Document:

EXHIBIT 10.1

 

Silicon Valley Bank

 

Loan and
Security Agreement

 

	
  Borrower:

  	
   

  	
  SATCON
  TECHNOLOGY CORPORATION

  
	
   

  	
   

  	
  SATCON
  POWER SYSTEMS, INC.

  
	
   

  	
   

  	
  SATCON
  ELECTRONICS, INC.

  
	
   

  	
   

  	
  SATCON
  APPLIED TECHNOLOGY, INC.

  
	
   

  	
   

  	
  SATCON
  POWER SYSTEMS CANADA LTD.

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  27
  Drydock Avenue

  
	
   

  	
   

  	
  Boston,
  Massachusetts 02210

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  January
  28, 2005

  

 

This
LOAN AND SECURITY AGREEMENT is entered into on the above date between SILICON
VALLEY BANK, a California-chartered bank, with its principal place of business
at 3003 Tasman Drive, Santa Clara, California 
95054 and with a loan production office located at One Newton Executive
Park, Suite 200, 2221 Washington Street, Newton, Massachusetts 02462 (“Silicon”)
and the borrowers named above (jointly and severally the “Borrower”), with offices
located at the above address (“Borrower’s Address”).  The Schedule and Exhibits to this Agreement
(the “Schedule” and the “Exhibits,” respectively) shall for all purposes be
deemed to be part of this Agreement, and the same are integral parts of this
Agreement.  (Definitions of certain terms
used in this Agreement are set forth in Section 8 below.)

 

RECITALS

 

Each of the entities comprising the Borrower wishes to
obtain credit from time to time from Silicon, and Silicon desires to extend
credit to each and/or any one of the entities comprising the Borrower.  This Agreement sets forth the terms on which
Silicon will advance credit to Borrower, and Borrower, jointly and several,
will repay the amounts owing to Silicon.

 

1.             LOANS.

 

1.1          Loans.  Silicon will make loans to Borrower (the “Loans”)
­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, upon notice to Borrower.  Amounts borrowed may be repaid and reborrowed
during the term of this Agreement.

 

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.

 

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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 two percent (2%)
per annum.

 

1.4          Fees. 
Borrower shall pay Silicon the fees shown on the Schedule, which are in
addition to all interest and other sums payable to Silicon and are not
refundable.

 

1.5          Loan
Requests.  To obtain a Loan, Borrower shall make a
request to Silicon by facsimile or telephone. 
Loan requests received after 12:00 Noon will not be considered by
Silicon until the next Business Day. 
Silicon may rely on any telephone request for a Loan given by a person
whom Silicon believes is an authorized representative of Borrower, and Borrower
will indemnify Silicon for any loss Silicon suffers as a result of that
reliance.  In the event Borrower has
elected to be on “non-borrowing reporting status” (see Section 6 of the
Schedule), Borrower shall furnish Silicon with a Loan request at least thirty
(30) days prior to the requested funding date.

 

1.6          Letters of
Credit.  At the request of Borrower, Silicon may, in
its commercially reasonable 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 commercially reasonable 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 commercially reasonable 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, excluding gross negligence or willful
misconduct by Silicon.  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.

 

1.7          Foreign
Exchange Sublimit. Borrower may use up to the amount set forth on the Schedule for
foreign exchange forward contracts with Silicon 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 Contract”).  Silicon shall subtract 10% of each outstanding
FX Forward Contract from the foreign exchange sublimit.   Silicon may terminate the FX Forward
Contracts if an Event of Default occurs.

 

1.8          Cash
Management Services Sublimit.  Borrower may
use up to the amount set forth on the Schedule for Cash Management
Services.  Such aggregate amounts
utilized under the Cash Management Services Sublimit shall at all times reduce
the amount otherwise available for Loans hereunder.  Any amounts Silicon pays on behalf 

 

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of Borrower or any amounts that are not paid by Borrower for any Cash
Management Services will be treated as Loans hereunder and will accrue interest
at the interest rate applicable to Loans.

 

1.9          Designation
of Agent.  Each Borrower hereby designates SatCon
Technology Corporation (the”Agent”) as the agent of that Borrower to discharge
the duties and responsibilities of the Agent as provided herein.

 

1.10        Operation
of Agreement.
(a) Except as otherwise permitted by Silicon, loans hereunder shall be re­quested
solely by the Agent as agent for each Borrower.

 

(b)           Any
Loan which may be made by Silicon under this Agreement and which is directed to
the Agent is received by the Agent in trust for that Borrower who is intended
to receive such Loan. The Agent shall distribute the proceeds of any such Loan
solely to that Borrower.  Each Borrower
shall be directly indebted to Silicon for each Loan distributed to any Borrower
by the Agent, together with all accrued interest thereon, as if that amount had
been advanced directly by Silicon to a Borrower (whether or not the subject
Loan was based upon the accounts and/or inventory or other assets of the
Borrower which actually received such distribution), in addition to which each
Borrow­er shall be liable to Silicon for all Obligations under this Agreement,
whether or not the proceeds of the Loan are distributed to any particular
Borrower.

 

(c)           Silicon
shall have no responsibility to inquire as to the distribution of Loans made by
Silicon through the Agent as described herein.

 

1.11                        Loans
Directly to Borrower.  (a) If, for any reason, and at
any time during the term of this Agreement,

 

(i)            any Borrower, including the Agent,
as agent for each Borrower, shall be unable to, or prohib­ited from carrying
out the terms and conditions of this Agreement (as deter­mined by Silicon in
Silicon’s sole and absolute discretion); or

 

(ii)           Silicon deems it inexpedient (in
Silicon’s sole and absolute discretion) to continue making Loans to or for the
account of any particular Borrower, or to channel such loans and Loans through
the Agent, then Silicon may make Loans directly to such Borrower as Silicon
determines to be expedient, which Loans may be made without regard to the
procedures otherwise included in this Article 1.

 

(b)           In the event that Silicon determines
to forgo the procedures included herein pursuant to which Loans are to be
channeled through the Agent, then Silicon may designate one or more Borrower to
fulfill the financial and other reporting requirements otherwise imposed herein
upon the Agent.

 

(c)           Each Borrower shall remain liable to
Silicon for the payment and performance of all Obligations (which payment and
perfor­mance shall continue to be secured by all Collateral) notwithstanding
any determination by Silicon to cease making Loans to or for the benefit of any
Borrow­er.

 

1.12                        Continuation
of Authority of Agent.  The authority of the Agent to
request Loans on behalf of, and to bind, each Borrower, shall continue unless
and until Silicon acts as provided in Section 1.8, above, or Silicon actually
receives:

 

(a)           written notice of: (i) the termina­tion
of such authority, and (ii) the subsequent appointment of a successor Agent,
which notice is executed by the respective Presidents of each Borrower (other
than the President of the Agent being replaced) then eligible for borrowing
under this Agreement; and

 

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(b)           written notice from the successor
Agent (i) accept­ing such appointment; (ii) acknowledging that the removal and
appoint­ment has been effected by the respective Presidents of each Borrower
eligible for borrowing under the within Agreement; and (iii) acknowledging that
from and after the date of appointment, the newly appointed Agent shall be
bound by the terms hereof, and that as used herein, the term “Agent” shall mean
and include the newly appointed Agent.

 

1.13        Indemnification. 
The Agent and each Borrower respectively shall indem­nify, defend, and
save and hold Silicon harmless from and against any liabilities, claims, demands,
expenses, or losses made against or suffered by Silicon on account of, or
arising out of, this Agreement, Silicon’s reliance upon Loan requests made by
the Agent, or any other action taken by Silicon hereunder or under any of
Silicon’s various agreements with the Agent and/or any Borrower and/or any
other person arising under this Agreement.

 

2.  SECURITY INTEREST.

 

2.1          Security
Interest.  To secure the payment and performance of
all of the Obligations when due, and the performance of each of the Borrower’s
duties under this Agreement and all documents executed in connection herewith,
Borrower hereby grants to Silicon a continuing security interest in all of
Borrower’s interest in the following, whether now owned or hereafter acquired,
and wherever located:  All Inventory,
Equipment, Payment Intangibles, Letter-of-Credit Rights, Supporting
Obligations, Receivables, and General Intangibles, including, without
limitation, all of Borrower’s Intellectual Property, 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”).  The security interest granted herein shall be
a first priority security interest in the Collateral.  After the occurrence of a Default, Silicon
may place a “hold” on any Deposit Account pledged as collateral.  Borrower is not a party to, nor is bound by,
any license or other agreement with respect to which the Borrower is the
licensee that prohibits or otherwise restricts Borrower from granting a
security interest in Borrower’s interest in such license or agreement or any
other property.  Without prior consent
from Silicon, Borrower shall not enter into, or become bound by, any such
license or agreement which is reasonably likely to have a material impact on
Borrower’s business or financial condition. 
Borrower shall take such steps as Silicon requests to obtain the consent
of, or waiver by, any person whose consent or waiver is necessary for all such
licenses or contract rights to be deemed “Collateral” and for Silicon to have a
security interest in it that might otherwise be restricted or prohibited by law
or by the terms of any such license or agreement, whether now existing or
entered into in the future.

