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EXHIBIT 10.31
AMENDED AND RESTATED
REVOLVING CREDIT AND SECURITY AGREEMENT
This AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT
is entered into as of July 10, 2000 by and between COMERICA BANK-CALIFORNIA
("Bank") and AVANEX CORPORATION, a Delaware corporation ("Borrower").
RECITALS
A._____Borrower wishes to obtain credit from time to time from
Bank, and Bank desires to extend credit to Borrower. This Agreement sets forth
the terms on which Bank will advance credit to Borrower, and Borrower will repay
the amounts owing to Bank.
B._____This Agreement amends, restates, and supersedes the
Revolving Credit and Security Agreement dated July 8, 1999 by and between Bank
and Borrower, as amended by the Modification to Credit and Security Agreement
dated March 21, 2000.
AGREEMENT
The parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Definitions. All other terms contained in this
Agreement which are not specifically defined herein shall have
the meanings provided in the UCC to the extent the same are used
herein. All references herein to the singular or plural shall
also mean the plural or the singular, respectively. As used
herein, the following terms shall have the following meanings:
"Advance" means a borrowing requested by Borrower and made
by Bank under the Revolving Credit pursuant to Section 2.1 of this Agreement.
"Affiliate" means when used with respect to any Person,
any other Person which, directly or indirectly, controls or is controlled by or
is under common control with such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by" and
"under common control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Amended and Restated Revolving
Credit and Security Agreement, as amended, supplemented, or modified from time
to time.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred by Bank in
connection with the preparation, negotiation, administration, and enforcement of
the Loan Documents; and Bank's reasonable attorneys' fees and expenses incurred
in amending, enforcing or defending the Loan Documents (including fees and
expenses of appeal or review, or those incurred in any Insolvency Proceeding),
whether or not suit is brought.
"Base Rate" means the variable rate of interest, per
annum, most recently announced by Bank, as its "Base Rate," whether or not such
announced rate is the lowest rate available from Bank.
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"Borrower's Books" means all of Borrower's books and
records including ledgers, records indicating, summarizing, or evidencing
Borrower's properties or assets or liabilities, all information relating to
Borrower's business operations or financial condition, and all computer
programs, disc or tape files, printouts, runs, or other computer prepared
information, and the equipment containing such information.
"Business Day" means any day, other than a Saturday,
Sunday or holiday, on which the Bank is open to carry on all or substantially
all of its normal commercial lending business in California.
"Capital Expenditures" means the expenditures of any
Person which should be capitalized on the balance sheet of such Person in
accordance with GAAP and which are made in connection with the purchase,
construction, development or improvement of items properly classified on such
balance sheet as property, plant, equipment or other fixed assets or
intangibles.
"Capital Lease" means all leases which have been or should
be capitalized on the books of the lessee in accordance with GAAP.
"Closing Date" means the date of this Agreement.
"Collateral" means the property described on Exhibit A
attached hereto.
"Collateral Documents" means all security agreements,
assignments, stock pledge agreements, mortgages, deeds of trust, guarantees and
other collateral documents executed by Borrower, or any other Person(s), and
delivered to Bank prior to or as of the date hereof, or from time to time
subsequent hereto, in connection with this Agreement, or any of the Loan
Documents, or the Indebtedness, to secure the payment and performance of the
Indebtedness, as such collateral documents may be amended from time to time,
including, without limitation, those Collateral Documents identified in this
Agreement.
"Committed Line" means Ten Million and 00/100 Dollars
($10,000,000.00).
"Contingent Obligation" means, as applied to any Person,
any direct or indirect liability, contingent or otherwise, of that Person with
respect to (a) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (b) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (c) all obligations
arising under any interest rate, currency or commodity swap agreement, interest
rate cap agreement, interest rate collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices.
"Current Assets" means, in respect of a Person and as of
any applicable date of determination, all (a) unrestricted cash, marketable
securities, or certificates of deposit, (b) non-affiliated accounts receivable,
(c) United States government securities, (d) claims against the United States
government, and (e) inventories (held for sale in the ordinary course of
business) of such Person.
"Current Liabilities" means in respect of a Person as of
any applicable date, (a) all liabilities that should be classified as current in
accordance with GAAP, including without limitation any portion of the principal
of the Indebtedness classified as current, plus (b) to the extent not otherwise
included, all liabilities of the Borrower to any of its Affiliates whether
classified as current in accordance with GAAP.
"Effective Tangible Net Worth" means net worth as
determined in accordance with GAAP consistently applied, increased by
Subordinated Debt, if any, and decreased by the following: patents, licenses,
goodwill, subscription lists, organization expenses, trade receivables converted
to notes, money due from affiliates (including officers, directors, subsidiaries
and commonly held companies).
"ERISA" means the Employment Retirement Income Security
Act of 1974, as amended, and the regulations thereunder.
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"Event of Default" has the meaning set forth in Article X.
"Exchange Act" has the meaning set forth in Section 7.3.1.
"Financial Statements" shall mean all balance sheets,
earnings statements and other financial data, statements and reports (whether of
Borrower, any of its Subsidiaries, any Guarantor, or otherwise) which have been
furnished to Bank, or may from time to time hereafter be furnished to Bank, for
the purposes of, or in connection with, the Agreement and the transactions
contemplated hereby.
"Funding Date" means the date that amounts are advanced by
Bank under the Revolving Credit.
"GAAP" means generally accepted accounting principles as
in effect from time to time in the United States of America, applied on a
consistent basis over the time period in question as to classification of items
and amounts.
"Indebtedness" means (a) indebtedness or liability for
borrowed money; (b) obligations evidenced by bonds, debentures, notes, or other
similar instruments; (c) obligations for the deferred purchase price of property
or services (including trade obligations); (d) obligations as lessee under
Capital Leases; (e) current liabilities in respect of unfunded vested benefits
under Plans covered by ERISA; (f) obligations under letters of credit; (g)
obligations under acceptance facilities; (h) all guaranties, endorsements and
other Contingent Obligations to purchase, to provide funds for payment, to
supply funds to invest in any Person, or otherwise to assure a creditor against
loss; and (i) obligations secured by any Liens, whether or not the obligations
have been assumed.
"Insolvency Proceeding" means any proceeding commenced by
or against any person or entity under any provision of the United States
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
"Investment" means any beneficial ownership of (including
stock, partnership interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.
"Letters of Credit" mean commercial or standby letters of
credit issued by Bank from time to time under the Revolving Credit.
"Lien" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority, or other security agreement or
preferential arrangement, charge, or encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the UCC or comparable law of any jurisdiction to evidence any of the foregoing).
"Loan Agreement" means the Revolving Credit and Security
Agreement dated July 8, 1999 by and between Bank and Borrower, as amended by the
Modification to Credit and Security Agreement dated March 21, 2000.
"Loan Documents" means, collectively, this Agreement and
any other agreement or instrument executed pursuant to or in connection with the
Indebtedness, this Agreement or the other Loan Documents, as such documents may
be amended from time to time.
"Material Adverse Effect" means a material adverse effect
upon the financial or other condition of Borrower or any of its Subsidiaries, or
upon Borrower's or any of its Subsidiaries' ability to perform their respective
obligations under any of the Loan Documents, or upon the enforceability of this
Agreement or any of the other Loan Documents.
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"Negotiable Collateral" means all of Borrower's present
and future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Bank pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising
under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and
disclosed to Bank in Borrower's most recent Financial Statements;
(c) Indebtedness to trade creditors and with respect to
surety bonds and similar obligations incurred in the ordinary course of
business;
(d) Subordinated Debt;
(e) Indebtedness of Borrower to any Subsidiary and
Contingent Obligations of any Subsidiary with respect to obligations of Borrower
(provided that the primary obligations are not prohibited hereby), and
indebtedness of any Subsidiary to any other Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of any other
Subsidiary (provided that the primary obligations are not prohibited hereby);
(f) Subject to Section 9.2, Indebtedness secured by
Permitted Liens;
(g) Subject to Section 9.2, Capital Expenditures
incurred solely to purchase equipment which is secured in accordance with clause
(g) of the definition "Permitted Liens" below and such Capital Expenditure is
not in excess of the lesser of: (i) the purchase price of such equipment; or
(ii) the fair market value of such equipment on the date of acquisition; and
(h) Extensions, refinancings, modifications, amendments
and restatements of any of items of Permitted Indebtedness (a) through (g)
above, provided that the principal amount thereof is not increased or the terms
thereof are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.
