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SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
BORROWER: Advanced Power Technology, Inc.
ADDRESS: 405 S.W. Columbia Street
Bend, Oregon 97702
DATE: September 6, 1995
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date
between SILICON VALLEY BANK ("Silicon"), whose address is 3000 Lakeside Drive,
Santa Clara, California 95054-2895 and the borrower named above (the
"Borrower"), whose chief executive office is located at the above address
("Borrower's Address").
1. LOANS.
1.1 LOANS. Silicon will make loans to the Borrower (the "Loans") in
amounts determined by Silicon up to the amounts (the "Credit Limits") shown on
the Schedule to this Agreement (the "Schedule"), the terms of which are
incorporated into this Agreement. The Borrower is responsible for monitoring
the total amount of Loans and other Obligations outstanding from time to time,
and the Borrower shall not permit that amount, at any time, to exceed the Credit
Limit. If at any time the total of all outstanding Loans and all other
Obligations exceeds the Credit Limits, the Borrower shall immediately pay the
amount of the excess to Silicon, without notice or demand.
1.2 INTEREST; REQUEST TO DEBIT ACCOUNTS. All Loans and all other
monetary Obligations shall bear interest at the rate shown on the Schedule
hereto. Interest shall be payable monthly, on the due date shown on the monthly
billing from Silicon to the Borrower. The Borrower hereby requests and
authorizes Silicon to debit any of the Borrower's accounts with Silicon,
including without limitation account no. _______________, for payments of
interest and principal due on the Loans and all other obligations owing by the
Borrower to Silicon. Silicon shall promptly notify the Borrower of all debits
which Silicon makes against the Borrower's accounts. Any such debit against the
Borrower's accounts shall in no way be deemed a setoff by Silicon.
1.3 FEES. The Borrower shall pay to Silicon the commitment fees in
the amounts shown on the Schedule hereto concurrently herewith. These fees are
in addition to all interest and other sums payable to Silicon and are not
refundable.
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2. GRANT OF SECURITY INTEREST.
2.1 OBLIGATIONS. The term "Obligations" as used in this Agreement
means the following: the obligation to pay all Loans and all interest thereon
when due, and to pay and perform when due all other present and future
indebtedness, liabilities, obligations, guarantees, covenants, agreements,
warranties and representations of the Borrower to Silicon, whether joint or
several, monetary or non-monetary, and whether created pursuant to this
Agreement or any other present or future agreement or otherwise. Silicon may,
in its discretion, require that the Borrower pay monetary Obligations in cash to
Silicon, or charge them to Borrower's Loan account, in which event they will
bear interest at the same rate applicable to the Loans.
2.2 COLLATERAL. As security for all Obligations, the Borrower hereby
grants Silicon a continuing security interest in all of the Borrower's assets,
including but not limited to all of the Borrower's interest in the types of
property described below, whether now owned or hereafter acquired, and wherever
located (collectively, the "Collateral"): (a) all accounts; (b) all chattel
paper; (c) all documents; (d) all instruments; (e) all inventory; (f) all
equipment, except such equipment that is or will be sold to and leased back from
Financing for Science, Inc.; (g) all goods; (h) all fixtures (except as provided
below in this Section 2.2); (i) all general intangibles including, but not
limited to, deposit accounts, goodwill, names, trade names, trademarks and the
goodwill of the business symbolized thereby, trademark applications, trade
secrets, drawings, blueprints, customer lists, patents, patent applications,
copyrights, copyright applications, and all insurance policies and claims
(including without limitation credit, liability, property and other insurance),
and all other rights, privileges and franchises of every kind; (j) all books and
records, whether stored on computers or otherwise maintained; (k) all of the
Borrower's cash; and (l) all substitutions, additions and accessions to any of
the foregoing, and all products, proceeds and insurance proceeds of the
foregoing, and all guaranties of and security for the foregoing; and all books
and records relating to any of the foregoing. Notwithstanding anything to the
contrary in this paragraph 2.2, Borrower does not grant to Silicon a security
interest in any intellectual property consisting of any patents, patent
applications or other forms of process technology or product designs, although
Borrower does grant to Silicon a continuing security interest in proceeds of the
sale of these assets. All terms used above in this Section 2.2 that are defined
in the Oregon Uniform Commercial Code shall have the meaning given to such terms
in the Oregon Uniform Commercial Code. Silicon's security interest in
equipment includes equipment of the Borrower that is attached to the real
property occupied by the Borrower, but Silicon shall not have a security
interest in any tenant improvements of Borrower that are part of the real
property occupied by Borrower. The Borrower shall, at least every six months,
provide a written Schedule to Silicon showing (i) all applications for the
registration of any patent, trademark, or copyright with the U.S. Patent and
Trademark Office, the U.S. Copyright Office, or any similar office or agency in
any other country, state, or any political subdivision (the "Offices") filed by
Borrower or any agent, employee, licensee or designee of Borrower, and (ii) all
assignments of any patent, trademark, or copyright which Borrower has acquired
from a third party with any one of the Offices.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
The Borrower represents and warrants to Silicon as follows, and the
Borrower covenants that the following representations will continue to be true,
and that the Borrower will comply with all of the following covenants:
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3.1 CORPORATE EXISTENCE AND AUTHORITY. The Borrower is and will
continue to be duly authorized, validly existing and in good standing under the
laws of the state of Delaware. The Borrower is and will continue to be
qualified and licensed to do business in all jurisdictions in which any failure
to do so would have a material adverse effect on the Borrower. The execution,
delivery and performance by the Borrower of this Agreement, and all other
documents contemplated hereby have been duly and validly authorized, are
enforceable against the Borrower in accordance with their terms, subject to
applicable bankruptcy law and equitable principles of law, and do not violate
any law or any provision of, and are not grounds for acceleration under, any
agreement or instrument which is binding upon the Borrower.
3.2 NAME, TRADE NAMES AND STYLES. The name of the Borrower set forth
in the heading to this Agreement is its correct name. Listed on the Schedule
hereto are all prior names of the Borrower and all of the Borrower's present and
prior trade names. The Borrower shall give Silicon 15 days' prior written
notice before changing its name or doing business under any other name. The
Borrower has complied, and will in the future comply, with all laws relating to
the conduct of business under a fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth
in the heading to this Agreement is the Borrower's chief executive office. In
addition, the Borrower has places of business and Collateral is located only at
the locations set forth on the Schedule to this Agreement. The Borrower will
give Silicon at least 15 days prior written notice before changing its chief
executive office or moving the Collateral to any other location.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. The Borrower is now, and
will at all times in the future be, the sole owner of all the Collateral, except
for general intangibles licensed to the Borrower and items of equipment which
are leased by the Borrower. The Collateral now is and will remain free and
clear of any and all liens, charges, security interests, encumbrances and
adverse claims, except for the following ("Permitted Liens"): (i) purchase money
security interests in specific items of equipment; (ii) licenses of general
intangibles and leases of specific items of equipment, including without
limitation the lease of equipment from Financing for Science, Inc.; (iii) liens
for taxes not yet payable; (iv) additional security interests and liens
consented to in writing by Silicon in its sole discretion; and (v) security
interests being terminated substantially concurrently with this Agreement.
Silicon will have the right to require, as a condition to its consent under
subparagraph (iv) above, that the holder of the additional security interest or
lien sign an intercreditor agreement on terms satisfactory to Silicon in its
sole discretion, acknowledge that the holder's security interest is subordinate
to the security interest in favor of Silicon, and that the Borrower agree that
any uncured default in any obligation secured by the subordinate security
interest shall also constitute an Event of Default under this Agreement.
Silicon now has, and will continue to have, a first priority, perfected and
enforceable security interest in all of the Collateral. The Collateral shall
not be subject to any other liens or security interests of any type except for
the Permitted Liens. The Borrower will at all times defend Silicon and the
Collateral against all claims of others. None of the Collateral now is or will
be affixed to any real property in such a manner, or with such intent, as to
become a fixture.
3.5 MAINTENANCE OF COLLATERAL. The Borrower will maintain the
Collateral in good working condition, and the Borrower will not use the
Collateral for any unlawful purpose. The Borrower will immediately advise
Silicon in writing of any material loss or damage to the Collateral.
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3.6 DEPOSIT SWEEP. The Borrower will enter into a written contract,
in a form satisfactory to Silicon, with either U.S. Bank or First Interstate
Bank of Oregon (individually the "Depository Bank" ) whereby all of Borrower's
funds in its account with the Depository Bank are transferred to Silicon account
no. on a daily basis.
3.7 BOOKS AND RECORDS. The Borrower has maintained and will maintain
at the Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.8 FINANCIAL CONDITION AND STATEMENTS. All financial statements now
or in the future delivered to Silicon have been, and shall be, prepared in
conformity with generally accepted accounting principles and now and in the
future shall completely and accurately reflect the financial condition of the
Borrower, at the times and for the periods therein stated. Since the last date
covered by any such statement, there has been no material adverse change in the
financial condition or business of the Borrower. The Borrower is now and shall
continue to be solvent. The Borrower shall provide Silicon: (a) within 30 days
after the end of each month, a monthly financial statement (consisting of an
income statement and a balance sheet) prepared by the Borrower; (b) within 15
days after the end of each month, an accounts receivable report and an accounts
payable report in such form as Silicon shall reasonably specify; (c) within 15
days after the end of each month, a Borrowing Base Certificate in the form
attached to this Agreement as Exhibit A, as Silicon may reasonably modify such
Certificate from time to time, signed by the President or Chief Financial
Officer of the Borrower; and (d) within 30 days after the end of each quarter of
each fiscal year, a Compliance Certificate in such form as Silicon shall
reasonably specify, signed by the President or Chief Financial Officer of the
Borrower, certifying that throughout such quarter the Borrower was in full
compliance with all of the terms and conditions of this Agreement, and setting
forth calculations showing compliance with the financial covenants set forth on
the Schedule hereto and such other information as Silicon shall reasonably
request. The Borrower shall provide Silicon, within 90 days following the end
of the Borrower's fiscal year, complete CPA-audited financial statements with
details on Borrower, such review being conducted by independent certified public
accountants reasonably acceptable to Silicon.
3.9 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. The Borrower has
timely filed, and will timely file, all tax returns and reports required by
foreign, federal, state and local law, and the Borrower has timely paid, and
will timely pay, all foreign, federal, state and local taxes, assessments,
deposits and contributions now or in the future owed by the Borrower. The
Borrower may, however, defer payment of any contested taxes, provided that the
Borrower (i) in good faith contests the Borrower's obligation to pay the taxes
by appropriate proceedings promptly and diligently instituted and conducted,
(ii) notifies Silicon in writing of the commencement of, and any material
development in, the proceedings, and (iii) posts bonds or takes any other steps
required to keep the contested taxes from becoming a lien upon any of the
Collateral. The Borrower is unaware of any claims or adjustments proposed for
any of the Borrower's prior tax years which could result in additional taxes
becoming due and payable by the Borrower. The Borrower has paid, and shall
continue to pay all amounts necessary to fund all present and future pension,
profit sharing and deferred compensation plans in accordance with their terms,
and the Borrower has not and will not withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any such plan which could result in any liability of the
Borrower, including, without limitation, any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
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3.10 COMPLIANCE WITH LAW. The Borrower has complied, and will comply,
in all material respects, with all provisions of all foreign, federal, state and
local laws and regulations relating to the Borrower, including, but not limited
to, those relating to the Borrower's ownership of real or personal property,
conduct and licensing of the Borrower's business, and environmental matters.
3.11 LITIGATION. Except as disclosed in the Schedule hereto, there is
no claim, suit, litigation, proceeding or investigation pending or (to best of
the Borrower's knowledge) threatened by or against or affecting the Borrower in
any court or before any governmental agency (or any basis therefor known to the
Borrower) which may result, either separately or in the aggregate, in any
material adverse change in the financial condition or business of the Borrower,
or in any material impairment in the ability of the Borrower to carry on its
business in substantially the same manner as it is now being conducted. The
Borrower will promptly inform Silicon in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted by or against
the Borrower involving amounts in excess of $100,000.
3.12 USE OF PROCEEDS. All proceeds of all Loans shall be used solely
for lawful business purposes.
3.13 NO PATENTS, TRADEMARKS OR COPYRIGHTS. The attached Schedule 3.13
shows the patents (including pending applications, if any), trademarks and
copyrights with the U.S. Patent and Trademark Office, the U.S. Copyright Office
or any similar office or agency of any state, of the United States of America or
of any foreign jurisdiction that the Borrower owns. The Borrower has not
granted a security interest in, assigned, or pledged any of the foregoing in any
manner to secure any obligations of the Borrower.