 

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), (iii) do not violate Borrower’s
articles or certificate of incorporation, 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 

 

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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 during the past
five (5) years.  Borrower shall give
Silicon 30 days’ prior written notice before changing its name or doing
business under any other name.  The
Borrower will be deemed to be in compliance with this provision by furnishing
Silicon with notice of acquiring any new trade name within fifteen (15) days
after such acquisition provided that prior notice, as otherwise required
hereunder, was prohibited by a confidentiality agreement to which the Borrower
is a party. 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’s places
of business and Collateral are 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, changing its state of formation
or moving any of the Collateral to a location other than Borrower’s Address or
one of the locations set forth on the Schedule, except for the movement of
goods in the ordinary course of business. 
The Borrower will be deemed to be in compliance with this provision by
furnishing Silicon with notice of a new location where Collateral may be
located within fifteen (15) days after establishing such location provided that
prior notice, as otherwise required hereunder, was prohibited by a
confidentiality agreement to which the Borrower is a party.

 

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 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, 

 

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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) takes all
reasonable 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.  Except as disclosed in the Schedule, 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 $100,000 or more, or involving
$200,000  or more in the aggregate.

 

3.11        Use of
Proceeds.  All proceeds of all Loans shall be used
solely for working capital 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.”

 

3.12        Withholding
for SatCon Power Systems Canada Ltd. In the event any payments are received by Silicon from
SatCon Power Systems Canada Ltd. (the “Cdn Borrower”) hereunder such payments
will be made subject to applicable withholding for any taxes, levies, fees,
deductions, withholding, restrictions or conditions of any nature
whatsoever.  Specifically, if at any time
any governmental authority, applicable law, regulation or international
agreement requires the Cdn Borrower to make any such withholding or deduction
from any such  payment or other sum
payment hereunder to Silicon, the Cdn Borrower hereby covenants and agrees that
the amount due from the Cdn Borrower with respect to such payment or other sum
payable hereunder will be increased to the extent necessary to ensure that,
after the making of such required withholding or deduction, Silicon receives a
net sum equal to the sum which it would have received had no withholding or
deduction been required and the Cdn Borrower shall pay the full amount withheld
or deducted to the relevant governmental authority.  The Cdn Borrower will, upon request, furnish
Silicon with proof satisfactory to Silicon indicating that the Cdn Borrower has
made such withholding payment provided, however, that the Cdn Borrower need not
make any withholding payment if the amount or validity of such withholding
payment is contested in good faith by appropriate and timely proceedings 

 

6

 

and as to which payment in full is bonded or reserved against by the
Cdn Borrower.  The agreements and
obligations of the Cdn Borrower contained in this Section shall survive the
Maturity Date.

 

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 loan requests (including, without limitation, a statement setting forth the
intended use of each requested Loan), 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.  In the event
Borrower has elected to be on “non-borrowing reporting status” (see
Section 6 of the Schedule), Borrower shall furnish Silicon with a Loan request
at least thirty (30) days prior to the requested funding date.  Otherwise, 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, at Silicon’s
request, furnish Silicon with copies or 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 endorsements, 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 cause the Account Debtors to remit all Receivables to Silicon and Silicon
shall hold all payments on, and proceeds of, Receivables in a lockbox account,
or such other “blocked account” as Silicon may specify, pursuant to a blocked account
agreement in such form as Silicon may reasonably specify.  All such payments on, and proceeds of,
Receivables shall be applied to the Obligations in such order as Silicon shall
determine.  ­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 

 

7

 

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 $50,000 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 4.5 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.  Nothing herein shall, however,
relieve Silicon from liability for its own gross negligence or willful
misconduct.

 

 

5.  ADDITIONAL DUTIES OF THE 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 

 

8

 

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. 
Silicon acknowledges that Borrower is a publicly traded company and that
federal and state law restricts the disclosure and use of certain material,
non-public information regarding the Borrower’s finances.  The foregoing inspections and audits shall be
at Borrower’s expense and the charge therefor shall be $750 per person per day
(or such higher amount as shall repre­sent 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) except as shown on the Schedule, 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; (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) dissolve or elect to dissolve.  Transactions permitted by the foregoing
provisions of this Section 5.5 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, provided, however,
that such cooperation by Borrower shall not be construed as a waiver of its
attorney-client privilege.

 

9

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 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 6.2 below.

 

6.2          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 105% 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 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 written termination of this Agreement by
Silicon, 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 ­, including, without
limitation, the service of process upon Silicon seeking to attach by trustee,
mesne, or other process, Borrower’s funds on deposit with, or assets of the
Borrower in the possession of, Silicon in an amount in excess of $200,000; 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, 

 

10

 

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 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 35% 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 (i) a
material impairment in the perfection or priority of Silicon’s security
interest in the Collateral or in the value of such Collateral; (ii) a material
adverse change in the business, operations, or condition (financial or
otherwise) of the Borrower; (iii) a material impairment of the prospect of
repayment of any portion of the Obligations; or (iv) Silicon determines, based
upon information available to it and in its reasonable judgment, that there is
significant likelihood that Borrower shall fail to comply with one or more of
the financial covenants in Section 5.1 during the next succeeding financial
reporting period; or (q) Silicon, acting in good faith and in a commercially
reasonable manner, deems itself inse­cure because of the occurrence of a
materially adverse 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; or (r) Borrower shall breach any term
of the IP Security Agreement.  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 which has not been timely
cured, 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 posses­sion 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 

 

11

 

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 (4%) 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 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 limited 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 (upon commercially reasonable terms) 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, 

 

12

 

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. 
The irrevocable limited power of attorney shall cease if and when the
Event of Default is cured by Borrower and Silicon is reimbursed all reasonable
costs occasioned by the Event of Default.

 

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 Massachusetts 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 Person controlling, controlled by or under common control with
such Person.

 

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

 

“Cash
Management Services” means Silicon’s cash management services, direct
deposit of payroll, business credit card, and check cashing services as may be
further identified in the various cash management services agreements related
to such Cash Management Services.

 

13

 

“Code”
means the Uniform Commercial Code as adopted and in effect in the Commonwealth
of Massachusetts 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 9-102 of the Code.

 

“Eligible
Inventory” means Borrower’s  raw
materials, finished goods and work in process arising in the ordinary course of
Borrower’s business, which Silicon, in its sole judgment, shall deem eligible
for borrowing, based on such considerations as Silicon may from time to time
deem appropriate; provided, however, Eligible Inventory does not include, in
any event, (i) used, returned, obsolete, consigned, demonstrative or custom
Inventory or supplies, or (ii) any raw materials, finished goods or work in
process not subject to a first perfected security interest in favor of Silicon,
or (iii) any of Borrower’s raw materials, finished goods or work in process not
in Borrower’s possession.

 

“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, except as
may otherwise be acceptable to Silicon in its discretion), (iv) the Receivable
must not be owing from an Account Debtor with whom the 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), and (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 the 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.

 

14

 

“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, rights to payment for credit extended, amounts due to Borrower, credit
memoranda in favor of Borrower, warranty claims, causes of action, corporate or
other busi­ness records, deposits, 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).

 

“Intellectual
Property” is the Intellectual Property Collateral, as defined in the IP
Security Agreement.

 

“IP Security
Agreement” means that certain Intellectual Property Security Agreement
dated as of the date hereof by and between Silicon and Borrower.

 

“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 owned by
Borrower and are intended for use or are 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 receipts, docu­ments of title and other documents
representing any of the foregoing.

 

“Letter-of-Credit
Rights” means all letter-of-credit rights including, without limitation, “letter-of-credit
rights” as defined in the Code and also any right to payment or performance
under a letter of credit, whether or not the beneficiary has demanded or is at
the time entitled to demand payment or performance.

 

“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, including, without limitation, the 
Borrower’s obligations pursuant to the IP Security Agreement, whether
aris­ing from an extension of credit, opening of a letter of credit, banker’s
acceptance, FX Forward Contracts, loan, Cash Management Services, 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 Handling Fees, closing fees, facility fees, Cancellation 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.

 

“Payment”
means all checks, wire transfers and other items of payment received by Silicon
(including proceeds of Accounts and payment of the Obligations in full) for
credit to Borrower’s outstanding Loans or, if the balance of the Loans have
been reduced to zero, for credit to its Deposit Accounts.