"Permitted Investment" means:
(a) Investments existing on the Closing Date and
disclosed to Bank in Borrower's most recent Financial Statements;
(b) (i) marketable direct obligations of the United
States or any agency thereof with maturities of one (1) year or less from the
date of acquisition; (ii) commercial paper of a domestic issuer maturing no more
than one (1) from the date issuance thereof rated at least "A-1" by Standard &
Poor's Corporation of "P-1" by Moody's Investors Service, Inc.; (iii)
certificates of deposit with maturities of one (1) year or less from the date of
acquisition issued by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than Two Hundred Fifty Million
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and 00/100 Dollars ($250,000,000) and not subject to setoff rights in favor of
such bank; and (iv) any Investments permitted by Borrower's investment policy,
as amended from time to time, provided that such investment policy and any such
amendment thereto has been approved by Bank;
(c) Investments consisting of the endorsement of
negotiable instruments for deposit or collection or similar transaction in the
ordinary course of business;
(d) Investments accepted in connection with
dispositions permitted by Section 9.1;
(e) Investments consisting of (i) compensation of
employees, officers and directors of Borrower or its Subsidiaries so long as the
Board of Directors of Borrower determines that such compensation is in the best
interests of Borrower, (ii) travel advances, employee relocation loans and other
employee loans and advances in the ordinary course of business, and (iii) loans
to employees, officers or directors relating to the purchase of equity
securities of Borrower or its Subsidiaries pursuant to employee stock purchase
plans or agreements approved by Borrower's Board of Directors;
(f) Investments (including debt obligations) received
in connection with the bankruptcy or reorganization of customers or suppliers
and in settlement of delinquent obligations of, and other disputes with,
customers or suppliers arising in the ordinary course of business;
(g) Investments pursuant to or arising under currency
agreements or interest rate agreements entered into in the ordinary course of
business;
(h) Investments consisting of notes receivable of, or
prepaid royalties and other credit extensions to, customers and suppliers who
are not Affiliates, in the ordinary course of business; provided that this
paragraph (h) shall not apply to Investments by Borrower in any Subsidiary;
(i) Investments constituting acquisitions permitted
under Section 9.4;
(j) Deposit accounts of Borrower in which Bank has a
Lien prior to any other Lien;
(k) Deposit accounts of any subsidiaries maintained in
the ordinary course of business;
(l) Investments or Subsidiaries in or to other
Subsidiaries or Borrower and Investments by Borrower in Subsidiaries not to
exceed $100,000 in the aggregate;
(m) Other Investments not otherwise permitted by
Section 9.9 not exceeding $100,000 in the aggregate outstanding at any time; and
(n) Investments not to exceed $100,000 in the aggregate
consisting of joint ventures and strategic partnership consisting of the
development or licensing of technology or the providing of technical support.
"Permitted Liens" means the following:
(a) any Liens existing on the Closing Date and
disclosed in Exhibit B or arising under this Agreement or the other Loan
Documents;
(b) Liens for taxes, assessments or other governmental
charges incurred in the ordinary course of business and for which no interest,
late charge or penalty is attaching or which is being contested in good faith by
appropriate proceedings and, if requested by Bank, bonded in an amount and
manner satisfactory to
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Bank;
(c) Liens, not delinquent, created by statute in
connection with worker's compensation, unemployment insurance, social security
and similar statutory obligations;
(d) Liens of mechanics, materialmen, carriers,
warehousemen or other like statutory or common law liens securing obligations
incurred in good faith in the ordinary course of business that are not yet due
and payable;
(e) Encumbrances consisting of existing or future
zoning restrictions, existing recorded rights-of-way, existing recorded
easements, existing recorded private restrictions or existing or future public
restrictions on the use of real property, none of which materially impairs the
use of such property in the operation of the business for which it is used and
none of which is violated in any material respect by any existing or proposed
structure or land use;
(f) Deposits under worker's compensation, unemployment
insurance, social security and other similar laws, or to secure the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure indemnity, performance or other similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations (other than liens arising under ERISA or
environmental liens) or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business;
(g) Liens (i) upon or in any equipment, other than
equipment financed hereunder, acquired or held by Borrower or any of its
Subsidiaries to secure the purchase price of such equipment or indebtedness
incurred solely for the purpose of financing the acquisition of such Equipment,
or (ii) existing on such Equipment at the time of its acquisition, provided that
the Lien is confined solely to the property so acquired and improvements
thereof, and the proceeds of such Equipment;
(h) Liens on equipment leased by Borrower or any
Subsidiary pursuant to an operating or capital lease in the ordinary course of
business (including proceeds thereof and accessions thereto) incurred solely for
the purpose of financing the lease of such equipment (including Liens pursuant
to leases permitted pursuant to Section 9.1 and Liens arising from UCC financing
statements regarding leases permitted by this Agreement);
(i) Leases or subleases and licenses and sublicenses
granted to others in the ordinary course of Borrower's business not interfering
in any material respect with the business of Borrower and its Subsidiaries taken
as a whole, and any interest or title of a lessor, licensor or under any lease
or license;
(j) Liens or assets (including the proceeds thereof and
accessions thereto that existed at the time such assets were acquired by
Borrower or any Subsidiary (including Liens on assets of any corporation that
existed at the time it became or becomes a Subsidiary); provided such Liens are
not granted in contemplation or in connection with the acquisition of such asset
by Borrower or a Subsidiary;
(k) Liens arising from judgments, decrees or
attachments in circumstances not constituting an Event of Default under Section
10.9;
(l) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payments of customs duties in connection
with the importation of goods;
(m) Liens that are not prior to the Lien of Bank which
constitute rights of set-off of a customary nature or banker's Liens with
respect to amounts on deposit, where arising by operation of law or by contract,
in connection with arrangement entered in to with banks in the ordinary course
of business;
(n) Earn-out and royalty obligations existing on the
date hereof or entered into in connection with an acquisition permitted by
Section 9.4 or Section 9.9;
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(o) Liens on insurance proceeds in favor of insurance
companies granted solely as security for financed premiums; and
(p) Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by Liens of the type
described in clauses (a), (g) (h), (i), (j) and (n) above, provided that any
extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Quick Assets" means, at any date as of which the amount
thereof shall be determined, the total cash, marketable securities and
net-accounts receivable of such Person.
"Responsible Officer" means each of the President, Chief
Executive Officer, Chief Financial Officer, Chief Technology Officer or Senior
Vice President of Borrower.
"Revolving Credit" means the facility under which Borrower
may request Bank to issue cash advances, as specified in Section 2.1 hereof.
"Subordinated Debt" means indebtedness of Borrower to
third parties which has been subordinated to the Obligations pursuant to a
subordination agreement in form and substance satisfactory to Bank.
"Subsidiary" means any corporation or partnership in which
(a) any general partnership interest or (b) more than 50% of the stock of which
by the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.
"Tangible Net Worth" means the excess of (a) the net book
value of all assets of a Person (excluding money due from Affiliates (including
officers, directors, subsidiaries and commonly held companies) patents, patent
rights, trademarks, trade names, franchises, copyrights, licenses, goodwill and
similar intangible assets) after all appropriate deductions in accordance with
GAAP (including, without limitation, reserves for doubtful receivables,
obsolescence, depreciation and amortization), over all Total Liabilities of such
Person.
"Termination Date" means the earlier of (a) acceleration
of the Obligations for any reason under the terms of this Agreement; (b) July
10, 2001; or (c) termination by either party as set forth in Section 14.2.
"Total Liabilities" means at any date as of which the
amount thereof shall be determined, all obligations that should, in accordance
with GAAP be classified as liabilities on the consolidated balance sheet of a
Person, including in any event all Indebtedness, but specifically excluding
Subordinated Debt.
"UCC" means the Uniform Commercial Code as in effect on
the date hereof in the State of California.
1.2 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance
with GAAP and all calculations made hereunder shall be made in
accordance with GAAP. When used herein, the term "Financial
Statements" shall include the notes and schedules thereto.
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ARTICLE II
REVOLVING CREDIT
2.1 Revolving Credit. Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Advances to
Borrower (pursuant to Section 2.1 hereof) and issue Letters of
Credit (pursuant to Section 2.2 hereof) under a revolving line
of credit (the "Revolving Credit") from time to time in amounts
requested by Borrower up to an aggregate outstanding principal
amount equal to the Committed Line less the face amount of all
issued and outstanding Letters of Credit (including drawn but
unreimbursed letters of credit). Subject to the terms and
conditions of this Agreement, Borrower may borrow and reborrow
under this Section 2.1.
2.2 Letters of Credit.
2.2.1 Issuance. Subject to, and upon the terms
and conditions contained herein, at the request of
Borrower, Bank agrees from time to time during the term
of this Agreement to issue Letters of Credit for the
account of Borrower containing terms and conditions
acceptable to Bank, provided however that no Letter of
Credit shall have an expiration date beyond ninety (90)
days from the Termination Date. Each draft paid by Bank
under a Letter of Credit shall be deemed an Advance
under the Revolving Credit and shall be repaid by
Borrower in accordance with the terms and conditions of
this Agreement applicable to such Advances; provided
however, that if the Revolving Credit is not available,
for any reason whatsoever, at the time any draft is paid
by Bank, or if Advances are not available under the
Revolving Credit at such time due to any limitation on
borrowings set forth herein, then the full amount of
such draft shall be immediately due and payable,
together with interest thereon, from the date such
amount is paid by Bank to the date such amount is fully
repaid by Borrower, at the rate of interest applicable
to Advances. In such event, Borrower agrees that Bank,
at Bank's sole discretion, may debit Borrower's deposit
account with Bank for the amount of any such draft.
2.2.2 Letter of Credit Sublimit. No Letters of
Credit shall be issued unless, on the date of the
proposed issuance of any Letter of Credit, the Advances
available to Borrower under the Revolving Credit are
equal to one hundred percent (100%) of the face amount
of such Letters of Credit. Except in Bank's discretion,
the amount of all Letter of Credit Obligations shall not
at any time exceed Three Million Five Hundred Thousand
and 00/100 Dollars ($3,500,000).
2.2.3 Letter of Credit Agreement. Each Letter of
Credit shall be subject to the additional terms and
conditions of the Letter of Credit Agreement and related
documents, if any, required by Bank in connection with
the issuance thereof (each, a "Letter of Credit
Agreement").
2.2.4 Letter of Credit Fees. Borrower shall pay
to Bank fees upon the issuance or amendment of each
Letter of Credit and upon the payment by Bank of each
draft under any Letter of Credit determined in
accordance with Bank's standard fees and charges in
effect at the time any Letter of Credit is issued or
amended or any draft is paid.
2.2.5 Termination of Revolving Credit. Upon
termination of the Revolving Credit, Borrower shall
provide Bank cash security for all issued and
outstanding Letters of Credit.
2.3 Manner of Borrowing. Borrower may request an Advance
under the Revolving Credit only after delivery to Bank of a
Request for Advance executed by an authorized officer of
Borrower, subject to the following: (a) each such Request for
Advance shall set forth the information required on the Request
for Advance form annexed hereto as Exhibit D (or such other
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form as acceptable to Bank), including, without limitation, the
proposed amount and date of such Advance, which date must be a
Business Day; (b) each such Request for Advance shall be
delivered to Bank by 3:00 p.m. California time on the proposed
date of Advance; and (c) a Request for Advance, once delivered
to Bank, shall not be revocable by Borrower.