3.14 HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used in this
Agreement, shall have the same meanings as set forth in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. Except as disclosed to and acknowledged by Silicon in
writing, the Borrower represents and warrants that: (a) the Borrower has no
knowledge of (i) any use, generation, manufacture, storage, treatment, disposal,
release, or threatened release of any hazardous waste or substance by any prior
owners or occupants of any of the properties, or (ii) any actual or threatened
litigation or claims of any kind by any person relating to such matters; (b)
Except as set forth in Schedule 3.14, neither the Borrower nor any subtenant,
contractor, agent or other user authorized by Borrower of any of the properties
shall use, generate, manufacture, store, treat, dispose of, or release any
hazardous waste or substance on, under, or about any of the properties owned or
operated by the Borrower; and any such activity shall be conducted in compliance
with all applicable federal, state, and local laws, regulations, and ordinances,
including without limitation those laws, regulations and ordinances described
above. The Borrower authorizes Silicon and its agents, upon 24 hours prior
notice (which need not be in writing), to enter upon the properties to make such
inspections and tests as Silicon may deem appropriate to determine compliance of
the properties owned or operated by the Borrower with this section of the
Agreement. Any inspections or tests made by Silicon shall be for Silicon's
purposes only and shall not be construed to create any responsibility or
liability on the part of Silicon to the Borrower or to any other person. The
Borrower hereby (a) releases and waives any future claims against Silicon for
indemnity or contribution in the event the Borrower becomes liable for
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cleanup or other costs under any such laws, and (b) agrees to indemnify and hold
harmless Silicon against any and all claims, losses, liabilities, damages,
penalties, and expenses which Silicon may directly or indirectly sustain or
suffer resulting from a breach of this section of the Agreement or as a
consequence of any use, generation, manufacture, storage, disposal, release or
threatened release occurring prior to the Borrower's ownership or interest in
the properties, whether or not the same was or should have been known to the
Borrower. The provisions of this section of the Agreement, including the
obligation to indemnify, shall survive the payment of the Indebtedness and the
termination or expiration of this Agreement and shall not be affected by
Silicon's acquisition of any interest in ny of the properties, whether by
foreclosure or otherwise.
4. ADDITIONAL DUTIES OF THE BORROWER.
4.1 COVENANTS. The Borrower shall at all times comply with the
covenants set forth in the Schedule to this Agreement.
4.2 OVERADVANCE; PROCEEDS OF ACCOUNTS. If for any reason the total of
any outstanding Loan and all other Obligations exceeds the applicable Credit
Limit, without limiting Silicon's other remedies, and whether or not Silicon
declares an Event of Default, the Borrower shall remit to Silicon all checks and
other proceeds of the Borrower's accounts and other Collateral, in the same form
as received by the Borrower, within one day after the Borrower's receipt of the
same, to be applied to the Obligations in such order as Silicon shall determine
in its discretion.
4.3 INSURANCE. The Borrower shall, at all times insure all of the
tangible personal property Collateral and carry such other business insurance,
with insurers reasonably acceptable to Silicon, in such form and amounts as
Silicon may reasonably require. All such insurance policies shall name Silicon
as an additional loss payee, and shall contain a lenders loss payee endorsement
in form reasonably acceptable to Silicon. Upon receipt of the proceeds of any
such insurance, Silicon shall apply such proceeds in reduction of the
Obligations as Silicon shall determine in its sole and absolute discretion,
except that, provided no Event of Default has occurred, Silicon shall release to
the Borrower insurance proceeds with respect to equipment totalling less than
$100,000, which shall be utilized by the Borrower for the replacement of the
equipment with respect to which the insurance proceeds were paid. Silicon may
require reasonable assurance that the insurance proceeds so released will be so
used. If the Borrower fails to provide or pay for any insurance, Silicon may,
but is not obligated to, obtain the same at the Borrower's expense. The
Borrower shall promptly deliver to Silicon copies of all reports made to
insurance companies.
4.4 REPORT. The Borrower shall provide Silicon with such written
reports with respect to the Borrower, as Silicon shall from time to time
reasonably specify.
4.5 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At all reasonable times,
and upon one business day notice, Silicon, or its agents, shall have the right
to inspect the Collateral, and the right to audit and copy the Borrower's
accounting books, records, ledgers, journals, or registers and the Borrower's
books and records relating to the Collateral. Silicon shall take reasonable
steps to keep confidential all information obtained in any such inspection or
audit, but Silicon shall have the right to disclose any such information to its
auditors, regulatory agencies and attorneys, and pursuant to any subpoena or
other legal process. Borrower shall reimburse Silicon for up to $1,250.00 per
audit for Silicon's out-of-pocket costs for semi-annual accounts receivable
audits, and Silicon may debit the
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Borrower's deposit accounts with Silicon for the actual, reasonable
out-of-pocket cost of such accounts receivable audits (up to the limit stated
above), in which event Silicon shall send notification thereof to the
Borrower. Notwithstanding the foregoing, during the continuation of an Event
of Default all audits shall be at the Borrower's expense.
4.6 NEGATIVE COVENANTS. Except as may be permitted in the Schedule
hereto, the Borrower shall not, without Silicon's prior written consent, do any
of the following: (i) merge or consolidate with another corporation, except that
the Borrower may merge or consolidate with another corporation if the Borrower
is the surviving corporation in the merger and the aggregate value of the assets
acquired in the merger do not exceed 25% of Borrower's Tangible Net Worth (as
defined herein) as of the end of the month prior to the effective date of the
merger, and the assets of the corporation acquired in the merger are not subject
to any liens or encumbrances, except Permitted Liens; (ii) acquire any assets
outside the ordinary course of business for an aggregate purchase price
exceeding 25% of Borrower's Tangible Net Worth (as defined herein) as of the end
of the month prior to the effective date of the acquisition; (iii) enter into
any other transaction outside the ordinary course of business (except as
permitted by the other provisions of this Section); (iv) sell or transfer any
Collateral, except for the sale of finished inventory in the ordinary course of
the Borrower's business (which inventory shall be released from the security
interest granted in Section 2.2 upon completion of such sales), and except for
the sale of obsolete or unneeded equipment in the ordinary course of business;
(v) make any loans of any money or any other asset to any subsidiary or
affiliate of Borrower; (vi) incur any debts, outside the ordinary course of
business, which would have a material, adverse effect on the Borrower or on the
prospect of repayment of the Obligations; (vii) guarantee or otherwise become
liable with respect to the obligations of another party or entity; (viii) pay or
declare any dividends on the Borrower's stock (except for dividends payable
solely in stock of the Borrower); (ix) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of the Borrower's stock, except as the
Borrower may decide in order to satisfy stock warrants granted to Silicon,
Financing for Science International, Inc., Advanced Energy Industries, Inc., or
Bridgewater Capital Corporation; (x) make any change in the Borrower's capital
structure which has a material adverse effect on the Borrower or on the prospect
of repayment of the Obligations; (xi) dissolve or elect to dissolve; (xii) pay
bonuses or cash compensation to employees or officers for any fiscal year in
excess of net after tax earnings for the fiscal year; or (xiii) pledge or
otherwise encumber any patents, trademarks or other intellectual property of any
type owned or controlled by Borrower. "Tangible Net Worth" means stockholders'
equity plus debt that is subordinated to the Loans pursuant to a written
subordination agreement satisfactory to Silicon and accrued interest thereon,
less goodwill, patents, capitalized software costs, tradenames, trademarks, and
all other assets which would be classified as intangible assets under generally
accepted accounting principles. Transactions permitted by the foregoing
provisions of this Section are only permitted if no Event of Default is pending
at the time.
4.7 LITIGATION COOPERATION. Should any third-party suit or proceeding
be instituted by or against Silicon with respect to any Collateral or in any
manner relating to the Borrower, the Borrower shall, without expense to Silicon,
make available the Borrower and its officers, employees and agents and the
Borrower's books and records to the extent that Silicon may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
4.8 VERIFICATION. Silicon may, from time to time, following prior
notification to the Borrower, verify directly with the respective account
debtors the validity, amount and other matters relating to the Borrower's
accounts, by means of mail, telephone or otherwise, either in the name of the
Borrower or Silicon or such other name as Silicon may reasonably choose,
provided that no prior
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notification shall be required following an Event of Default. Silicon shall not
be required to obtain the Borrower's consent prior to any such verification of
accounts, whether or not an Event of Default has occurred.
4.9 EXECUTE ADDITIONAL DOCUMENTATION. The Borrower agrees, at its
expense, on request by Silicon, to execute from time to time all documents in
form satisfactory to Silicon, as Silicon may deem reasonably necessary or useful
in order to perfect and maintain Silicon's perfected security interest in the
Collateral, and in order to fully consummate all of the transactions
contemplated by this Agreement.
5. TERM.
5.1 MATURITY DATE. This Agreement shall continue in effect until the
payment in full of the Obligations, provided, however, that the Borrower shall
repay the Loans in full, with all accrued but unpaid interest, not later than
the "Maturity Date" for each such Loan set forth on the Schedule.
5.2 EARLY TERMINATION. Subject to Section 5.3, this Agreement may be
terminated, without penalty, prior to the latest Maturity Date for any Loan as
follows: (i) by the Borrower, effective three business days after written notice
of termination is given to Silicon; or (ii) by Silicon at any time after the
occurrence of an Event of Default, without notice, effective immediately.
5.3 PAYMENT OF OBLIGATIONS. On the due dates stated in the
Schedule, or on any earlier effective date of termination, the Borrower shall
pay and perform in full all Obligations, whether evidenced by installment
notes or otherwise, and whether or not all or any part of such Obligations
are otherwise then due and payable. Notwithstanding any termination of this
Agreement, all of Silicon's security interests in all of the Collateral and
all of the terms and provisions of this Agreement shall continue in full
force and effect until all Obligations have been paid and performed in full;
provided that, without limiting the fact that Loans are discretionary on the
part of Silicon, Silicon may, in its sole discretion, refuse to make any
further Loans after termination. No termination shall in any way affect or
impair any right or remedy of Silicon, nor shall any such termination relieve
the Borrower of any Obligation to Silicon, until all of the Obligations have
been paid and performed in full. Upon payment and performance in full of all
the Obligations, Silicon shall promptly deliver to the Borrower termination
statements, requests for reconveyances and such other documents as may be
required to fully terminate any of Silicon's security interests.
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6. EVENTS OF DEFAULT AND REMEDIES.
6.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and the Borrower
shall give Silicon immediate written notice thereof: (a) any warranty,
representation, statement, report or certificate made or delivered to Silicon by
the Borrower or any of the Borrower's officers or employees, now or in the
future, shall be untrue or misleading in any material respect; (b) the Borrower
shall fail to pay when due any Loan or any interest thereon or any other
monetary Obligation; (c) the total Loans and other Obligations outstanding at
any time exceed the applicable Credit Limits; (d) the Borrower shall fail to
comply with any of the covenants set forth in the Schedule to this Agreement or
shall fail to perform any other non-monetary Obligation which by its nature
cannot be cured; (e) the Borrower shall fail to pay or perform any other
non-monetary Obligation, under this Agreement or any other agreement or document
relating to any Loan; (f) any levy, assessment, attachment, seizure, lien or
encumbrance is made on all or any part of the Collateral; (g) dissolution,
termination of existence, insolvency or business failure of the Borrower, or
appointment of a receiver, trustee or custodian, for all or any part of the
property of, assignment for the benefit of creditors by, or the commencement of
any proceeding by the Borrower under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect; (h) the commencement of any
proceeding against the Borrower or any guarantor of any of the Obligations under
any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, which is not cured by the dismissal thereof within 30 days
after the date commenced; (i) revocation or termination of, or limitation of
liability upon, any guaranty of the Obligations; (j) commencement of proceedings
by any guarantor of any of the Obligations under any bankruptcy or insolvency
law; (k) the Borrower makes any payment on account of any indebtedness or
obligation which has been subordinated to the Obligations, unless such payment
is permitted in the applicable subordination agreement, or if any person who has
subordinated such indebtedness or obligations terminates or in any way limits
his subordination agreement; (l) the Borrower shall generally not pay its debts
as they become due; or the Borrower shall conceal, remove or transfer any part
of its property, with intent to hinder, delay or defraud its creditors, or make
or suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; (m) either the Borrower or any
other party thereto shall breach any subordination agreement executed in
connection with the Loan; (n) the sale or transfer of fifty percent or more of
the outstanding shares of stock of the Borrower; (o) the Borrower shall fail to
pay when due, or within any applicable grace periods, any amount due to
Sundstrand Corporation or the Oregon Economic Development Commission that is
secured by a lien on the Borrower's real property located in Deschutes County,
Oregon, or any such creditor shall commence a foreclosure on such real property;
or (p) the Borrower shall breach any of its obligations under the Deed of Trust,
Assignment of Rents and Leases, and Security Agreement given by the Borrower to
Silicon with respect to Borrower's real property located in Deschutes County,
Oregon. If any of the foregoing defaults is curable and if Borrower has not
been given more than one prior notice of default within the preceding twelve
months, it may be cured (and no Event of Default will have occurred) if
Borrower, after receiving written notice from Lender demanding cure of such
default cures the failure within thirty days. Silicon may cease making any
Loans hereunder during any of the above cure periods, and thereafter if an Event
of Default has occurred.
