Document:

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED

UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY AP

EXHIBIT 4.5

 

THIS WARRANT AND THE SHARES ISSUABLE

HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED

OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED, OR

OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT

OR PURSUANT TO RULE 144 AND AN EXEMPTION UNDER APPLICABLE STATE LAW OR AN

OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL,

THAT SUCH REGISTRATION IS NOT REQUIRED.

 

WARRANT TO PURCHASE STOCK

 

	

  Corporation:  

  	

   

  	

  Network Computing Devices,

  Inc.

  	

   

  
	

  Number of Shares:

  	

   

  	

  650,000 shares

  	

   

  
	

  Class of Stock:

  	

   

  	

  Common Stock

  	

   

  
	

  Initial Exercise Price:

  	

   

  	

  $0.50 per share

  	

   

  
	

  Issue Date:  

  	

   

  	

  October 29, 2001

  	

   

  
	

  Expiration Date:

  	

   

  	

  October 29, 2006

  	

   

  

 

THIS WARRANT CERTIFIES THAT,

for the agreed upon value of $1.00 and for other good and valuable

consideration, SILICON VALLEY BANK (“Holder”) is entitled to purchase the

number of fully paid and nonassessable shares of the class of securities (the

“Shares”) of the corporation (the “Company”) at the initial exercise price per

Share (the “Warrant Price”) all as set forth above and as adjusted pursuant to

Article 2 of this Warrant, subject to the provisions and upon the terms

and conditions set forth in this Warrant.

 

ARTICLE 1. EXERCISE.

 

1.1           Method of Exercise.  Holder may exercise this Warrant by

delivering a duly executed Notice of Exercise in substantially the form

attached as Appendix 1 to the principal office of the Company.  Unless Holder is exercising the conversion

right set forth in Section 1.2, Holder shall also deliver to the Company a check for the

aggregate Warrant Price for the Shares being purchased.

 

1.2           Conversion Right.  In lieu of exercising this Warrant as

specified in Section 1.1, Holder may from time to time convert this Warrant, in

whole or in part, into a number of Shares determined by dividing (a)

the aggregate fair market value of the Shares or other securities otherwise

issuable upon exercise of this Warrant minus the aggregate Warrant Price of

such Shares by (b) the fair market value of one Share.  The fair market value of the Shares shall be

determined pursuant to Section 1.3.

 

1.3           Fair Market Value.  If the Shares are traded in a public market,

the fair market value of the Shares shall be the closing price of the Shares

(or the closing price of the Company’s stock into which the Shares are

convertible) reported for the business day immediately before Holder delivers

its Notice of Exercise to the Company. 

If the Shares are not traded in a public market, the Board of Directors

of the Company shall determine fair market value in its reasonable good faith

judgment.

 

1.4           Delivery of Certificate and New Warrant.  Promptly after Holder exercises or converts this Warrant, the

Company shall deliver to Holder certificates for the Shares acquired and, if

this Warrant has not been fully exercised or converted and has not expired, a

new Warrant representing the Shares not so acquired.

 

1.5           Replacement of Warrants.  On receipt of evidence reasonably

satisfactory to the Company of the loss, theft, destruction or mutilation of

this Warrant and, in the case of loss, theft or destruction, on delivery of an

indemnity agreement reasonably satisfactory in form and amount to the 

 

 

Company or, in the case of

mutilation, or surrender and cancellation of this Warrant, the Company shall

execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

 

1.6           Assumption on Sale, Merger, or Consolidation of the Company.

 

1.6.1        “Acquisition”.  For the purpose of this Warrant, “Acquisition”

means any sale, license, or other disposition of all or substantially all of

the assets of the Company, or any reorganization, consolidation, or merger of

the Company where the holders of the Company’s securities before the transaction

beneficially own less than 50% of the outstanding voting securities of the

surviving entity after the transaction.

 

1.6.2        Assumption of Warrant.  Upon the closing of any Acquisition, the

successor entity shall assume the obligations of this Warrant, and this Warrant

shall be exercisable for the same securities, cash, and property as would be payable for the Shares

issuable upon exercise of the unexercised portion of this Warrant as if such

Shares were outstanding on the record date for the Acquisition and subsequent

closing.  The Initial Exercise Price

and/or number of Shares shall be adjusted accordingly.

 

ARTICLE 2. ADJUSTMENTS TO

THE SHARES.

 

2.1           Stock Dividends, Splits, Etc.  If the Company declares or pays a dividend

on its common stock (or the Shares if the Shares are securities other than

common stock) payable in

common stock, or other securities, subdivides the outstanding common stock into

a greater amount of common stock, or, if the Shares are securities other than

common stock, subdivides the Shares in a transaction that increases the amount

of common stock into which the Shares are convertible, then upon exercise of

this Warrant, for each Share acquired, Holder shall receive, without cost to

Holder, the total number and kind of securities to which Holder would have been

entitled had Holder owned the Shares of record as of the date the dividend or

subdivision occurred.  If the

outstanding shares are combined or consolidated, by reclassification or

otherwise, into a lesser number of shares, the Initial Exercise Price shall be

proportionately increased.

 

2.2           Reclassification, Exchange,

Combinations or Substitution.  Upon

any reclassification, exchange, substitution, or other event that results in a

change of the number and/or class of the securities issuable upon exercise or

conversion of this Warrant, Holder shall be entitled to receive, upon exercise

or conversion of this Warrant, the number and kind of securities and property

that Holder would have received for the Shares if this Warrant had been exercised immediately before such

reclassification, exchange, substitution, or other event.  Such an event shall include any automatic

conversion of the outstanding or issuable securities of the Company of the same

class or series as the Shares to common stock pursuant to the terms of the

Company’s Articles of Incorporation upon the closing of a registered public

offering of the Company’s common stock. 

The Company or its successor shall promptly issue to Holder a new

Warrant for such new securities or other property.  The new Warrant shall provide for adjustments which shall be as

nearly equivalent as may be practicable to the adjustments provided for in this

Article 2 including, without limitation, adjustments to the Initial Exercise

Price and to the number of securities or property issuable upon exercise of the

new Warrant.  The provisions of this

Section 2.2 shall similarly apply to successive reclassifications, exchanges,

substitutions, or other events.

 

2.3           Adjustments for

Diluting Issuances.  The Warrant

Price and the number of Shares issuable upon exercise of this Warrant or, if

the Shares are Preferred Stock, the number of shares of common stock issuable

upon conversion of the Shares, shall be subject to adjustment, from time to

time in the manner set forth in the Company’s Certificate of

Incorporation.  The provisions set forth

for the Shares in the Company’s Certificate of Incorporation relating to the

above in effect as of the Issue Date may not be amended, modified or waived, without

the prior written consent of Holder unless such amendment, modification or

waiver affects Holder in the same manner as they affect all other shareholders

of the same series of shares granted to the Holder.

 

2

 

2.4           No Impairment.  The Company shall not, by amendment of its

Articles of Incorporation or through a reorganization, transfer of assets,

consolidation, merger, dissolution, issue, or sale of securities or any other

voluntary action, avoid or seek to avoid the observance or performance of any

of the terms to be observed or performed under this Warrant by the Company, but

shall at all times in good faith assist in carrying out of all the provisions

of this Article 2 and in taking all such action as may be necessary or

appropriate to protect Holder’s rights under this Article against impairment.

 

2.5           Fractional Shares.  No fractional Shares shall be issuable upon

exercise or conversion of the Warrant and the number of Shares to be issued

shall be rounded down to the nearest whole Share.  If a fractional share interest arises upon any exercise or

conversion of the Warrant, the Company shall eliminate such fractional share

interest by paying Holder the amount computed by multiplying the fractional interest

by the fair market value of a full

Share.

 

2.6           Certificate as to Adjustments.  Upon each adjustment of the Warrant Price,

the Company shall promptly notify Holder in writing, and, at the Company’s

expense, promptly compute such

adjustment, and furnish Holder with a certificate of its Chief Financial

Officer setting forth such adjustment and the facts upon which such adjustment

is based. The Company shall, upon written request, furnish Holder a certificate

setting forth the Warrant Price in effect upon the date thereof and the series

of adjustments leading to such Warrant Price.

 

ARTICLE 3. REPRESENTATIONS

AND COVENANTS OF THE COMPANY.

 

3.1           Representations and Warranties.  The Company represents and warrants to

the Holder as follows:

 

(a)           The initial Warrant Price referenced

on the first page of this Warrant is not greater than (i) the price per share

at which the Shares were last issued in an arms-length transaction in which at

least $500,000 of the Shares were sold and (ii) the fair market value of the

Shares as of the date of this Warrant.

 

(b)           All Shares which may be issued upon

the exercise of the purchase right represented by this Warrant, and all

securities, if any, issuable upon conversion of the Shares, shall, upon

issuance, be duly authorized, validly issued, fully paid and nonassessable, and

free of any liens and encumbrances except for restrictions on transfer provided

for herein or under applicable federal and state securities laws.

 

(c)           The Capitalization Table previously

provided to Holder remains true and complete as of the Issue Date.

 

3.2           Notice of Certain Events.  If the Company proposes at any time (a) to

declare any dividend or distribution upon its common stock, whether in cash,

property, stock, or other securities and whether or not a regular cash

dividend; (b) to offer for subscription pro rata to the holders of any class or

series of its stock any additional shares of stock of any class or series or

other rights; (c) to effect any reclassification or recapitalization of common

stock; (d) to merge or consolidate with or into any other corporation, or sell,

lease, license, or convey all or substantially all of its assets, or to

liquidate, dissolve or wind up; or (e) offer holders of registration rights the

opportunity to participate in an underwritten public offering of the company’s

securities for cash, then, in connection with each such event, the Company

shall give Holder (1) at least 10 days prior written notice of the date on

which a record will be taken for such dividend, distribution, or subscription

rights (and specifying the date on which the holders of common stock will be

entitled thereto) or for determining rights to vote, if any, in respect of the

matters referred to in (c) and (d) above; (2) in the case of the matters

referred to in (c) and (d) above at least 10 days prior written notice of the

date when the same will take place (and specifying the date on which the

holders of common stock will be entitled to exchange their common stock for

securities or other property deliverable upon the occurrence of such event);

and (3) in the case of the matter referred to in (e) above, the same notice as

is given to the holders of such registration rights.

 

3

 

3.3           Registration Under Securities Act

of 1933, as amended.  The Company

agrees that the Shares or, if the Shares are convertible into common stock of

the Company, such common stock, shall be subject to the registration rights set

forth in the Amended and Restated Registration Rights Agreement among the

Company, SCI Technology, Inc., Guenther Pfaff, and Hofmann & Co. dated as

of August 29, 2001 or similar agreement. 

The provisions set forth in the Company’s Investors’ Right Agreement or

similar agreement relating to the above in effect as of the Issue Date may not

be amended, modified or waived without the prior written consent of Holder

unless such amendment, modification or waiver affects Holder in the same manner

as they affect all other shareholders of the same series of shares granted to

the Holder .

 

ARTICLE 4. REPRESENTATIONS, WARRANTIES OF

THE HOLDER.  The Holder represents

and warrants to the Company as follows:

 

4.1           Purchase for Own Account.  Except for transfers to Holder’s affiliates,

this Warrant and the securities to be acquired upon exercise of this Warrant by

the Holder will be acquired for investment for the Holder’s account, not as a

nominee or agent, and not with a view to the public resale or distribution

within the meaning of the 1933 Act, and the Holder has no present intention of

selling, granting any participation in, or otherwise distributing the

same.  If not an individual, the Holder

also represents that the Holder has not been formed for the specific purpose of

acquiring this Warrant or the Shares.