 

15

 

“Payment
Intangibles” means all payment intangibles including, without limitation, “payment
intangibles” as defined in the Code and also any general intangible under which
the Account Debtor’s primary obligation is a monetary obligation.

 

“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; and (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 sub­section (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), accounts receivable, health-care insurance
receivables, rights to payment, 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 in any material respect (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.

 

“Supporting
Obligations” means all supporting obligations including, without
limitation, “supporting obligations” as defined in the Code and also any
letter-of-credit right or secondary obligations which supports the payment or
performance of an account, chattel paper, a document, a general intangible, an
instrument, or investment property.

 

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 

 

16

 

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; Float Charge.  In computing
interest on the Obligations, all Payments received after 12:00 Noon on any day
shall be deemed received on the next Business Day.  In addition, at any time that Loans are
outstanding Silicon shall be entitled to charge Borrower a “float” charge in an
amount equal to three Business Days interest, at the interest rate applicable
to the Loans, on all Payments received by Silicon.  Said float charge is not included in interest
for purposes of computing Minimum Monthly Interest (if any) under this
Agreement.  The float charge for each
month shall be payable on the last day of the month.  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 good faith business judgment, and Silicon may
charge Borrower’s loan account for the amount of any item of payment which is
returned to Silicon unpaid.

 

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 omissions.

 

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.

 

17

 

                9.8          Waivers; Indemnity.  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.  Borrower
hereby agrees to indemnify Silicon and its affiliates, subsidiaries, parent,
directors, officers, employees, agents, and attorneys, and to hold them
harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, costs and expenses (including
reasonable attorneys’ fees), of every kind, which they may sustain or incur
based upon or arising out of any of the Obligations, or any relationship or
agreement between Silicon and Borrower, or any other matter, relating to
Borrower or the Obligations; provided, that this indemnity shall not extend to
damages proximately caused by the indemnitee’s own gross negligence or willful
misconduct.  Notwithstanding any
provision in this Agreement to the contrary, the indemnity agreement set forth
in this Section shall survive any termination of this Agreement and shall for
all purposes continue in full force and effect for a period up to the statute
of limitations for any actions that arise or could arise under the indemnity.

 

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 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, Riemer & Braunstein, LLP, but
Borrower acknowledges and agrees that Riemer & Braunstein, LLP 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, Silicon
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 

 

18

 

Silicon may be
entitled pursuant to this Section 9.12 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        Right of
Set-Off.   Borrower and any guarantor hereby grant to
Silicon, a lien, security interest and right of setoff as security for all
Obligations to Silicon, whether now existing or hereafter arising upon and
against all deposits, credits, collateral and property, now or hereafter in the
possession, custody, safekeeping or control of Silicon or any entity under the
control of Silicon Valley Bank or in transit to any of them.  At any time after the occurrence and during
the continuance of an Event of Default, without demand or notice, Silicon may
set off the same or any part thereof and apply the same to any liability or
obligation of Borrower and any guarantor even though unmatured and regardless
of the adequacy of any other collateral securing the loan.  ANY AND ALL RIGHTS TO REQUIRE SILICON TO
EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR, ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

9.15.       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.

 

9.16        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 Borrower’s knowledge of 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.

 

9.17        Section
Headings; Construction.  Section
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
section, 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.

 

9.18        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 Commonwealth of
Massachusetts.  As a ma­terial part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees 

 

19

 

that all actions
and pro­ceedings relating directly or indirectly to this Agreement shall, at
Silicon’s option, be litigated in state or federal courts located within
Massachusetts; (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, provided,
however, that if for any reason Silicon cannot avail itself of such courts in
the Commonwealth of Massachusetts, Borrower accepts jurisdiction of the courts
and venue in Santa Clara, California.

 

9.19        Ratification
of IP Security Agreement.  Borrower
hereby ratifies, confirms and reaffirms, all and singular, the terms and conditions
of the IP Security Agreement and acknowledges, confirms and agrees that the IP
Security Agreement contains an accurate and complete listing of all
Intellectual Property Collateral as defined therein.

 

9.20        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.

 

9.21        Confidentiality.  In handling any confidential information, Silicon
shall exercise the same degree of care that it exercises for its own
proprietary information, but disclosure of information may be made:  (i) to Silicon’s subsidiaries or affiliates
in connection with their present or prospective business relations with
Borrower; (ii) to prospective transferees or purchasers of any interest in the
Loans; (iii) as required by law, regulation, subpoena, or other order; (iv) as
required in connection with Silicon’s examination or audit; and (v) as Silicon
considers appropriate in exercising remedies under this Agreement.  Confidential information does not include
information that either:  (a) is in the
public domain or in Silicon’s possession when disclosed to Silicon, or becomes
part of the public domain after disclosure to Silicon (through no act or
omission of Silicon); or (b) is disclosed to Silicon by a third party, which
third party is not under any non-disclosure obligation.

 

20

 

IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be executed as a
sealed instrument under the laws of the Commonwealth of Massachusetts as of the
date first above written.

 

Borrower:

 

	
  SATCON TECHNOLOGY CORPORATION

  	
   

  
	
   

  	
   

  
	
  By 

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title 

  	
   

  	
   

  
	
   

  	
   

  
	
  SATCON POWER SYSTEMS,
  INC.

  	
   

  
	
   

  	
   

  
	
  By 

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title 

  	
   

  	
   

  
	
   

  	
   

  
	
  SATCON APPLIED
  TECHNOLOGY, INC.

  	
   

  
	
   

  	
   

  
	
  By 

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title 

  	
   

  	
   

  
	
   

  	
   

  
	
  SATCON ELECTRONICS,
  INC.

  	
   

  
	
   

  	
   

  
	
  By 

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title 

  	
   

  	
   

  
	
   

  	
   

  
	
  SATCON POWER SYSTEMS
  CANADA LTD.

  	
   

  
	
   

  	
   

  
	
  By 

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title 

  	
   

  	
   

  
	
   

  	
   

  

 

21

 

Silicon:

	
   

  	
   

  
	
   

  	
   

  
	
  SILICON VALLEY BANK
  d/b/a

  	
   

  
	
  SILICON VALLEY EAST

  	
   

  
	
   

  	
   

  
	
  By 

  	
  /s/ John Atanasoff

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  John Atanasoff

  	
   

  
	
   

  	
   

  
	
  Title 

  	
  Senior Relationship Manager

  	
   

  

 

22

 

Silicon
Valley Bank

 

Schedule
to

Loan
and Security Agreement

 

	
  Borrower:

  	
   

  	
  SATCON TECHNOLOGY CORPORATION

  
	
   

  	
   

  	
  SATCON POWER SYSTEMS, INC.

  
	
   

  	
   

  	
  SATCON ELECTRONICS, INC.

  
	
   

  	
   

  	
  SATCON APPLIED TECHNOLOGY, INC.

  
	
   

  	
   

  	
  SATCON POWER SYSTEMS CANADA LTD.

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  27 Drydock Avenue

  
	
   

  	
   

  	
  Boston, Massachusetts 0210

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  January 28, 2005

  

 

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
(A) or (B), below:

 

(A)          (i)            $7,000,000
(the “Maximum Credit Limit”); minus

 

(ii)           the aggregate amounts then undrawn on
all outstanding letters of credit, foreign exchange contracts, or any other
accommodations issued or incurred, or caused to be issued or incurred by
Silicon for the account and/or benefit of the Borrower.

 

(B)           (i)            80.0% of the amount of the Borrower’s Eligible
Receivables;

 

                                plus

 

                (ii)           the lesser of

 

(a)  (x) 40% of
Borrower’s Eligible Inventory comprised of raw materials and finished goods
(valued at the lower of actual cost or fair market value), plus (y) the
lesser of (A) 10% of Borrower’s Eligible Inventory comprised of work in process
(valued at the lower of actual cost or fair market value) or (B) $300,000; or

 

(b) 85% of the orderly liquidation value of Borrower’s
Eligible Inventory; or

 

 

 

23

 

(c) the lesser of (x) 25% of the amount set forth in
Section (B) (i) above (regarding availability based on Borrower’s Eligible
Receivables) or (y) $1,000,000.00;

 

minus

 

(iii)                               the aggregate amounts then undrawn on all
outstanding letters of credit, foreign exchange contracts, or any other
accommodations issued or incurred, or caused to be issued or incurred by Silicon
for the account and/or benefit of the Borrower.

 

Silicon may, from time to time, modify the advance rate(s) set forth
herein in its good faith business judgment upon notice to Borrower based on
changes in collection experience with respect to the Receivables or other
issues or factors relating to the Receivables or the Collateral.