6.2 REMEDIES. Upon the occurrence of any Event of Default and the
expiration of any applicable cure period under Section 6.1, and at any time
thereafter, Silicon, at its option, and without
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<PAGE>
notice or demand of any kind (all of which are hereby expressly waived by the
Borrower), may do any one or more of the following: (a) Cease making Loans or
otherwise extending credit to the Borrower under this Agreement or any other
document or agreement; (b) Accelerate and declare all or any part of the
Obligations to be immediately due, payable, and performable, notwithstanding any
deferred or installment payments allowed by any instrument evidencing or
relating to any Obligation; (c) Take possession of any or all of the Collateral
wherever it may be found, and for that purpose the Borrower hereby authorizes
Silicon without judicial process to enter onto any of the Borrower's premises
without interference to search for, take possession of, keep, store, or remove
any of the Collateral, and remain on the premises or cause a custodian to remain
on the premises in exclusive control thereof without charge for so long as
Silicon deems it reasonably necessary in order to complete the enforcement of
its rights under this Agreement or any other agreement; provided, however, that
should Silicon seek to take possession of any or all of the Collateral by Court
process, the Borrower hereby irrevocably waives: (i) any bond and any surety or
security relating thereto required by any statute, court rule or otherwise as an
incident to such possession; (ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (iii) any
requirement that Silicon retain possession of and not dispose of any such
Collateral until after trial or final judgment; (d) Require the Borrower to
assemble any or all of the Collateral and make it available to Silicon at places
designated by Silicon which are reasonably convenient to Silicon and the
Borrower, and to remove the Collateral to such locations as Silicon may deem
advisable; (e) Require the Borrower to deliver to Silicon, in kind, all checks
and other payments received with respect to all accounts and other Collateral,
together with any necessary endorsements, within one day after the date received
by the Borrower; (f) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Silicon shall have the right to use the Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge; (g) Sell, lease or otherwise dispose of any of the Collateral in its
condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at any one or more public and/or private
sales, in lots or in bulk, for cash, exchange or other property, or on credit,
and to adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Silicon shall have the right to
conduct such disposition on the Borrower's premises without charge, for such
time or times as Silicon deems reasonable, or on Silicon's premises, or
elsewhere and the Collateral need not be located at the place of disposition.
Silicon may directly or through any affiliated company purchase or lease any
Collateral at any such public disposition, and if permissible under applicable
law, at any private disposition. Any sale or other disposition of Collateral
shall not relieve the Borrower of any liability the Borrower may have if any
Collateral is defective as to title or physical condition or otherwise at the
time of sale; (h) Demand payment of, and collect any accounts and general
intangibles comprising Collateral and, in connection therewith, the Borrower
irrevocably authorizes Silicon to endorse or sign the Borrower's name on all
collections, receipts, instruments and other documents, to take possession of
and open mail addressed to the Borrower and remove therefrom payments made with
respect to any item of the Collateral or proceeds thereof, and, in Silicon's
sole discretion, to grant extensions of time to pay, compromise claims and
settle accounts and the like for less than face value; (i) Offset against any
sums in any of the Borrower's general, special or other deposit accounts with
Silicon, including but not limited to account no. ; and (j)
Demand and receive possession of any of the Borrower's federal and state income
tax and the books and records utilized in the preparation thereof or referring
thereto. All reasonable fees of professionals (including attorneys' fees),
expenses, costs, liabilities and obligations incurred by Silicon with respect to
the foregoing shall be added to and become part of the Obligations, shall be due
on demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. Without limiting any of Silicon's rights
and remedies, from and after the failure of
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<PAGE>
Borrower to cure any Event of Default, Silicon shall have the right to increase
the interest rate applicable to the Obligations by an additional four percent
per annum.
6.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. The Borrower
and Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to the
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the Collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in
cash or by cashier's check or wire transfer is required; (vi) With respect to
any sale of any of the Collateral, Silicon may (but is not obligated to) direct
any prospective purchaser to ascertain directly from the Borrower any and all
information concerning the same. Silicon may employ other methods of noticing
and selling the Collateral, in its discretion, if they are commercially
reasonable.
6.4 POWER OF ATTORNEY. Upon the occurrence of any Event of Default,
without limiting Silicon's other rights and remedies, the Borrower grants to
Silicon an irrevocable power of attorney coupled with an interest, authorizing
and permitting Silicon (acting through any of its employees, attorneys or
agents) at any time, at its option, but without obligation, with or without
notice to the Borrower, and at the Borrower's expense, to do any or all of the
following, in the Borrower's name or otherwise: (a) Execute on behalf of the
Borrower any documents that Silicon may, in its sole and absolute discretion,
deem advisable in order to perfect and maintain Silicon's security interest in
the Collateral, or in order to exercise a right of the Borrower or Silicon, or
in order to fully consummate all the transactions contemplated under this
Agreement, and all other present and future agreements; (b) Execute on behalf of
the Borrower any document exercising, transferring or assigning any option to
purchase, sell or otherwise dispose of or to lease (as lessor or lessee) any
real or personal property which is part of Silicon's Collateral or in which
Silicon has an interest; (c) Execute on behalf of the Borrower, any invoices
relating to any account, any draft against any account debtor and any notice to
any account debtor, any proof of claim in bankruptcy, any Notice of Lien, claim
of mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien; (d) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name of
the Borrower upon any instruments, or documents, evidence of payment or
Collateral that may come into Silicon's possession; (e) Endorse all checks and
other forms of remittances received by Silicon; (f) Pay, contest or settle any
lien, charge, encumbrance, security interest and adverse claim in or to any of
the Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; (g) Grant extensions of time to pay, compromise
claims and settle accounts and general intangibles for less than face value and
execute all releases and other documents in connection therewith; (h) Pay any
sums required on account of the Borrower's taxes or to secure the release of any
liens therefor, or both; (i) Settle and adjust, and give releases of, any
insurance claim that relates to any of the Collateral and obtain payment
therefor; (j) Instruct any third party having custody or control of any books or
records belonging to, or relating to, the Borrower to give Silicon the same
rights of access and other rights with respect thereto as Silicon has under this
Agreement; and (k) Take any action or pay any sum required of the Borrower
pursuant to this Agreement and any other present or future agreements. Any and
all reasonable sums paid and any and all reasonable costs, expenses,
liabilities, obligations and attorneys' fees incurred by Silicon with respect to
the foregoing shall be added to and become part of the Obligations, shall be
payable on demand, and shall bear interest at a rate equal to the highest
interest rate
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<PAGE>
applicable to any of the Obligations. In no event shall Silicon's rights under
the foregoing power of attorney or any of Silicon's other rights under this
Agreement be deemed to indicate that Silicon is in control of the business,
management or properties of the Borrower.
6.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of
any sale of the Collateral shall be applied by Silicon first to the costs,
expenses, liabilities, obligations and attorneys' fees incurred by Silicon in
the exercise of its rights under this Agreement, second to the interest due upon
any of the Obligations, and third to the principal of the Obligations, in such
order as Silicon shall determine in its sole discretion. Any surplus shall be
paid to the Borrower or other persons legally entitled thereto; the Borrower
shall remain liable to Silicon for any deficiency. If Silicon, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale or other disposition of
Collateral, Silicon shall have the option, exercisable at any time, in its sole
discretion, of either reducing the Obligations by the principal amount of
purchase price or deferring the reduction of the Obligations until the actual
receipt by Silicon of the cash therefor.
6.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, Silicon shall have all the other rights and remedies
accorded a secured party under the Oregon Uniform Commercial Code and under all
other applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and the Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any
rights or remedies shall not operate as a waiver thereof, but all rights and
remedies shall continue in full force and effect until all of the Obligations
have been fully paid and performed.
7. GENERAL PROVISIONS.
7.1 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by regular first-class mail, or
certified mail return receipt requested, addressed to Silicon or the Borrower at
the addresses shown in the heading to this Agreement, or at any other address
designated in writing by one party to the other party. All notices shall be
deemed to have been given upon delivery in the case of notices personally
delivered to the Borrower or to Silicon, or at the expiration of two business
days following the deposit thereof in the United States mail, with postage
prepaid.
7.2 SEVERABILITY. Should any provision of this Agreement be held by
any court of competent jurisdiction to be void or unenforceable, such defect
shall not affect the remainder of this Agreement, which shall continue in full
force and effect.
7.3 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between the Borrower and Silicon and
supersede all prior and contemporaneous negotiations and oral representations
and agreements, all of which are merged and integrated in this Agreement. UNDER
OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY SILICON AFTER
OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR
PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING,
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<PAGE>
EXPRESS CONSIDERATION AND BE SIGNED BY SILICON TO BE ENFORCEABLE.
7.4 WAIVERS. The failure of Silicon at any time or times to require
the Borrower to strictly comply with any of the provisions of this Agreement or
any other present or future agreement between the Borrower and Silicon shall not
waive or diminish any right of Silicon later to demand and receive strict
compliance therewith. Any waiver of any default shall not waive or affect any
other default, whether prior or subsequent thereto. None of the provisions of
this Agreement or any other agreement now or in the future executed by the
Borrower and delivered to Silicon shall be deemed to have been waived by any act
or knowledge of Silicon or its agents or employees, but only by a specific
written waiver signed by an officer of Silicon and delivered to the Borrower.
The Borrower waives demand, protest, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, account, document or
guaranty at any time held by Silicon on which the Borrower is or may in any way
be liable, and notice of any action taken by Silicon, unless expressly required
by this Agreement.
7.5 [INTENTIONALLY OMITTED].
7.6 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by the Borrower and a duly
authorized officer of Silicon.
7.7 TIME OF ESSENCE. Time is of the essence in the performance by the
Borrower of each and every obligation under this Agreement.
7.8 ATTORNEYS' FEES AND COSTS. The Borrower shall reimburse Silicon
for all reasonable attorneys' fees and fees of other professionals, and all
filing, recording, search, title insurance, appraisal, audit, and other
reasonable costs incurred by Silicon, pursuant to, or in connection with, or
relating to this Agreement (whether or not a lawsuit is filed), including, but
not limited to, any reasonable attorneys' fees and costs Silicon incurs in order
to do the following: prepare and negotiate this Agreement and the documents
relating to this Agreement; obtain legal advice in connection with this
Agreement; enforce, or seek to enforce, any of its rights; prosecute actions
against, or defend actions by, account debtors; commence, intervene in, or
defend any action or proceeding; initiate any complaint to be relieved of the
automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy
claim, third-party claim, or other claim; examine, audit, copy, and inspect any
of the Collateral or any of the Borrower's books and records; protect, obtain
possession of, lease, dispose of, or otherwise enforce Silicon's security
interest in, the Collateral and otherwise represent Silicon in any litigation
relating to the Borrower. If either Silicon or the Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and
professionals' fees, including (but not limited to) reasonable attorneys' fees
and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment. All fees and costs to which Silicon may be
entitled pursuant to this Paragraph shall immediately become part of the
Borrower's Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.
7.9 BENEFIT OF AGREEMENT; CONFIDENTIALITY. The provisions of this
Agreement shall be binding upon and inure to the benefit of the respective
successors, assigns, heirs, beneficiaries and representatives of the parties
hereto; provided, however, that the Borrower may not assign or transfer any of
its rights under this Agreement without the prior written consent of Silicon,
and any prohibited
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<PAGE>
assignment shall be void. No consent by Silicon to any assignment shall release
the Borrower from its liability for the Obligations. The Borrower agrees and
consents to Silicon's sale or transfer, whether now or later, of one or more
participation interests in the Loans to one or more purchasers, whether related
or unrelated to Silicon. Silicon may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Silicon may have about the Borrower or about any other
matter relating to the Loan and the Borrower hereby waive any rights to privacy
it may have with respect to such matters. The Borrower additionally waives any
and all notices of sale of participation interests, as well as all notices of
any repurchase of such participation interests. The Borrower also agrees that
the purchasers of any such participation interests shall be considered as the
absolute owners of such interests in the Loans and shall have all the rights
granted under the participation agreement or agreements governing the sale of
such participation interests. The Borrower unconditionally agrees that either
Silicon or such purchaser may enforce the Borrower's obligations under the Loans
irrespective of the failure or insolvency of any holder of any interest in the
Loans.
7.10 JOINT AND SEVERAL LIABILITY. If the Borrower consists of more
than one person, their liability shall be joint and several, and the compromise
of any claim with, or the release of, any Borrower shall not constitute a
compromise with, or a release of, any other Borrower.
7.11 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only
used in this Agreement for convenience. The Borrower acknowledges that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. This Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed strictly
against Silicon or the Borrower under any rule of construction or otherwise.
7.12 MUTUAL WAIVER OF JURY TRIAL. THE BORROWER AND SILICON EACH
HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SILICON AND THE BORROWER, OR ANY
CONDUCT, ACTS OR OMISSIONS OF SILICON OR THE BORROWER OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
SILICON OR THE BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.
7.13 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts
and transactions hereunder and all rights and obligations of Silicon and the
Borrower shall be governed by, and construed in accordance with, the laws of the
State of Oregon. Any undefined term used in this Agreement that is defined in
the Oregon Uniform Commercial Code shall have the meaning assigned to that term
in the Oregon Uniform Commercial Code. As a material part of the consideration
to Silicon to enter into this Agreement, the Borrower agrees (subject to the
parties right to require arbitration under Section 7.13 of this Agreement) that
all actions and proceedings relating directly or indirectly hereto shall be
litigated in courts located within Oregon, and that the exclusive venue therefor
shall be Washington County.
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<PAGE>
BORROWER:
ADVANCED POWER TECHNOLOGY, INC.
By:
----------------------------------
Title:
-------------------------------
SILICON:
SILICON VALLEY BANK
By:
----------------------------------
Title:
-------------------------------
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<PAGE>
SCHEDULE TO LOAN AND SECURITY AGREEMENT
Borrower: Advanced Power Technology, Inc.
Address: 405 S.W. Columbia Street
Bend, Oregon 97702
Date: September 6, 1995
SECURED ACCOUNTS RECEIVABLE LINE OF CREDIT
CREDIT LIMIT:
(Section 1. 1) An amount not to exceed the lesser of: (i) $2,500,000.00
at any one time outstanding; or (ii) the amount of the
"Borrowing Base", as defined below.