 

4.2           Disclosure of Information.  The Holder has received or has had full

access to all the information it considers necessary or appropriate to make an

informed investment decision with respect to the acquisition of this Warrant

and its underlying securities.  The Holder

further has had an opportunity to ask questions and receive answers from the

Company regarding the terms and conditions of the offering of this Warrant and

its underlying securities and to obtain additional information (to the extent

the Company possessed such information or could acquire it without unreasonable

effort or expense) necessary to verify any information furnished to the Holder

or to which the Holder has access.

 

4.3           Investment Experience.  The Holder understands that the purchase of

this Warrant and its underlying securities involves substantial risk.  The Holder: 

(i) has experience as an investor in securities of companies in the

development stage and acknowledges that the Holder is able to fend for itself,

can bear the economic risk of such Holder’s investment in this Warrant and its

underlying securities and has such knowledge and experience in financial or

business matters that the Holder is capable of evaluating the merits and risks

of its investment in this Warrant and its underlying securities and/or (ii) has

a preexisting personal or business relationship with the Company and certain of

its officers, directors or controlling persons of a nature and duration that

enables the Holder to be aware of the character, business acumen and financial

circumstances of such persons.

 

4.4           Accredited Investor Status.  The Holder is an “accredited investor”

within the meaning of Regulation D promulgated under the 1933 Act.

 

ARTICLE 5. MISCELLANEOUS.

 

5.1           Term:  This Warrant is exercisable in whole or in

part at any time and from time to time on or before the Expiration Date.  

 

5.2           Legends.  This Warrant and the Shares (and the

securities issuable, directly or indirectly, upon conversion of the Shares, if

any) shall be imprinted with a legend in substantially the following form:

 

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,

AS AMENDED OR UNDER ANY APPLICABLE STATE LAWS, AND MAY NOT BE SOLD, PLEDGED OR

OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THERE OF UNDER SUCH ACT

AND AN EXEMPTION UNDER APPLICABLE STATE LAW OR PURSUANT TO 

 

4

 

RULE 144 OR AN OPINION OF 

COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT

SUCH REGISTRATION IS NOT REQUIRED.

 

5.3           Compliance with Securities Laws on

Transfer.  This Warrant and the

Shares issuable upon exercise of this Warrant (and the securities issuable,

directly or indirectly, upon conversion of the Shares, if any) may not be

transferred or assigned in whole or in part without compliance with applicable

federal and state securities laws by the transferor and the transferee

(including, without limitation, the delivery of investment representation

letters and legal opinions reasonably satisfactory to the Company, as

reasonably requested by the Company). 

The Company shall not require Holder to provide an opinion of counsel if

the transfer is to an affiliate of Holder or if there is no material question

as to the availability of current information as referenced in Rule 144(c),

Holder represents that it has complied with Rule 144(d) and (e) in reasonable

detail, the selling broker represents that it has complied with Rule 144(f),

and the Company is provided with a copy of Holder’s notice of proposed sale.

 

5.4 Transfer Procedure.  Subject to the provisions of Section 5.3,

Holder may transfer all or part of this Warrant or the Shares issuable upon

exercise of this Warrant (or the securities issuable, directly or indirectly,

upon conversion of the Shares, if any) to Silicon Valley Bancshares, or The

Silicon Valley Bank Foundation, or to any affiliate of Holder at any time

without prior notice to Company; provided, however, if Holder

transfers this warrant to any other transferee, Holder will give the Company

notice of the portion of the Warrant being transferred with the name, address

and taxpayer identification number of the transferee and surrendering this

Warrant to the Company for reissuance to the transferee(s) (and Holder if

applicable).  The Company may refuse to

transfer this Warrant to any person who directly competes with the Company

unless the Company’s stock is publicly traded.

 

5.5           Notices.  All notices and other communications from

the Company to the Holder, or vice versa, shall be deemed delivered and

effective when given personally or mailed by first-class registered or

certified mail, postage prepaid, at such address as may have been furnished to

the Company or the Holder, as the case may be, in writing by the Company or

such holder from time to time.  All notices

to the Holder shall be addressed as follows:

 

Silicon

Valley Bank

Attn:  Treasury Department

3003

Tasman Drive, HG 110

Santa

Clara, CA 95054

 

5.6           Waiver.  This Warrant and any term hereof may be

changed, waived, discharged or terminated only by an instrument in writing

signed by the party against which enforcement of such change, waiver, discharge

or termination is sought.

 

5.7           Attorney’s Fees. 

In the event of any dispute between the parties concerning the terms and

provisions of this Warrant, the party prevailing in such dispute shall be entitled

to collect from the other party all costs incurred in such dispute, including

reasonable

 

5.8           Automatic Conversion upon

Expiration.  In the event that, upon

the Expiration  Date, the fair market

value of one Share (or other security issuable upon the exercise hereof) as

determined in accordance with Section 1.3 above is greater than the Exercise

Price in effect on such date, then this Warrant shall automatically be deemed

on and as of such date to be converted pursuant to Section 1.2 above as to all

Shares (or such other securities) for which it shall not previously have been

exercised or converted, and the Company shall promptly deliver a certificate

representing the Shares (or such other securities) issued upon such conversion

to the Holder.

 

5.9           Governing Law.  This Warrant shall be governed by and

construed in accordance with the laws of the State of California, without

giving effect to its principles regarding conflicts of law.

 

5

 

	

   

  	

  “COMPANY”

  
	

   

  	

   

  
	

   

  	

  NETWORK

  COMPUTING DEVICES, INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

  /s/

  Rudolph G. Morin

  	

   

  
	

   

  	

   

  
	

   

  	

  Name:

  

  	

  Rudolph

  G. Morin

  	

   

  
	

   

  	

  (Print)

  
	

   

  	

  Title:

  

  	

  Chairman

  of the Board, President or

  Vice President

  
	

   

  	

   

  
	

   

  	

  By:

  	

  /s/

  Michael Garner

  	

   

  
	

   

  	

   

  
	

   

  	

  Name:

  

  	

  Michael

  Garner

  	

   

  
	

   

  	

  (Print)

  	

   

  
	

   

  	

  Title:

  

  	

  Chief

  Financial Officer, Secretary,

  Assistant Treasurer or Assistant

  Secretary

  
	

   

  	

   

  
	

   

  	

  “HOLDER”

  
	

   

  	

   

  
	

   

  	

  Silicon Valley Bank

  
	

   

  	

   

  
	

   

  	

  By: 

  	

  /s/ Milad Hanna

  	

   

  
	

   

  	

   

  
	

   

  	

  Name: 

  	

  Milad T. Hanna

  	

   

  
	

   

  	

   

  
	

   

  	

  Title: 

  	

   Senior Vice President

  	

   

  
															

 

6

 

APPENDIX

1

 

NOTICE

OF EXERCISE

 

1.             Holder elects to purchase                          shares of the Common/Series                               Preferred

[strike one] Stock of                                         

pursuant to the terms of the attached Warrant, and tenders

payment of the purchase price of the shares in full.

 

1.             Holder elects to convert the attached Warrant into

Shares/cash [strike one] in the manner specified in the Warrant.  This conversion is exercised for                                         of the Shares covered by the Warrant.

 

[Strike paragraph that does not apply.]

 

2.             Please issue a certificate or certificates

representing the shares in the name specified below:

 

	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Holders Name

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (Address)

  	

   

  
	

   

  	

   

  	

   

  	

   

  

 

3.   The undersigned represents it is acquiring the shares solely for

its own account and not as a nominee for any other party and not with a view

toward the resale or distribution except in compliance with applicable

securities laws.

 

 

	

   

  	

   

  	

  HOLDER:

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Name:

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  	

   

  
	

  (Date)

  	

   

  	

   

  	

   

  
								

 

8Silicon Valley Bank

EXHIBIT 10.71

 

Silicon

Valley Bank

 

Loan and Security

Agreement

 

	

  Borrower:

  	

  Network Computing Devices, Inc.

  
	

  Address:

  	

  301 Ravendale Drive

  Mountain View, California  94043

  
	

   

  	

   

  
	

  Date:

  	

  October 29, 2001

  

 

THIS LOAN AND SECURITY AGREEMENT

is entered into on the above date between SILICON VALLEY BANK,  COMMERCIAL FINANCE DIVISION (“Silicon”),

whose address is 3003 Tasman Drive, Santa Clara, California  95054 and the borrower(s) named above

(jointly and severally, the “Borrower”), whose chief executive office is located

at the above address (“Borrower’s Address”). 

The Schedule to this Agreement (the “Schedule”) shall for all purposes

be deemed to be a part of this Agreement, and the same is an integral part of

this Agreement.  (Definitions of certain

terms used in this Agreement are set forth in Section 8 below.)

 

1.     LOANS.

 

1.1  Loans.  Silicon will make loans to Borrower (the

“Loans”), in amounts determined by Silicon in its sole discretion, up to the

amounts (the “Credit Limit”) shown on the Schedule, provided no Default or

Event of Default has occurred and is continuing, and subject to deduction of

any Reserves for accrued interest and such other Reserves as Silicon deems

proper from time to time.

 

1.2  Interest.  All Loans and all other monetary Obligations

shall bear interest at the rate shown on the Schedule, except where expressly

set forth to the contrary in this Agreement. 

Interest shall be payable monthly, on the last day of the month.  Interest may, in Silicon’s discretion, be

charged to Borrower’s loan account, and the same shall thereafter bear interest

at the same rate as the other Loans. 

Silicon may, in its discretion, charge interest to Borrower’s Deposit

Accounts maintained with Silicon. 

Regardless of the amount of Obligations that may be outstanding from

time to time, Borrower shall pay Silicon minimum monthly interest during the

term of this Agreement in the amount set forth on the Schedule (the “Minimum

Monthly Interest”).

 

1.3  Overadvances.  If at any time or for any reason the total of

all outstanding Loans and all other Obligations exceeds the Credit Limit (an

“Overadvance”), Borrower shall immediately pay the amount of the excess to

Silicon, without notice or demand. 

Without limiting Borrower’s obligation to repay to Silicon on demand the

amount of any Overadvance, Borrower agrees to pay Silicon interest on the

outstanding amount of any Overadvance, on demand, at a rate equal to the

interest rate which would otherwise be applicable to the Overadvance, plus an

additional 2% per annum.

 

1.4  Fees.  Borrower shall pay Silicon the fee(s) shown

on the Schedule, which are in addition to all interest and other sums payable

to Silicon and are not refundable.

 

1.5  Letters of Credit.  At the request of Borrower, Silicon may, in

its sole discretion, issue or arrange for the issuance of letters of credit for

the account of Borrower, in each case in form and substance satisfactory to

Silicon in its sole discretion (collectively, “Letters of Credit”).  The aggregate face amount of all outstanding

Letters of Credit from time to time shall not exceed the amount shown on the

Schedule (the “Letter of Credit Sublimit”), and shall be reserved against Loans

which would otherwise be available hereunder. 

Borrower shall pay all bank charges (including charges of Silicon) for

the issuance of Letters of Credit, together with such additional fee as

Silicon’s letter of credit department shall charge in connection with the

issuance of the Letters of Credit.  Any

payment by Silicon under or in connection with a Letter of Credit shall

constitute a Loan hereunder on the date such payment is made.  Each Letter of Credit shall have an expiry

date no later than thirty days prior to the Maturity Date.  Borrower hereby agrees to indemnify, save,

and hold Silicon harmless from any loss, cost, expense, or liability, including

payments made by Silicon, expenses, and reasonable attorneys’ fees incurred by

Silicon arising out of or in connection with any Letters of Credit.  Borrower agrees to be bound by the

regulations and interpretations of the issuer of any Letters of Credit

guarantied by Silicon and opened for Borrower’s account or by Silicon’s

 

 

interpretations of any Letter

of Credit issued by Silicon for Borrower’s account, and Borrower understands

and agrees that Silicon shall not be liable for any error, negligence, or

mistake, whether of omission or commission, in following Borrower’s

instructions or those contained in the Letters of Credit or any modifications,

amendments, or supplements thereto. 