2.3.1 Bank may make Advances under the Revolving
Credit upon the telephonic or facsimile request of
Borrower, which Borrower shall confirm in writing by
delivering to Bank, on or before 11:00 a.m. on the next
Business Day following such Advance with a duly executed
Request for Advance and Borrower shall indemnify and
hold Bank harmless for any damages or loss suffered by
Bank as a result of reliance on such telephonic or
facsimile request.
2.4 Interest. Borrower shall pay interest to Bank on the
outstanding and unpaid principal amount of the Revolving Credit
at a floating rate per annum equal to the Base Rate.
2.4.1 Adjusted Rate. Any change in the interest
rate resulting from a change in the Base Rate shall be
effective as of the opening of business on the day on
which such change in the Base Rate becomes effective.
2.4.2 Default Rate. From and after the
Termination Date, Advances under the Revolving Credit
shall bear interest at a rate equal to three percentage
points (3%) more than the interest rate that would have
been applicable hereunder. Anything herein to the
contrary notwithstanding, interest at the default rate
shall be due and payable on demand but shall accrue from
the Termination Date until all Advances are paid in
full.
2.5 Repayment Terms. Interest only shall be due and
payable on the unpaid principal balance of the Revolving Credit,
without claim, notice, presentment or demand, in consecutive
monthly installments on the first (1st) day of each month
commencing on the first (1st) day of the first (1st) full
calendar month following the Funding Date. Whenever any payment
to Bank under the Loan Documents would otherwise be due (except
by reason of acceleration) on a date that is not a Business Day,
such payment shall instead be due on the next Business Day, and
additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5.1 Application of Payments. Each payment
received by Bank shall be credited as of its due date,
without regard to its date of receipt by Bank, first to
interest accrued and unpaid as of such due date and the
remainder to principal, and interest shall cease upon
the principal so credited. All interest calculations
shall be on a basis of a three hundred and sixty
(360)-day year for the actual number of days elapsed.
Daily interest shall consist of the product of the
outstanding principal balance of the Revolving Credit
times the annual interest rate then in effect divided by
360, then multiplied by the number of days for which the
daily interest calculation is made. Interest paid for
any partial month shall be prorated based on a thirty
(30)-day month and the actual number of day elapsed.
Interest shall be compounded monthly.
2.5.2 Crediting Payments. Prior to the
occurrence of an Event of Default, Bank shall credit a
wire transfer of funds, check or other item of payment
to such deposit account or Obligation as Borrower
specifies. After the occurrence of an Event of Default,
the receipt by Bank of any wire transfer of funds,
check, or other item of payment shall be immediately
applied to conditionally reduce Obligations, but shall
not be considered a payment on account unless such
payment is of immediately available federal funds or
unless and until such check or other item of payment is
honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00
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noon California time shall be deemed to have been
received by Bank as of the opening of business on the
immediately following Business Day.
2.5.3 Method of Payment. Borrower shall make
each payment under this Agreement when due in lawful
money of the United States to Bank at its address set
forth herein, or at such other location as directed by
Bank in writing, in immediately available funds.
Borrower hereby authorizes Bank, if and to the extent
payment is not made when due under this Agreement, to
charge from time to time against any deposit account of
Borrower with Bank any amount so due. Whenever any
payment to be made under this Agreement shall be stated
to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business
Day, and such extension of time shall in such case be
included in the computation of the payment of interest.
2.6 Revolving Credit Fee. Borrower agrees to pay to Bank
a commitment fee equal to the rate of one quarter (1/4) of one
percent (0.25%) per annum of the Committed Line, payable on the
Closing Date and each anniversary of such date thereafter.
2.7 Overadvances. If, at any time or for any reason, the
amount of Obligations owed by Borrower to Bank pursuant to
Section 2.1 of this Agreement is greater than the Committed
Line, Borrower shall immediately pay to Bank, in cash, the
amount the Obligations exceed the Committed Line.
2.8 Termination of Revolving Credit. The Revolving
Credit shall terminate on the Termination Date, at which time
all unpaid principal, all unpaid and accrued interest, and all
other amounts due under the Revolving Credit shall be
immediately due and payable.
2.9 Statements. With respect to each Advance, Bank is
hereby authorized to note the date, principal amount, and
interest rate applicable thereto, and any payments made thereon,
on its books and records (either manually or by electronic
entry), which notations shall be conclusive evidence of the
information noted in the absence of manifest error. A failure by
Bank to record any such information shall not impair the
Borrower's liability to make payment when due. Bank shall render
to Borrower each month a statement setting forth the balance in
Borrower's loan account maintained by Bank for Borrower pursuant
to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Bank but shall, absent
manifest errors or omissions, be considered correct and deemed
accepted by Borrower and conclusively binding upon Borrower as
an account stated except to the extent that Bank receives a
written notice from Borrower of any specific exceptions of
Borrower thereto within thirty (30) days after the date such
statement has been mailed by Bank. Until such time as Bank shall
have rendered to Borrower a written statement as provided above,
the balance in Borrower's loan account shall be presumptive
evidence of the amounts due and owing to Bank by Borrower.
2.10 Ratification of Obligations. Borrower ratifies and
reaffirms the Obligations under the Loan Agreement, which are
currently outstanding, as of the Closing Date, in the principal
amount of One Million Five Hundred Twenty-Five Thousand and
00/100 Dollars ($1,525,000.00) without setoff, defense, or
counterclaim. Borrower agrees fully and faithfully to pay,
perform and discharge, as and when payment, performance and
discharge are due, all of the Obligations under the Loan
Agreement, as amended hereby. By executing this Agreement,
Borrower acknowledges and agrees that except as supplemented or
modified hereby, the Loan Documents are and shall remain in full
force and effect.
ARTICLE III
ADDITIONAL COSTS
<PAGE> 11
3.1 Financial Examination and Appraisal Fees. Borrower
shall pay Bank's customary fees and out-of-pocket expenses for
Bank's audits of Borrower's accounts, and for each appraisal of
Collateral and financial analysis and examination of Borrower
performed from time to time by Bank or its agents.
3.2 Bank Expenses. Borrower shall pay upon the date
hereof, all Bank Expenses incurred through the Closing Date,
including reasonable attorneys' fees and expenses, and, after
the date hereof, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.
3.3 Additional Costs. In case any change in any law,
regulation, treaty or official directive or the interpretation
or application thereof by any court or any governmental
authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or
other governmental authority (whether or not having the force of
law), in each case after the date of this Agreement: (a)
subjects Bank to any tax with respect to payments of principal
or interest or any other amounts payable hereunder by Borrower
or otherwise with respect to the transactions contemplated
hereby (except for taxes on the overall net income of Bank
imposed by the United States of America or any political
subdivision thereof); (b) imposes, modifies or deems applicable
any deposit insurance, reserve, special deposit or similar
requirement against assets held by, or deposits in or for the
account of, or loans by, Bank; or (c) imposes upon Bank any
other condition with respect to its performance under this
Agreement, and the result of any of the foregoing is to increase
the cost to Bank, reduce the income receivable by Bank or impose
any expense upon Bank with respect to any loans, Bank shall
notify Borrower thereof. Borrower agrees to pay to Bank the
amount of such increase in cost, reduction in income or
additional expense as and when such cost, reduction or expense
is incurred or determined, upon presentation by Bank of a
statement of the amount and setting forth Bank's calculation
thereof, all in reasonable detail.
ARTICLE IV
CONDITIONS OF LOANS
4.1 Conditions Precedent to Initial Advance. The
obligation of Bank to make the initial Advance is subject to the
condition precedent that Bank shall have received, in form and
substance satisfactory to Bank, the following:
4.1.1 this Agreement;
4.1.2 the payment by Borrower of Bank's
attorneys' fees and costs in preparing this Agreement;
4.1.3 a certificate of the Secretary of Borrower
with respect to incumbency and resolutions authorizing
the execution and delivery of this Agreement; and
4.1.4 such other documents, and completion of
such other matters, as Bank may reasonably deem
necessary or appropriate.
4.2 Conditions Precedent to Disbursement of All Loans.
The obligation of Bank to make any Advance under this Agreement,
including the initial Advance hereunder, shall be further
subject to the satisfaction of each of the following conditions
precedent on or before any disbursement under such Advance:
4.2.1 Representations and Warranties. Each of
the representations and warranties of Borrower, and any
other Person who is a party to any of
<PAGE> 12
the Loan Documents, under this Agreement and any of the
other Loan Documents shall be true and correct in all
material respects.
4.2.2 No Default or Material Adverse Change. No
Default or Event of Default shall have occurred and be
continuing; there shall have been no material adverse
change in the condition (financial or otherwise),
properties, business, or operations of Borrower, any of
its Subsidiaries, or any guarantor since the date of the
most recent Financial Statements delivered to Bank in
accordance with the terms of this Agreement; and no
provision of law, any order of any court or other agency
of government, or any regulation, rule or interpretation
thereof, shall reasonably be expected to have had any
Material Adverse Effect on the validity or
enforceability of this Agreement, or any other Loan or
Collateral Documents.
