer Date: ______________________________
Compliance Status: Yes No
Exhibit C-1
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: APPLIX, INC.
The undersigned authorized officer of Applix, Inc. certifies that under
the terms and conditions of the Loan and Security Agreement between Borrower and
Bank (the "Agreement"), (i) Borrower is in complete compliance for the period
ending _______________ with all required covenants except as noted below and
(ii) all representations and warranties in the Agreement are true and correct in
all material respects on this date. Attached are the required documents
supporting the certification. The Officer certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) consistently
applied from one period to the next except as explained in an accompanying
letter or footnotes. The Officer acknowledges that no borrowings may be
requested at any time or date of determination that Borrower is not in
compliance with any of the terms of the Agreement, and that compliance is
determined not just at the date this certificate is delivered.
..PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
- ------------------ -------- --------
Monthly financial statements with CC Monthly within 30 days Yes No
Annual (CPA Audited) with CC FYE within 120 days Yes No
Board Approved Financial Plans Annually, as revised Yes No
BBC A/R Agings Monthly within 30 days Yes No
Audit Annually Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
- ------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio 1.25:1.0 _____:1.0 Yes No
(12/31/03-9/30/04)
1.50:1.0
(10/31/04 and
thereafter)
Maintain on a Quarterly Basis
Minimum EBITDA $_______* $_______ Yes No
* As set forth in Section 6.7(b) of the Agreement
BANK USE ONLY
COMMENTS REGARDING EXCEPTIONS: Received by: _______________________
See Attached. Sincerely, AUTHORIZED SIGNER
_____________________________ Date: __________________________
SIGNATURE
_____________________________ Verified: _________________________
TITLE AUTHORIZED SIGNER
_____________________________ Date: __________________________
DATE
Compliance Status: Yes No
Exhibit D-1
Exhibit D-2