Borrower understands that Letters of Credit may require Silicon to

indemnify the issuing bank for certain costs or liabilities arising out of

claims by Borrower against such issuing bank. 

Borrower hereby agrees to indemnify and hold Silicon harmless with

respect to any loss, cost, expense, or liability incurred by Silicon under any

Letter of Credit as a result of Silicon’s indemnification of any such issuing

bank.  The provisions of this Loan

Agreement, as it pertains to Letters of Credit, and any other present or future

documents or agreements between Borrower and Silicon relating to Letters of

Credit are cumulative.

 

2.     SECURITY INTEREST.

 

2.1  Security Interest.  To secure the payment and

performance of all of the Obligations when due, Borrower hereby grants to

Silicon a security interest in all of Borrower’s interest in the following,

whether now owned or hereafter acquired, and wherever located:  All Inventory, Equipment, Receivables, and

General Intangibles, including, without limitation, all of Borrower’s Deposit

Accounts, and all money, and all property now or at any time in the future in

Silicon’s possession (including claims and credit balances), and all proceeds

(including proceeds of any insurance policies, proceeds of proceeds and claims

against third parties), all products and all books and records related to any

of the foregoing (all of the foregoing, together with all other property in

which Silicon may now or in the future be granted a lien or security interest,

is referred to herein, collectively, as the “Collateral”).

 

3.     REPRESENTATIONS, WARRANTIES

AND COVENANTS OF BORROWER.

 

In order to

induce Silicon to enter into this Agreement and to make Loans, Borrower

represents and warrants to Silicon as follows, and Borrower covenants that the

following representations will continue to be true, and that Borrower will at

all times comply with all of the following covenants:

 

3.1  Corporate Existence and Authority.  Borrower, if a corporation, is and will

continue to be, duly organized, validly existing and in good standing under the

laws of the jurisdiction of its incorporation. 

Borrower is and will continue to be qualified and licensed to do

business in all jurisdictions in which any failure to do so would have a

material adverse effect on Borrower. 

The execution, delivery and performance by Borrower of this Agreement,

and all other documents contemplated hereby (i) have been duly and validly

authorized, (ii) are enforceable against Borrower in accordance with their

terms (except as enforcement may be limited by equitable principles and by

bankruptcy, insolvency, reorganization, moratorium or similar laws relating to

creditors’ rights generally), and (iii) do not violate Borrower’s articles or

certificate of incorporation, or Borrower’s by-laws, or any law or any  material agreement or instrument which is

binding upon Borrower or its property, and (iv) do not constitute grounds for

acceleration of any material indebtedness or obligation under any material

agreement or instrument which is binding upon Borrower or its property.

 

3.2  Name; Trade Names and Styles.  The name of Borrower set forth in the

heading to this Agreement is its correct name. 

Listed on the Schedule are all prior names of Borrower and all of

Borrower’s present and prior trade names. 

Borrower shall give Silicon 30 days’ prior written notice before

changing its name or doing business under any other name.  Borrower has complied, and will in the

future comply, with all laws relating to the conduct of business under a fictitious

business name.

 

3.3  Place of Business; Location of Collateral.  The address set forth in the heading to this

Agreement is Borrower’s chief executive office.  In addition, Borrower has places of business and Collateral is

located only at the locations set forth on the Schedule.  Borrower will give Silicon at least 30 days

prior written notice before opening any additional place of business, changing

its chief executive office, or moving any of the Collateral to a location other

than Borrower’s Address or one of the locations set forth on the Schedule.

 

3.4  Title to Collateral; Permitted Liens.  Borrower is now, and will at all times in

the future be, the sole owner of all the Collateral, except for items of

Equipment which are leased by Borrower. 

The Collateral now is and will remain free and clear of any and all

liens, charges, security interests, encumbrances and adverse claims, except for

Permitted Liens.  Silicon now has, and

will continue to have, a first-priority perfected and enforceable security

interest in all of the Collateral, subject only to the Permitted Liens, and

Borrower will at all times defend Silicon and the Collateral against all claims

of others.  None of the Collateral now

is or will be affixed to any real property in such a manner, or with such

intent, as to become a fixture. 

Borrower is not and will not become a lessee under any real property

lease pursuant to which the lessor may obtain any rights in any of the

Collateral and no such lease now prohibits, restrains, impairs or will

prohibit, restrain or impair Borrower’s right to remove any Collateral from the

leased premises.  Whenever any

Collateral is located upon premises in which any third party has an interest

(whether as owner, mortgagee, beneficiary under a deed of trust, lien or

otherwise), Borrower shall, whenever requested by Silicon, use its best efforts

to cause such third party to execute and deliver to Silicon, in form acceptable

to Silicon, such waivers and subordinations as Silicon shall specify, so as to

ensure that Silicon’s rights in the Collateral are, and will continue to be,

superior to the rights of any such third party.  Borrower will keep in full force and effect, and will comply with

all the terms of, any lease of real

 

2

 

property where any of the

Collateral now or in the future may be located.

 

3.5  Maintenance of Collateral.  Borrower will maintain the Collateral in good

working condition, and Borrower will not use the Collateral for any unlawful

purpose.  Borrower will immediately

advise Silicon in writing of any material loss or damage to the Collateral.

 

3.6  Books and Records.  Borrower has maintained and will maintain at

Borrower’s Address complete and accurate books and records, comprising an

accounting system in accordance with generally accepted accounting principles.

 

3.7  Financial Condition, Statements and Reports.  All financial statements now or in the

future delivered to Silicon have been, and will be, prepared in conformity with

generally accepted accounting principles and now and in the future will

completely and accurately reflect the financial condition of Borrower, at the

times and for the periods therein stated. 

Between the last date covered by any such statement provided to Silicon

and the date hereof, there has been no material adverse change in the financial

condition or business of Borrower. 

Borrower is now and will continue to be solvent.

 

3.8  Tax Returns and Payments; Pension

Contributions. 

Borrower has timely filed, and will timely file, all tax returns and

reports required by foreign, federal, state and local law, and Borrower has

timely paid, and will timely pay, all foreign, federal, state and local taxes,

assessments, deposits and contributions now or in the future owed by Borrower.  Borrower may, however, defer payment of any

contested taxes, provided that Borrower (i) in good faith contests Borrower’s

obligation to pay the taxes by appropriate proceedings promptly and diligently

instituted and conducted, (ii) notifies Silicon in writing of the commencement

of, and any material development in, the proceedings, and (iii) posts bonds or

takes any other steps required to keep the contested taxes from becoming a lien

upon any of the Collateral.  Borrower is

unaware of any claims or adjustments proposed for any of Borrower’s prior tax

years which could result in additional taxes becoming due and payable by

Borrower.  Borrower has paid, and shall

continue to pay all amounts necessary to fund all present and future pension,

profit sharing and deferred compensation plans in accordance with their terms,

and Borrower has not and will not withdraw from participation in, permit

partial or complete termination of, or permit the occurrence of any other event

with respect to, any such plan which could result in any liability of Borrower,

including any liability to the Pension Benefit Guaranty Corporation or its

successors or any other governmental agency. 

Borrower shall, at all times, utilize the services of an outside payroll

service providing for the automatic deposit of all payroll taxes payable by

Borrower.

 

3.9  Compliance with Law.  Borrower has complied, and will comply, in

all material respects, with all provisions of all foreign, federal, state and

local laws and regulations relating to Borrower, including, but not limited to,

those relating to Borrower’s ownership of real or personal property, the

conduct and licensing of Borrower’s business, and all environmental matters.

 

3.10  Litigation.  Except as disclosed in the Schedule, there

is no claim, suit, litigation, proceeding or investigation pending or (to best

of Borrower’s knowledge) threatened by or against or affecting Borrower in any

court or before any governmental agency (or any basis therefor known to

Borrower) which may result, either separately or in the aggregate, in any

material adverse change in the financial condition or business of Borrower, or

in any material impairment in the ability of Borrower to carry on its business

in substantially the same manner as it is now being conducted.  Borrower will promptly inform Silicon in

writing of any claim, proceeding, litigation or investigation in the future

threatened or instituted by or against Borrower involving any single claim of $50,000

or more, or involving $100,000  or more

in the aggregate.

 

3.11  Use of Proceeds.  All proceeds of all Loans shall be used

solely for lawful business purposes. 

Borrower is not purchasing or carrying any “margin stock” (as defined in

Regulation U of the Board of Governors of the Federal Reserve System) and no

part of the proceeds of any Loan will be used to purchase or carry any “margin

stock” or to extend credit to others for the purpose of purchasing or carrying

any “margin stock.”

 

4.     RECEIVABLES.

 

4.1  Representations Relating to Receivables.  Borrower represents and warrants to Silicon

as follows:  Each Receivable with

respect to which Loans are requested by Borrower shall, on the date each Loan

is requested and made, (i) represent an undisputed bona fide existing

unconditional obligation of the Account Debtor created by the sale, delivery,

and acceptance of goods or the rendition of services in the ordinary course of

Borrower’s business, and (ii) meet the Minimum Eligibility Requirements set

forth in  Section 8 below.

 

4.2  Representations Relating to Documents and

Legal Compliance.  Borrower

represents and warrants to Silicon as follows: 

All statements made and all unpaid balances appearing in all invoices,

instruments and other documents evidencing the Receivables are and shall be

true and correct and all such invoices, instruments and other documents and all

of Borrower’s books and records are and shall be genuine and in all respects

what they purport to be, and all signatories and endorsers have the capacity to

contract.  All sales and other

transactions underlying or giving rise to each Receivable shall fully comply

with all applicable laws and governmental rules and regulations.  All signatures and endorsements on all

documents, instruments, and agreements relating to all Receivables are and

shall be genuine, and all such documents, instruments and agreements are and

shall be legally enforceable in accordance with their terms.

 

4.3  Schedules and Documents relating to

Receivables.  Borrower

shall deliver to Silicon transaction reports and 

 

3

 

loan requests, schedules and

assignments of all Receivables, and schedules of collections, all on Silicon’s

standard forms; provided, however, that Borrower’s failure to execute and

deliver the same shall not affect or limit Silicon’s security interest and

other rights in all of Borrower’s Receivables, nor shall Silicon’s failure to

advance or lend against a specific Receivable affect or limit Silicon’s

security interest and other rights therein. 

Loan requests received after 12:00 Noon will not be considered by

Silicon until the next Business Day. 

Together with each such schedule and assignment, or later if requested

by Silicon, Borrower shall furnish Silicon with copies (or, at Silicon’s

request, originals) of all contracts, orders, invoices, and other similar

documents, and all original shipping instructions, delivery receipts, bills of

lading, and other evidence of delivery, for any goods the sale or disposition

of which gave rise to such Receivables, and Borrower warrants the genuineness

of all of the foregoing.  Borrower shall

also furnish to Silicon an aged accounts receivable trial balance in such form

and at such intervals as Silicon shall 

request.  In addition, Borrower

shall deliver to Silicon the originals of all instruments, chattel paper,

security agreements, guarantees and other documents and property evidencing or

securing any Receivables, immediately upon receipt thereof and in the same form

as received, with all necessary indorsements, all of which shall be with

recourse.  Borrower shall also provide

Silicon with copies of all credit memos within two days after the date issued.

 

4.4  Collection of Receivables.  Borrower shall have the right to collect all

Receivables, unless and until a Default or an Event of Default has occurred.  Borrower shall hold all payments on, and

proceeds of, Receivables in trust for Silicon, and Borrower shall immediately

deliver all such payments and proceeds to Silicon in their original form, duly

endorsed in blank, to be applied to the Obligations in such order as Silicon

shall determine.  Silicon may, in its

discretion, require that all proceeds of Collateral be deposited by Borrower

into a lockbox account, or such other “blocked account” as Silicon may specify,

pursuant to a blocked account agreement in such form as Silicon may

specify.  Silicon or its designee may,

at any time, notify Account Debtors that the Receivables have been assigned to

Silicon.