For purposes of this Schedule, the "Borrowing Base" shall
mean the sum of (i) 80% of the Net Amount of Borrower's
eligible accounts receivable, plus (ii) 25% of Borrower's
"Eligible Inventory" (as defined below), up to a maximum
advance of $500,000.00 against Eligible Inventory. With
respect to Borrower's accounts, "Net Amount" means the
gross amount of the account, minus all applicable sales,
use, excise and other similar taxes and minus all
discounts, credits and allowances of any nature granted
or claimed. Borrower's "Eligible Inventory" means the
Borrower's inventory held for sale in the United States
or Canada, valued at the lower of wholesale cost or
market value, which Silicon in its reasonable discretion
deems eligible for borrowing, subject to the Backlog
Covenant described below.
The amount of all letters of credit issued by Silicon at
the request of the Borrower shall reduce, dollar for
dollar, the amount otherwise available to be borrowed
under the formulas described in this paragraph and the
paragraphs below.
Without limiting the fact that the determination of which
accounts are eligible for borrowing is a matter of
Silicon's discretion, the following shall not be deemed
eligible for borrowing: accounts outstanding for more
than 90 days from the invoice date unless otherwise
agreed to in writing by Silicon, accounts subject to any
contingencies, accounts owing from an account debtor
outside the United States or billed or payable outside
the United States (except for those backed by a letter of
credit satisfactory to Silicon), accounts owing from
governmental agencies unless otherwise agreed to in
writing by Silicon, accounts owing from one account
debtor to the extent they exceed 25% of the total
eligible accounts outstanding, accounts owing from an
affiliate of the Borrower, accounts owing from an
affiliate of Borrower, and accounts subject to
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<PAGE>
setoff, recoupment, counterclaim or any other demand by
the account debtor. In addition, if more than 50% of the
accounts owing from an account debtor are outstanding
more than 120 days from the invoice date or are otherwise
not eligible accounts, then all accounts owing from that
account debtor shall be deemed ineligible for borrowing.
Without limiting the fact that the determination of which
inventory is eligible for borrowing is a matter of
Silicon's discretion, the following shall not be deemed
eligible for borrowing: any inventory other than finished
goods that are owned by Borrower and located in Bend,
Oregon; inventory that is used, obsolete or returned
goods; inventory that is stored at a location other than
the Borrowers' Address or any location owned, leased or
rented by Borrowers and previously identified to Silicon;
inventory that is subject to a landlord's lien; and
inventory that is not in the possession of the Borrower.
INTEREST RATE:
(Section 1.2) The interest rate applicable to the Secured Accounts
Receivable Line of Credit shall be a rate equal to the
"Prime Rate" in effect from time to time, plus 2.0% per
annum. In the event that the Borrower's ratio of total
liabilities to tangible net worth falls below 1.75, and
the Borrower realizes net profits after taxes, the
interest rate shall decrease to the Prime Rate, plus
1.75% per annum. Interest calculations shall be made on
the basis of a 360-day year and the actual number of days
elapsed. Interest is payable monthly.
"Prime Rate" means the rate announced from time to time
by Silicon as its "prime rate"; it is a base rate upon
which other rates charged by Silicon are based, and it is
not necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall change
on each date there is a change in the Prime Rate.
COMMITMENT
FEE: (Section 1.3) $25,000.00, which is fully earned and payable at closing.
(Any Commitment Fee previously paid by the Borrower in
connection with this loan shall be credited against this
Fee.)
MATURITY DATE:
(Section 1.3) One year from the date of this Schedule, at which time
all unpaid principal and accrued but unpaid interest
shall be due and payable.
MATURITIES OF
LETTERS OF CREDIT: Commercial or standby letters of credit issued by Silicon
shall have a maximum maturity of not later than the
Maturity Date for the Secured Accounts Receivable Line of
Credit.
REPAYMENT: The Borrower shall repay on demand any amount drawn on a
letter of credit issued by Silicon. Silicon may, but is
not obligated to, add to the principal amount outstanding
under the Secured Accounts Receivable Line of Credit any
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<PAGE>
amount drawn on a letter of credit issued by Silicon.
Any such amount shall be subject to the terms applicable
to the Secured Accounts Receivable Line of Credit.
ISSUANCE: The issuance of any letter of credit under this Agreement
is subject to Silicon's written approval and must be in
form and content satisfactory to Silicon and in favor of
a beneficiary reasonably acceptable to Silicon. The
Borrower shall execute Silicon's then-current application
forms, reimbursement agreement and related documents as a
condition to Silicon's issuance of any letter of credit.
FEES: The Borrower shall pay Silicon the fees and costs
customarily charged by Silicon (at the time of issuance
of the letter of credit) with respect to the issuance of
letters of credit.
SECURED TERM LOAN
CREDIT LIMIT: An amount not to exceed $1,000,000.00.
INTEREST RATE: The interest rate applicable to the Secured Term Loan
shall be a rate equal to the "Prime Rate" in effect from
time to time, plus 1.75% per annum. Interest
calculations shall be made on the basis of a 360-day year
and the actual number of days elapsed. "Prime Rate"
means the rate announced from time to time by Silicon as
its "prime rate"; it is a base rate upon which other
rates charged by Silicon are based, and it is not
necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall change
on each date there is a change in the Prime Rate.
Interest is payable monthly.
MATURITY DATE: Two years from the date of this Schedule, at which time
all unpaid principal and accrued but unpaid interest
shall be due and payable.
COMMITMENT
FEE: (Section 1.3) 1,000.00.
PRIOR NAMES OF
BORROWER: See Exhibit B
TRADE NAMES OF
BORROWER: See Exhibit B
OTHER LOCATIONS
AND ADDRESSES: See Exhibit B
MATERIAL ADVERSE
LITIGATION: See Exhibit B
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<PAGE>
FINANCIAL
COVENANTS:
(Section 4.1) The Borrower shall comply with all of the following
covenants, all of which shall be determined and measured
in accordance with generally accepted accounting
principles, except as otherwise stated below:
TANGIBLE NET
WORTH: Borrower shall at all times maintain a Tangible Net Worth
(defined below) of not less than $4,250,000, measured
quarterly.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall maintain a ratio of total liabilities to
Tangible Net Worth of not more than 2.75:1.0, measured
quarterly. Upon maturity of the Interim Bridge Loan,
Borrower shall maintain a ratio of total liabilities to
Tangible Net Worth of not more than 2.50:1.0, measured
quarterly. For purposes of this calculation, total
liabilities shall exclude deferred revenues and debt, if
any, that has been subordinated to the Loans in a written
subordination agreement on terms satisfactory to Silicon.
QUICK RATIO: Borrower shall maintain a ratio of Quick Assets (defined
below) to current liabilities of not less than 0.50:1,
measured quarterly. Upon maturity of the Interim Bridge
Loan, Borrower shall maintain a ratio of Quick Assets to
current liabilities of not less than 0.55:1, measured
quarterly.
BACKLOG TO
INVENTORY RATIO: Borrower shall maintain a ratio of Backlog (as defined
below) to the book value of inventory of at least
2.50:1.0, measured monthly on a rolling three month
average. In the event that the ratio of Backlog to book
value of inventory is less than 2.50:1.0 for two
consecutive months, the definition of Borrowing Base for
the Secured Accounts Receivable Line of Credit shall be
revised to prohibit borrowing against Eligible Inventory
for a period of 30 consecutive days each year.
PROFITABILITY: Borrower shall not incur a quarterly loss in excess of
$500,000 for one quarter, $750,000 for two quarters, nor
incur losses in any amount in more than three or more
consecutive quarters. For purposes of this paragraph,
"loss" means net sales, less cost of goods sold, less
operating expenses excluding non-cash expenses.
DEFINITIONS: "Tangible Net Worth" means stockholders' equity plus debt,
if any, that has been subordinated to the Loans in a
written subordination agreement on terms satisfactory to
Silicon, and accrued interest thereon, less goodwill,
patents, capitalized software costs, deferred
organizational costs, tradenames, trademarks, and all
other assets which would be classified as intangible
assets
Page 19 - LOAN AND SECURITY AGREEMENT
<PAGE>
under generally accepted accounting principles. "Quick
Assets" means cash on hand or on deposit in banks,
readily marketable securities issued by the United
States, readily marketable commercial paper rated "A-I"
by Standard & Poor's Corporation (or a similar rating by
a similar rating organization), certificates of deposit
and banker's acceptances, and accounts receivable (net of
allowance for doubtful accounts). "Backlog" is defined
as the book value of orders received by Borrower, backed
by purchase orders, for shipment of product within 12
months.
OTHER COVENANTS:
(Section 4.1) Borrower shall at all times comply with all of the
following additional covenants:
BANKING RELATIONSHIP. Borrower shall at all times
maintain its primary banking relationship with Silicon.
CONDITIONS TO
CLOSING: Without in any way limiting the discretionary nature of
advances under this Agreement, before requesting any such
advance, the Borrower shall satisfy each of the following
conditions:
1. LOAN DOCUMENTS:
Silicon shall have received this Agreement, the Schedule,
and such other loan documents as Silicon shall require,
each duly executed and delivered by the parties thereto.
2. DOCUMENTS RELATING
TO AUTHORITY, ETC.:
Silicon shall have received each of the following in form
and substance satisfactory to it:
(a) Certified Copies of the Articles of Incorporation
and Bylaws of the Borrower;
(b) A Certificate of Good Standing issued by the
Secretary of State of the Borrower's state of
incorporation and such other states as Silicon may
reasonably request with respect to the Borrower;
(c) A certified copy of a Resolution adopted by the
Board of Directors of the Borrower authorizing the
execution, delivery and performance of this Agreement,
and any other documents or certificates to be executed by
the Borrower in connection with this transaction; and
(d) Incumbency Certificates describing the office and
identifying the specimen signatures of the individuals
signing all such loan documents on behalf of the
Borrower.
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<PAGE>
(e) A Subordination Agreement executed by all
shareholders of Borrower to whom Borrower is indebted.
3. PERFECTION AND
PRIORITY OF SECURITY: Silicon shall have received evidence satisfactory to it
that its security interest in the Collateral has been
duly perfected and that such security interest is prior
to all other liens, charges, security interests,
encumbrances and adverse claims in or to the Collateral
other than Permitted Liens, which evidence shall include,
without limitation, a certificate from the Oregon
Secretary of State showing the due filing and first
priority of the UCC Financing Statements to be signed by
the Borrower covering the Collateral.
4. INSURANCE: Silicon shall have received evidence satisfactory to it
that all insurance required by this Agreement is in full
force and effect, with loss payee designations and
additional insured designations as required by this
Agreement.
5. OTHER INFORMATION:
Silicon shall have received such other statements,
opinions, certificates, documents and information with
respect to matters contemplated by this Agreement as it
may reasonably request, including a copy of the documents
relating to the purchase of shares of Borrower from
Sundstrand Corporation, all of which must be acceptable
to Silicon.
Silicon shall have conducted an examination of the
Borrower's books, records, ledgers, journals, and
registers, as Silicon may deem necessary, and shall be
satisfied with the results of such examination in its
sole discretion.
6. EQUITY INVESTMENT:
Management in the Borrower shall have contributed not
less than $250,000 to purchase capital stock the Borrower
from Sundstrand Corporation.
Silicon and the Borrower agree that the terms of this Schedule supplement
the Loan and Security Agreement between Silicon and the Borrower and agree to be
bound by the terms of this Schedule.
BORROWER:
ADVANCED POWER TECHNOLOGY, INC.
By:
--------------------------------------
Title:
-----------------------------------
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<PAGE>
SILICON:
SILICON VALLEY BANK
By:
---------------------------------------
Title:
------------------------------------
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EXHIBIT A
[INSERT BORROWING BASE CERTIFICATE]
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<PAGE>
EXHIBIT B
[DISCLOSURES BY BORROWER]
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<PAGE>
SCHEDULE 3.13
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<PAGE>
SCHEDULE 3.14
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<PAGE>
SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
(EXIM PROGRAM)
BORROWER: Advanced Power Technology, Inc.
ADDRESS: 405 S.W. Columbia Street
Bend, Oregon 97702
DATE: September 6, 1995
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date
between SILICON VALLEY BANK ("Silicon"), whose address is 3000 Lakeside Drive,
Santa Clara, California 95054-2895 and the borrower named above (the
"Borrower"), whose chief executive office is located at the above address
("Borrower's Address").
1. LOANS.
1.1 LOANS. Silicon will make loans to the Borrower (the "Loans") in
amounts determined by Silicon up to the amount (the "Credit Limit") shown on the
Schedule to this Agreement (the "Schedule"), the terms of which are incorporated
into this Agreement. The Borrower is responsible for monitoring the total amount
of Loans and other Obligations outstanding from time to time, and the Borrower
shall not permit that amount, at any time, to exceed the Credit Limit. If at any
time the total of all outstanding Loans and all other Obligations exceeds the
Credit Limit, the Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand.
1.2 INTEREST; REQUEST TO DEBIT ACCOUNTS. All Loans and all other
monetary Obligations shall bear interest at the rate shown on the Schedule
hereto. Interest shall be payable monthly, on the due date shown on the monthly
billing from Silicon to the Borrower. The Borrower hereby requests and
authorizes Silicon to debit any of the Borrower's accounts with Silicon,
including without limitation account no. _______________, for payments of
interest and principal due on the Loan and all other obligations owing by the
Borrower to Silicon. Silicon shall promptly notify the Borrower of all debits
which Silicon makes against the Borrower's accounts. Any such debit against the
Borrower's accounts shall in no way be deemed a setoff by Silicon.
1.3 FEES. The Borrower shall pay to Silicon a commitment fee in the
amount shown on the Schedule hereto concurrently herewith. This fee is in
addition to all interest and other sums payable to Silicon and is not
refundable.