 

Borrower acknowledges that (i) Silicon will make no advances under this
Agreement unless and until it has received an audit of the Collateral in form
and substance satisfactory to Silicon, and (ii) Silicon will make no advances
under this Agreement based upon Borrower’s Eligible Inventory unless and until
it has received an appraisal of Borrower’s Inventory in form and substance
satisfactory to Silicon performed by an independent auditor that is acceptable
to Silicon in its sole discretion.

 

                Letter of
Credit/Foreign Exchange Contract/Cash Management Services Sublimit

                (Section 1.6, 1.7,
and 1.8):   $3,000,000

 

2.  INTEREST.

 

Interest
Rate (Section
1.2):

 

                A rate equal to
the greater of (i) 6.75% per annum or (ii) the “Prime Rate” in effect from time
to time, plus 2.00% 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, 9.1) None.

 

3. 
FEES (Section 1.4):

 

Loan Fee:               $25,000.00.

 

Collateral
Handling Fee:      $1,000.00 per month,
payable in arrears.

 

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 0.50% per annum on the difference between the amount
of the Maximum Credit Limit and the average daily principal balance 

 

24

 

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.

 

Cancellation Fee:  If the Obligations are voluntarily
or involuntarily (in the event of bankruptcy) prepaid or if this Agreement is
otherwise terminated prior to its maturity (a “Cancellation Event”), the
Borrower shall pay to Silicon a termination fee (the “Cancellation Fee”) in the
amount equal to 0.50% of the Maximum Credit Limit if a Cancellation Event
occurs on or before six (6) months from the date hereof, provided that no such
Cancellation Fee shall be charged if the credit facility hereunder is replaced
or transferred to another division of Silicon. 
The Cancellation Fee shall be due and payable upon prepayment by the
Borrower in the case of voluntary prepayments or upon demand by Silicon in the
event of  involuntary prepayment, and if
not paid immediately shall bear interest at a rate equal to the highest rate
applicable to any of the Obligations.

 

4. 
MATURITY DATE

 

(Section 6.1):         364 days 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:

 

                a. Minimum Tangible Net Worth:

 

                Borrower shall
maintain an Tangible Net Worth of not less than the sum of (i) plus (ii) below:

 

(i)                                     (a) from October 1, 2004  through and including October 31, 2004 -
$9,000,000;

(b) from November
1, 2004 through November 30, 2004 - $8,250,000.00;

(c) from December
1, 2004 through December 31, 2004 - $12,500,000;

(d) from January
1, 2005 through January 31, 2005 - $11,750,000;

(e) from February
1, 2005 through February 28, 2005 - $11,000,000;

(f) from
March  1, 2005 through March 31, 2005 -
$12,500,000;

(e) from April 1,
2005 through April 30, 2005 - 
$11,750,000;

(f) from May 1,
2005 through May 31, 2005 - $11,000,000;

(g) from June 1,
2005 through June 30, 2005 - $12,500,000;

(h) from July 1,
2005 through July 31, 2005 - $11,750,000;

(i) from August 1,
2005 through August 31, 2005 - $11,000,000;

(j) from September
1, 2005 through September 30, 2005 - $12,500,000

(k) from October
1, 2005 through October 31, 2005 - $11,750,000;

(l) from November
1, 2005 through November 30, 2005 - $11,000,000; and

(m) from December
1, 2005 through December 31, 2005 - $12,500,000

 

(ii) 80% of all consideration received in addition to
those amount to be received pursuant to the Capitalization Event (as defined in
Section 8 (4) of this Schedule to Loan and Security Agreement) from proceeds from
the issuance of any equity securities of the Borrower and/or subordinated debt
incurred by the Borrower.

 

25

 

                b.
Minimum Cash or Excess Availability:

 

The Borrower shall at all times maintain $400,000.00 in
(i) cash deposits maintained at Silicon, and/or (ii) excess “availability”
under this Agreement (net of Loans, Letters of Credit or other indebtedness
under this Agreement), as determined by Silicon based upon the Credit Limit
restrictions set forth in Section 1 above).

 

                Definitions.           For
purposes of the foregoing financial covenants, the following term shall have
the following meaning:

 

                                “Liabilities”
shall have the meaning ascribed thereto by generally accepted accounting
principles.

 

                                “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 the 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.

 

6.  REPORTING.

 

Borrower shall provide Silicon with the following:

i.              Weekly
(monthly, if no amounts are outstanding under this Agreement and Borrower has
advised Silicon in writing that it has elected to be on “non-borrowing
reporting status”), and upon each loan request, borrowing base certificates and
transaction reports.

ii.             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.

iii.            Monthly
accounts receivable agings, aged by invoice date, and receivable
reconciliations, within fifteen days after the end of each month.

iv.            Monthly
unaudited financial statements, as soon as available, and in any event within
thirty days after the end of each month; provided, however, for the months
ending March, June, September and December, Borrower shall forward only a draft
of such financial statements, with a final statement due within forty-five days
after the end of such month.

v.             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.

26

 

vi.            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.

vii.           Draft
annual financial statements, as soon as available, and in any event within 45
days following the end of Borrower’s fiscal year, prepared under GAAP,
consistently applied.

viii.          Annual
audited financial statements, as
soon as available, and in any event within 90 days following the end of
Borrower’s fiscal year, prepared under GAAP, consistently applied, together
with an unqualified opinion on the
financial statements from an independent certified public accounting firm
reasonably acceptable to Silicon.

ix.            Such
additional reports and information as Silicon may from time to time specify.

 

                Borrower may elect
to be on “non-borrowing reporting status” if Borrower notifies Silicon in
writing that it so elects and  there are
no Loans or other Obligations outstanding hereunder (including, without
limitation, any issued Letters of Credit). 
After Borrower has notified Silicon of its intention to be on
“non-borrower reporting status”, as further set forth in Section 4.3 of this
Agreement, Borrower must provide Silicon at least 30 days prior written notice
of its intention to borrow.

 

7. 
BORROWER INFORMATION:

 

Prior
Names of

Borrower

 

(Section 3.2):         See Perfection Certificate of even date
herewith.

 

Prior
Trade

Names
of Borrower

(Section 3.2):         See Perfection Certificate of even date
herewith.

 

Existing
Trade

Names
of Borrower

(Section 3.2):         See Perfection Certificate of even date
herewith.

 

Other
Locations and

Addresses (Section 3.3):     See Perfection Certificate of even date herewith.

 

27

 

Material
Adverse

Litigation (Section 3.10):    None

 

 

8. 
OTHER COVENANTS

 

(Section 5.1):         Borrower shall at all times comply with
all of the following additional covenants:

 

(1)           Banking
Relationship.  In order for Silicon to properly monitor
its loan arrangement with the Borrower, Borrower shall at all times maintain
all of its depository, operating (other than payroll and operating accounts
maintained in Canada) and securities accounts with Silicon (or an affiliate of
Silicon with respect to securities accounts).

 

(2)           Subordination of Inside Debt. 
All present and future indebtedness (excluding reasonable salary, bonus
and expense reimbursement) of the Borrower to its officers, directors and
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)           Subordination Agreements. Borrower represents and warrants that
Borrower is not presently indebted to any third party for borrowed money.  Prior to incurring any such indebtedness
(which incurrence may only occur upon Silicon’s prior written consent),
Borrower shall cause each creditor to execute and deliver to Silicon a
subordination agreement on Silicon’s standard form subordinating to the
Obligations the indebtedness of Borrower to any such creditor and shall cause
such subordination agreements to continue in full force and effect at all times
during the term of this Agreement.

 

(4)           Capitalization Event. 
As a condition precedent to the effectiveness of this Agreement, receive
from investors acceptable to Silicon cash proceeds from the issuance of equity
securities of the Borrower and/or subordinated debt incurred by the Borrower in
the aggregate amount of at least $4,000,000.00 (the “Capitalization Event”).

 

28

 

Borrower:

 

	
  SATCON
  TECHNOLOGY CORPORATION

  	
   

  
	
   

  	
   

  
	
  By 

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title 

  	
   

  	
   

  
	
   

  	
   

  
	
  SATCON POWER
  SYSTEMS, INC.

  	
   

  
	
   

  	
   

  
	
  By 

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title 

  	
   

  	
   

  
	
   

  	
   

  
	
  SATCON APPLIED
  TECHNOLOGY, INC.

  	
   

  
	
   

  	
   

  
	
  By 

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title 

  	
   

  	
   

  
	
   

  	
   

  
	
  SATCON
  ELECTRONICS, INC.

  	
   

  
	
   

  	
   

  
	
  By 

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title 

  	
   

  	
   

  
	
   

  	
   

  
	
  SATCON POWER
  SYSTEMS CANADA LTD.