 

4.5.  Remittance of Proceeds.  All proceeds arising from the disposition

of any Collateral shall be delivered, in kind, by Borrower to Silicon in the

original form in which received by Borrower not later than the following

Business Day after receipt by Borrower, to be applied to the Obligations in

such order as Silicon shall determine; provided that, if no Default or Event of

Default has occurred, Borrower shall not be obligated to remit to Silicon the

proceeds of the sale of worn out or obsolete equipment disposed of by Borrower

in good faith in an arm’s length transaction for an aggregate purchase price of

$25,000 or less (for all such transactions in any fiscal year).  Borrower agrees that it will not commingle

proceeds of Collateral with any of Borrower’s other funds or property, but will

hold such proceeds separate and apart from such other funds and property and in

an express trust for Silicon.  Nothing

in this Section limits the restrictions on disposition of Collateral set forth

elsewhere in this Agreement.

 

4.6  Disputes.  Borrower shall notify Silicon promptly of all

disputes or claims relating to Receivables. 

Borrower shall not forgive (completely or partially), compromise or

settle any Receivable for less than payment in full, or agree to do any of the

foregoing, except that Borrower may do so, provided that: (i) Borrower does so

in good faith, in a commercially reasonable manner, in the ordinary course of

business, and in arm’s length transactions, which are reported to Silicon on

the regular reports provided to Silicon; (ii) no Default or Event of Default

has occurred and is continuing; and (iii) taking into account all such

discounts settlements and forgiveness, the total outstanding Loans will not

exceed the Credit Limit.  Silicon may,

at any time after the occurrence of an Event of Default, settle or adjust

disputes or claims directly with Account Debtors for amounts and upon terms

which Silicon considers advisable in its reasonable credit judgment and, in all

cases, Silicon shall credit Borrower’s Loan account with only the net amounts

received by Silicon in payment of any Receivables.

 

4.7  Returns.  Provided no Event of Default has occurred

and is continuing, if any Account Debtor returns any Inventory to Borrower in

the ordinary course of its business, Borrower shall promptly determine the

reason for such return and promptly issue a credit memorandum to the Account

Debtor in the appropriate amount (sending a copy to Silicon).  In the event any attempted return occurs

after the occurrence of any Event of Default, Borrower shall (i) hold the

returned Inventory in trust for Silicon, (ii) segregate all returned

Inventory from all of Borrower’s other property, (iii) conspicuously label

the returned Inventory as Silicon’s property, and (iv) immediately notify

Silicon of the return of any Inventory, specifying the reason for such return,

the location and condition of the returned Inventory, and on Silicon’s request

deliver such returned Inventory to Silicon.

 

4.8  Verification.  Silicon may, from time to time, verify

directly with the respective Account Debtors the validity, amount and other

matters relating to the Receivables, by means of mail, telephone or otherwise,

either in the name of Borrower or Silicon or such other name as Silicon may

choose.

 

4.9  No Liability.  Silicon shall not under any circumstances

be responsible or liable for any shortage or discrepancy in, damage to, or loss

or destruction of, any goods, the sale or other disposition of which gives rise

to a Receivable, or for any error, act, omission, or delay of any kind

occurring in the settlement, failure to settle, collection or failure to

collect any Receivable, or for settling any Receivable in good faith for less

than the full amount thereof, nor shall Silicon be deemed to be responsible for

any of Borrower’s obligations under any contract or agreement giving rise to a

Receivable.

 

4

 

Nothing herein shall, however,

relieve Silicon from liability for its own gross negligence or willful

misconduct.

 

5.     ADDITIONAL DUTIES OF BORROWER.

 

5.1  Financial and Other Covenants.  Borrower shall at all times comply with the

financial and other covenants set forth in the Schedule.

 

5.2  Insurance.  Borrower shall, at all times insure all of

the tangible personal property Collateral and carry such other business

insurance, with insurers reasonably acceptable to Silicon, in such form and

amounts as Silicon may reasonably require, and Borrower shall provide evidence

of such insurance to Silicon, so that Silicon is satisfied that such insurance

is, at all times, in full force and effect. 

All such insurance policies shall name Silicon as an additional loss

payee, and shall contain a lenders loss payee endorsement in form reasonably

acceptable to Silicon.  Upon receipt of

the proceeds of any such insurance, Silicon shall apply such proceeds in reduction

of the Obligations as Silicon shall determine in its sole discretion, except

that, provided no Default or Event of Default has occurred and is continuing,

Silicon shall release to Borrower insurance proceeds with respect to Equipment

totaling less than $100,000, which shall be utilized by Borrower for the

replacement of the Equipment with respect to which the insurance proceeds were

paid.  Silicon may require reasonable

assurance that the insurance proceeds so released will be so used.  If Borrower fails to provide or pay for any

insurance, Silicon may, but is not obligated to, obtain the same at Borrower’s

expense.  Borrower shall promptly

deliver to Silicon copies of all reports made to insurance companies.

 

5.3  Reports.  Borrower, at its expense, shall provide

Silicon with the written reports set forth in the Schedule, and such other

written reports with respect to Borrower (including budgets, sales projections,

operating plans and other financial documentation), as Silicon shall from time

to time reasonably specify.

 

5.4  Access to Collateral, Books and Records.  At reasonable times, and on one Business

Day’s notice, Silicon, or its agents, shall have the right to inspect the

Collateral, and the right to audit and copy Borrower’s books and records.  Silicon shall take reasonable steps to keep

confidential all information obtained in any such inspection or audit, but

Silicon shall have the right to disclose any such information to its auditors,

regulatory agencies, and attorneys, and pursuant to any subpoena or other legal

process.  The foregoing inspections and

audits shall be at Borrower’s expense and the charge therefor shall be $700 per

person per day (or such higher amount as shall represent Silicon’s then current

standard charge for the same), plus reasonable out of pocket expenses.  Borrower will not enter into any agreement

with any accounting firm, service bureau or third party to store Borrower’s

books or records at any location other than Borrower’s Address, without first

obtaining Silicon’s written consent, which may be conditioned upon such

accounting firm, service bureau or other third party agreeing to give Silicon

the same rights with respect to access to books and records and related rights

as Silicon has under  this Loan

Agreement.  Borrower waives the benefit

of any accountant-client privilege or other evidentiary privilege precluding or

limiting the disclosure, divulgence or delivery of any of its books and records

(except that Borrower does not waive any attorney-client privilege).

 

5.5  Negative Covenants.  Except as may be permitted in the Schedule,

Borrower shall not, without Silicon’s prior written consent, do any of the

following:  (i) merge or consolidate

with another corporation or entity; (ii) acquire any assets, except in the ordinary

course of business; (iii) enter into any other transaction outside the ordinary

course of business; (iv) sell or transfer any Collateral, except for the sale

of finished Inventory in the ordinary course of Borrower’s business, and except

for the sale of obsolete or unneeded Equipment in the ordinary course of

business; (v) store any Inventory or other Collateral with any warehouseman or

other third party; (vi) sell any Inventory on a sale-or-return, guaranteed

sale, consignment, or other contingent basis; (vii) make any loans of any money

or other assets; (viii) incur any debts, outside the ordinary course of

business, which would have a material, adverse effect on Borrower or on the

prospect of repayment of the Obligations; (ix) guarantee or otherwise become

liable with respect to the obligations of another party or entity; (x) pay or

declare any dividends on Borrower’s stock (except for dividends payable solely

in stock of Borrower); (xi) redeem, retire, purchase or otherwise acquire,

directly or indirectly, any of Borrower’s stock; (xii) make any change in

Borrower’s capital structure which would have a material adverse effect on

Borrower or on the prospect of repayment of the Obligations; or (xiii) pay

total compensation, including salaries, fees, bonuses, commissions, and all

other payments, whether directly or indirectly, in money or otherwise, to

Borrower’s executives, officers and directors (or any relative thereof) in an

amount in excess of the amount set forth on the Schedule; or (xiv) dissolve or

elect to dissolve.  Transactions

permitted by the foregoing provisions of this Section are only permitted if no

Default or Event of Default would occur as a result of such transaction.

 

5.6  Litigation Cooperation.  Should any third-party suit or proceeding be

instituted by or against Silicon with respect to any Collateral or in any

manner relating to Borrower, Borrower shall, without expense to Silicon, make

available Borrower and its officers, employees and agents and Borrower’s books

and records, to the extent that Silicon may deem them reasonably necessary in

order to prosecute or defend any such suit or proceeding.

 

5.7  Further Assurances.  Borrower agrees, at its expense, on request

by Silicon, to execute all documents and take all actions, as Silicon, may deem

reasonably necessary or useful in order to perfect and maintain Silicon’s

perfected security interest in the Collateral, and in order to 

 

5

 

fully consummate the

transactions contemplated by this Agreement.

 

6.     TERM.

 

6.1  Maturity Date.  This Agreement shall continue in effect

until the maturity date set forth on the Schedule (the “Maturity Date”),

subject to Section 6.3 below.

 

6.2  Early Termination.  This Agreement may be terminated prior to

the Maturity Date as follows:  (i) by

Borrower, effective three Business Days after written notice of termination is

given to Silicon; or (ii) by Silicon at any time after the occurrence of an

Event of Default, without notice, effective immediately.  If this Agreement is terminated by Borrower

or by Silicon under this Section 6.2, Borrower shall pay to Silicon a

termination fee in an amount equal to * of the Maximum Credit Limit, provided

that no termination fee shall be charged if the credit facility hereunder is

replaced with a new facility from another division of Silicon Valley Bank.  The termination fee shall be due and payable

on the effective date of termination and thereafter shall bear interest at a

rate equal to the highest rate applicable to any of the Obligations.

 

*one percent (1%)

 

6.3  Payment of Obligations.  On the Maturity Date or on any earlier

effective date of termination, Borrower shall pay and perform in full all

Obligations, whether evidenced by installment notes or otherwise, and whether

or not all or any part of such Obligations are otherwise then due and

payable.  Without limiting the

generality of the foregoing, if on the Maturity Date,  or on any earlier effective date of termination, there are any

outstanding Letters of Credit issued by Silicon or issued by another

institution based upon an application, guarantee, indemnity or similar

agreement on the part of Silicon, then on such date Borrower shall provide to

Silicon cash collateral in an amount equal to the face amount of all such

Letters of Credit plus all interest, fees and cost due or to become due in

connection therewith, to secure all of the Obligations relating to said Letters

of Credit, pursuant to Silicon’s then standard form cash pledge agreement.  Notwithstanding any termination of this

Agreement, all of Silicon’s security interests in all of the Collateral and all

of the terms and provisions of this Agreement shall continue in full force and

effect until all Obligations have been paid and performed in full; provided

that, without limiting the fact that Loans are subject to the discretion of

Silicon, Silicon may, in its sole discretion, refuse to make any further Loans

after termination.  No termination shall

in any way affect or impair any right or remedy of Silicon, nor shall any such

termination relieve Borrower of any Obligation to Silicon, until all of the

Obligations have been paid and performed in full.  Upon payment and performance in full of all the Obligations and

termination of this Agreement, Silicon shall promptly deliver to Borrower

termination statements, requests for reconveyances and such other documents as

may be required to fully terminate Silicon’s security interests.