ARTICLE V
CREATION OF SECURITY INTEREST
5.1 Grant of Security Interest. In order to secure
prompt repayment of any and all Obligations, and in order to
secure prompt performance by Borrower of each of its covenants
and duties under the Loan Documents, Borrower grants and pledges
to Bank a continuing security interest in all presently existing
and hereafter acquired or arising Collateral. Except as set
forth in the Exhibit B, and for Permitted Liens, such security
interest constitutes a valid, first priority security interest
in the presently existing Collateral, and will constitute a
valid, first priority security interest in Collateral acquired
after the date hereof., to the extent that a security interest
in such Collateral can be perfected by the filing of a financing
statement or, in the case of Collateral consisting of
instruments, documents, chattel paper or certificated
securities, to the extent that Bank takes possession of such
Collateral. Borrower acknowledges that Bank may place a "hold"
on any deposit account pledged as Collateral to secure the
Obligations. Bank agrees to execute and deliver to Borrower from
time to time such subordination agreements as Borrower may
request and as are necessary to give to other lenders which
finance equipment for Borrower a first priority security
interest in the equipment financed so long as the Liens and the
Indebtedness incurred with respect to such equipment financing
are permitted under this Agreement. Notwithstanding the
foregoing, the security interest granted herein shall not extend
to and the term "Collateral" shall not include any property,
rights or licenses to the extent the granting of a security
interest therein (a) would be contrary to applicable law; or (b)
is prohibited by or would constitute a default under any
agreement or document governing such property, rights or
licenses (but only to the extent such prohibition is enforceable
under applicable law, including without limitation Section 9318
of the Code); provided that immediately and automatically upon
the ineffectiveness, lapse or termination of any such
prohibition or restriction, the Collateral shall include such
property, rights or licenses, and Borrower shall be deemed to
have granted a security interest in all such rights and
interests as if such prohibition or restriction had never been
in effect. Notwithstanding termination of this Agreement, Bank's
Lien on the Collateral shall remain in effect for so long as any
Obligations are outstanding.
5.2 Delivery of Additional Documentation Required.
Borrower shall from time to time execute and deliver to Bank, at
the request of Bank, all Negotiable Collateral, all financing
statements and other documents that Bank may reasonably request,
in form satisfactory to Bank, to perfect and continue perfected
Bank's security interests in the Collateral and in order to
fully consummate all of the transactions contemplated under the
Loan Documents.
5.3 Right to Inspect. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable
prior notice, from time to time during Borrower's usual business
hours, to inspect Borrower's Books and to make copies thereof
and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition
of, or any other matter relating to, the Collateral.
Notwithstanding any provision of this Agreement to the contrary,
except upon the occurrence and during the continuation of an
Event of Default, Borrower shall not be required to disclose,
permit the inspection, examination, copying or
<PAGE> 13
making extracts of, or discuss, any document, information or
other matter that (a) constitutes non-financial trade secrets or
non-financial proprietary information, or (b) the disclosure of
which to Bank, or their designated representative, is then
prohibited by (i) law, or (ii) an agreement binding on the
Borrower that was not entered into by the Borrower for the
primary purpose of concealing information from the Bank.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
6.1 Due Organization and Qualification. Borrower and
each Subsidiary is a corporation duly existing and in good
standing under the laws of its state of incorporation and
qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or
its ownership of property requires that it be so qualified.
6.2 Due Authorization; No Conflict. The execution,
delivery, and performance of the Loan Documents are within
Borrower's powers, have been duly authorized, and are not in
conflict with nor constitute a breach of any provision contained
in Borrower's Articles of Incorporation or Bylaws, nor will they
constitute an event of default under any material agreement to
which Borrower is a party or by which Borrower is bound.
Borrower is not in default under any agreement to which it is a
party or by which it is bound, which default could have a
Material Adverse Effect.
6.3 No Prior Encumbrances. Borrower has good and valid
title to all property and assets purported to be owned by it,
including those assets identified on the Financial Statements
most recently delivered by Borrower to and accepted by Bank,
free and clear of all security interests, liens, mortgages, or
other encumbrances, except for Permitted Liens.
6.4 Bona Fide Accounts. Borrower's accounts are bona
fide existing obligations. The property giving rise to such
accounts has been delivered to the account debtor or to the
account debtor's agent for immediate shipment to and
unconditional acceptance by the account debtor. Borrower has not
received notice of actual or imminent Insolvency Proceeding of
any account debtor.
6.5 Merchantable Inventory. All inventory not otherwise
disclosed in the Financial Statements is in all material
respects of good and marketable quality, free from all material
defects.
6.6 Name; Location of Chief Executive Office. Borrower
has not done business under any name other than that specified
on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Article XII
hereof.
6.7 Litigation. Except as set forth in Exhibit E, there
are no actions or proceedings pending by or against Borrower or
any Subsidiary before any court or administrative agency in
which an adverse decision could have a Material Adverse Effect
on Borrower's interest or Bank's security interest in the
Collateral. Borrower does not have knowledge of any such pending
or threatened actions or proceedings.
<PAGE> 14
6.8 No Material Adverse Change in Financial Statements.
All consolidated Financial Statements related to Borrower and
any Subsidiary that have been delivered by Borrower to Bank
fairly present in all material respects Borrower's consolidated
financial condition as of the date thereof and Borrower's
consolidated results of operations for the period then ended.
There has not been a material adverse change in the consolidated
financial condition of Borrower since the date of the most
recent of such Financial Statements submitted to Bank.
6.9 Solvency. Borrower is solvent and able to pay its
debts (including trade debts) as they mature.
6.10 Regulatory Compliance. Borrower and each Subsidiary
has met the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA. No event has
occurred resulting from Borrower's failure to comply with ERISA
that is reasonably likely to result in Borrower's incurring any
liability that could have a Material Adverse Effect. Borrower is
not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment
Company Act of 1940. Borrower is not engaged principally, or as
one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulations G, T and U of the Board of
Governors of the Federal Reserve System). Borrower has complied
with all the provisions of the Federal Fair Labor Standards Act.
Borrower has not violated any statutes, laws, ordinances or
rules applicable to it, violation of which could have a Material
Adverse Effect.
6.11 Environmental Condition. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower
or any Subsidiary or, to the best of Borrower's knowledge, by
previous owners or operators, in the disposal of, or to produce,
store, handle, treat, release, or transport, any hazardous waste
or hazardous substance other than in accordance with applicable
law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in
any manner pursuant to any environmental protection statute as a
hazardous waste or hazardous substance disposal site, or a
candidate for closure pursuant to any environmental protection
statute; no lien arising under any environmental protection
statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither
Borrower nor any Subsidiary has received a summons, citation,
notice, or directive from the Environmental Protection Agency or
any other federal, state or other governmental agency concerning
any action or omission by Borrower or any Subsidiary resulting
in the releasing, or otherwise disposing of hazardous waste or
hazardous substances into the environment.
6.12 Taxes. Borrower and each Subsidiary has filed or
caused to be filed all tax returns required to be filed, and has
paid, or has made adequate provision for the payment of, all
taxes reflected therein.
6.13 Subsidiaries and Ownership of Stock. Set forth in
Exhibit F is a complete and accurate list of the Subsidiaries of
Borrower, showing the jurisdiction of incorporation of each and
showing the percentage of Borrower's ownership of the
outstanding stock of each Subsidiary. All of the outstanding
capital stock of each such Subsidiary has been validly issued,
is fully paid and nonassessable, and is owned by Borrower free
and clear of all Liens.
6.14 Government Consents. Borrower and each Subsidiary
has obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all
governmental authorities that are necessary for the continued
operation of Borrower's business as currently conducted.
6.15 Full Disclosure. No representation, warranty or
other statement made by Borrower in any certificate or written
statement furnished to Bank contains any untrue
<PAGE> 15
statement of a material fact or omits to state a material fact
necessary in order to make the statements contained in such
certificates or statements not misleading.
ARTICLE VII
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:
7.1 Good Standing. Borrower shall maintain its and each
of its Subsidiaries' corporate existence and good standing in
its jurisdiction of incorporation and maintain qualification in
each jurisdiction in which the failure to so qualify could have
a Material Adverse Effect. Borrower shall maintain, and shall
cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in
force all licenses, approvals and agreements, the loss of which
could have a Material Adverse Effect.
7.2 Government Compliance. Borrower shall meet, and
shall cause each Subsidiary to meet, the minimum funding
requirements of ERISA with respect to any employee benefit plans
subject to ERISA. Borrower shall comply, and shall cause each
Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject,
noncompliance with which could have a Material Adverse Effect or
a material adverse effect on the Collateral or the priority of
Bank's Lien on the Collateral.
7.3 Financial Statements. Borrower shall deliver to
Bank:
7.3.1 Quarterly Reports. As soon as available
and in any event within forty-five (45) days after the
end of each fiscal quarter, Borrower shall deliver its
Form 10-Q Quarterly Report filed pursuant to the
Securities Exchange Act of 1934, as amended from time to
time, and any successor statute, and the rules and
regulations issued thereunder ("Exchange Act"), all as
the same may be in effect at the time.
7.3.2 Annual Report. As soon as available and in
any event within ninety (90) days after the end of each
fiscal year, Borrower shall deliver its Form 10-K Annual
Report filed pursuant to the Exchange Act.
7.4 Compliance Certificate. Borrower shall deliver to
Bank with each Form 10-Q Quarterly Report and Form 10-K Annual
Report a Compliance Certificate signed by a Responsible Officer
in substantially the form of Exhibit C hereto.
7.5 Audit of Accounts. Upon an Event of Default, Bank
shall have the right to conduct audits of Borrower's accounts
and Borrower's Books, at Borrower's expense, as frequent as Bank
may determine in its reasonable discretion.
7.6 Inventory; Returns. Borrower shall keep all
inventory in good and marketable condition, free from all
material defects. Returns and allowances, if any, as between
Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this
Agreement. Borrower shall promptly notify Bank of all returns
and recoveries and of all disputes and claims, where the return,
recovery, dispute or claim involves more than Five-Hundred
Thousand Dollars ($500,000). Upon an Event of Default, Bank
shall have a right from time to time hereafter to audit
Borrower's inventory at Borrower's expense, as frequent as Bank
may determine in its reasonable discretion.