  	
   

  
	
   

  	
   

  
	
  By 

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title 

  	
   

  	
   

  
	
   

  	
   

  

 

29

 

	
  Silicon:

  	
   

  
	
   

  	
   

  
	
  SILICON VALLEY
  BANK d/b/a

  	
   

  
	
  SILICON VALLEY
  EAST

  	
   

  
	
   

  	
   

  
	
  By 

  	
  /s/ John Atanasoff

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  John Atanasoff

  	
   

  
	
   

  	
   

  
	
  Title 

  	
  Senior Relationship Manager

  	
   

  
				

 

30Exhibit 10.1

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made as of May 11, 2005 between Samsonite Corporation, a Delaware corporation (the “Company”), and Marcello Bottoli (“Executive”).

 

WHEREAS, the Company and Executive entered into an employment agreement on March 3, 2004 (the “Original Agreement”).

 

WHEREAS, the Company and Executive desire to amend and restate the Original Agreement as set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Original Agreement is amended and restated in its entirety as follows:

 

1.             Definitions.

 
“Affiliate” means, as applied to any specified Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. For purposes of the foregoing, “control,” when used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise, and the terms “controlled” and “controlling” shall have meanings correlative to the foregoing.

 

“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a governmental or political subdivision or an agency or instrumentality thereof.

 

“Voting Stock” means, with respect to any Person, any shares of
stock or other equity interests of any class or classes of such Person, the
holders of which are entitled under ordinary circumstances (irrespective of whether
at the time stock or other equity interests of any other class or classes shall
have or might have voting power by reason of the happening of any contingency)
to vote for the election of a majority of the directors, executives, trustees
or other governing body of such Person.

 

2.             Employment. The
Company shall continue to employ Executive, and Executive agrees to remain
employed by the Company, upon the terms and conditions set forth in this
Agreement for the period beginning on March 3, 2004 and ending as provided in
paragraph 6 hereof (the “Employment Period”).

 

3.             Position and
Duties.

 

(a)           Executive
shall serve as Chief Executive Officer of the Company and shall have the normal
duties, responsibilities, functions and authority of the Chief Executive
Officer, subject to the power and authority of the Company’s Board of Directors
(the “Board”)

 

 

to
expand or limit such duties, responsibilities, functions and authority and to
overrule actions of officers of the Company. During the Employment Period, Executive
shall render such administrative, financial and other executive and managerial
services to the Company and its Subsidiaries that are consistent with
Executive’s position as the Board may from time to time direct.

 

(b)           Executive
shall report directly to the Board and Executive shall devote his best efforts
and substantially all of his business time and attention (except as may be
reasonably required by Executive to perform his duties and responsibilities as
a managing director of Samsonite Europe N.V. and for permitted vacation periods
and reasonable periods of illness or other incapacity) to the business and
affairs of the Company and its Subsidiaries. Executive shall perform his
duties, responsibilities and functions to the Company and its Subsidiaries
hereunder to the best of his abilities in a diligent, trustworthy, professional
and efficient manner and shall comply with the Company’s and its Subsidiaries’
policies and procedures in all material respects. In performing his duties and
exercising his authority under the Agreement, Executive shall support and
implement the business and strategic plans approved from time to time by the
Board and shall support and cooperate with the Company’s and its Subsidiaries’
efforts to expand their businesses and operate profitably and in conformity
with the business and strategic plans approved by the Board. So long as
Executive is employed by the Company, Executive shall not, without the prior
written consent of the Board, actively engage in any other employment,
occupation or consulting for any direct or indirect compensation, excluding his
engagement as a managing director of Samsonite Europe N.V.; provided that
Executive may continue to serve in his current capacity on the board of
directors of the Italian company, Ratti, so long as such service does not
require Executive to spend more than 7 days per annum engaged in such
activities (the “Ratti Days”). Executive’s place of work shall be
initially a location in the European Union and will vary subject to the needs
of the Company’s business and the reasonable discretion of the Board. Notwithstanding
the preceding sentence and subject to paragraph 6(i), Executive acknowledges
and agrees that once a permanent operational headquarters has been established
for the Company by the Board (the “Headquarters”) he will relocate to
the Headquarters and that the terms of this Agreement shall continue after such
relocation.

 

(c)           For
purposes of this Agreement, “Subsidiaries” shall mean any corporation or
other entity of which the securities or other ownership interests having the
voting power to elect a majority of the board of directors or other governing
body are, at the time of determination, owned by the Company, directly or
through one or more subsidiaries of the Company. Notwithstanding the preceding
sentence, for purposes of this Agreement, “Subsidiaries” shall not
include Samsonite Europe N.V. or any corporation or other entity of which the
securities or other ownership interests having the voting power to elect a
majority of the board of directors or other governing body are, at the time of
determination, owned by Samsonite Europe N.V., directly or through one or more
subsidiaries of Samsonite Europe N.V.

 

4.             Compensation and
Benefits.

 

(a)           During
the Employment Period, Executive’s base salary shall be €300,000 per annum and
shall be subject to the review by the Board on an annual basis commencing
January 1, 2005 (as adjusted from time to time, the “Base Salary”),
which salary shall be payable by the Company in regular installments in
accordance with the Company’s

 

 

2

 

general
payroll practices (in effect from time to time) and shall be subject to such
withholdings as may be required by law.

 

(b)           During
the Employment Period, the Company shall reimburse Executive for all reasonable
business expenses incurred by him in the course of performing his duties and
responsibilities under this Agreement that are consistent with the Company’s
policies in effect from time to time with respect to travel, entertainment and
other business expenses, subject to the Company’s requirements with respect to
reporting and documentation of such expenses.

 

(c)           In
addition to the Base Salary, during the Employment Period, Executive will be
eligible to earn an annual bonus of up to €600,000 (subject to such
withholdings as may be required by law) per annum based on the assessment of
the compensation committee of the Board (the “Compensation Committee”)
with respect to Executive’s performance during such year as measured against
performance targets to be agreed between the Board and Executive on an annual
basis.

 

(d)           Furthermore,
so long as the Executive remains employed as the Chief Executive Officer of the
Company, the Company will pay Executive, on January 31st of each year,
commencing January 31st, 2005, an aggregate amount
equal to the sum of: (1) the benefit that the Executive would otherwise accrue
if Executive were eligible to participate on the same basis as other senior
executive employees of the Company in the Company’s salaried pension plan and
supplemental retirement plan, provided that for the purposes of such
calculation no statutory or plan compensation maximum limits shall apply and
Executive shall be deemed to have a base salary equal to the Base Salary plus
€100,000 (or any other amount as agreed to in writing by the Company and the
Executive); plus (2) the amount of $6,500 for the 2005 payment, $7,000 for the
2006 payment, $7,500 for the 2007 payment, and $7,500 indexed for inflation for
years after 2007. With reference to payments made under the preceding sentence,
if prior to March 3, 2009 Executive’s employment is either terminated by the
Company or Executive resigns from his position as the Chief Executive Officer
of the Company, in either case for any reason other than the Company is
declared insolvent or bankrupt in any federal or state bankruptcy or insolvency
proceeding, then Executive shall owe and pay the Company a cash amount equal to
the aggregate payments (net of deductions made by the Company for federal,
state, local or foreign withholding taxes, excise tax, employment taxes, or any
other deductions or withholdings) made by the Company under this paragraph
4(d); provided that if Employee is employed as the Chief Executive Officer
of the Company on the applicable date in the column immediately below, Employee
shall not be obligated to the Company for more than the applicable percentage
of payments made under clause (2) of the preceding sentence:

 

 

	
  On or after March 3:

  	
   

  	
  Applicable Percentage:

  	
   

  
	
  2005

  	
   

  	
  80%

  	
   

  
	
  2006

  	
   

  	
  60%

  	
   

  
	
  2007

  	
   

  	
  40%

  	
   

  
	
  2008

  	
   

  	
  20%

  	
   

  
	
  2009 and
  thereafter

  	
   

  	
   0%

  	
   

  

 

 

3

 

All payments made by the Company pursuant to this paragraph 4(d) shall
be paid in accordance with the Company’s general payroll practices (in effect
from time to time) and shall be subject to such withholdings as may be required
by law.

 

(e)           Executive
shall be entitled to four paid weeks of vacation per year during the Employment
Period (excluding the Ratti Days), to be accrued and taken in accordance with
the Company’s normal vacation policy applicable to senior executive employees.

 

(f)            Executive
hereby opts out of all of the Company’s and its Subsidiaries’ employee benefit
plans, programs, arrangements, and agreements for which Executive may otherwise
be eligible and releases the Company and its Subsidiaries from any obligations
related thereto and waives any claims thereunder or related thereto.