 

7.     EVENTS OF DEFAULT AND REMEDIES.

 

7.1  Events of Default.  The 

occurrence of any of the following events shall constitute an “Event of

Default” under this Agreement, and Borrower shall give Silicon immediate

written notice thereof: (a) Any warranty, representation, statement, report or

certificate made or delivered to Silicon by Borrower or any of Borrower’s

officers, employees or agents, now or in the future, shall be untrue or

misleading in a material respect; or (b) Borrower shall fail to pay when due

any Loan or any interest thereon or any other monetary Obligation; or (c) the total

Loans and other Obligations outstanding at any time shall exceed the Credit

Limit; or (d) Borrower shall fail to comply with any of the financial covenants

set forth in the Schedule or shall fail to perform any other non-monetary

Obligation which by its nature cannot be cured; or (e) Borrower shall fail to

perform any other non-monetary Obligation, which failure is not cured within 5

Business Days after the date due; or (f) any levy, assessment, attachment,

seizure, lien or encumbrance (other than a Permitted Lien) is made on all or

any part of the Collateral which is not cured within 10 days after the

occurrence of the same; or (g) any default or event of default occurs under any

obligation secured by a Permitted Lien, which is not cured within any applicable

cure period or waived in writing by the holder of the Permitted Lien; or (h)

Borrower breaches any material contract or obligation, which has or may

reasonably be expected to have a material adverse effect on Borrower’s business

or financial condition; or (i) Dissolution, termination of existence,

insolvency or business failure of Borrower; or appointment of a receiver,

trustee or custodian, for all or any part of the property of, assignment for

the benefit of creditors by, or the commencement of any proceeding by Borrower

under any reorganization, bankruptcy, insolvency, arrangement, readjustment of

debt, dissolution or liquidation law or statute of any jurisdiction, now or in

the future in effect; or (j) the commencement of any proceeding against Borrower

or any guarantor of any of the Obligations under any reorganization,

bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or

liquidation law or statute of any jurisdiction, now or in the future in effect,

which is not cured by the dismissal thereof within 30 days after the date

commenced; or (k) revocation or termination of, or limitation or denial of

liability upon, any guaranty of the Obligations or any attempt to do any of the

foregoing, or commencement of proceedings by any guarantor of any of the

Obligations under any bankruptcy or insolvency law; or (l) revocation or

termination of, or limitation or denial of liability upon, any pledge of any

certificate of deposit, securities or other property or asset of any kind

pledged by any third party to secure any or all of the Obligations, or any

attempt to do any of the foregoing, or commencement of proceedings by or

against any such third party under any bankruptcy or insolvency law; or (m)

Borrower makes any payment on account of any indebtedness or obligation which

has been subordinated to the Obligations other than as permitted in the

applicable subordination agreement, or if any Person

 

6

 

who has subordinated such

indebtedness or obligations terminates or in any way limits his subordination

agreement; or (n) there shall be a change in the record or beneficial ownership

of an aggregate of more than 20% of the outstanding shares of stock of

Borrower, in one or more transactions, compared to the ownership of outstanding

shares of stock of Borrower in effect on the date hereof, without the prior

written consent of Silicon; or (o) Borrower shall generally not pay its debts

as they become due, or Borrower shall conceal, remove or transfer any part of

its property, with intent to hinder, delay or defraud its creditors, or make or

suffer any transfer of any of its property which may be fraudulent under any

bankruptcy, fraudulent conveyance or similar law; or (p) there shall be a

material adverse change in Borrower’s business or financial condition; or (q)

Silicon, acting in good faith and in a commercially reasonable manner, deems

itself insecure because of the occurrence of an event prior to the effective

date hereof of which Silicon had no knowledge on the effective date or because

of the occurrence of an event on or subsequent to the effective date.  Silicon may cease making any Loans hereunder

during any of the above cure periods, and thereafter if an Event of Default has

occurred.

 

7.2  Remedies.  Upon the occurrence of any Event of Default,

and at any time thereafter, Silicon, at its option, and without notice or

demand of any kind (all of which are hereby expressly waived by Borrower), may

do any one or more of the following: (a) Cease making Loans or otherwise

extending credit to Borrower under this Agreement or any other document or

agreement; (b) Accelerate and declare all or any part of the Obligations to be

immediately due, payable, and performable, notwithstanding any deferred or installment

payments allowed by any instrument evidencing or relating to any Obligation;

(c) Take possession of any or all of the Collateral wherever it may be found,

and for that purpose Borrower hereby authorizes Silicon without judicial

process to enter onto any of Borrower’s premises without interference to search

for, take possession of, keep, store, or remove any of the Collateral, and

remain on the premises or cause a custodian to remain on the premises in

exclusive control thereof, without charge for so long as Silicon deems it

reasonably necessary in order to complete the enforcement of its rights under

this Agreement or any other agreement; provided, however, that should Silicon

seek to take possesion of any of the Collateral by Court process, Borrower

hereby irrevocably waives: (i) any bond and any surety or security relating

thereto required by any statute, court rule or otherwise as an incident to such

possession; (ii) any demand for possession prior to the commencement of any

suit or action to recover possession thereof; and (iii) any requirement that

Silicon retain possession of, and not dispose of, any such Collateral until

after trial or final judgment; (d) Require Borrower to assemble any or all of

the Collateral and make it available to Silicon at places designated by Silicon

which are reasonably convenient to Silicon and Borrower, and to remove the

Collateral to such locations as Silicon may deem advisable; (e) Complete the

processing, manufacturing or repair of any Collateral prior to a disposition

thereof and, for such purpose and for the purpose of removal, Silicon shall

have the right to use Borrower’s premises, vehicles, hoists, lifts, cranes,

equipment and all other property without charge; (f) Sell, lease or otherwise

dispose of any of the Collateral, in its condition at the time Silicon obtains

possession of it or after further manufacturing, processing or repair, at one

or more public and/or private sales, in lots or in bulk, for cash, exchange or

other property, or on credit, and to adjourn any such sale from time to time

without notice other than oral announcement at the time scheduled for

sale.  Silicon shall have the right to

conduct such disposition on Borrower’s premises without charge, for such time

or times as Silicon deems reasonable, or on Silicon’s premises, or elsewhere

and the Collateral need not be located at the place of disposition.  Silicon may directly or through any

affiliated company purchase or lease any Collateral at any such public

disposition, and if permissible under applicable law, at any private

disposition.  Any sale or other

disposition of Collateral shall not relieve Borrower of any liability Borrower

may have if any Collateral is defective as to title or physical condition or

otherwise at the time of sale; (g) Demand payment of, and collect any

Receivables and General Intangibles comprising Collateral and, in connection

therewith, Borrower irrevocably authorizes Silicon to endorse or sign

Borrower’s name on all collections, receipts, instruments and other documents,

to take possession of and open mail addressed to Borrower and remove therefrom

payments made with respect to any item of the Collateral or proceeds thereof,

and, in Silicon’s sole discretion, to grant extensions of time to pay,

compromise claims and settle Receivables and the like for less than face value;

(h) Offset against any sums in any of Borrower’s general, special or other

Deposit Accounts with Silicon; and (i) Demand and receive possession of any of

Borrower’s federal and state income tax returns and the books and records

utilized in the preparation thereof or referring thereto.  All reasonable attorneys’ fees, expenses,

costs, liabilities and obligations incurred by Silicon with respect to the

foregoing shall be added to and become part of the Obligations, shall be due on

demand, and shall bear interest at a rate equal to the highest interest rate

applicable to any of the Obligations. 

Without limiting any of Silicon’s rights and remedies, from and after

the occurrence of any Event of Default, the interest rate applicable to the

Obligations shall be increased by an additional four percent per annum.

 

7.3  Standards for Determining Commercial

Reasonableness. 

Borrower and Silicon agree that a sale or other disposition

(collectively, “sale”) of any Collateral which complies with the following

standards will conclusively be deemed to be commercially reasonable:  (i) Notice of the sale is given to Borrower

at least seven days prior to the sale, and, in the case of a public sale,

notice of the sale is published at least seven days before the sale in a

newspaper of general circulation in the county where the

 

7

 

sale is to be conducted; (ii)

Notice of the sale describes the collateral in general, non-specific terms;

(iii) The sale is conducted at a place designated by Silicon, with or without

the Collateral being present; (iv) The sale commences at any time between 8:00

a.m. and 6:00 p.m;  (v) Payment of the

purchase price in cash or by cashier’s check or wire transfer is required; (vi)

With respect to any sale of any of the Collateral, Silicon may (but is not

obligated to) direct any prospective purchaser to ascertain directly from

Borrower any and all information concerning the same.  Silicon shall be free to employ other methods of noticing and

selling the Collateral, in its discretion, if they are commercially reasonable.

 

7.4  Power of Attorney.  Upon the occurrence of any Event of Default,

without limiting Silicon’s other rights and remedies, Borrower grants to

Silicon an irrevocable power of attorney coupled with an interest, authorizing

and permitting Silicon (acting through any of its employees, attorneys or

agents) at any time, at its option, but without obligation, with or without

notice to Borrower, and at Borrower’s expense, to do any or all of the

following, in Borrower’s name or otherwise, but Silicon agrees to exercise the

following powers in a commercially reasonable manner:  (a) Execute on behalf of Borrower any documents that Silicon may,

in its sole discretion, deem advisable in order to perfect and maintain

Silicon’s security interest in the Collateral, or in order to exercise a right

of Borrower or Silicon, or in order to fully consummate all the transactions

contemplated under this Agreement, and all other present and future agreements;

(b) Execute on behalf of Borrower any document exercising, transferring or

assigning any option to purchase, sell or otherwise dispose of or to lease (as

lessor or lessee) any real or personal property which is part of Silicon’s

Collateral or in which Silicon has an interest; (c) Execute on behalf of

Borrower, any invoices relating to any Receivable, any draft against any

Account Debtor and any notice to any Account Debtor, any proof of claim in

bankruptcy, any Notice of Lien, claim of mechanic’s, materialman’s or other

lien, or assignment or satisfaction of mechanic’s, materialman’s or other lien;

(d) Take control in any manner of any cash or non-cash items of payment or

proceeds of Collateral; endorse the name of Borrower upon any instruments, or

documents, evidence of payment or Collateral that may come into Silicon’s

possession; (e) Endorse all checks and other forms of remittances received by

Silicon; (f) Pay, contest or settle any lien, charge, encumbrance, security

interest and adverse claim in or to any of the Collateral, or any judgment

based thereon, or otherwise take any action to terminate or discharge the same;

(g) Grant extensions of time to pay, compromise claims and settle Receivables

and General Intangibles for less than face value and execute all releases and

other documents in connection therewith; (h) Pay any sums required on account

of Borrower’s taxes or to secure the release of any liens therefor, or both;

(i) Settle and adjust, and give releases of, any insurance claim that relates

to any of the Collateral and obtain payment therefor; (j) Instruct any third

party having custody or control of any books or records belonging to, or

relating to, Borrower to give Silicon the same rights of access and other

rights with respect thereto as Silicon has under this Agreement; and (k) Take

any action or pay any sum required of Borrower pursuant to this Agreement and

any other present or future agreements. 

Any and all reasonable sums paid and any and all reasonable costs,

expenses, liabilities, obligations and attorneys’ fees incurred by Silicon with

respect to the foregoing shall be added to and become part of the Obligations,

shall be payable on demand, and shall bear interest at a rate equal to the highest

interest rate applicable to any of the Obligations.  In no event shall Silicon’s rights under the foregoing power of

attorney or any of Silicon’s other rights under this Agreement be deemed to

indicate that Silicon is in control of the business, management or properties

of Borrower.

 

7.5  Application of Proceeds.  All proceeds realized as the result of any

sale of the Collateral shall be applied by Silicon first to the reasonable

costs, expenses, liabilities, obligations and attorneys’ fees incurred by

Silicon in the exercise of its rights under this Agreement, second to the

interest due upon any of the Obligations, and third to the principal of the

Obligations, in such order as Silicon shall determine in its sole discretion.  Any surplus shall be paid to Borrower or

other persons legally entitled thereto; Borrower shall remain liable to Silicon

for any deficiency.  If, Silicon, in its

sole discretion, directly or indirectly enters into a deferred payment or other

credit transaction with any purchaser at any sale of Collateral, Silicon shall

have the option, exercisable at any time, in its sole discretion, of either

reducing the Obligations by the principal amount of purchase price or deferring

the reduction of the Obligations until the actual receipt by Silicon of the

cash therefor.