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<PAGE>
2. GRANT OF SECURITY INTEREST.
2.1 OBLIGATIONS. The term "Obligations" as used in this Agreement means
the following: the obligation to pay all Loans and all interest thereon when
due, and to pay and perform when due all other present and future indebtedness,
liabilities, obligations, guarantees, covenants, agreements, warranties and
representations of the Borrower to Silicon, whether joint or several, monetary
or non-monetary, and whether created pursuant to this Agreement or any other
present or future agreement or otherwise. Silicon may, in its discretion,
require that the Borrower pay monetary Obligations in cash to Silicon, or charge
them to Borrower's Loan account, in which event they will bear interest at the
same rate applicable to the Loans.
2.2 COLLATERAL. As security for all Obligations, the Borrower hereby
grants Silicon a continuing security interest in all of the Borrower's assets,
including but not limited to all of the Borrower's interest in the types of
property described below, whether now owned or hereafter acquired, and wherever
located (collectively, the "Collateral"): (a) all accounts; (b) all chattel
paper; (c) all documents; (d) all instruments; (e) all inventory; (f) all
equipment, except such equipment that is or will be sold to and leased back from
Financing for Science, Inc.; (g) all goods; (h) all fixtures (except as provided
below in this Section 2.2); (i) all general intangibles including, but not
limited to, deposit accounts, goodwill, names, trade names, trademarks and the
goodwill of the business symbolized thereby, trademark applications, trade
secrets, drawings, blueprints, customer lists, patents, patent applications,
copyrights, copyright applications, and all insurance policies and claims
(including without limitation credit, liability, property and other insurance),
and all other rights, privileges and franchises of every kind; (j) all books and
records, whether stored on computers or otherwise maintained; (k) all of the
Borrower's cash; and (l) all substitutions, additions and accessions to any of
the foregoing, and all products, proceeds and insurance proceeds of the
foregoing, and all guaranties of and security for the foregoing; and all books
and records relating to any of the foregoing. Notwithstanding anything to the
contrary in this paragraph 2.2, Borrower does not grant to Silicon a security
interest in any intellectual property consisting of any patents, patent
applications or other forms of process technology or product designs, although
Borrower does grant to Silicon a continuing security interest in proceeds of the
sale of these assets. All terms used above in this Section 2.2 that are defined
in the Oregon Uniform Commercial Code shall have the meaning given to such terms
in the Oregon Uniform Commercial Code. Silicon's security interest in equipment
includes equipment of the Borrower that is attached to the real property
occupied by the Borrower, but Silicon shall not have a security interest in any
tenant improvements of Borrower that are part of the real property occupied by
Borrower. The Borrower shall, at least every six months, provide a written
Schedule to Silicon showing (i) all applications for the registration of any
patent, trademark, or copyright with the U.S. Patent and Trademark Office, the
U.S. Copyright Office, or any similar office or agency in any other country,
state, or any political subdivision (the "Offices") filed by Borrower or any
agent, employee, licensee or designee of Borrower, and (ii) all assignments of
any patent, trademark, or copyright which Borrower has acquired from a third
party with any one of the Offices.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
The Borrower represents and warrants to Silicon as follows, and the
Borrower covenants that the following representations will continue to be true,
and that the Borrower will comply with all of the following covenants:
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<PAGE>
3.1 CORPORATE EXISTENCE AND AUTHORITY. The Borrower is and will
continue to be duly authorized, validly existing and in good standing under the
laws of the state of Delaware. The Borrower is and will continue to be qualified
and licensed to do business in all jurisdictions in which any failure to do so
would have a material adverse effect on the Borrower. The execution, delivery
and performance by the Borrower of this Agreement, and all other documents
contemplated hereby have been duly and validly authorized, are enforceable
against the Borrower in accordance with their terms, subject to applicable
bankruptcy law and equitable principles of law, and do not violate any law or
any provision of, and are not grounds for acceleration under, any agreement or
instrument which is binding upon the Borrower.
3.2 NAME, TRADE NAMES AND STYLES. The name of the Borrower set forth in
the heading to this Agreement is its correct name. Listed on the Schedule hereto
are all prior names of the Borrower and all of the Borrower's present and prior
trade names. The Borrower shall give Silicon 15 days' prior written notice
before changing its name or doing business under any other name. The Borrower
has complied, and will in the future comply, with all laws relating to the
conduct of business under a fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is the Borrower's chief executive office. In
addition, the Borrower has places of business and Collateral is located only at
the locations set forth on the Schedule to this Agreement. The Borrower will
give Silicon at least 15 days prior written notice before changing its chief
executive office or moving the Collateral to any other location.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. The Borrower is now, and will
at all times in the future be, the sole owner of all the Collateral, except for
general intangibles licensed to the Borrower and items of equipment which are
leased by the Borrower. The Collateral now is and will remain free and clear of
any and all liens, charges, security interests, encumbrances and adverse claims,
except for the following ("Permitted Liens"): (i) purchase money security
interests in specific items of equipment; (ii) licenses of general intangibles
and leases of specific items of equipment, including without limitation the
lease of equipment from Financing for Science, Inc.; (iii) liens for taxes not
yet payable; (iv) additional security interests and liens consented to in
writing by Silicon in its sole discretion; and (v) security interests being
terminated substantially concurrently with this Agreement. Silicon will have the
right to require, as a condition to its consent under subparagraph (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement on terms satisfactory to Silicon in its sole discretion,
acknowledge that the holder's security interest is subordinate to the security
interest in favor of Silicon, and that the Borrower agree that any uncured
default in any obligation secured by the subordinate security interest shall
also constitute an Event of Default under this Agreement. Silicon now has, and
will continue to have, a first priority, perfected and enforceable security
interest in all of the Collateral. The Collateral shall not be subject to any
other liens or security interests of any type except for the Permitted Liens.
The Borrower will at all times defend Silicon and the Collateral against all
claims of others. None of the Collateral now is or will be affixed to any real
property in such a manner, or with such intent, as to become a fixture.
3.5 MAINTENANCE OF COLLATERAL. The Borrower will maintain the
Collateral in good working condition, and the Borrower will not use the
Collateral for any unlawful purpose. The Borrower will immediately advise
Silicon in writing of any material loss or damage to the Collateral.
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<PAGE>
3.6 DEPOSIT SWEEP. The Borrower will enter into a written contract, in
a form satisfactory to Silicon, with either U.S. Bank or First Interstate Bank
of Oregon (individually the "Depository Bank" ) whereby all of Borrower's funds
in its account with the Depository Bank are transferred to Silicon account no.
___________ on a daily basis.
3.7 BOOKS AND RECORDS. The Borrower has maintained and will maintain at
the Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.8 FINANCIAL CONDITION AND STATEMENTS. All financial statements now or
in the future delivered to Silicon have been, and shall be, prepared in
conformity with generally accepted accounting principles and now and in the
future shall completely and accurately reflect the financial condition of the
Borrower, at the times and for the periods therein stated. Since the last date
covered by any such statement, there has been no material adverse change in the
financial condition or business of the Borrower. The Borrower is now and shall
continue to be solvent. The Borrower shall provide Silicon: (a) within 30 days
after the end of each month, a monthly financial statement (consisting of an
income statement and a balance sheet) prepared by the Borrower; (b) within 15
days after the end of each month, an accounts receivable report and an accounts
payable report in such form as Silicon shall reasonably specify; (c) within 15
days after the end of each month, a Borrowing Base Certificate as required by
the rules and regulations of the Export-Import Bank of the United States in the
form attached to this Agreement as Exhibit A, as Silicon may reasonably modify
such Certificate from time to time, signed by the President or Chief Financial
Officer of the Borrower; and (d) within 30 days after the end of each quarter of
each fiscal year, a Compliance Certificate in such form as Silicon shall
reasonably specify, signed by the President or Chief Financial Officer of the
Borrower, certifying that throughout such quarter the Borrower was in full
compliance with all of the terms and conditions of this Agreement, and setting
forth calculations showing compliance with the financial covenants set forth on
the Schedule hereto and such other information as Silicon shall reasonably
request. The Borrower shall provide Silicon, within 90 days following the end of
the Borrower's fiscal year, complete CPA-audited financial statements with
details on Borrower, such review being conducted by independent certified public
accountants reasonably acceptable to Silicon.
3.9 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. The Borrower has
timely filed, and will timely file, all tax returns and reports required by
foreign, federal, state and local law, and the Borrower has timely paid, and
will timely pay, all foreign, federal, state and local taxes, assessments,
deposits and contributions now or in the future owed by the Borrower. The
Borrower may, however, defer payment of any contested taxes, provided that the
Borrower (i) in good faith contests the Borrower's obligation to pay the taxes
by appropriate proceedings promptly and diligently instituted and conducted,
(ii) notifies Silicon in writing of the commencement of, and any material
development in, the proceedings, and (iii) posts bonds or takes any other steps
required to keep the contested taxes from becoming a lien upon any of the
Collateral. The Borrower is unaware of any claims or adjustments proposed for
any of the Borrower's prior tax years which could result in additional taxes
becoming due and payable by the Borrower. The Borrower has paid, and shall
continue to pay all amounts necessary to fund all present and future pension,
profit sharing and deferred compensation plans in accordance with their terms,
and the Borrower has not and will not withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any such plan which could result in any liability of the
Borrower, including, without limitation, any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
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<PAGE>
3.10 COMPLIANCE WITH LAW. The Borrower has complied, and will comply,
in all material respects, with all provisions of all foreign, federal, state and
local laws and regulations relating to the Borrower, including, but not limited
to, those relating to the Borrower's ownership of real or personal property,
conduct and licensing of the Borrower's business, and environmental matters.
3.11 LITIGATION. Except as disclosed in the Schedule hereto, there is
no claim, suit, litigation, proceeding or investigation pending or (to best of
the Borrower's knowledge) threatened by or against or affecting the Borrower in
any court or before any governmental agency (or any basis therefor known to the
Borrower) which may result, either separately or in the aggregate, in any
material adverse change in the financial condition or business of the Borrower,
or in any material impairment in the ability of the Borrower to carry on its
business in substantially the same manner as it is now being conducted. The
Borrower will promptly inform Silicon in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted by or against
the Borrower involving amounts in excess of $100,000.
3.12 USE OF PROCEEDS. All proceeds of all Loans shall be used solely
for lawful business purposes.
3.13 NO PATENTS, TRADEMARKS OR COPYRIGHTS. The attached Schedule 3.13
shows the patents (including pending applications, if any), trademarks and
copyrights with the U.S. Patent and Trademark Office, the U.S. Copyright Office
or any similar office or agency of any state, of the United States of America or
of any foreign jurisdiction that the Borrower owns. The Borrower has not granted
a security interest in, assigned, or pledged any of the foregoing in any manner
to secure any obligations of the Borrower.
3.14 HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used in this
Agreement, shall have the same meanings as set forth in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. Except as disclosed to and acknowledged by Silicon in writing,
the Borrower represents and warrants that: (a) the Borrower has no knowledge of
(i) any use, generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance by any prior owners or
occupants of any of the properties, or (ii) any actual or threatened litigation
or claims of any kind by any person relating to such matters; (b) Except as set
forth in Schedule 3.14, neither the Borrower nor any subtenant, contractor,
agent or other user authorized by Borrower of any of the properties shall use,
generate, manufacture, store, treat, dispose of, or release any hazardous waste
or substance on, under, or about any of the properties owned or operated by the
Borrower; and any such activity shall be conducted in compliance with all
applicable federal, state, and local laws, regulations, and ordinances,
including without limitation those laws, regulations and ordinances described
above. The Borrower authorizes Silicon and its agents, upon 24 hours prior
notice (which need not be in writing), to enter upon the properties to make such
inspections and tests as Silicon may deem appropriate to determine compliance of
the properties owned or operated by the Borrower with this section of the
Agreement. Any inspections or tests made by Silicon shall be for Silicon's
purposes only and shall not be construed to create any responsibility or
liability on the part of Silicon to the Borrower or to any other person. The
Borrower hereby (a) releases and waives any
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<PAGE>
future claims against Silicon for indemnity or contribution in the event the
Borrower becomes liable for cleanup or other costs under any such laws, and (b)
agrees to indemnify and hold harmless Silicon against any and all claims,
losses, liabilities, damages, penalties, and expenses which Silicon may directly
or indirectly sustain or suffer resulting from a breach of this section of the
Agreement or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior to the Borrower's
ownership or interest in the properties, whether or not the same was or should
have been known to the Borrower. The provisions of this section of the
Agreement, including the obligation to indemnify, shall survive the payment of
the Indebtedness and the termination or expiration of this Agreement and shall
not be affected by Silicon's acquisition of any interest in any of the
properties, whether by foreclosure or otherwise.
4. ADDITIONAL DUTIES OF THE BORROWER.
4.1 COVENANTS. The Borrower shall at all times comply with the
covenants set forth in the Schedule to this Agreement.
4.2 OVERADVANCE; PROCEEDS OF ACCOUNTS. If for any reason the total of
all outstanding Loans and all other Obligations exceeds the Credit Limit,
without limiting Silicon's other remedies, and whether or not Silicon declares
an Event of Default, the Borrower shall remit to Silicon all checks and other
proceeds of the Borrower's accounts and other Collateral, in the same form as
received by the Borrower, within one day after the Borrower's receipt of the
same, to be applied to the Obligations in such order as Silicon shall determine
in its discretion.