\
<PAGE> 16
7.7 Taxes. Borrower shall make, and shall cause each
Subsidiary to make, due and timely payment or deposit of all
material federal, state, and local taxes, assessments, or
contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting
to the payment or deposit thereof; and Borrower will make, and
will cause each Subsidiary to make, timely payment or deposit of
all material tax payments and withholding taxes required of it
by applicable laws, including, but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish
Bank with proof satisfactory to Bank indicating that Borrower or
a Subsidiary has made such payments or deposits; provided that
Borrower or a Subsidiary need not make any payment if the amount
or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent
required by GAAP) by Borrower.
7.8 Insurance.
7.8.1 Borrower, at its expense, shall keep the
Collateral insured against loss or damage by fire,
theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as ordinarily insured
against by other owners in similar businesses conducted
in the locations where Borrower's business is conducted
on the date hereof. Borrower shall also maintain
insurance relating to Borrower's ownership and use of
the Collateral in amounts and of a type that are
customary to businesses similar to Borrower's.
7.8.2 All such policies of insurance shall be in
such form, with such companies, and in such amounts as
reasonably satisfactory to Bank. All such policies of
property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing
Bank as an additional loss payee thereof and all
liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer
must give at least twenty (20) days notice to Bank
before canceling its policy for any reason. Upon Bank's
request, Borrower shall deliver to Bank certified copies
of such policies of insurance and evidence of the
payments of all premiums therefor. All proceeds payable
under any such policy shall, at the option of Bank, be
payable to Bank to be applied on account of the
Obligations.
7.9 Principal Depository. Borrower shall maintain its
principal depository and operating accounts with Bank.
7.10 Environmental Covenants. Comply in all material
respects with all applicable Environmental Laws, and maintain
all material permits, licenses and approvals required under
applicable Environmental Laws, where the failure to do so could
have a Material Adverse Effect upon the business, operations,
condition (financial or otherwise) performance or properties of
Borrower, of any of its Subsidiaries, or could have a Material
Adverse Effect upon Borrower's, or any of its Subsidiaries',
ability to perform their respective obligations under this
Agreement or any of the other Loan Documents, or could
materially adversely affect the enforceability of this Agreement
or any of the other Loan Documents.
7.10.1 Promptly notify Bank, in writing, as soon
as Borrower becomes aware of any condition or
circumstance which makes any of the environmental
representations or warranties set forth in this
Agreement incomplete, incorrect or inaccurate in any
material respect as of any date; and promptly provide to
Bank, immediately upon receipt thereof, copies of any
material correspondence, notice, pleading, citation,
indictment, complaint, order, decree, or other document
from any source asserting or alleging a violation of any
Environmental Laws by either Borrower, or any of its
Subsidiaries, or of any circumstance or condition which
requires or may require, a material financial
contribution by Borrower, or any of its Subsidiaries, or
a clean-up, removal, remedial action or other response
by or on behalf of Borrower, or any of its Subsidiaries,
under applicable Environmental Law(s), or which seeks
damages or
<PAGE> 17
civil, criminal, or punitive penalties from Borrower, or
any of its Subsidiaries, in an amount in excess of One
Million Dollars ($1,000,000.00), or any violation or
alleged violation of Environmental Law(s).
7.11 Further Assurances. At any time and from time to
time Borrower shall execute and deliver such further instruments
and take such further action as may reasonably be requested by
Bank to effect the purposes of this Agreement.
ARTICLE VIII
FINANCIAL COVENANTS
8.1 Quick Ratio. Borrower shall maintain, as of the last
day of each fiscal quarter, a ratio of Quick Assets to Current
Liabilities of at least 2.0 to 1.0.
8.2 Debt Ratio. Borrower shall maintain, as of the last
day of each fiscal quarter, a ratio of Indebtedness to Effective
Tangible Net Worth of not more than 0.75 to 1.00.
8.3 Tangible Net Worth. Borrower shall maintain, as of
the last day of each fiscal quarter, a Tangible Net Worth of not
less than One Hundred Fifty Million and 00/100 Dollars
($150,000,000.00), provided however that this amount shall
increase quarterly by an amount equal to one hundred percent
(100%) of Borrower's new equity or Subordinated Debt.
ARTICLE IX
NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following, without the prior written consent of
Bank:
9.1 Sale of Assets. Sell, lease, assign, transfer, or
otherwise dispose of, or permit any Subsidiary to sell, lease,
assign, transfer, or otherwise dispose of, any of its now owned
of hereafter acquired assets (including, without limitation,
shares of stock and indebtedness of Subsidiaries, receivables,
and leasehold interests), except: (a) inventory disposed of in
the ordinary course of business; (b) the sale or other
disposition of assets no longer used or useful in the conduct of
its business; or (c) that any Subsidiary may sell, lease,
assign, or otherwise transfer its assets to the Borrower.
9.2 Capital Expenditures. Borrower will not make any
Capital Expenditures if, after giving thereto, the aggregate of
all such expenditures made by Borrower would exceed Twenty Five
Million and 00/100 Dollars ($25,000,000.00) during Borrower's
calendar year 2000.
9.3 Capital Structure; Change in Business. Purchase,
acquire or redeem any of its capital stock, or enter into any
reorganization or recapitalization or reclassify its capital
stock, or make any material change in its capital structure or
engage in any business, or permit any of its Subsidiaries to
engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or
related thereto (or incidental thereto), or suffer a material
change in Borrower's ownership. Borrower will not, without
thirty (30) days prior written notification to Bank, relocate
its chief executive office.
9.4 Mergers or Acquisitions. Wind up, liquidate or
dissolve itself, reorganize, merge or consolidate with or into,
or convey, sell, assign, transfer, lease, or otherwise dispose
of (whether in one transaction or in a series of transactions)
all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person, or acquire all of
substantially all of the assets or the business of any Person,
or permit any Subsidiary to do so, except that (a) any
<PAGE> 18
Subsidiary may merge with Borrower, so long as Borrower is the
surviving entity, or transfer assets to the Borrower; (b) any
Subsidiary may merge into or consolidate with or transfer assets
to any other Subsidiary; (c) Borrower may, with the prior
written consent of Bank, merge with or acquire a Person with
Borrower's stock, or a combination of stock plus cash, provided
that (i) the cash portion of the transaction does not exceed One
Hundred Million and 00/100 Dollars ($100,000,000.00) annually;
(ii) the merger or acquisition is with a Person in a similar
line of business; and (iii) the current management of Borrower
survives such merger or acquisition; and (d) Borrower may
purchase the inventory, equipment, or intellectual property
rights in any transaction valued at less than $100,000 in the
ordinary course of business.
9.5 Indebtedness. Create, incur, assume or be or remain
liable with respect to any Indebtedness, or permit any
Subsidiary so to do, other than Permitted Indebtedness.
9.6 Encumbrances. Create, incur assume, or suffer to
exist, or permit any Subsidiary to create, incur, assume, or
suffer to exist, any Lien, upon or with respect to any of its
properties, now owned or hereafter acquired, except for
Permitted Liens.
9.7 Sale and Leaseback. Sell, transfer, or otherwise
dispose of, or permit any Subsidiary to sell, transfer, or
otherwise dispose of, any real or personal property to any
Person other than Borrower and thereafter directly or indirectly
lease back the same or similar property.
9.8 Dividends. Declare or pay any dividends; or
purchase, redeem, retire, or otherwise acquire for value any of
its capital stock now or hereafter outstanding, or make any
distribution of assets to its stockholders as such whether in
cash, assets, or in obligations of the Borrower; or allocate or
otherwise set apart any sum for the payment of any dividend or
distribution on, or for the purchase, redemption, or retirement
of any shares of its capital stock; or make any other
distribution by reduction of capital or otherwise in respect of
any shares of its capital stock; or permit any of its
Subsidiaries to purchase or otherwise acquire for value any
stock of the Borrower or another Subsidiary, except (a)
dividends and distributions payable solely in common stock of
Borrower; (b) dividends payable by a Subsidiary to Borrower; (c)
conversion of any of its convertible securities into other
securities pursuant to the terms of such convertible securities
or otherwise in exchange therefore, and (d) redemption,
repurchase or acquisition of any shares of its capital stock
payable upon an employee's termination pursuant to its employee
stock option, repurchase, or similar plan; provided, however,
that after giving effect to such redemption, repurchase or
acquisition, Borrower shall be in full compliance with the terms
of this Agreement.
9.9 Investments and Guaranties, Etc. Borrower will not:
(a) make, or permit any Subsidiary to make, any loans or
advances to any Persons; and (b) assume, guarantee, endorse, or
otherwise be or become directly or contingently responsible or
liable, or permit any Subsidiary to assume, guarantee, endorse,
or otherwise be or become directly or contingently responsible
or liable (including, but not limited to, an agreement to
purchase any obligation, stock, assets, goods, or services, or
to supply or advance any funds, assets, goods, or services, or
an agreement to maintain or cause such Person to maintain a
minimum working capital or net worth or otherwise to assure the
creditors of any Person against loss), for obligations of any
Persons except: (i) guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in
the ordinary course of business; and (ii) guaranties in favor of
Bank, in an aggregate amount in excess of Ten Million and 00/100
Dollars ($10,000,000.00).
9.9.1 Borrower will not purchase or otherwise
acquire, or permit any Subsidiary to purchase or
otherwise acquire, any capital stock, assets,
obligations, or other securities of, make any capital
contribution to, or otherwise invest in or acquire any
interest in any Person, or participate as a partner or
joint venture with any other Person, except Permitted
Investments.