 

7.6  Remedies Cumulative.  In addition to the rights and remedies set

forth in this Agreement, Silicon shall have all the other rights and remedies

accorded a secured party under the California Uniform Commercial Code and under

all other applicable laws, and under any other instrument or agreement now or

in the future entered into between Silicon and Borrower, and all of such rights

and remedies are cumulative and none is exclusive.  Exercise or partial exercise by Silicon of one or more of its

rights or remedies shall not be deemed an election, nor bar Silicon from

subsequent exercise or partial exercise of any other rights or remedies.  The failure or delay of Silicon to exercise

any rights or remedies shall not operate as a waiver thereof, but all rights

and remedies shall continue in full force and effect until all of the

Obligations have been fully paid and performed.

 

8.     DEFINITIONS.  As used in this Agreement, the

following terms have the following meanings:

 

“Account Debtor”

means the obligor on a Receivable.

 

“Affiliate”

means, with respect to any Person, a relative, partner, shareholder, director,

officer, or employee of such Person, or any parent or subsidiary of such

Person, or any 

 

8

 

Person controlling, controlled

by or under common control with such Person.

 

“Business

Day” means a day on which Silicon is open for business.

 

“Code”

means the Uniform Commercial Code as adopted and in effect in the State of

California from time to time.

 

“Collateral”

has the meaning set forth in Section 2.1 above.

 

“Default”

means any event which with notice or passage of time or both, would constitute

an Event of Default.

 

“Deposit

Account” has the meaning set forth in Section 9102(a) of the Code.

 

“Eligible

Inventory”  [NOT APPLICABLE].

 

“Eligible

Receivables” means Receivables arising in the ordinary course of Borrower’s

business from the sale of goods or rendition of services, which Silicon, in its

sole judgment, shall deem eligible for borrowing, based on such considerations

as Silicon may from time to time deem appropriate.  Without limiting the fact that the determination of which

Receivables are eligible for borrowing is a matter of Silicon’s discretion, the

following (the “Minimum Eligibility Requirements”) are the minimum

requirements for a Receivable to be  an

Eligible Receivable:  (i) the Receivable

must not be outstanding for more than 90 days from its invoice date, (ii) the

Receivable must not represent progress billings, or be due under a fulfillment

or requirements contract with the Account Debtor, (iii) the Receivable must not

be subject to any contingencies (including Receivables arising from sales on

consignment, guaranteed sale or other terms pursuant to which payment by the

Account Debtor may be conditional), (iv) the Receivable must not be owing from

an Account Debtor with whom Borrower has any dispute (whether or not relating

to the particular Receivable), (v) the Receivable must not be owing from an

Affiliate of Borrower, (vi) the Receivable must not be owing from an Account

Debtor which is subject to any insolvency or bankruptcy proceeding, or whose

financial condition is not acceptable to Silicon, or which, fails or goes out

of a material portion of its business, (vii) the Receivable must not be owing

from the United States or any department, agency or instrumentality thereof

(unless there has been compliance, to Silicon’s satisfaction, with the United

States Assignment of Claims Act), (viii) the Receivable must not be owing from

an Account Debtor located outside the United States or Canada (unless

pre-approved by Silicon in its discretion in writing, or backed by a letter of

credit satisfactory to Silicon, or FCIA insured satisfactory to Silicon),  (ix) the Receivable must not be owing from

an Account Debtor to whom Borrower is or may be liable for goods purchased from

such Account Debtor or otherwise. Receivables owing from one Account Debtor

will not be deemed Eligible Receivables to the extent they exceed 25% of the

total Receivables outstanding.  In

addition, if more than 50% of the Receivables owing from an Account Debtor are

outstanding more than 90  days from their invoice date (without

regard to unapplied credits) or are otherwise not eligible Receivables, then

all Receivables owing from that Account Debtor will be deemed ineligible for

borrowing.  Silicon may, from time to

time, in its discretion, revise the Minimum Eligibility Requirements, upon

written notice to Borrower.

 

“Equipment”

means all of Borrower’s present and hereafter acquired machinery, molds,

machine tools, motors, furniture, equipment, furnishings, fixtures, trade

fixtures, motor vehicles, tools, parts, dyes, jigs, goods and other tangible

personal property (other than Inventory) of every kind and description used in

Borrower’s operations or owned by Borrower and any interest in any of the

foregoing, and all attachments, accessories, accessions, replacements,

substitutions, additions or improvements to any of the foregoing, wherever

located.

 

“Event of

Default” means any of the events set forth in Section 7.1 of this

Agreement.

 

“General

Intangibles” means all general intangibles of Borrower, whether now owned

or hereafter created or acquired by Borrower, including, without limitation,

all choses in action, causes of action, corporate or other business records,

Deposit Accounts, inventions, designs, drawings, blueprints, patents, patent

applications, trademarks and the goodwill of the business symbolized thereby,

names, trade names, trade secrets, goodwill, copyrights, registrations,

licenses, franchises, customer lists, security 

and other deposits, rights in all litigation presently or hereafter

pending for any cause or claim (whether in contract, tort or otherwise), and

all judgments now or hereafter arising therefrom, all claims of Borrower

against Silicon, rights to purchase or sell real or personal property, rights

as a licensor or licensee of any kind, royalties, telephone numbers,

proprietary information, purchase orders, and all insurance policies and claims

(including without limitation life insurance, key man insurance, credit

insurance, liability insurance, property insurance and other insurance), tax

refunds and claims, computer programs, discs, tapes and tape files, claims

under guaranties, security interests or other security held by or granted to

Borrower, all rights to indemnification and all other intangible property of

every kind and nature (other than Receivables).

 

“Inventory”

means all of Borrower’s now owned and hereafter acquired goods, merchandise or

other personal property, wherever located, to be furnished under any contract

of service or held for sale or lease (including without limitation all raw

materials, work in process, finished goods and goods in transit), and all materials

and supplies of every kind, nature and description which are or might be used

or consumed in Borrower’s business or used in connection with the manufacture,

packing, shipping, advertising, selling or finishing of such goods, merchandise

or other personal property, and all warehouse

 

9

 

receipts, documents of title

and other documents representing any of the foregoing.

 

“Obligations”

means all present and future Loans, advances, debts, liabilities, obligations,

guaranties, covenants, duties and indebtedness at any time owing by Borrower to

Silicon, whether evidenced by this Agreement or any note or other instrument or

document, whether arising from an extension of credit, opening of a letter of

credit, banker’s acceptance, loan, guaranty, indemnification or otherwise,

whether direct or indirect (including, without limitation, those acquired by

assignment and any participation by Silicon in Borrower’s debts owing to

others), absolute or contingent, due or to become due, including, without

limitation, all interest, charges, expenses, fees, attorney’s fees, expert

witness fees, audit fees, letter of credit fees, collateral monitoring fees,

closing fees, facility fees, termination fees, minimum interest charges and any

other sums chargeable to Borrower under this Agreement or under any other

present or future instrument or agreement between Borrower and Silicon.

 

“Permitted

Liens” means the following:  (i)

purchase money security interests in specific items of Equipment; (ii) leases

of specific items of Equipment; (iii) liens for taxes not yet payable; (iv)

additional security interests and liens consented to in writing by Silicon,

which consent shall not be unreasonably withheld; (v) security interests being terminated

substantially concurrently with this Agreement; (vi) liens of materialmen,

mechanics, warehousemen, carriers, or other similar liens arising in the

ordinary course of business and securing obligations which are not delinquent;

(vii) liens incurred in connection with the extension, renewal or

refinancing of the indebtedness secured by liens of the type described above in

clauses (i) or (ii) above, provided that any extension, renewal or replacement

lien is limited to the property encumbered by the existing lien and the

principal amount of the indebtedness being extended, renewed or refinanced does

not increase; (viii) Liens in favor of customs and revenue authorities which

secure payment of customs duties in connection with the importation of goods.  Silicon will have the right to require, as a

condition to its consent under subparagraph (iv) above, that the holder of the

additional security interest or lien sign an intercreditor agreement on

Silicon’s then standard form, acknowledge that the security interest is

subordinate to the security interest in favor of Silicon, and agree not to take

any action to enforce its subordinate security interest so long as any

Obligations remain outstanding, and that Borrower agree that any uncured

default in any obligation secured by the subordinate security interest shall

also constitute an Event of Default under this Agreement.

 

“Person”

means any individual, sole proprietorship, partnership, joint venture, trust,

unincorporated organization, association, corporation, government, or any

agency or political division thereof, or any other entity.

 

“Receivables”

means all of Borrower’s now owned and hereafter acquired accounts (whether or

not earned by performance), letters of credit, contract rights, chattel paper,

instruments, securities, securities accounts, investment property, documents

and all other forms of obligations at any time owing to Borrower, all

guaranties and other security therefor, all merchandise returned to or

repossessed by Borrower, and all rights of stoppage in transit and all other

rights or remedies of an unpaid vendor, lienor or secured party.

 

“Reserves”

means, as of any date of determination, such amounts as Silicon may from time

to time establish and revise in good faith reducing the amount of Loans,

Letters of Credit and other financial accommodations which would otherwise be

available to Borrower under the lending formula(s) provided in the

Schedule:  (a) to reflect events,

conditions, contingencies or risks which, as determined by Silicon in good

faith, do or may affect (i) the Collateral or any other property which is

security for the Obligations or its value (including without limitation any

increase in delinquencies of Receivables), (ii) the assets, business or

prospects of Borrower or any Guarantor, or (iii) the security interests and

other rights of Silicon in the Collateral (including the enforceability,

perfection and priority thereof); or (b) to reflect Silicon’s good faith belief

that any collateral report or financial information furnished by or on behalf

of Borrower or any Guarantor to Silicon is or may have been incomplete,

inaccurate or misleading in any material respect; or (c) in respect of any

state of facts which Silicon determines in good faith constitutes an Event of

Default or may, with notice or passage of time or both, constitute an Event of

Default.

 

Other Terms. 

All accounting terms used in this Agreement, unless otherwise indicated,

shall have the meanings given to such terms in accordance with generally

accepted accounting principles, consistently applied.  All other terms contained in this Agreement, unless otherwise

indicated, shall have the meanings provided by the Code, to the extent such

terms are defined therein.

 

9.     GENERAL PROVISIONS.

 

9.1  Interest Computation.  In computing

interest on the Obligations, all checks, and other items of payment received by

Silicon (including proceeds of Receivables and payment of the Obligations in

full) shall be deemed applied by Silicon on account of the Obligations three

Business Days after receipt by Silicon of immediately available funds, and wire

transfers received by Silicon shall be applied on the date of receipt, provided

that, for purposes of the foregoing, all funds received after 12:00 Noon on any

day shall be deemed received on the next Business Day.  Silicon shall not, however, be required to

credit Borrower’s account for the amount of any item of payment which is

unsatisfactory to Silicon in its sole discretion, and Silicon may charge

Borrower’s loan account for the amount of any item of payment which is returned

to Silicon unpaid.

 

10

 

9.2  Application of Payments.  All payments

with respect to the Obligations may be applied, and in Silicon’s sole

discretion reversed and re-applied, to the Obligations, in such order and

manner as Silicon shall determine in its sole discretion.

 

9.3  Charges to Accounts.  Silicon may, in

its discretion, require that Borrower pay monetary Obligations in cash to

Silicon, or charge them to Borrower’s Loan account, in which event they will

bear interest at the same rate applicable to the Loans.  Silicon may also, in its discretion, charge

any monetary Obligations to Borrower’s Deposit Accounts maintained with

Silicon.

 

9.4  Monthly Accountings.  Silicon shall provide Borrower monthly with

an account of advances, charges, expenses and payments made pursuant to this

Agreement.  Such account shall be deemed

correct, accurate and binding on Borrower and an account stated (except for

reverses and reapplications of payments made and corrections of errors

discovered by Silicon), unless Borrower notifies Silicon in writing to the

contrary within thirty days after each account is rendered, describing the

nature of any alleged errors or admissions.