4.3 INSURANCE. The Borrower shall, at all times insure all of the
tangible personal property Collateral and carry such other business insurance,
with insurers reasonably acceptable to Silicon, in such form and amounts as
Silicon may reasonably require. All such insurance policies shall name Silicon
as an additional loss payee, and shall contain a lenders loss payee endorsement
in form reasonably acceptable to Silicon. Upon receipt of the proceeds of any
such insurance, Silicon shall apply such proceeds in reduction of the
Obligations as Silicon shall determine in its sole and absolute discretion,
except that, provided no Event of Default has occurred, Silicon shall release to
the Borrower insurance proceeds with respect to equipment totalling less than
$100,000, which shall be utilized by the Borrower for the replacement of the
equipment with respect to which the insurance proceeds were paid. Silicon may
require reasonable assurance that the insurance proceeds so released will be so
used. If the Borrower fails to provide or pay for any insurance, Silicon may,
but is not obligated to, obtain the same at the Borrower's expense. The Borrower
shall promptly deliver to Silicon copies of all reports made to insurance
companies.
4.4 REPORT. The Borrower shall provide Silicon with such written
reports with respect to the Borrower, as Silicon shall from time to time
reasonably specify.
4.5 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At all reasonable times,
and upon one business day notice, Silicon, or its agents, shall have the right
to inspect the Collateral, and the right to audit and copy the Borrower's
accounting books, records, ledgers, journals, or registers and the Borrower's
books and records relating to the Collateral. Silicon shall take reasonable
steps to keep confidential all information obtained in any such inspection or
audit, but Silicon shall have the right to disclose any such information to its
auditors, regulatory agencies and attorneys, and pursuant to any subpoena or
other legal process. Borrower shall reimburse Silicon for up to $1,250.00 per
audit for Silicon's out-of-pocket costs
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<PAGE>
for semi-annual accounts receivable audits, and Silicon may debit the Borrower's
deposit accounts with Silicon for the actual, reasonable out-of-pocket cost of
such accounts receivable audits (up to the limit stated above), in which event
Silicon shall send notification thereof to the Borrower. Notwithstanding the
foregoing, during the continuation of an Event of Default all audits shall be at
the Borrower's expense.
4.6 NEGATIVE COVENANTS. Except as may be permitted in the Schedule
hereto, the Borrower shall not, without Silicon's prior written consent, do any
of the following: (i) merge or consolidate with another corporation, except that
the Borrower may merge or consolidate with another corporation if the Borrower
is the surviving corporation in the merger and the aggregate value of the assets
acquired in the merger do not exceed 25% of Borrower's Tangible Net Worth (as
defined herein) as of the end of the month prior to the effective date of the
merger, and the assets of the corporation acquired in the merger are not subject
to any liens or encumbrances, except Permitted Liens; (ii) acquire any assets
outside the ordinary course of business for an aggregate purchase price
exceeding 25% of Borrower's Tangible Net Worth (as defined herein) as of the end
of the month prior to the effective date of the acquisition; (iii) enter into
any other transaction outside the ordinary course of business (except as
permitted by the other provisions of this Section); (iv) sell or transfer any
Collateral, except for the sale of finished inventory in the ordinary course of
the Borrower's business (which inventory shall be released from the security
interest granted in Section 2.2 upon completion of such sales), and except for
the sale of obsolete or unneeded equipment in the ordinary course of business;
(v) make any loans of any money or any other asset to any subsidiary or
affiliate of Borrower; (vi) incur any debts, outside the ordinary course of
business, which would have a material, adverse effect on the Borrower or on the
prospect of repayment of the Obligations; (vii) guarantee or otherwise become
liable with respect to the obligations of another party or entity; (viii) pay or
declare any dividends on the Borrower's stock (except for dividends payable
solely in stock of the Borrower); (ix) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of the Borrower's stock, except as the
Borrower may decide in order to satisfy stock warrants granted to Silicon,
Financing for Science International, Inc., Advanced Energy Industries, Inc., or
Bridgewater Capital Corporation; (x) make any change in the Borrower's capital
structure which has a material adverse effect on the Borrower or on the prospect
of repayment of the Obligations; (xi) dissolve or elect to dissolve; (xii) pay
bonuses or cash compensation to employees or officers for any fiscal year in
excess of net after tax earnings for the fiscal year; or (xiii) pledge or
otherwise encumber any patents, trademarks or other intellectual property of any
type owned or controlled by Borrower. "Tangible Net Worth" means stockholders'
equity plus debt that is subordinated to the Loans pursuant to a written
subordination agreement satisfactory to Silicon and accrued interest thereon,
less goodwill, patents, capitalized software costs, tradenames, trademarks, and
all other assets which would be classified as intangible assets under generally
accepted accounting principles. Transactions permitted by the foregoing
provisions of this Section are only permitted if no Event of Default is pending
at the time.
4.7 LITIGATION COOPERATION. Should any third-party suit or proceeding
be instituted by or against Silicon with respect to any Collateral or in any
manner relating to the Borrower, the Borrower shall, without expense to Silicon,
make available the Borrower and its officers, employees and agents and the
Borrower's books and records to the extent that Silicon may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
4.8 VERIFICATION. Silicon may, from time to time, following prior
notification to the Borrower, verify directly with the respective account
debtors the validity, amount and other matters relating to the Borrower's
accounts, by means of mail, telephone or otherwise, either in the name of the
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<PAGE>
Borrower or Silicon or such other name as Silicon may reasonably choose,
provided that no prior notification shall be required following an Event of
Default. Silicon shall not be required to obtain the Borrower's consent prior to
any such verification of accounts, whether or not an Event of Default has
occurred.
4.9 EXECUTE ADDITIONAL DOCUMENTATION. The Borrower agrees, at its
expense, on request by Silicon, to execute from time to time all documents in
form satisfactory to Silicon, as Silicon may deem reasonably necessary or useful
in order to perfect and maintain Silicon's perfected security interest in the
Collateral, and in order to fully consummate all of the transactions
contemplated by this Agreement.
5. TERM.
5.1 MATURITY DATE. This Agreement shall continue in effect until the
payment in full of the Obligations, provided, however, that the Borrower shall
repay the Loans in full, with all accrued but unpaid interest, not later than
the "Maturity Date" for each such Loan set forth on the Schedule.
5.2 EARLY TERMINATION. Subject to Section 5.3, this Agreement may be
terminated, without penalty, prior to the Maturity Date as follows: (i) by the
Borrower, effective three business days after written notice of termination is
given to Silicon; or (ii) by Silicon at any time after the occurrence of an
Event of Default, without notice, effective immediately.
5.3 PAYMENT OF OBLIGATIONS. On the due dates stated in the Schedule, or
on any earlier effective date of termination, the Borrower shall pay and perform
in full all Obligations, whether evidenced by installment notes or otherwise,
and whether or not all or any part of such Obligations are otherwise then due
and payable. Notwithstanding any termination of this Agreement, all of Silicon's
security interests in all of the Collateral and all of the terms and provisions
of this Agreement shall continue in full force and effect until all Obligations
have been paid and performed in full; provided that, without limiting the fact
that Loans are discretionary on the part of Silicon, Silicon may, in its sole
discretion, refuse to make any further Loans after termination. No termination
shall in any way affect or impair any right or remedy of Silicon, nor shall any
such termination relieve the Borrower of any Obligation to Silicon, until all of
the Obligations have been paid and performed in full. Upon payment and
performance in full of all the Obligations, Silicon shall promptly deliver to
the Borrower termination statements, requests for reconveyances and such other
documents as may be required to fully terminate any of Silicon's security
interests.
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<PAGE>
6. EVENTS OF DEFAULT AND REMEDIES.
6.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and the Borrower
shall give Silicon immediate written notice thereof: (a) any warranty,
representation, statement, report or certificate made or delivered to Silicon by
the Borrower or any of the Borrower's officers or employees, now or in the
future, shall be untrue or misleading in any material respect; (b) the Borrower
shall fail to pay when due any Loan or any interest thereon or any other
monetary Obligation; (c) the total Loans and other Obligations outstanding at
any time exceeds the Credit Limit; (d) the Borrower shall fail to comply with
any of the covenants set forth in the Schedule to this Agreement or shall fail
to perform any other non-monetary Obligation which by its nature cannot be
cured; (e) the Borrower shall fail to pay or perform any other non-monetary
Obligation, which failure is not cured within 15 days after the occurrence of
the same; (f) any levy, assessment, attachment, seizure, lien or encumbrance is
made on all or any part of the Collateral; (g) dissolution, termination of
existence, insolvency or business failure of the Borrower, or appointment of a
receiver, trustee or custodian, for all or any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding by the Borrower under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect; (h) the commencement of any
proceeding against the Borrower or any guarantor of any of the Obligations under
any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, which is not cured by the dismissal thereof within 60 days
after the date commenced; (i) revocation or termination of, or limitation of
liability upon, any guaranty of the Obligations; (j) the Borrower makes any
payment on account of any indebtedness or obligation which has been subordinated
to the Obligations, unless such payment is permitted in the applicable
subordination agreement, or if any person who has subordinated such indebtedness
or obligations terminates or in any way limits his subordination agreement; (k)
the Borrower shall generally not pay its debts as they become due; or the
Borrower shall conceal, remove or transfer any part of its property, with intent
to hinder, delay or defraud its creditors, or make or suffer any transfer of any
of its property which may be fraudulent under any bankruptcy, fraudulent
conveyance or similar law; (m) either the Borrower or any other party thereto
shall breach any subordination agreement executed in connection with the Loan;
(n) the sale or transfer of fifty percent or more of the outstanding shares of
stock of the Borrower; (o) the Borrower shall fail to pay when due, or within
any applicable grace periods, any amount due to Sundstrand Corporation or the
Oregon Economic Development Commission that is secured by a lien on the
Borrower's real property located in Deschutes County, Oregon, or any such
creditor shall commence a foreclosure on such real property; or (p) the Borrower
shall breach any of its obligations under the Deed of Trust, Assignment of Rents
and Leases, and Security Agreement given by the Borrower to Silicon with respect
to Borrower's real property located in Deschutes County, Oregon. If any of the
foregoing defaults is curable and if Borrower has not been given more than one
prior notice of default within the preceding twelve months, it may be cured (and
no Event of Default will have occurred) if Borrower, after receiving written
notice from Lender demanding cure of such default cures the failure within
thirty days. Silicon may cease making any Loans hereunder during any of the
above cure periods, and thereafter if an Event of Default has occurred.
6.2 REMEDIES. Upon the occurrence of any Event of Default and the
expiration of any applicable cure period under Section 6.1, and at any time
thereafter, Silicon, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by the Borrower), may do any one or
more of the following: (a) Cease making Loans or otherwise extending credit to
the Borrower under this Agreement or any other document or agreement; (b)
Accelerate and declare all or any part of
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<PAGE>
the Obligations to be immediately due, payable, and performable,
notwithstanding any deferred or installment payments allowed by any
instrument evidencing or relating to any Obligation; (c) Take possession of
any or all of the Collateral wherever it may be found, and for that purpose
the Borrower hereby authorizes Silicon without judicial process to enter onto
any of the Borrower's premises without interference to search for, take
possession of, keep, store, or remove any of the Collateral, and remain on
the premises or cause a custodian to remain on the premises in exclusive
control thereof without charge for so long as Silicon deems it reasonably
necessary in order to complete the enforcement of its rights under this
Agreement or any other agreement; provided, however, that should Silicon seek
to take possession of any or all of the Collateral by Court process, the
Borrower hereby irrevocably waives: (i) any bond and any surety or security
relating thereto required by any statute, court rule or otherwise as an
incident to such possession; (ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (iii)
any requirement that Silicon retain possession of and not dispose of any such
Collateral until after trial or final judgment; (d) Require the Borrower to
assemble any or all of the Collateral and make it available to Silicon at
places designated by Silicon which are reasonably convenient to Silicon and
the Borrower, and to remove the Collateral to such locations as Silicon may
deem advisable; (e) Require the Borrower to deliver to Silicon, in kind, all
checks and other payments received with respect to all accounts and other
Collateral, together with any necessary endorsements, within one day after
the date received by the Borrower; (f) Complete the processing, manufacturing
or repair of any Collateral prior to a disposition thereof and, for such
purpose and for the purpose of removal, Silicon shall have the right to use
the Borrower's premises, vehicles, hoists, lifts, cranes, equipment and all
other property without charge; (g) Sell, lease or otherwise dispose of any of
the Collateral in its condition at the time Silicon obtains possession of it
or after further manufacturing, processing or repair, at any one or more
public and/or private sales, in lots or in bulk, for cash, exchange or other
property, or on credit, and to adjourn any such sale from time to time
without notice other than oral announcement at the time scheduled for sale.
Silicon shall have the right to conduct such disposition on the Borrower's
premises without charge, for such time or times as Silicon deems reasonable,
or on Silicon's premises, or elsewhere and the Collateral need not be located
at the place of disposition. Silicon may directly or through any affiliated
company purchase or lease any Collateral at any such public disposition, and
if permissible under applicable law, at any private disposition. Any sale or
other disposition of Collateral shall not relieve the Borrower of any
liability the Borrower may have if any Collateral is defective as to title or
physical condition or otherwise at the time of sale; (h) Demand payment of,
and collect any accounts and general intangibles comprising Collateral and,
in connection therewith, the Borrower irrevocably authorizes Silicon to
endorse or sign the Borrower's name on all collections, receipts, instruments
and other documents, to take possession of and open mail addressed to the
Borrower and remove therefrom payments made with respect to any item of the
Collateral or proceeds thereof, and, in Silicon's sole discretion, to grant
extensions of time to pay, compromise claims and settle accounts and the like
for less than face value; (i) Offset against any sums in any of the
Borrower's general, special or other deposit accounts with Silicon, including
but not limited to account no. ; and (j) Demand and receive
possession of any of the Borrower's federal and state income tax and the
books and records utilized in the preparation thereof or referring thereto.