 

5.             Board Membership.
With respect to all regular elections of directors during the Employment
Period, after termination of the Samsonite Corporate Therapeutics, as adopted
pursuant to the Stipulation of Settlement dated as of April 28, 2000, by and
among the Company and certain third parties thereto, the parties acknowledge
that it is the intention of the parties that the Company shall cause Executive
to be nominated to, and Executive shall if elected serve as a member of, the
Board. Upon the termination or expiration of the Employment Period, Executive
shall resign as a director of the Company and its Subsidiaries and Affiliates,
as the case may be.

 

6.             Term.

 

(a)           The
Employment Period shall continue for an indefinite period; provided that the
Employment Period shall terminate (i) immediately upon Executive’s death or Disability,
or (ii) upon 45 days prior written notice (a “Notice Period”) upon
Executive’s resignation (with or without Good Reason, as defined below), or
(iii) immediately upon the Board’s determination in its good faith judgment
that termination of Executive’s employment for Cause (as defined below) is in
the best interests of the Company, or (iv) upon 45 days prior written notice
(also a “Notice Period”) upon the Board’s determination in its good
faith judgment that termination of Executive’s employment without Cause is in
the best interests of the Company.

 

(b)           If
the Employment Period is terminated (1) by the Company without Cause (other
than as a result of Executive’s Disability) or (2) upon Executive’s resignation
with Good Reason, Executive shall be entitled to:

 

(i)            his Base Salary
through the date of termination or resignation; and

 

(ii)           any bonus amounts
to which Executive is entitled through the date of the initiation of the Notice
Period, measured and paid at the end of the annual period specified in and
pursuant to the criteria set forth in paragraph 4(c), as determined by
reference to years that ended on or prior to the earlier of the date of the
initiation of the Notice Period, if applicable, or the date of termination or
resignation.

 

(c)           If
the Employment Period is terminated by the Company without Cause (other than as
a result of Executive’s Disability), then, in addition to paragraph 6(b) above,

 

 

4

 

Executive
shall be entitled to an amount equal to twenty-four (24) months of Executive’s
Base Salary and eighteen (18) months of bonus (minus any payments owed to the
Company pursuant to paragraph 4(d), in each case calculated as the average of
Base Salary and bonus paid by the Company to Executive during the previous
3-year period (or, if Executive has not yet been employed by the Company for a
3-year period, as the average of the entire period during which Executive has
been employed by the Company) (the “Severance Compensation”), which
shall be payable in a lump sum in cash within 30 days after the date the
Employment Period is terminated if and only if Executive has executed and
delivered to the Company a general release (other than with respect to those
matters as may arise from Executive’s direct or indirect ownership of shares of
the Company, Executive’s rights to applicable statutory benefits after
termination, and Executive’s other rights on termination as contained herein)
in form and substance satisfactory to the Company and only so long as Executive
has not breached the provisions of paragraphs 7 and 8 hereof.

 

(d)           If
the Employment Period is terminated (1) by the Company for Cause, (2) due to
Executive’s death or Disability or (3) by Executive’s resignation without Good
Reason, Executive, or his estate, as applicable, shall be entitled to receive
(i) his Base Salary through the date of termination or resignation and (ii) any
bonus amounts to which Executive is entitled determined by reference to years
that ended on or prior to the date of termination or resignation.

 

(e)           Except
as otherwise expressly provided herein, Executive shall not be entitled to any
other salary, bonuses, employee benefits or compensation from the Company or
its Subsidiaries or Affiliates after the termination or expiration of the
Employment Period and all of Executive’s rights to salary, bonuses, employee
benefits and other compensation hereunder which would have accrued or become
payable after the termination or expiration of the Employment Period (other
than amounts owing hereunder as of the date of such termination or expiration
that have not yet been paid) shall cease upon such termination or expiration,
other than those expressly required under applicable law.

 

(f)            The
Company may offset any amounts Executive owes it or its Subsidiaries or
Affiliates (including any indemnities Executive owes to the Company or its
Subsidiaries or Affiliates) against any amounts it owes, or its Subsidiaries or
Affiliates owe, Executive hereunder, subject to any requirements of applicable law.

 

(g)           For
purposes of this Agreement, “Cause” means (i) the engaging by Executive
in gross negligence or wilful misconduct that is injurious to any of the
Company, its Subsidiaries or its Affiliates, (ii) the embezzlement or
misappropriation of funds or property of the Company or any of its Subsidiaries
or Affiliates by Executive or the conviction of Executive of a felony or the
entrance of a plea of guilty or nolo contendere by Executive to a felony, (iii)
the wilful failure or refusal by Executive to substantially perform his duties
or responsibilities that continues after being brought to the attention of
Executive (other than any such failure resulting from Executive’s incapacity
due to Executive becoming Disabled), (iv) conduct causing the Company or any of
its Subsidiaries or Affiliates substantial public disgrace or disrepute, (v)
any act or omission aiding or abetting a competitor, supplier or customer of
the Company or any of its Subsidiaries or Affiliates to the material
disadvantage or detriment of the Company or any of its Subsidiaries or
Affiliates, (vi) any other material breach of Executive’s employment agreement
or terms of employment,

 

 

5

 

as
applicable, which is not cured to the Board’s reasonable satisfaction, after
written notice to Executive and opportunity to cure.

 

(h)           Executive
will be “Disabled” or deemed to have a “Disability” only if the
Board determines in good faith, based on medical evidence acceptable to it,
that Executive has become physically or mentally disabled or incapacitated
during his employment for a continuous period of at least ninety (90) days to
such an extent that he shall be unable to perform his duties.

 

(i)            For
purposes of this Agreement, “Good Reason” shall mean, so long as
Executive has not been guilty of (a) engaging in willful misconduct that is
materially injurious to the Company or any of its Subsidiaries or Affiliates ,
(b) the embezzlement or misappropriation of funds or property of the Company or
any of its Subsidiaries or Affiliates or the conviction of Executive of a
felony or the entrance of a plea of guilty by Executive to a felony or (c) the
failure or refusal by Executive to devote his full business time and attention
to the performance of Executive’s duties and responsibilities pursuant to
Executive’s employment or similar agreement with the Company and/or any of its
Subsidiaries or Affiliates, Executive resigns from employment with the Company
as a result of one or more of the following reasons: (i) within 24 months from
the commencement of the Employment Period the Board has not resolved that the
Headquarters will be located in a “major” European city or its environs (an “Acceptable
Location”), or has resolved that the Headquarters will not be located in an
Acceptable Location (the “Affirmative Decision”), provided that written
notice of Executive’s resignation must be delivered to the Company within
twelve (12) months of the earlier of the expiration of such 24-month period or
the date of the Affirmative Decision in order for Executive’s resignation with
Good Reason to be effective hereunder, (ii) the assignment to Executive by the
Company of duties inconsistent with Executive’s position, duties or
responsibilities as in effect on March 3, 2004, including, but not limited to,
any material reduction in such position, duties or responsibilities or material
change in his title, or (iii) any material breach by the Company (or its
successors) of this Agreement, in each case set forth above which is not cured
to Executive’s reasonable satisfaction within 15 days after written notice
thereof to the Company; provided that written notice of Executive’s resignation
must be delivered to the Company within 45 days after the occurrence (or, 15
days after the date upon which Executive is aware, after due inquiry, of such
breach, if later) of any such material breach in order for Executive’s
resignation with Good Reason to be effective hereunder, provided that in each
case of clauses (i), (ii) or (iii) of this paragraph 6(i), Executive did not
give prior written consent, which consent may be withheld in Executive’s sole
discretion.

 

7.             Confidential Information.

 

(a)           Unless
otherwise required by law or judicial process, Executive shall keep
confidential all Confidential Information known to Executive concerning the
Company, its Subsidiaries, or its Affiliates and their respective businesses
during the Employment Period and for the shorter of three (3) years following
the termination of the Employment Period or until such information is publicly
disclosed by the Company or otherwise becomes publicly disclosed other than
through Executive’s actions; provided that Executive shall provide notice to
the Company in advance of any disclosure required by law or judicial process in
a timely manner to permit the Company to oppose such compelled disclosure.

 

 

6

 

(b)           For
purposes of this Agreement, “Confidential Information” shall mean
proprietary information of the Company, its Subsidiaries or its Affiliates of
any nature and in any form or information about the Company’s, its
Subsidiaries’ or its Affiliates’ business, operations, strategy, personnel or
plans which is not made publicly available by the Company, its Subsidiaries or
its Affiliates, except for information independently developed by Executive
without any use of Confidential Information or which was at the time of
disclosure to Executive part of the public domain or thereafter becomes
generally part of the public domain other than through Executive’s actions, or
which Executive can demonstrate was lawfully in Executive’s possession prior to
disclosure to Executive by the Company or was lawfully received by Executive
after disclosure from a third party. For the avoidance of doubt, after the
Non-compete Period defined below, or if the Company shall not make the written
election provided for in paragraphs 8(b)(i) or 8(b)(ii) below, as applicable,
the provisions of paragraph 7(a) shall not be construed to prevent Executive
from taking any employment on grounds that Executive possesses general or
specific knowledge of any such Confidential Information.