 

9.5  Notices.  All notices to be given under this Agreement

shall be in writing and shall be given either personally or by reputable

private delivery service or by regular first-class mail, or certified mail

return receipt requested, addressed to Silicon or Borrower at the addresses

shown in the heading to this Agreement, or at any other address designated in

writing by one party to the other party. 

Notices to Silicon shall be directed to the Commercial Finance Division,

to the attention of the Division Manager or the Division Credit Manager.  All notices shall be deemed to have been

given upon delivery in the case of notices personally delivered, or at the

expiration of one Business Day following delivery to the private delivery

service, or two Business Days following the deposit thereof in the United

States mail, with postage prepaid.

 

9.6  Severability.  Should any provision of this Agreement be

held by any court of competent jurisdiction to be void or unenforceable, such

defect shall not affect the remainder of this Agreement, which shall continue

in full force and effect.

 

9.7  Integration.  This Agreement and such other written

agreements, documents and instruments as may be executed in connection herewith

are the final, entire and complete agreement between Borrower and Silicon and

supersede all prior and contemporaneous negotiations and oral representations

and agreements, all of which are merged and integrated in this Agreement.  There are no oral understandings,

representations or agreements between the parties which are not set forth in

this Agreement or in other written agreements signed by the parties in

connection herewith.

 

9.8  Waivers.  The failure of Silicon at any time or times

to require Borrower to strictly comply with any of the provisions of this

Agreement or any other present or future agreement between Borrower and Silicon

shall not waive or diminish any right of Silicon later to demand and receive

strict compliance therewith.  Any waiver

of any default shall not waive or affect any other default, whether prior or

subsequent, and whether or not similar. 

None of the provisions of this Agreement or any other agreement now or

in the future executed by Borrower and delivered to Silicon shall be deemed to

have been waived by any act or knowledge of Silicon or its agents or employees,

but only by a specific written waiver signed by an authorized officer of

Silicon and delivered to Borrower. 

Borrower waives demand, protest, notice of protest and notice of default

or dishonor, notice of payment and nonpayment, release, compromise, settlement,

extension or renewal of any commercial paper, instrument, account, General

Intangible, document or guaranty at any time held by Silicon on which Borrower

is or may in any way be liable, and notice of any action taken by Silicon,

unless expressly required by this Agreement.

 

9.9  No Liability for Ordinary Negligence.  Neither Silicon, nor any of its directors,

officers, employees, agents, attorneys or any other Person affiliated with or

representing Silicon shall be liable for any claims, demands, losses or

damages, of any kind whatsoever, made, claimed, incurred or suffered by

Borrower or any other party through the ordinary negligence of Silicon, or any

of its directors, officers, employees, agents, attorneys or any other Person

affiliated with or representing Silicon, but nothing herein shall relieve

Silicon from liability for its own gross negligence or willful misconduct.

 

9.10  Amendment.  The terms and provisions of this Agreement

may not be waived or amended, except in a writing executed by Borrower and a

duly authorized officer of Silicon.

 

9.11  Time of Essence.  Time is of the essence in the performance by

Borrower of each and every obligation under this Agreement.

 

9.12  Attorneys Fees and Costs.  Borrower shall reimburse Silicon for all

reasonable attorneys’ fees and all filing, recording, search, title insurance,

appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,

or in connection with, or relating to this Agreement (whether or not a lawsuit

is filed), including, but not limited to, any reasonable attorneys’ fees and

costs Silicon incurs in order to do the following: prepare and negotiate this

Agreement and the documents relating to this Agreement; obtain legal advice in

connection with this Agreement or Borrower; enforce, or seek to enforce, any of

its rights; prosecute actions against, or defend actions by, Account Debtors;

commence, intervene in, or defend any action or proceeding; initiate any

complaint to be relieved of the automatic stay in bankruptcy; file or prosecute

any probate claim, bankruptcy claim, third-party claim, or other claim;

examine, audit, copy, and inspect any of the Collateral or any of Borrower’s

books and records; protect, obtain possession of, lease, dispose of, or

otherwise enforce Silicon’s security interest in, the Collateral; and otherwise

represent

 

11

 

Silicon in any litigation

relating to Borrower.  In satisfying

Borrower’s obligation hereunder to reimburse Silicon for attorneys fees,

Borrower may, for convenience, issue checks directly to Silicon’s attorneys,

Levy, Small & Lallas, but Borrower acknowledges and agrees that Levy, Small

& Lallas is representing only Silicon and not Borrower in connection with

this Agreement.  If either Silicon

or Borrower files any lawsuit against the other predicated on a breach of this

Agreement, the prevailing party in such action shall be entitled to recover its

reasonable costs and attorneys’ fees, including (but not limited to) reasonable

attorneys’ fees and costs incurred in the enforcement of, execution upon or

defense of any order, decree, award or judgment.  All attorneys’ fees and costs to which Silicon may be entitled pursuant

to this Paragraph shall immediately become part of Borrower’s Obligations,

shall be due on demand, and shall bear interest at a rate equal to the highest

interest rate applicable to any of the Obligations.

 

9.13  Benefit of Agreement.  The provisions of this Agreement shall be

binding upon and inure to the benefit of the respective successors, assigns,

heirs, beneficiaries and representatives of Borrower and Silicon; provided,

however, that Borrower may not assign or transfer any of its rights under this

Agreement without the prior written consent of Silicon, and any prohibited

assignment shall be void.  No consent by

Silicon to any assignment shall release Borrower from its liability for the

Obligations.

 

9.14  Joint and Several Liability.  If Borrower consists of more than one

Person, their liability shall be joint and several, and the compromise of any

claim with, or the release of, any Borrower shall not constitute a compromise

with, or a release of, any other Borrower.

 

9.15  Limitation of Actions.  Any claim or cause of action by

Borrower against Silicon, its directors, officers, employees, agents,

accountants or attorneys, based upon, arising from, or relating to this Loan

Agreement, or any other present or future document or agreement, or any other

transaction contemplated hereby or thereby or relating hereto or thereto, or

any other matter, cause or thing whatsoever, occurred, done, omitted or

suffered to be done by Silicon, its directors, officers, employees, agents,

accountants or attorneys, shall be barred unless asserted by Borrower by the

commencement of an action or proceeding in a court of competent jurisdiction by

the filing of a complaint within one year after the first act, occurrence or

omission upon which such claim or cause of action, or any part thereof, is

based, and the service of a summons and complaint on an officer of Silicon, or

on any other person authorized to accept service on behalf of Silicon, within

thirty (30) days thereafter.  Borrower

agrees that such one-year period is a reasonable and sufficient time for Borrower

to investigate and act upon any such claim or cause of action.  The one-year period provided herein shall

not be waived, tolled, or extended except by the written consent of Silicon in

its sole discretion.  This provision

shall survive any termination of this Loan Agreement or any other present or

future agreement.

 

9.16  Paragraph Headings; Construction.  Paragraph headings are only used in this

Agreement for convenience.  Borrower and

Silicon acknowledge that the headings may not describe completely the subject

matter of the applicable paragraph, and the headings shall not be used in any

manner to construe, limit, define or interpret any term or provision of this

Agreement.  The term “including”,

whenever used in this Agreement, shall mean “including (but not limited

to)”.  This Agreement has been fully

reviewed and negotiated between the parties and no uncertainty or ambiguity in

any term or provision of this Agreement shall be construed strictly against

Silicon or Borrower under any rule of construction or otherwise.

 

9.17  Governing Law; Jurisdiction; Venue.  This Agreement and all acts and transactions

hereunder and all rights and obligations of Silicon and Borrower shall be

governed by the laws of the State of California.  As a material part of the consideration to Silicon to enter into

this Agreement, Borrower (i) agrees that all actions and proceedings relating

directly or indirectly to this Agreement shall, at Silicon’s option, be

litigated in courts located within California, and that the exclusive venue

therefor shall be Santa Clara County; (ii) consents to the jurisdiction and

venue of any such court and consents to service of process in any such action

or proceeding by personal delivery or any other method permitted by law; and

(iii) waives any and all rights Borrower may have to object to the jurisdiction

of any such court, or to transfer or change the venue of any such action or

proceeding.

 

12

 

9.18  Mutual Waiver of Jury Trial.  BORROWER AND SILICON EACH HEREBY WAIVE THE

RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,

OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE

INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR

OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,

EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR

BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT

OR OTHERWISE.

 

	

  Borrower:

  
	

   

  	

   

  
	

   

  	

  NETWORK COMPUTING

  DEVICES, INC.

  
	

   

  	

   

  
	

   

  	

  By 

  	

  /s/ Rudolph Morin

  
	

   

  	

  President or Vice President

  
	

   

  	

   

  
	

   

  	

  By 

  	

  /s/ Michael Garner

  
	

   

  	

  Secretary or Ass’t Secretary

  
	

   

  	

   

  
	

  Silicon:

  
	

   

  	

   

  
	

   

  	

  SILICON VALLEY BANK

  
	

   

  	

   

  
	

   

  	

  By 

  	

  /s/ Milad Hanna

  
	

   

  	

  Title 

  	

    Senior Vice President

  
						

 

13

 

Silicon Valley Bank

 

Schedule to

 

Loan and Security

Agreement

 

	

  Borrower:

  	

   

  	

  Network Computing Devices, Inc.

  	

   

  
	

  Address:

  	

   

  	

  301 Ravendale Drive

  	

   

  
	

   

  	

   

  	

  Mountain View, California  94043 

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Date:

  	

   

  	

  October 29, 2001

  	

   

  

 

This Schedule forms an integral

part of the Loan and Security Agreement between Silicon Valley Bank and the

above-borrower of even date.

 

	

  1.  CREDIT LIMIT

  	

   

  	

   

  
	

   

  	

  (Section

  1.1):

  	

   

  	

  An amount

  not to exceed the lesser of:  (i) $5,000,000

  at any one time outstanding (the “Maximum Credit Limit”); or (ii) 60%

  of the amount of Borrower’s Eligible Receivables (as defined in Section 8

  above).

  
	

   

  	

   

  	

   

  
	

  Letter of Credit Sublimit

  	

   

  	

   

  
	

   

  	

  (Section

  1.5):

  	

   

  	

  $500,000.

  
	

   

  	

   

  	

   

  
	

  Foreign Exchange

  	

   

  	

   

  
	

  Contract Sublimit

  	

   

  	

  $500,000.

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Borrower may

  enter into foreign exchange forward contracts with Silicon, on its standard

  forms, under which Borrower commits to purchase from or sell to Silicon a set

  amount of foreign currency more than one business day after the contract date

  (the “FX Forward Contracts”); provided that (1) at the time the FX Forward

  Contract is entered into Borrower has Loans available to it under this

  Agreement in an amount at least equal to 10% of the amount of the FX Forward

  Contract; (2) the total FX Forward Contracts at any one time outstanding may

  not exceed 10 times the amount of the Foreign Exchange Contract Sublimit set

  forth above. Silicon shall have the right to withhold, from the Loans

  otherwise available to Borrower under this Agreement, a reserve (which shall

  be in addition to all other reserves) in an amount equal to 10% of the total

  FX Forward Contracts from time to time outstanding. Silicon may, in its

  discretion, terminate the FX Forward Contracts at any time that an Event

  of Default occurs and is continuing. Borrower shall execute all standard form

  applications and agreements of Silicon in connection with the FX Forward

  Contracts, and without limiting any of the terms of such 

  
					

 

 

	

   

  	

   

  	

  applications

  and agreements, Borrower shall pay all standard fees and charges of Silicon

  in connection with the FX Forward Contracts.

  

 

2. 

INTEREST.

 

	

  Interest Rate (Section 1.2):

  
	

   

  
	

   

  	

   

  	

  A rate equal

  to the “Prime Rate” in effect from time to time, plus 2% per annum.  Interest shall be calculated on the basis

  of a 360-day year for the actual number of days elapsed.  “Prime Rate” means the rate announced from

  time to time by Silicon as its “prime rate;” it is a base rate upon which

  other rates charged by Silicon are based, and it is not necessarily the best

  rate available at Silicon.  The

  interest rate applicable to the Obligations shall change on each date there

  is a change in the Prime Rate.