All reasonable fees of professionals (including attorneys' fees), expenses,
costs, liabilities and obligations incurred by Silicon with respect to the
foregoing shall be added to and become part of the Obligations, shall be due
on demand, and shall bear interest at a rate equal to the highest interest
rate applicable to any of the Obligations. Without limiting any of Silicon's
rights and remedies, from and after the failure of Borrower to cure any Event
of Default, Silicon shall have the right to increase the interest rate
applicable to the Obligations by an additional four percent per annum.
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<PAGE>
6.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. The Borrower
and Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to the
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the Collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in
cash or by cashier's check or wire transfer is required; (vi) With respect to
any sale of any of the Collateral, Silicon may (but is not obligated to) direct
any prospective purchaser to ascertain directly from the Borrower any and all
information concerning the same. Silicon may employ other methods of noticing
and selling the Collateral, in its discretion, if they are commercially
reasonable.
6.4 POWER OF ATTORNEY. Upon the occurrence of any Event of Default,
without limiting Silicon's other rights and remedies, the Borrower grants to
Silicon an irrevocable power of attorney coupled with an interest, authorizing
and permitting Silicon (acting through any of its employees, attorneys or
agents) at any time, at its option, but without obligation, with or without
notice to the Borrower, and at the Borrower's expense, to do any or all of the
following, in the Borrower's name or otherwise: (a) Execute on behalf of the
Borrower any documents that Silicon may, in its sole and absolute discretion,
deem advisable in order to perfect and maintain Silicon's security interest in
the Collateral, or in order to exercise a right of the Borrower or Silicon, or
in order to fully consummate all the transactions contemplated under this
Agreement, and all other present and future agreements; (b) Execute on behalf of
the Borrower any document exercising, transferring or assigning any option to
purchase, sell or otherwise dispose of or to lease (as lessor or lessee) any
real or personal property which is part of Silicon's Collateral or in which
Silicon has an interest; (c) Execute on behalf of the Borrower, any invoices
relating to any account, any draft against any account debtor and any notice to
any account debtor, any proof of claim in bankruptcy, any Notice of Lien, claim
of mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien; (d) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name of
the Borrower upon any instruments, or documents, evidence of payment or
Collateral that may come into Silicon's possession; (e) Endorse all checks and
other forms of remittances received by Silicon; (f) Pay, contest or settle any
lien, charge, encumbrance, security interest and adverse claim in or to any of
the Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; (g) Grant extensions of time to pay, compromise
claims and settle accounts and general intangibles for less than face value and
execute all releases and other documents in connection therewith; (h) Pay any
sums required on account of the Borrower's taxes or to secure the release of any
liens therefor, or both; (i) Settle and adjust, and give releases of, any
insurance claim that relates to any of the Collateral and obtain payment
therefor; (j) Instruct any third party having custody or control of any books or
records belonging to, or relating to, the Borrower to give Silicon the same
rights of access and other rights with respect thereto as Silicon has under this
Agreement; and (k) Take any action or pay any sum required of the Borrower
pursuant to this Agreement and any other present or future agreements. Any and
all reasonable sums paid and any and all reasonable costs, expenses,
liabilities, obligations and attorneys' fees incurred by Silicon with respect to
the foregoing shall be added to and become part of the Obligations, shall be
payable on demand, and shall bear interest at a rate equal to the highest
interest rate applicable to any of the Obligations. In no event shall Silicon's
rights under the foregoing power of attorney or any of Silicon's other rights
under this Agreement be deemed to indicate that Silicon is in control of the
business, management or properties of the Borrower.
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<PAGE>
6.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale of the Collateral shall be applied by Silicon first to the costs, expenses,
liabilities, obligations and attorneys' fees incurred by Silicon in the exercise
of its rights under this Agreement, second to the interest due upon any of the
Obligations, and third to the principal of the Obligations, in such order as
Silicon shall determine in its sole discretion. Any surplus shall be paid to the
Borrower or other persons legally entitled thereto; the Borrower shall remain
liable to Silicon for any deficiency. If Silicon, in its sole discretion,
directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale or other disposition of Collateral,
Silicon shall have the option, exercisable at any time, in its sole discretion,
of either reducing the Obligations by the principal amount of purchase price or
deferring the reduction of the Obligations until the actual receipt by Silicon
of the cash therefor.
6.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, Silicon shall have all the other rights and remedies
accorded a secured party under the Oregon Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or
in the future entered into between Silicon and the Borrower, and all of such
rights and remedies are cumulative and none is exclusive. Exercise or partial
exercise by Silicon of one or more of its rights or remedies shall not be
deemed an election, nor bar Silicon from subsequent exercise or partial
exercise of any other rights or remedies. The failure or delay of Silicon to
exercise any rights or remedies shall not operate as a waiver thereof, but
all rights and remedies shall continue in full force and effect until all of
the Obligations have been fully paid and performed.
7. GENERAL PROVISIONS.
7.1 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by regular first-class mail, or
certified mail return receipt requested, addressed to Silicon or the Borrower at
the addresses shown in the heading to this Agreement, or at any other address
designated in writing by one party to the other party. All notices shall be
deemed to have been given upon delivery in the case of notices personally
delivered to the Borrower or to Silicon, or at the expiration of two business
days following the deposit thereof in the United States mail, with postage
prepaid.
7.2 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
7.3 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between the Borrower and Silicon and
supersede all prior and contemporaneous negotiations and oral representations
and agreements, all of which are merged and integrated in this Agreement. UNDER
OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY SILICON AFTER
OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR
PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY SILICON TO
BE ENFORCEABLE.
7.4 WAIVERS. The failure of Silicon at any time or times to require the
Borrower to strictly
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<PAGE>
comply with any of the provisions of this Agreement or any other present or
future agreement between the Borrower and Silicon shall not waive or diminish
any right of Silicon later to demand and receive strict compliance therewith.
Any waiver of any default shall not waive or affect any other default, whether
prior or subsequent thereto. None of the provisions of this Agreement or any
other agreement now or in the future executed by the Borrower and delivered to
Silicon shall be deemed to have been waived by any act or knowledge of Silicon
or its agents or employees, but only by a specific written waiver signed by an
officer of Silicon and delivered to the Borrower. The Borrower waives demand,
protest, notice of protest and notice of default or dishonor, notice of payment
and nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, instrument, account, document or guaranty at any time held by
Silicon on which the Borrower is or may in any way be liable, and notice of any
action taken by Silicon, unless expressly required by this Agreement.
7.5 [INTENTIONALLY OMITTED]
7.6 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by the Borrower and a duly
authorized officer of Silicon.
7.7 TIME OF ESSENCE. Time is of the essence in the performance by the
Borrower of each and every obligation under this Agreement.
7.8 ATTORNEYS' FEES AND COSTS. The Borrower shall reimburse Silicon for
all reasonable attorneys' fees and fees of other professionals, and all filing,
recording, search, title insurance, appraisal, audit, and other reasonable costs
incurred by Silicon, pursuant to, or in connection with, or relating to this
Agreement (whether or not a lawsuit is filed), including, but not limited to,
any reasonable attorneys' fees and costs Silicon incurs in order to do the
following: prepare and negotiate this Agreement and the documents relating to
this Agreement; obtain legal advice in connection with this Agreement; enforce,
or seek to enforce, any of its rights; prosecute actions against, or defend
actions by, account debtors; commence, intervene in, or defend any action or
proceeding; initiate any complaint to be relieved of the automatic stay in
bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party
claim, or other claim; examine, audit, copy, and inspect any of the Collateral
or any of the Borrower's books and records; protect, obtain possession of,
lease, dispose of, or otherwise enforce Silicon's security interest in, the
Collateral and otherwise represent Silicon in any litigation relating to the
Borrower. If either Silicon or the Borrower files any lawsuit against the other
predicated on a breach of this Agreement, the prevailing party in such action
shall be entitled to recover its reasonable costs and professionals' fees,
including (but not limited to) reasonable attorneys' fees and costs incurred in
the enforcement of, execution upon or defense of any order, decree, award or
judgment. All fees and costs to which Silicon may be entitled pursuant to this
Paragraph shall immediately become part of the Borrower's Obligations, shall be
due on demand, and shall bear interest at a rate equal to the highest interest
rate applicable to any of the Obligations.
7.9 BENEFIT OF AGREEMENT; CONFIDENTIALITY. The provisions of this
Agreement shall be binding upon and inure to the benefit of the respective
successors, assigns, heirs, beneficiaries and representatives of the parties
hereto; provided, however, that the Borrower may not assign or transfer any of
its rights under this Agreement without the prior written consent of Silicon,
and any prohibited assignment shall be void. No consent by Silicon to any
assignment shall release the Borrower from its liability for the Obligations.
The Borrower agrees and consents to Silicon's sale or transfer, whether now or
later, of one or more participation interests in the Loans to one or more
purchasers, whether related or
Page 13 - LOAN AND SECURITY AGREEMENT
<PAGE>
unrelated to Silicon. Silicon may provide, without any limitation whatsoever, to
any one or more purchasers, or potential purchasers, any information or
knowledge Silicon may have about the Borrower or about any other matter relating
to the Loan and the Borrower hereby waive any rights to privacy it may have with
respect to such matters. The Borrower additionally waives any and all notices of
sale of participation interests, as well as all notices of any repurchase of
such participation interests. The Borrower also agrees that the purchasers of
any such participation interests shall be considered as the absolute owners of
such interests in the Loans and shall have all the rights granted under the
participation agreement or agreements governing the sale of such participation
interests. The Borrower unconditionally agrees that either Silicon or such
purchaser may enforce the Borrower's obligations under the Loans irrespective of
the failure or insolvency of any holder of any interest in the Loans.
7.10 JOINT AND SEVERAL LIABILITY. If the Borrower consists of more than
one person, their liability shall be joint and several, and the compromise of
any claim with, or the release of, any Borrower shall not constitute a
compromise with, or a release of, any other Borrower.
7.11 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used
in this Agreement for convenience. The Borrower acknowledges that the headings
may not describe completely the subject matter of the applicable paragraph, and
the headings shall not be used in any manner to construe, limit, define or
interpret any term or provision of this Agreement. This Agreement has been fully
reviewed and negotiated between the parties and no uncertainty or ambiguity in
any term or provision of this Agreement shall be construed strictly against
Silicon or the Borrower under any rule of construction or otherwise.
7.12 MUTUAL WAIVER OF JURY TRIAL. THE BORROWER AND SILICON EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND THE BORROWER, OR ANY CONDUCT, ACTS
OR OMISSIONS OF SILICON OR THE BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR THE
BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
7.13 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts
and transactions hereunder and all rights and obligations of Silicon and the
Borrower shall be governed by, and construed in accordance with, the laws of the
State of Oregon. Any undefined term used in this Agreement that is defined in
the Oregon Uniform Commercial Code shall have the meaning assigned to that term
in the Oregon Uniform Commercial Code. As a material part of the consideration
to Silicon to enter into this Agreement, the Borrower agrees (subject to the
parties right to require arbitration under Section 7.13 of this Agreement) that
all actions and proceedings relating directly or indirectly hereto shall be
litigated in courts located within Oregon, and that the exclusive venue therefor
shall be Washington County.
BORROWER:
ADVANCED POWER TECHNOLOGY, INC.
By:____________________________
Title:_________________________
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<PAGE>
SILICON:
SILICON VALLEY BANK
By:____________________________
Title:_________________________
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<PAGE>
SCHEDULE TO LOAN AND SECURITY AGREEMENT
(Exim Program)
Borrower: Advanced Power Technology, Inc.
Address: 405 S.W. Columbia Street
Bend, Oregon 97702
Date: September 6, 1995
NON-EXIM AGREEMENT;
CROSS-COLLATERALIZATION;
CROSS-DEFAULT:
Silicon and the Borrower are parties to that certain
other Loan and Security Agreement of even date (the
"Non-Exim Agreement"). Both this Agreement and the
Non-Exim Agreement shall continue in full force and
effect, and all rights and remedies under this
Agreement and the Non-Exim Agreement are cumulative.
The term "Obligations" as used in this Agreement and
in the Non-Exim Agreement shall include without
limitation the obligation to pay when due all Loans
made pursuant to this Agreement (the "Exim Loans")
and all interest thereon and the obligation to pay
when due all Loans made pursuant to the Non-Exim
Agreement (the "Non-Exim Loans") and all interest
thereon. Without limiting the generality of the
foregoing, all "Collateral" as defined in this
Agreement and as defined in the Non-Exim Agreement
shall secure all Exim Loans and all Non-Exim Loans
and interest thereon, and all other Obligations. Any
Event of Default under this Agreement shall
constitute an Event of Default under the Non-Exim
Agreement, and any Event of Default under the
Non-Exim Agreement shall also constitute an Event of
Default under this Agreement. In the event Silicon
assigns its rights under this Agreement and/or under
any Note evidencing Exim Loans and/or its rights
under the Non-Exim Agreement and/or under any Note
evidencing Non-Exim Loans, to any third party,
including without limitation the Export-Import Bank
of the United States ("Exim Bank"), whether before or
after the occurrence of any Event of Default, Silicon
shall have the right (but not any obligation), in its
sole discretion, to allocate and apportion Collateral
to the Agreement and/or Note assigned and to specify
the priorities of the respective security interests
in such Collateral between itself and the assignee,
all without notice to or consent of the Borrower.