<PAGE> 19
9.10 Transactions With Affiliates. Enter into any
transaction, including, without limitation, the purchase, sale,
or exchange of property or the rendering of any service, with
any Affiliate, or permit any Subsidiary to enter into any
transaction, including, without limitation, the purchase, sale,
or exchange of property or the rendering of any service, with
any Affiliate, except in the ordinary course of and pursuant to
the reasonable requirements of the Borrower's or such
Subsidiary's business and upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary than would obtain
in a comparable arm's-length transaction with a Person not an
Affiliate.
9.11 Subordinated Debt. Make any payment in respect of
any Subordinated Debt, or permit any of its Subsidiaries to make
any such payment, except in compliance with the terms of such
Subordinated Debt, or amend any provision contained in any
documentation relating to the Subordinated Debt without Bank's
prior written consent.
9.12 Prepayment of Indebtedness. Prepay any Indebtedness
(or take any actions which impose an obligation to prepay),
except, subject to the terms hereof or thereof, Indebtedness or
other Debt payable to Bank.
9.13 Pension Plans. Except in compliance with this
Agreement, enter into, maintain, or make contribution to,
directly or indirectly, any Pension Plan that is subject to
ERISA.
9.14 Subordinate Indebtedness. Subordinate any
indebtedness due to it from any Person to indebtedness of other
creditors of such Person.
9.15 No Further Negative Pledges. Enter into or become
subject to any agreement (other than this Agreement or the Loan
Documents) (a) prohibiting the guaranteeing by Borrower or any
of its Subsidiaries of any obligations, (b) prohibiting the
creation or assumption of any lien or encumbrance upon the
properties or assets of Borrower or any of its Subsidiaries,
whether now owned or hereafter acquired, or (c) requiring an
obligation to become secured (or further secured) if another
obligation is secured or further secured.
9.16 Accounts Receivable. Sell or assign any account,
accounts receivable, note or trade acceptance, except to the
Bank.
9.17 Inventory. Store inventory with a bailee,
warehouseman, or similar party unless Bank has received a pledge
of the warehouse receipt covering such Inventory. Except for
Inventory sold in the ordinary course of business and except for
such other locations as Bank may approve in writing, Borrower
shall keep the Inventory only at 40919 Encyclopedia Circle,
Fremont, California 94538 and 405 International Parkway,
Richardson, Texas 75082 and such other locations of which
Borrower gives Bank prior written notice and as to which
Borrower signs and files a financing statement where needed to
perfect Bank's security interest.
9.18 Compliance. Become an "investment company"
controlled by an "investment company," within the meaning of the
Investment Company Act of 1940, or become principally engaged
in, or undertake as one of its important activities, the
business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for
such purpose. Fail to meet the minimum funding requirements of
ERISA, permit a Reportable Event or Prohibited Transaction, as
defined in ERISA, to occur, fail to comply with the Federal Fair
Labor Standards Act or violate any law or regulation, which
violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien
on the Collateral, or permit any of its Subsidiaries to do any
of the foregoing.
<PAGE> 20
ARTICLE X
EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
"Event of Default" by Borrower under this Agreement:
10.1 Payment Default. If Borrower fails to pay the
principal of, or any interest on, any Advances when due and
payable; or fails to pay any portion of any other Obligations
not constituting such principal or interest, including without
limitation Bank Expenses when due;
10.2 Covenant Default. If Borrower fails to perform any
obligation hereunder or violates any of the covenants contained
in this Agreement, or fails or neglects to perform, keep, or
observe any other material term, provision, condition, covenant,
or agreement contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between
Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured,
has failed to cure such default within ten (10) Business Days
after Borrower receives notice thereof or any officer of
Borrower becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day
period or cannot after diligent attempts by Borrower be cured
within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an
additional reasonable period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within
such reasonable time period the failure to have cured such
default shall not be deemed an Event of Default (provided that
no Advances will be required to be made during such cure
period);
10.3 Material Adverse Change. If there occurs a material
adverse change in Borrower's business or financial condition, or
if there is a material impairment of the prospect of repayment
of any portion of the Obligations or a material impairment of
the value or priority of Bank's security interests in the
Collateral;
10.4 Attachment. If any material portion of Borrower's
assets is attached, seized, subjected to a writ or distress
warrant, or is levied upon, or comes into the possession of any
trustee, receiver or person acting in a similar capacity and
such attachment, seizure, writ or distress warrant or levy has
not been removed, discharged or rescinded within ten (10)
Business Days, or if Borrower is enjoined, restrained, or in any
way prevented by court order from continuing to conduct all or
any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material
portion of Borrower's assets, or if a notice of lien, levy, or
assessment is filed of record with respect to any of Borrower's
assets by the United States Government, or any department,
agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid
within ten (10) Business Days after Borrower receives notice
thereof, provided that none of the foregoing shall constitute an
Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by
Borrower (provided that no Advances will be required to be made
during such cure period);
10.5 Insolvency. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an
Insolvency Proceeding is commenced against Borrower and is not
dismissed or stayed within ten (10) Business Days (provided that
no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
10.6 Change in Management. If there shall be any change
in the management, ownership or control of Borrower, whether by
reason of incapacity, death, resignation, termination or
otherwise, which, in Bank's sole judgment, shall have a Material
Adverse Effect upon the future prospects for the successful
operation by Borrower, of its businesses as conducted before
such change, or its ability to pay and perform its liabilities
and obligations under this Agreement, the Indebtedness, or the
Loan Documents
<PAGE> 21
10.7 Other Agreements. If there is a default in any
agreement to which Borrower is a party with a third party or
parties resulting in a right by such third party or parties,
whether or not exercised, to accelerate the maturity of any
Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could have a Material Adverse Effect;
10.8 Subordinated Debt. If Borrower makes any payment on
account of Subordinated Debt, except to the extent such payment
is allowed under any subordination agreement entered into with
Bank;
10.9 Judgments. If a judgment or judgments for the
payment of money in an amount, individually or in the aggregate,
of at least Two Hundred and Fifty Thousand and 00/100 Dollars
($250,000.00) shall be rendered against Borrower and shall
remain unsatisfied and unstayed for a period of ten (10)
Business Days (provided that no Advances will be made prior to
the satisfaction or stay of such judgment);
10.10 Misrepresentations. If any material
misrepresentation or material misstatement exists now or
hereafter in any warranty or representation set forth herein or
in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document; or
10.11 Guaranty. Any guaranty of all or a portion of the
Obligations ceases for any reason to be in full force and
effect, or any guarantor fails to perform any obligation under
any guaranty of all or a portion of the Obligations, or any
material misrepresentation or material misstatement exists now
or hereafter in any warranty or representation set forth in any
guaranty of all or a portion of the Obligations or in any
certificate delivered to Bank in connection with such guaranty.
ARTICLE XI
BANK'S RIGHTS AND REMEDIES
11.1 Rights and Remedies. Upon the occurrence and during
the continuance of an Event of Default, Bank may, at its
election, without notice of its election and without demand, do
any one or more of the following, all of which are authorized by
Borrower:
11.1.1 Declare all Obligations, whether
evidenced by this Agreement, by any of the other Loan
Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of
Default described in Section 10.5 all Obligations shall
become immediately due and payable without any action by
Bank);
11.1.2 Cease advancing money or extending credit
to or for the benefit of Borrower under this Agreement
or under any other agreement between Borrower and Bank;
11.1.3 Demand that Borrower (a) deposit cash
with Bank in an amount equal to the amount of any
Letters of Credit remaining undrawn, as collateral
security for the repayment of any future drawings under
such Letters of Credit, and Borrower shall forthwith
deposit and pay such amounts, and (b) pay in advance all
Letters of Credit fees scheduled to be paid or payable
over the remaining term of the Letters of Credit;
11.1.4 Settle or adjust disputes and claims
directly with account debtors for amounts, upon terms
and in whatever order that Bank reasonably considers
advisable;
<PAGE> 22
11.1.5 Without notice to or demand upon
Borrower, make such payments and do such acts as Bank
considers necessary or reasonable to protect its
security interest in the Collateral. Borrower agrees to
assemble the Collateral if Bank so requires, and to make
the Collateral available to Bank as Bank may designate.
Borrower authorizes Bank to enter the premises where the
Collateral is located, after reasonable notice, to take
and maintain possession of the Collateral, or any part
of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien which in Bank's
determination appears to be prior or superior to its
security interest and to pay all expenses incurred in
connection therewith. With respect to any of Borrower's
owned premises, Borrower hereby grants Bank a license to
enter into possession of such premises and to occupy the
same, without charge, in order to exercise any of Bank's
rights or remedies provided herein, at law, in equity,
or otherwise;
11.1.6 Without notice to Borrower set off and
apply to the Obligations any and all (a) balances and
deposits of Borrower held by Bank, or (b) indebtedness
at any time owing to or for the credit or the account of
Borrower held by Bank;
11.1.7 Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale,
and sell (in the manner provided for herein) the
Collateral. Bank is hereby granted a license or other
right, solely pursuant to the provisions of this Section
11.1, to use, without charge, Borrower's labels,
patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature,
as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any
Collateral and, in connection with Bank's exercise of
its rights under this Section 11.1, Borrower's rights
under all licenses and all franchise agreements shall
inure to Bank's benefit;
11.1.8 Sell the Collateral at either a public or
private sale, or both, by way of one or more contracts
or transactions, for cash or on terms, in such manner
and at such places (including Borrower's premises) as
Bank determines is commercially reasonable, and apply
any proceeds to the Obligations in whatever manner or
order Bank deems appropriate;
11.1.9 Bank may credit bid and purchase at any
public sale; and
11.1.10 Any deficiency that exists after
disposition of the Collateral as provided above will be
paid immediately by Borrower.
11.2 Attorneys' Fees and Costs. Borrower shall pay all
attorneys' fees and costs and expenses, including court costs,
incurred in connection with enforcement of the Loan Documents,
or any amendment, modification, or supplement thereto, whether
by negotiation, legal proceedings, or otherwise.