  
	

  Minimum Monthly

  	

   

  	

   

  
	

  Interest (Section

  1.2):

  	

   

  	

  None.

  

 

3.  FEES (Section 1.4):

 

	

  Loan Fee:

  	

   

  	

  $50,000,

  payable concurrently herewith.

  
	

   

  	

   

  	

   

  
	

  Collateral Monitoring

  Fee:

  	

   

  	

  
$1,000 per month, payable in arrears

  (prorated for any partial month at the beginning and at termination of this

  Agreement).

  
	

   

  	

   

  	

   

  
	

  Unused Line Fee:

  	

   

  	

  In the

  event, in any calendar month (or portion thereof at the beginning and end of

  the term hereof), the average daily principal balance of the Loans

  outstanding during the month is less than the amount of the Maximum Credit

  Limit, Borrower shall pay Silicon an unused line fee in an amount equal to

  0.25% per month on the difference between the amount of the Maximum Credit

  Limit and the average daily principal balance of the Loans outstanding during

  the month, which unused line fee shall be computed and paid monthly, in

  arrears, on the first day of the following month.

  

 

2

 

	

  4.  MATURITY DATE

  	

   

  	

   

  
	

   

  	

  (Section

  6.1):

  	

   

  	

  One year

  from the date of this Agreement.

  
	

   

  	

   

  	

   

  
				

 

	

  5.  FINANCIAL COVENANTS

  
	

   

  	

  (Section

  5.1):

  	

   

  	

  Borrower

  shall comply with each of the following covenant(s).  Compliance shall be determined as of the

  end of each month, except as otherwise specifically provided below:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Minimum Tangible

  Net Worth:

  	

   

  	

  
Borrower shall maintain a Tangible

  Net Worth of not less than the following amounts as of the end of each month

  during the following periods:

  

 

	

   

  	

   

  	

  Dates

  	

   

  	

  Tangible Net Worth

  
	

   

  	

   

  	

  October 1, 2001 to and

  including December 31, 2001

  	

   

  	

  $

  	

  4,500,000

  
	

   

  	

   

  	

  January 1, 2002 to and including June 30,

  2002

  	

   

  	

  $

  	

  4,000,000

  
	

   

  	

   

  	

  After June 30, 2002

  	

   

  	

  $

  	

  4,500,000

  

 

	

  Definitions.

  	

   

  	

  For purposes

  of the foregoing financial covenants, the following term shall have the

  following meaning:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  “Tangible

  Net Worth” shall mean the excess of total assets over total liabilities,

  determined in accordance with generally accepted accounting principles, with

  the following adjustments:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (A) there shall be excluded from assets:  (i) notes, accounts receivable and other obligations owing to

  Borrower from its officers or other Affiliates, and (ii) all assets which

  would be classified as intangible assets under generally accepted accounting

  principles, including without limitation goodwill, licenses, patents,

  trademarks, trade names, copyrights, capitalized software and organizational

  costs, licenses and franchises

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (B) there shall be excluded from liabilities:  all indebtedness which is subordinated to

  the Obligations under a subordination agreement in form specified by Silicon

  or by language in the instrument evidencing the indebtedness which is

  acceptable to Silicon in its discretion.

  

 

3

 

	

  6.  REPORTING.

  	

   

  	

   

  	

   

  
	

   

  	

  (Section 5.3):

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Borrower shall provide Silicon with the following:

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  1.

  	

  Monthly

  Receivable agings, aged by invoice date, within fifteen days after the end of

  each month.

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  2.

  	

  Monthly

  accounts payable agings, aged by invoice date, and outstanding or held check

  registers, if any, within fifteen days after the end of each month.

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  3.

  	

  Monthly

  reconciliations of Receivable agings (aged by invoice date), transaction

  reports, and general ledger, within fifteen days after the end of each month.

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  4.

  	

  Monthly

  perpetual inventory reports for the Inventory valued on a first-in, first-out

  basis at the lower of cost or market (in accordance with generally accepted

  accounting principles) or such other inventory reports as are reasonably

  requested by Silicon, all within fifteen days after the end of each month.

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  5.

  	

  Monthly

  unaudited financial statements, as soon as available, and in any event within

  thirty days after the end of each month.

  
	

   

  	

   

  	

  .

  	

   

  
	

   

  	

   

  	

  6.

  	

  Monthly

  Compliance Certificates, within thirty days after the end of each month, in

  such form as Silicon shall reasonably specify, signed by the Chief Financial

  Officer of Borrower, certifying that as of the end of such month Borrower was

  in full compliance with all of the terms and conditions of this Agreement,

  and setting forth calculations showing compliance with the financial

  covenants set forth in this Agreement and such other information as Silicon

  shall reasonably request, including, without limitation, a statement that at

  the end of such month there were no held checks.

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  7.

  	

  Quarterly

  unaudited financial statements, as soon as available, and in any event within

  forty-five days after the end of each fiscal quarter of Borrower.

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  8.

  	

  Annual operating

  budgets (including income statements, balance sheets and cash flow

  statements, by month) for the upcoming fiscal year of Borrower within thirty

  days prior to the end of each fiscal year of Borrower.

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  9.

  	

  Annual

  financial statements, as soon as available, and in any event within 120 days

  following the end of Borrower’s fiscal year, certified by independent

  certified public accountants acceptable to Silicon.

  
						

 

4

 

	

  7.  COMPENSATION

  	

   

  	

   

  
	

   

  	

  (Section 5.5):

  	

   

  	

  Without

  Silicon’s prior written consent, Borrower shall not pay total compensation,

  including salaries, withdrawals, fees, bonuses, commissions, drawing accounts

  and other payments, whether directly or indirectly, in money or otherwise,

  during any fiscal year to all of Borrower’s executives, officers and

  directors (or any relative thereof) as a group in excess of 115% of the total

  amount thereof in the prior fiscal year.

  
				

 

8. 

BORROWER INFORMATION:

 

	

  Prior Names of

  Borrower

  	

   

  	

   

  
	

  (Section 3.2):

  	

   

  	

  As set forth

  in the Borrower’s Representations and Warranties dated August 13, 2001.

  
	

   

  	

   

  	

   

  
	

  Prior Trade

  Names of Borrower
(Section 3.2):

  	

   

  	

  

  
As set forth in the Borrower’s

  Representations and Warranties dated August 13, 2001.

  
	

   

  	

   

  	

   

  
	

  Existing Trade

  Names of Borrower
(Section 3.2):

  	

   

  	

  

  
As set forth in the Borrower’s

  Representations and Warranties dated August 13, 2001.

  
	

   

  	

   

  	

   

  
	

  Other Locations  and

  Addresses (Section 3.3):

  	

   

  	

  
As set forth in the Borrower’s

  Representations and Warranties dated August 13, 2001.

  
	

   

  	

   

  	

   

  
	

  Material Adverse

  	

   

  	

   

  
	

  Litigation

  (Section 3.10):

  	

   

  	

  None

  

 

	

  9.  OTHER COVENANTS

  	

   

  	

   

  
	

  (Section 5.1):

  	

  Borrower shall at all times comply with all of the following

  additional covenants:

  
	

   

  	

   

  	

   

  
	

   

  	

  (1)

  	

  Banking Relationship.  Borrower shall at

  all times maintain its exclusive banking relationship with Silicon. Without

  limiting the generality of the foregoing, Borrower shall, within 10 Business

  Days after the date hereof, and, at all times during the term of this

  Agreement, maintain 100% of its total cash and investments on deposit with Silicon.

  
	

   

  	

   

  	

   

  
	

   

  	

  (2)

  	

  Subordination of Inside Debt.  All present and future indebtedness of

  Borrower to its officers, directors and 

  
				

 

5

 

	

   

  	

   

  	

  shareholders (“Inside Debt”) shall, at all

  times, be subordinated to the Obligations pursuant to a subordination

  agreement on Silicon’s standard form. 

  Borrower represents and warrants that there is no Inside Debt

  presently outstanding.  Prior to incurring

  any Inside Debt in the future, Borrower shall cause the person to whom such

  Inside Debt will be owed to execute and deliver to Silicon a subordination

  agreement on Silicon’s standard form.

  
	

   

  	

   

  	

   

  
	

   

  	

  (3)

  	

  Warrants. 

  Concurrently, Borrower shall issue to Silicon

  five-year warrants to purchase 650,000 shares of the common stock of Borrower

  (the “Warrants”) at $0.50 per share.

  
	

   

  	

   

  	

   

  
	

   

  	

  (4)

  	

  Copyright Filings.

  Concurrently, Borrower is executing and delivering to Silicon an Intellectual

  Property Security Agreement between Borrower and Silicon (the “Intellectual

  Property Agreement”).  Within 30 days

  after the date hereof, Borrower shall (i) cause all of its computer software,

  the licensing of which results in Receivables, to be registered with the

  United States Copyright Office, (ii) cause the Intellectual Property

  Agreement to be supplemented to cover such registered software and cause such

  supplement to be recorded in the United States Copyright Office, and (iii)

  provide evidence of such recordation to Silicon.

  
	

   

  	

   

  	

   

  
	

   

  	

  (5)

  	

  Subsidiary. Borrower

  represents and warrants that its wholly-owned subsidiary, NCD Graphic

  Software Corporation, is and will continue to be a shell corporation without

  assets, and that it has been dissolved or will be dissolved within 60 days

  after the date hereof

  
	

   

  	

   

  	

   

  
	

   

  	

  (6)

  	

  Conditions Precedent.  Prior to the first disbursement of the

  Loans, Borrower shall comply with the following conditions precedent:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (a)

  	

  Subordination.  SCI Technology, Inc. shall execute and

  deliver to Silicon a Subordination Agreement on Silicon’s standard form,

  subordinating the following (the “Subordinated Debt”) to the Obligations: (i)

  indebtedness evidenced by that certain Amended and Restated Convertible

  Promissory Note made by Borrower to SCI Technology, Inc., dated August 31,

  2001 in the original principal amount of $3,300,000 and having an unpaid

  principal balance of $3,300,000; and (ii) indebtedness evidenced by that

  certain Promissory Note made by Borrower to SCI Technology, Inc., dated

  October 17, 2001 in the original principal amount of $1,000,000 and having an

  unpaid principal balance of $1,000,000.

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (b)

  	

  Equity.  Borrower shall receive cash proceeds of

  the issuance of new equity securities of Borrower, after October 1, 2001, of

  not less than $2,000,000 and shall 

  

 

6

 

	

   

  	

   

  	

   

  	

  provide evidence of the same to Silicon

  which is reasonably satisfactory to Silicon.

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (c)

  	

  Foreign Credit Insurance.  Borrower shall obtain foreign credit

  insurance in form and amount satisfactory to Silicon in its good faith

  business judgement

  

 

	

  Borrower:

  	

  Silicon:

  	

   

  
	

   

  	

   

  	

   

  
	 
	

  NETWORK COMPUTING DEVICES, INC.

  	

  SILICON VALLEY BANK

  	

   

  	 

	 
	

   

  	

   

  	

   

  	 

	 
	

  By

  	

  /s/ Rudolph Morin

  	

   

  	

  By

  	

  /s/ Milad Hanna

  	

   

  	 

	 
	

  President or Vice President

  	

  Title

  	

  Senior Vice President

  	

   

  	 

	 
	

   

  	

   

  	

   

  	 

	 
	

   

  	

   

  	

   

  	 

	 
	

  By

  	

  /s/ Michael Garner

  	

   

  	

   

  	

   

  	 

	 
	

  Secretary or Ass’t Secretary

  	

   

  	

   

  	 

													

 

7

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00038-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00038-of-00352.parquet"}]]