 

(c)           Upon
termination of Executive’s employment for any reason, Executive shall return
all property belonging to the Company, its Subsidiaries or its Affiliates, as
applicable, including any and all Confidential Information in Executive’s
possession or under his control.

 

8.             Non-compete

 

(a)           Executive
agrees that during the Employment Period and for a period of one (1) year
thereafter (the “Non-compete Period”), Executive shall not, directly or
indirectly, as a principal, officer, director, employee or in any other
capacity whatsoever, without the prior written consent of the Company, engage
in, or be or become interested or acquire any ownership of any kind in, or
become associated with, or make loans or advance property to any person engaged
in or about to engage in, any business activity that is in competition with any
of the businesses engaged in by the Company or its Subsidiaries or Affiliates
during the Employment Period, or in which, during the Employment Period, the
Company or its Subsidiaries or Affiliates made preparations to engage, in any
of the geographic areas in which such businesses are then conducted by the
Company or its Subsidiaries or Affiliates, have been conducted by the Company
or its Subsidiaries or Affiliates during the twelve months preceding the
termination of the Employment Period, or in which the Company or its
Subsidiaries or Affiliates conducts business during the Non-compete Period.

 

(b)           Unless
Executive’s employment is terminated by the Company for Cause or the Company
delivers to Executive its written election terminating the Non-compete Period,
Executive’s obligations under paragraph 8(a) above shall be subject to payment
of compensation by the Company to Executive during the Non-compete Period,
determined as follows:

 

(i)            if Executive’s
employment is terminated by the Company without Cause, the Company shall pay to
Executive monthly, in addition to any Severance Compensation, a pro rata
portion of his annual salary, calculated as the average of Executive’s salary
compensation during the previous 3-year period (or, if Executive has not yet
been employed by the Company for a 3-year period, the average of the entire
period during which Executive has been employed by the Company); or

 

 

7

 

(ii)           if Executive’s
employment is terminated by Executive with or without Good Reason, the Company
shall pay to Executive monthly a pro rata portion of his annual salary,
calculated as the average of Executive’s salary compensation during the
previous 3-year period (or, if Executive has not yet been employed by the
Company for a 3-year period, the average of the entire period during which
Executive has been employed by the Company), plus, provided that Executive
still owns directly or indirectly any 2003 convertible preferred stock of the
Company or shares of common stock of the Company resulting from the (a)
exercise of options granted by the Company on or from March 3, 2004 or (b)
conversion of 2003 convertible preferred stock of the Company, the greater of
his average bonus (excluding any payments made pursuant to paragraph 4(d))
during the previous 3 year period or 50% of his allocated bonus (excluding any
payments made pursuant to paragraph 4(d)).

 

Each payment specified in paragraphs 8(b)(i) and 8(b)(ii) is a “Non-compete
Payment.”

 

(c)           The
Non-compete Payment will cease on the earlier of (i) the effective date of the
Company’s written election to Executive terminating the Non-compete Period;
(ii) Executive’s acceptance of alternative employment or engagement in business
activity, which does not violate Executive’s obligations under this paragraph
8, in either case for monetary compensation equal to or greater than 100% of
Executive’s prior year Base Salary (provided that service on a board of
directors shall not be deemed to be engagement in business activity); or (iii)
the end of the Non-compete Period.

 

(d)           Nothing
in this Agreement shall prevent Executive from making or holding any investment
in any amount in securities traded on any national securities exchange or
traded in the over the counter market, provided said investments do not exceed
one percent (1%) of the issued and outstanding stock of any one such
corporation, and provided further that Executive has no active participation in
the business of such corporation.

 

(e)           During
the Non-compete Period, Executive shall not directly or indirectly through
another person or entity knowingly or intentionally (i) induce or attempt to
induce any person known to him to be an employee of the Company or its
Subsidiaries or Affiliates to leave the employ of the Company or its
Subsidiaries or Affiliates, or in any way interfere with the relationship
between the Company or its Subsidiaries or Affiliates and any employee thereof,
(ii) hire any person known to him to have been an employee of the Company or
its Subsidiaries or Affiliates at any time during the twelve (12) months prior
to the termination of the Employment Period or (iii) induce or attempt to
induce any material customer, supplier, licensee, licensor, franchisee or other
business relation of the Company or its Subsidiaries or Affiliates to cease
doing, or modify its, business with the Company or its Subsidiaries or
Affiliates, or in any way interfere with the relationship between any such
material customer, supplier, licensee or business relation (known to him) and
the Company or its Subsidiaries or Affiliates (including, without limitation,
making any negative or disparaging statements or communications regarding the
Company or its Subsidiaries or Affiliates and/or their officers, directors,
shareholders and employees).

 

(f)            If,
at the time of enforcement of this paragraph 8, a court shall hold that the
duration, scope or area restrictions stated herein are unreasonable under
circumstances then existing, the parties agree that the maximum duration, scope
or area reasonable under such circumstances shall be substituted for the stated
duration, scope or area and that the

 

 

8

 

court
shall be allowed to revise the restrictions contained herein to cover the
maximum period, scope and area permitted by law. Executive acknowledges that
the restrictions contained in this paragraph 8 are reasonable and that he has
reviewed the provisions of this Agreement with his legal counsel.

 

(g)           This
paragraph 8 will survive and continue in full force in accordance with its
terms notwithstanding any termination of this Agreement.

 

9.             Executive’s
Representations. Except as set forth on Schedule 9 attached hereto, Executive hereby
represents and warrants to the Company that (i) the execution, delivery and
performance of this Agreement by Executive do not and shall not conflict with,
breach, violate or cause a default under any contract, agreement, instrument,
order, judgment or decree to which Executive is a party or by which he is
bound, (ii) Executive is not a party to or bound by any employment
agreement, non-compete agreement or confidentiality agreement with any other
person or entity and (iii) upon the execution and delivery of this Agreement by
the Company, this Agreement shall be the valid and binding obligation of
Executive, enforceable in accordance with its terms. Executive hereby
acknowledges and represents that he has consulted with independent legal
counsel regarding his rights and obligations under this Agreement and that he
fully understands the terms and conditions contained herein.

 

10.           Survival. Paragraphs
6 through 23 shall survive and continue in full force in accordance with their
terms notwithstanding the expiration or termination of the Employment Period.

 

11.           Notices. Any
notice provided for in this Agreement shall be in writing and shall be either
personally delivered, sent by reputable overnight courier service or mailed by
first class mail, return receipt requested, to the recipient at the address
below indicated:

 

Notices to Executive:

 

c/o Jason Warner

9400 South Dadeland Boulevard

Suite 600

Miami, Florida 33156

UNITED STATES OF
AMERICA

Facsimile: +1 (305) 670-0005

 

 

9

 

With
a copy (which shall not constitute notice) to:

 

Jason Warner <jason.warner@abanet.org>

 

With
a further copy (which shall not constitute notice) to:

 

Stefania Tomasini

Studio Dott. Guido Severgnini

Via Camperio, 9

20123 Milan 

ITALY

Facsimile: +39 0286998501

 

 

Notices to the
Company:

 

Samsonite
Corporation

11200 East 45th Street

Denver, Colorado 80239

UNITED STATES OF AMERICA

Facsimile: +1 (303) 373-6606

Attention: General Counsel

 

With
a copy (which shall not constitute notice) to:

 

Kirkland & Ellis International LLP

Tower 42

25 Old Broad Street

London EC2N 1HQ

UNITED KINGDOM

Facsimile: +44 (0)20 7816 8800

Attention:
James L. Learner

David Patrick Eich

 

or such other address or to the attention of such other person as the
recipient party shall have specified by prior written notice to the sending
party. Any notice under this Agreement shall be deemed to have been given when
so delivered, sent or mailed.

 

12.           Severability.
Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or any action in any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.

 

13.           Complete
Agreement. This Agreement, those documents (except the Original Agreement)
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and

 

 

10

 

preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.

 

14.           No Strict
Construction. The language used in this Agreement shall be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against any party.

 

15.           Counterparts.
This Agreement may be executed in separate counterparts (including by means of
facsimile), each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.