11.3 Power of Attorney. Effective only upon the
occurrence and during the continuance of an Event of Default,
Borrower hereby irrevocably appoints Bank (and any of Bank's
designated officers, or employees) as Borrower's true and lawful
attorney to: (a) send requests for verification of Accounts or
notify account debtors of Bank's security interest in the
Accounts; (b) endorse Borrower's name on any checks or other
forms of payment or security that may come into Bank's
possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of
Accounts, and notices to account debtors; (d) make, settle, and
adjust all claims under and decisions with respect to Borrower's
policies of insurance; and (e) settle and adjust disputes and
claims respecting the accounts directly with account debtors,
for amounts and upon terms which Bank determines to be
reasonable; provided Bank may exercise such power of
<PAGE> 23
attorney to sign the name of Borrower on any of the documents
described in Section 5.2 upon an Event of Default. The
appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been
fully repaid and performed and Bank's obligation to provide
advances hereunder is terminated.
11.4 Accounts Collection. At any time from the date of
this Agreement, Bank may notify any Person owing funds to
Borrower of Bank's security interest in such funds and verify
the amount of such Account. Borrower shall collect all amounts
owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in
their original form as received from the account debtor, with
proper endorsements for deposit.
11.5 Bank Expenses. If Borrower fails to pay any amounts
or furnish any required proof of payment due to third persons or
entities, as required under the terms of this Agreement, then
Bank may do any or all of the following: (a) make payment of the
same or any part thereof; (b) set up such reserves under the
Revolving Credit as Bank deems necessary to protect Bank from
the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type discussed in Section 7.8 of this
Agreement, and take any action with respect to such policies as
Bank deems prudent. Any amounts so paid or deposited by Bank
shall constitute Bank Expenses, shall be immediately due and
payable, and shall bear interest at the then applicable rate
hereinabove provided, and shall be secured by the Collateral.
Any payments made by Bank shall not constitute an agreement by
Bank to make similar payments in the future or a waiver by Bank
of any Event of Default under this Agreement.
11.6 Bank's Liability for Collateral. So long as Bank
complies with reasonable banking practices, Bank shall not in
any way or manner be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage thereto
occurring or arising in any manner or fashion from any cause;
(c) any diminution in the value thereof; or (d) any act or
default of any carrier, warehouseman, bailee, forwarding agency,
or other person whomsoever. All risk of loss, damage or
destruction of the Collateral shall be borne by Borrower.
11.7 Remedies Cumulative. Bank's rights and remedies
under this Agreement, the Loan Documents, and all other
agreements shall be cumulative. Bank shall have all other rights
and remedies not inconsistent herewith as provided under the
UCC, by law, or in equity. No exercise by Bank of one right or
remedy shall be deemed an election, and no waiver by Bank of any
Event of Default on Borrower's part shall be deemed a continuing
waiver. No delay by Bank shall constitute a waiver, election, or
acquiescence by it. No waiver by Bank shall be effective unless
made in a written document signed on behalf of Bank and then
shall be effective only in the specific instance and for the
specific purpose for which it was given.
11.8 Demand; Protest. Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any
way be liable.
ARTICLE XII
NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for Financial
Statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
<PAGE> 24
If to Borrower: AVANEX CORPORATION
40919 Encyclopedia Circle
Fremont, California 94538
Attn: Jessy Chao
Chief Financial Officer
FAX: (510) 897-4292
If to Bank: COMERICA BANK-CALIFORNIA
55 Almaden Boulevard
San Jose, CA 95113
Attn: Elizabeth Wilkerson
Corporate Banking Officer
FAX: (408) 556-5889
The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.
ARTICLE XIII
CHOICE OF LAW; VENUE; AND JURY TRIAL WAIVER
This Agreement and all transactions contemplated hereunder and/
or evidenced hereby shall be governed by, construed under, and enforced in
accordance with the internal laws of the State of California, without regard to
principles of conflicts of law. Each of Borrower and Bank hereby submits to the
exclusive jurisdiction of the state and Federal courts located in the County of
Santa Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
ARTICLE XIV
GENERAL PROVISIONS
14.1 Successors and Assigns. This Agreement shall bind
and inure to the benefit of the respective successors and
permitted assigns of each of the parties; provided, however,
that neither this Agreement nor any rights hereunder may be
assigned by Borrower without Bank's prior written consent, which
consent may be granted or withheld in Bank's sole discretion.
Bank shall have the right without the consent of or notice to
Borrower to sell, transfer, negotiate, or grant participation in
all or any part of, or any interest in, Bank's obligations,
rights and benefits hereunder.
14.2 Term. This Agreement shall become effective on the
Closing Date and, subject to Section 14.2, shall continue in
full force and effect for a term ending on the Termination Date.
Notwithstanding the foregoing, this Agreement shall remain in
full force and effect until terminated by notice, by either
party. Notice of such termination shall be effectuated by
mailing of a registered or certified letter not less than thirty
(30) days prior to the effective date of such termination,
addressed to the other party at the address set forth herein and
the termination shall be effective as of the date so fixed in
such notice. Notwithstanding the foregoing, should Borrower be
in default of one or more of the provisions of this Agreement,
Bank may terminate this Agreement at any time without notice.
Notwithstanding the foregoing, should either Bank or Borrower
become insolvent or unable to meet its debts as they mature, or
fail, suspend, or go out
<PAGE> 25
of business, the other party shall have the right to terminate
this Agreement at any time without notice. On the date of
termination all Obligations shall become immediately due and
payable without notice or demand; no notice of termination by
Borrower shall be effective until Borrower shall paid all
Obligations to Bank in full. Notwithstanding termination, until
all Obligations have been fully satisfied, Bank shall retain its
security interest in all existing Collateral and Collateral
arising thereafter, and Borrower shall continue to perform all
of its Obligations. After termination and when Bank has received
payment in full of Borrower's Obligations to Bank, Bank shall
reassign to Borrower all Collateral held by Bank, and shall
execute a termination of all security agreements and security
interests given by Borrower to Bank, upon the execution and
delivery of mutual general releases.
14.3 Indemnification. Borrower shall defend, indemnify
and hold harmless Bank and its officers, employees, and agents
against: (a) all obligations, demands, claims, and liabilities
claimed or asserted by any other party in connection with the
transactions contemplated by this Agreement; and (b) all losses
or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or
consequential to transactions between Bank and Borrower whether
under this Agreement, or otherwise (including without limitation
reasonable attorneys fees and expenses), except for losses
caused by Bank's gross negligence or willful misconduct.
14.4 Time of Essence. Time is of the essence for the
performance of all obligations set forth in this Agreement.
14.5 Severability of Provisions. In the event any one or
more of the provisions contained in this Agreement is held to be
invalid, illegal or unenforceable in any respect, then such
provision shall be ineffective only to the extent of such
prohibition or invalidity, and the validity, legality, and
enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.
14.6 Amendments. Neither this Agreement nor any
provisions hereof may be changed, waived, discharged or
terminated, nor may any consent to the departure from the terms
hereof be given, orally (even if supported by new
consideration), but only by an instrument in writing signed by
all parties to this Agreement. Any waiver or consent so given
shall be effective only in the specific instance and for the
specific purpose for which given.
14.7 Entire Agreement. This Agreement, together with the
Loan Documents embodies the entire agreement and understanding
among and between the parties hereto, and supersedes all prior
or contemporaneous agreements and understandings between said
parties, verbal or written, express or implied, relating to the
subject matter hereof. No promises of any kind have been made by
Bank or any third party to induce Borrower to execute this
Agreement. No course of dealing, course of performance or trade
usage, and no parol evidence of any nature, shall be used to
supplement or modify any terms of this Agreement.
14.8 Waiver. No failure to exercise and no delay in
exercising any right, power, or remedy hereunder shall impair
any right, power, or remedy which Bank may have, nor shall any
such delay be construed to be a waiver of any of such rights,
powers, or remedies, or any acquiescence in any breach or
default hereunder; nor shall any waiver by Bank of any breach or
default by Borrower hereunder be deemed a waiver of any default
or breach subsequently occurring. All rights and remedies
granted to Bank hereunder shall remain in full force and effect
notwithstanding any single or partial exercise of, or any
discontinuance of action begun to enforce, any such right or
remedy. The rights and remedies specified herein are cumulative
and not exclusive of each other or of any rights or remedies
which Bank would otherwise have. Any waiver, permit, consent or
approval by Bank of any breach or default hereunder must be in
writing and shall be effective only to the extent set forth in
such writing and only as to that specific instance.
<PAGE> 26
14.9 Interpretation. This Agreement and all agreements
relating to the subject matter hereof are the product of
negotiation and preparation by and among each party and its
respective attorneys, and shall be construed accordingly. The
parties waive the provisions of California Civil Code
Section 1654.
14.10 Survival. All covenants, representations and
warranties made in this Agreement shall continue in full force
and effect so long as any Obligations remain outstanding. The
obligations of Borrower to indemnify Bank with respect to the
expenses, damages, losses, costs and liabilities shall survive
until all applicable statute of limitations periods with respect
to actions that may be brought against Bank have run, provided
that so long as the obligations set forth in the first sentence
of this Section 14.10 have been satisfied, and Bank has no
commitment to make any Advances or to make any other loans to
Borrower, Bank shall release all security interests granted
hereunder and redeliver all Collateral held by it in accordance
with applicable law.
14.11 Confidentiality. In handling any confidential
information Bank shall exercise the same degree of care that it
exercises with respect to its own proprietary information of the
same types to maintain the confidentiality of any non-public
information thereby received or received pursuant to this
Agreement except that disclosure of such information may be made
(a) to the subsidiaries or affiliates of Bank in connection with
their present or prospective business relations with Borrower,
(b) to prospective transferees or purchasers of any interest in
the Loans, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have
delivered a copy to Borrower, (c) as required by law,
regulations, rule or order, subpoena, judicial order or similar
order, (d) as may be required in connection with the
examination, audit or similar investigation of Bank and (e) as
Bank may determine in connection with the enforcement of any
remedies hereunder. Confidential information hereunder shall not
include information that either: (i) is in the public domain or
in the knowledge or possession of Bank when disclosed to Bank,
or becomes part of the public domain after disclosure to Bank
through no fault of Bank; or (ii) is disclosed to Bank by a
third party, provided Bank does not have actual knowledge that
such third party is prohibited from disclosing such information.
14.12 Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with
the same effect as if all signatures were upon the same
instrument. Delivery of an executed counterpart of the signature
page to this Agreement by telefacsimile shall be effective as
delivery of a manually executed counterpart of this Agreement,
and any party delivering such an executed counterpart of the
signature page to this Agreement by telefacsimile to any other
party shall thereafter also promptly deliver a manually executed
counterpart of this Agreement to such other party, provided that
the failure to deliver such manually executed counterpart shall
not affect the validity, enforceability, or binding effect of
this Agreement.
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Amended
and Restated Revolving Credit and Security Agreement to be executed as of the
date first above written.
AVANEX CORPORATION
/s/ WALTER ALESSANDRINI
----------------------------------------------
By: Walter Alessandrini
Its: President and Chief Executive Officer
/s/ JESSY CHAO
----------------------------------------------
By: Jessy Chao
Its: Chief Financial Officer
COMERICA BANK -- CALIFORNIA
/s/ ELIZABETH WILKERSON
----------------------------------------------
By: Elizabeth Wilkerson
Its: Assistant Vice President
<PAGE> 28
EXHIBIT A
COLLATERAL
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired,
including without limitation, all machinery, fixtures, vehicles, and any
interest in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including,
without limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily our of a Debtor's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and Debtor's
Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or
hereafter acquired, including, without limitation, goodwill, trademarks, service
marks, trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract
rights, royalties, license rights and all other forms of obligations owing to a
Debtor, whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by a Debtor and Debtor's Books relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters
of credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Debtor's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protections of semiconductor ships, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing;
(g) All investment property; and
(h) Any and all claims, rights and interests in any of the
above and all substitutions for, additions and accessions and all cash and
non-cash proceeds of any of the foregoing, in whatever form (including proceeds
in the form of inventory, equipment or any other form of personal property),
including proceeds of proceeds, insurance proceeds and all claims against third
parties for loss or damage to or destruction of any or all of the foregoing.
(i) Notwithstanding the foregoing, the term "Collateral" shall
not include any property, rights or licenses to the extent the granting of a
security interest therein (i) would be contrary to applicable law or (ii) is
prohibited by or would constitute a default under any agreement or document
governing such property, rights or licenses (but only to the extent such
prohibition is enforceable under applicable law, including without limitation
Section 9318 of the Code); provided that immediately and automatically upon the
ineffectiveness, lapse or termination of any such prohibition or restriction,
the Collateral shall include such property, rights and licenses, and Borrower
shall be deemed to have granted a security interest in all such rights and
interests as if such prohibition or restriction had never been in effect.
<PAGE> 29
EXHIBIT B
PERMITTED LIENS AND CAPITAL LEASES
California
Debtor: Avanex Corporation - Fremont, CA
<TABLE>
<CAPTION>
Instrument Number Filing Date Secured Party
<S> <C> <C>
9808960138 03/27/1998 Hewlett-Packard Company Finance & Remarketing Division
9817360855 06/19/1998 Hewlett-Packard Company Finance & Remarketing Division
9835560266 12/16/1998 Phoenix Warehouse II, Inc.
9835560292 12/16/1998 Phoenix Warehouse II, Inc. [amendment 5/6/99]
9907160504 03/04/1999 Hewlett-Packard Company Finance & Remarketing Division
9907160502 03/04/1999 Hewlett-Packard Company Finance & Remarketing Division
9907860782 03/11/1999 Phoenix Warehouse II, Inc.
9908160297 03/11/1999 Phoenix Warehouse II, Inc.
9916960704 06/14/1999 Phoenix Warehouse II, Inc.
9921760396 07/29/1999 Finova Capital Corporation
9921760402 07/29/1999 Finova Capital Corporation
9925460695 08/30/1999 BCL Capital
9927960410 10/01/1999 Finova Capital Corporation
9928560492 10/04/1999 Hewlett-Packard Company Finance & Remark
9934160969 11/24/1999 Agilent Technologies
9934161055 11/24/1999 Agilent Technologies
9934161070 11/24/1999 Agilent Technologies
9934860098 12/01/1999 Agilent Technologies
9934860290 12/01/1999 Agilent Technologies
9936460155 12/27/1999 Finova Capital Corporation
0006160519 02/28/2000 Phoenix Warehouse II, Inc.
0006160532 02/28/2000 Phoenix Warehouse II, Inc.
0006160539 02/28/2000 Phoenix Warehouse II, Inc.
0006160555 02/28/2000 Phoenix Warehouse II, Inc.
0006160569 02/28/2000 Phoenix Warehouse II, Inc.
0014360593 05/16/2000 Agilent Technologies
</TABLE>
Debtor: Avanex Corporation - Richardson, TX
<TABLE>
<CAPTION>
Instrument Number Filing Date Secured Party
<S> <C> <C>
9907860782 03/11/1999 Phoenix Warehouse II, Inc.
9908160297 03/11/1999 Phoenix Warehouse II, Inc.
9916960704 06/14/1999 Phoenix Warehouse II, Inc.
</TABLE>
Texas
Debtor: Avanex Corporation - Richardson, TX
<PAGE> 30
<TABLE>
<CAPTION>
Instrument Number Filing Date Secured Party
<S> <C> <C>
9900043848 03/04/1999 Hewlett-Packard Company Finance & Remarketing Division
9900043849 03/04/1999 Hewlett-Packard Company Finance & Remarketing Division
</TABLE>
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
[COMERICA BANK CALIFORNIA LOGO]
COVENANT COMPLIANCE CERTIFICATE
For the Period Ended:________________
To: Elizabeth Wilkerson
Assistant Vice President
Comerica Bank-California
55 Almaden Boulevard 2nd Floor
Mail Code 4043
San Jose, CA 95113
THE UNDERSIGNED OFFICER OF AVANEX CORPORATION (BORROWER) HEREBY, CERTIFIES THAT
IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE AMENDED AND RESTATED
REVOLVING CREDIT AND SECURITY AGREEMENT DATED JULY 10, 2000, AS MODIFIED FROM
TIME TO TIME, THE BORROWER IS IN COMPLIANCE FOR THE PERIOD NOTED ABOVE OF ALL
REQUIRED CONDITIONS AND TERMS, EXCEPT AS NOTED BELOW. ATTACHED HEREWITH ARE THE
REQUIRED DOCUMENTS SUPPORTING THE ABOVE CERTIFICATION, THE OFFICER FURTHER
CERTIFIES THAT THESE ARE PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPALS (GAAP) AND ARE CONSISTENT FROM ONE PERIOD TO THE NEXT,
EXCEPT AS EXPLAINED IN AN ACCOMPANYING LETTER OR FOOTNOTE.
FINANCIAL COVENANTS-MEASURED QUARTERLY
1.) MINIMUM QUICK RATIO OF 2.00:1.00
Calculation:
Cash + Cash Equivalents + Net Accounts Receivable
-------------------------------------------------
Current Liabilities
Actual Quick
Ratio_____________
2.) MINIMUM TANGIBLE NET WORTH OF $150,000,000
Calculation:
Net Worth - Intangibles
Actual Tangible Net Worth
-------------
3.) MAXIMUM DEBT/TNW OF 0.75:1.00
Calculation:
Total Liabilities
-----------------
Tangible Net Worth
1
<PAGE> 31
Actual
Debt/ETNW______________
Very Truly Yours,
AVANEX CORPORATION
By:
-------------------------------
Its:
------------------------------
EXHIBIT D
FORM OF REQUEST FOR ADVANCE
THE UNDERSIGNED HEREBY CERTIFIES AS FOLLOWS:
I, _______________________________________________, am the duly elected and
acting ________________________ of Avanex Corporation.
This Advance Request Form is delivered on behalf of Borrower to Comerica
Bank-California, pursuant to the Amended and Restated Revolving Credit and
Security Agreement between Avanex Corporation and Comerica Bank-California dated
July 10, 2000 (the "Agreement").
Borrower hereby requests on ______________________, 200__ an advance as follows:
(a) Date on which the advance is to be made is
____________________, 200__.
(b) The amount of the advance is to be
$____________________.
All representations and warranties of Borrower stated in the Agreement are true,
correct and complete in all material respects as of the date of this request for
an Advance; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
AVANEX CORPORATION
By:
--------------------------------------
Title:
--------------------------------------
Dated:
--------------------------------------
2
<PAGE> 32
EXHIBIT E
LITIGATION
None.
3
<PAGE> 33
EXHIBIT F
SUBSIDIARIES
1. Avanex Cayman, incorporated under the laws of the Cayman Islands.
Pursuant to a Lease Agreement, Avanex Cayman owns certain intellectual
property of Borrower, and Avanex Cayman and Borrower cross-license
certain intellectual property. Borrower owns 100% of the outstanding
equity of Avanex Cayman.
2. ASPEN ACQUISITION CORPORATION, A DELAWARE CORPORATION AND A WHOLLY-OWNED
SUBSIDIARY OF BORROWER. ON MAY 22, 2000, BORROWER ANNOUNCED THAT ASPEN
ACQUISITION CORPORATION WILL ACQUIRE CERTAIN ASSETS AND LIABILITIES OF
HOLOGRAPHIX INC., A DELAWARE CORPORATION. (SEE BORROWER'S FORM 8-K).
4