 

16.           Successors and
Assigns. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance satisfactory to Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same extent the Company
would be required to perform if no such succession had taken place. This
Agreement will be binding upon and inure to the benefit of the Company and any
successor to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or assets of
the Company whether by purchase, merger, consolidation, reorganization or
otherwise (and such successor shall thereafter be deemed the “Company” for the
purposes of this Agreement), but will not otherwise be assignable, transferable
or delegable by the Company. This Agreement will inure to the benefit of and be
enforceable by Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees, but otherwise
will not otherwise be assignable, transferable or delegable by Executive. This
Agreement is personal in nature and neither of the parties hereto shall,
without the consent of the other, assign, transfer or delegate this Agreement
or any rights or obligations hereunder except as otherwise expressly provided
in this paragraph 16.

 

17.           Choice of Law.
All issues and questions concerning the construction, validity, enforcement and
interpretation of this Agreement and the exhibits and schedules hereto shall be
governed by, and construed in accordance with, the laws of the State of New
York, without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of New York or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the
State of New York.

 

18.           Amendment and Waiver. The
provisions of this Agreement may be amended or waived only with the prior
written consent of the Company (as approved by the Board) and Executive, and no
course of conduct or course of dealing or failure or delay by any party hereto
in enforcing or exercising any of the provisions of this Agreement (including,
without limitation, the Company’s right to terminate the Employment Period for
Cause or, except as otherwise stated herein, Executive’s right to terminate the
Employment Agreement for Good Reason) shall affect the validity, binding effect
or enforceability of this Agreement or be deemed to be an implied waiver of any
provision of this Agreement.

 

19.           Insurance. The
Company may, at its discretion, apply for and procure in its own name and for
its own benefit life and/or disability insurance on Executive in any amount or
amounts considered advisable. Executive agrees to cooperate in any medical or
other examination, supply any information and execute and deliver any applications
or other instruments in writing as may be reasonably necessary to obtain and
constitute such

 

 

11

 

insurance. Executive
hereby represents that he has no reason to believe that his life is not insurable
at rates now prevailing for healthy men of his age.

 

20.           Indemnification
and Reimbursement of Payments on Behalf of Executive. The Company and its
respective Subsidiaries and Affiliates, if applicable, shall be entitled to
deduct or withhold from any amounts owing from the Company or any of its
Subsidiaries or Affiliates to Executive any federal, state, local or foreign
withholding taxes, excise tax, or employment taxes (“Taxes”) imposed
with respect to Executive’s compensation or other payments from the Company or
any of its Subsidiaries or Affiliates or Executive’s ownership interest in the
Company (including, without limitation, wages, bonuses, dividends, the receipt
or exercise of equity options and/or the receipt or vesting of restricted
equity). In the event the Company or any of its Subsidiaries or Affiliates does
not make such deductions or withholdings, Executive shall indemnify the Company
and its Subsidiaries or Affiliates for any amounts paid with respect to any
such Taxes, together (if such failure to withhold was at the written direction
of Executive or if Executive has not provided the Company with the information
necessary to make such deductions or withholdings) with any interest, penalties
and related expenses thereto.

 

21.           Waiver of Jury Trial.
AS A SPECIFICALLY BARGAINED FOR INDUCEMENT FOR EACH OF THE PARTIES HERETO TO
ENTER INTO THIS AGREEMENT (AFTER HAVING THE OPPORTUNITY TO CONSULT WITH
COUNSEL), EACH PARTY HERETO EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
LAWSUIT OR PROCEEDING RELATING TO OR ARISING IN ANY WAY FROM THIS AGREEMENT OR
THE MATTERS CONTEMPLATED HEREBY.

 

22.           Corporate
Opportunity. During the Employment Period, Executive shall submit to the
Board all business, commercial and investment opportunities or offers presented
to Executive or of which Executive becomes aware which relate to the business
of the Company and/or its Subsidiaries or Affiliates at any time during the
Employment Period (“Corporate Opportunities”). Unless approved by the
Board, Executive shall not accept or pursue, directly or indirectly, any
Corporate Opportunities on Executive’s own behalf.

 

23.           Executive’s
Cooperation. During the Employment Period and thereafter, Executive shall
cooperate with the Company and its Subsidiaries and Affiliates in any internal
investigation or administrative, regulatory or judicial proceeding as
reasonably requested by the Company (including, without limitation, Executive
being available to the Company upon reasonable notice for interviews and
factual investigations, appearing at the Company’s request to give testimony
without requiring service of a subpoena or other legal process, volunteering to
the Company all pertinent information and turning over to the Company all
relevant documents which are or may come into Executive’s possession, in all
cases by providing truthful and accurate information and all at times and on
schedules that are reasonably consistent with Executive’s other permitted
activities and commitments). In the event the Company requires Executive’s cooperation
in accordance with this paragraph, solely in recognition of Executive’s time
and expenses he may incur, the Company shall pay Executive a per diem
reasonably determined by the Board and reimburse Executive for reasonable
expenses incurred in connection therewith (including lodging and meals, upon
submission of receipts, and reasonable attorneys’ fees, except in relation to
matters as to which Executive is liable for negligence or misconduct).

 

*  *  *  *  *

 

 

12

IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first written above.

 

	
   

  	
  SAMSONITE CORPORATION

  
	
   

  	
  By:

  	
  /s/ Richard Wiley

  	
   

  
	
   

  	
  Its:

  	
  CFO

  	
   

  
	
   

  	
  /s/ Marcello
  Bottoli

  	
   

  
	
   

  	
  MARCELLO
  BOTTOLI

  

 

 

SCHEDULE
9

EMPLOYMENT AGREEMENT DATED AS OF
MARCH 3, 2004 BETWEEN SAMSONITE CORPORATION AND MARCELLO BOTTOLI

 

 

Executive is
subject to certain confidentiality and non-solicitation obligations related to
his previous employment with MOET HENNESY LOUIS VUITTON (“LVMH”) and its
subsidiaries, under the contract provisions set forth below. The French text
set forth below is the official text of the subject agreements and the English
translation is unofficial.

 

1.             Confidentiality provision under
employment agreement dated May 10th, 2001:

 

“ Secret
professionnel

 

Le titulaire
accepte de garder confidentiel pendant toute la durée de l’emploi, ainsi
qu’aprés, tout ce dont il pourrait avoir eu connaissance en raison de ses
fonctions. Cela inclut en particulier toute information concernant des produits
existants ou futurs, les services offerts ou utilisés par la Societé, toute
information concernat les strategies de la Société sur les produits, les
ventes, couts, prix, organigrammes, clients, fournisseurs, etc. Toute exception
a cette obligation de secret professionnel est soumise à l’approbation
préalable et écrite de la Direction Générale du Groupe”.

 

“ Professional
Secret

 

The executive
accepts to maintain confidential during the duration of the employment and
beyond all that he could have come to know due to his functions. This includes
in particular all information regarding existing or future products, services
offered or used by the Company, all information regarding company strategies on
products, sales, costs, prices, organisation charts, customers, suppliers, etc.
Any exception to this obligation of professional secret has to be submitted to
prior written approval by the General Management of the Group.”

 

2.             Confidentiality provision under
document dated March 13th, 2003:

 

“Monsieur Marcello
Bottoli s’engage et ce sans limitation de durée, à ne pas reveler ni utiliser
pour son compte ou pour le compte d’autrui, toutes informations considérées
comme confidentielles par le Groupe. Par “informations confidentielles”, il
faut comprendre toutes les informations qui ne sont pas connues du public, ou
qui ne se trouvent pas dans le domaine public, et dont Monsieur Marcello
Bottoli a eu connaissance en raison de ses fonctions depuis son entrée dans le
Groupe”.

 

“Mr. Marcello
Bottoli commits without limitation of time not to reveal or use for himself or
on behalf of third parties all information considered as confidential by the
Group. “Confidential information” is meant to be all information which are not
known to the public or which is not in the public domain, which Mr. Marcello
Bottoli has come to know due to his functions since his joining the Group.”

 

 

3.             Non-solicitation clause under
employment agreement dated May 10th, 2001, expiring December 9, 2004:

 

“ Clause de
non-debauchage En cas de cessation du present contrat, et quelle qu’en soit la
cause, le titulaire s’interdit , pendant une periode de 2 ans , de recruter ou
de favoriser le recrutement d’une façon directe ou indirecte, d’un salarié du
Groupe d’activités Mode et Maroquinerie - LVMH, ou d’un ancien salarié l’ayant
quitté depuis moins de 6 mois.

 

“Non solicitation
clause

In case of
termination of this agreement and regardless of the cause of termination, the
executive is prohibited to hire or favor directly or indirectly the hiring of a
Divisional (LVMH Fashion & Leather Goods Division) employee or of a
previous employee, having left the Division since less than 6 months. “

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