This Agreement is subject to all of the terms and
conditions of the Borrower Agreement attached hereto
as Exhibit A, and all documents attached to such
Borrower Agreement (collectively, the "Exim
Documents"), all of which are hereby incorporated
herein by this reference. Borrower shall perform all
of the obligations and comply with all of the
affirmative and negative covenants and all other
terms and conditions set forth in the Exim Documents
as though such
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<PAGE>
obligations and covenants were expressly set forth
herein, and all of which are hereby incorporated
herein by this reference. In the event of any
conflict between the terms of the Exim Documents and
the terms of the Exim Loan Agreement or the Schedule
or any related promissory note, whichever terms are
more restrictive on Borrower shall apply.
EXPORT LINE OF CREDIT
CREDIT LIMIT:
(Section 1.1)
EXIM LOANS: An amount not to exceed the lesser of:
(a) $1,750,000 at any one time outstanding; or
(b) a total of (i) 90% of the value of Borrower's
eligible export receivables, which are eligible for
borrowing as provided below, plus (ii) 70% of the
value of Borrower's eligible exportable inventory
which is eligible for borrowing as provided below,
which Silicon in its reasonable discretion deems
eligible for borrowing.
Without limiting the fact that the determination of
which accounts are eligible for borrowing is a matter
of Silicon's discretion, the following shall not be
deemed eligible for borrowing: accounts outstanding
for more than 90 days from the invoice date unless
otherwise agreed to in writing by Silicon, accounts
subject to any contingencies, accounts billed or
payable outside the United States (except for those
backed by a letter of credit satisfactory to
Silicon), accounts owing from governmental agencies
unless otherwise agreed to in writing by Silicon,
accounts owing from one account debtor to the extent
they exceed 25% of the total eligible accounts
outstanding, accounts owing from an affiliate of the
Borrower, accounts subject to setoff, recoupment,
counterclaim or any other demand by the account
debtor. In addition, if more than 50% of the accounts
owing from an account debtor are outstanding more
than 120 days from the invoice date or are otherwise
not eligible accounts, then all accounts owing from
that account debtor shall be deemed ineligible for
borrowing.
Without limiting the fact that the determination of
which inventory is eligible for borrowing is a matter
of Silicon's discretion, the following shall not be
deemed eligible for borrowing: any inventory other
finished goods that are owned by Borrower and located
in Bend, Oregon; inventory that is used, obsolete or
returned goods; inventory that is stored at a
location other than the Borrowers' Address or any
location owned, leased or rented by Borrowers and
previously identified to Silicon; inventory that is
subject to a landlord's lien; and inventory that is
not in the possession of the Borrower.
AGREEMENT SUBJECT
TO EXIM GUARANTEE;
COSTS: This Agreement is subject to all of the terms and
conditions of the Exim Guarantee (including without
limitation the Transaction Attachment thereto and
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<PAGE>
Special Conditions thereto) which are hereby
incorporated herein by this reference. Borrower
expressly agrees to perform all of the obligations
and comply with all of the affirmative and negative
covenants and all other terms and conditions set
forth in the Exim Guarantee as though the same were
expressly set forth herein, and all of the same are
hereby incorporated herein by this reference. In the
event of any conflict between the terms of the Exim
Guarantee and the other terms of this Agreement,
whichever terms are more restrictive shall apply.
Borrower shall reimburse Silicon for all fees and out
of pocket expenses incurred by Silicon with respect
to the Exim Guarantee, including without limitation
all facility fees and usage fees, and Silicon is
authorized to debit Borrower's account with Silicon
for such fees, costs and expenses when paid by
Silicon.
INTEREST RATE:
(Section 1.2) The interest rate applicable to the Export Line of
Credit shall be a rate equal to the "Prime Rate" in
effect from time to time, plus 1.0% per annum.
Interest calculations shall be made on the basis of a
360-day year and the actual number of days elapsed.
"Prime Rate" means the rate announced from time to
time by Silicon as its "prime rate"; it is a base
rate upon which other rates charged by Silicon are
based, and it is not necessarily the best rate
available at Silicon. The interest rate applicable to
the Obligations shall change on each date there is a
change in the Prime Rate.
LOAN ORIGINATION
FEE: (Section 1.3) $26,250.00, which is fully earned and payable at
closing. (Any Commitment Fee previously paid by the
Borrower in connection with this loan shall be
credited against this Fee.)
MATURITY DATE:
(Section 1.3) One year from the date first written above, at which
time all unpaid principal and accrued but unpaid
interest shall be due and payable.
PRIOR NAMES OF
BORROWER: See Exhibit B
TRADE NAMES OF
BORROWER: See Exhibit B
OTHER LOCATIONS
AND ADDRESSES: See Exhibit B
MATERIAL ADVERSE
LITIGATION: See Exhibit B
FINANCIAL
COVENANTS:
(Section 4.1) The Borrower shall comply with all of the following
covenants, all of which
Page 18 - LOAN AND SECURITY AGREEMENT
<PAGE>
shall be determined and measured in accordance with
generally accepted accounting principles, except as
otherwise stated below:
TANGIBLE NET
WORTH: Borrower shall at all times maintain a Tangible Net
Worth (defined below) of not less than $4,250,000,
measured quarterly.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall maintain a ratio of total liabilities
to Tangible Net Worth of not more than 2.75:1.0,
measured quarterly. Upon maturity of the Interim
Bridge Loan, Borrower shall maintain a ratio of total
liabilities to Tangible Net Worth of not more than
2.50:1.0, measured quarterly. For purposes of this
calculation, total liabilities shall exclude deferred
revenues and debt, if any, that has been subordinated
to the Loans in a written subordination agreement on
terms satisfactory to Silicon.
QUICK RATIO: Borrower shall maintain a ratio of Quick Assets
(defined below) to current liabilities of not less
than 0.50:1, measured quarterly. Upon maturity of the
Interim Bridge Loan, Borrower shall maintain a ratio
of Quick Assets to current liabilities of not less
than 0.55:1, measured quarterly.
BACKLOG TO
INVENTORY RATIO: Borrower shall maintain a ratio of Backlog (as
defined below) to the book value of inventory of at
least 2.50:1.0, measured monthly on a rolling three
month average. In the event that the ratio of Backlog
to book value of inventory is less than 2.50:1.0 for
two consecutive months, the definition of Borrowing
Base for the Secured Accounts Receivable Line of
Credit shall be revised to prohibit borrowing against
Eligible Inventory for a period of 30 consecutive
days each year.
PROFITABILITY: Borrower shall not incur a quarterly loss in excess
of $500,000 for one quarter, $750,000 for two
quarters, nor incur losses in any amount in more than
three or more consecutive quarters. For purposes of
this paragraph, "loss" means net sales, less cost of
goods sold, less operating expenses excluding
non-cash expenses.
DEFINITIONS: "Tangible Net Worth" means stockholders' equity plus
debt, if any, that has been subordinated to the Loans
in a written subordination agreement on terms
satisfactory to Silicon, and accrued interest
thereon, less goodwill, patents, capitalized software
costs, deferred organizational costs, tradenames,
trademarks, and all other assets which would be
classified as intangible assets under generally
accepted accounting principles. "Quick Assets" means
cash on hand or on deposit in banks, readily
marketable securities issued by the United States,
readily marketable commercial paper rated "A-I" by
Standard & Poor's Corporation (or a similar rating by
a similar rating organization), certificates of
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<PAGE>
deposit and banker's acceptances, and accounts
receivable (net of allowance for doubtful accounts).
"Backlog" is defined as the book value of orders
received by Borrower, backed by purchase order, for
shipment of product within 12 months.
OTHER COVENANTS:
(Section 4.1) Borrower shall at all times comply with all of the
following additional covenants:
BANKING RELATIONSHIP. Borrower shall at all
times maintain its primary banking relationship
with Silicon.
EXIM BANK REQUIREMENTS. Borrower shall at all
times conform the rules and regulations of the
Export-Import Bank of the United States.
CONDITIONS TO
CLOSING: Without in any way limiting the discretionary
nature of advances under this Agreement, before
requesting any such advance, the Borrower shall
satisfy each of the following conditions:
1. LOAN DOCUMENTS:
Silicon shall have received this Agreement, the
Schedule, and such other loan documents as Silicon
shall require, each duly executed and delivered by
the parties thereto.
2. DOCUMENTS RELATING
TO AUTHORITY, ETC.:
Silicon shall have received each of the following in
form and substance satisfactory to it:
(a) Certified Copies of the Articles of Incorporation
and Bylaws of the Borrower;
(b) A Certificate of Good Standing issued by the
Secretary of State of the Borrower's state of
incorporation and such other states as Silicon may
reasonably request with respect to the Borrower;
(c) A certified copy of a Resolution adopted by the
Board of Directors of the Borrower authorizing the
execution, delivery and performance of this
Agreement, and any other documents or certificates to
be executed by the Borrower in connection with this
transaction; and
(d) Incumbency Certificates describing the office and
identifying the specimen signatures of the
individuals signing all such loan documents on behalf
of the Borrower.
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<PAGE>
(e) A Subordination Agreement executed by all
shareholders of Borrower to whom Borrower is
indebted.
3. PERFECTION AND
PRIORITY OF SECURITY: Silicon shall have received evidence satisfactory to
it that its security interest in the Collateral has
been duly perfected and that such security interest
is prior to all other liens, charges, security
interests, encumbrances and adverse claims in or to
the Collateral other than Permitted Liens, which
evidence shall include, without limitation, a
certificate from the Oregon Secretary of State
showing the due filing and first priority of the UCC
Financing Statements to be signed by the Borrower
covering the Collateral.
4. INSURANCE: Silicon shall have received evidence satisfactory to
it that all insurance required by this Agreement is
in full force and effect, with loss payee
designations and additional insured designations as
required by this Agreement.
5. OTHER INFORMATION:
Silicon shall have received such other statements,
opinions, certificates, documents and information
with respect to matters contemplated by this
Agreement as it may reasonably request, all of which
must be acceptable to Silicon.
Silicon shall have conducted an examination of the
Borrower's books, records, ledgers, journals, and
registers, as Silicon may deem necessary, and shall
be satisfied with the results of such examination in
its sole discretion.
Exim Bank shall have agreed to guarantee payment of
ninety percent (90%) of the Loan and all interest
accrued thereon, subject to the terms of a master
guarantee agreement between Exim Bank and Silicon.
Silicon and the Borrower agree that the terms of this Schedule
supplement the Loan and Security Agreement between Silicon and the Borrower and
agree to be bound by the terms of this Schedule.
BORROWER:
ADVANCED POWER TECHNOLOGY, INC.
By:_________________________________
Title:______________________________
SILICON:
SILICON VALLEY BANK
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<PAGE>
By:_________________________________
Title:______________________________
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<PAGE>
EXHIBIT A
[INSERT EXIM BORROWER AGREEMENT]
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<PAGE>
EXHIBIT B
[INSERT BORROWER DISCLOSURES]
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<PAGE>
SCHEDULE 3.13
Page 25 - LOAN AND SECURITY AGREEMENT
<PAGE>
SCHEDULE 3.14
Page 26 - LOAN AND SECURITY AGREEMENT
<PAGE>
LOAN MODIFICATION AGREEMENT
BETWEEN: Advanced Power Technology, Inc., a Delaware corporation
("Borrower"), whose address is 405 S.W. Columbia Street, Bend,
Oregon 97702;
AND: Silicon Valley Bank ("Silicon"), whose address is 3003 Tasman
Drive, Santa Clara, California 95054;
DATE: December 18, 1997.
This Loan Modification Agreement is entered into on the above date by
Borrower and Silicon.
1. BACKGROUND. Borrower entered into a Loan and Security Agreement
(as amended from time to time, the "Loan Agreement") and a Loan and Security
Agreement (Exim Program) (as amended from time to time, the "Exim Loan
Agreement") with Silicon in September 1995. Capitalized terms used in this Loan
Modification Agreement shall, unless otherwise defined in this Agreement, have
the meaning given to such terms in the Loan Agreement and the Exim Loan
Agreement.
Silicon and Borrower are entering into this Agreement to state the terms
and conditions of certain modifications to the Loan Agreement and Schedule
thereto, and the Exim Loan Agreement and Schedule thereto.
2. MODIFICATIONS TO LOAN AGREEMENT AND SCHEDULE, AND EXIM LOAN
AGREEMENT AND SCHEDULE.
2.1 The Schedule to the Loan Agreement is hereby deleted and
replaced by the Amended and Restated Schedule to Loan and Security Agreement
attached to this Agreement as EXHIBIT A.
2.2 The Schedule to the Exim Loan Agreement is hereby deleted
and replaced by the Amended and Restated Schedule to Loan and Security Agreement
(Exim Program) attached to this Agreement as EXHIBIT B.
2.3 Borrower acknowledges and agrees that all Obligations,
including without limitation Borrower's obligation to repay amounts advanced by
Silicon to Borrower on the terms of the Loan Agreement and Schedule, and the
Exim Loan Agreement and Schedule, as modified by this Loan Modification
Agreement, are secured by all liens and security interests granted by Borrower
to Silicon in the Loan Agreement and the Exim Loan Agreement. Borrower shall
not grant a lien on, or security interest in, any of its patents, maskworks,
copyrights, trademarks, tradenames, or service marks (in each case whether
registered or not), or any applications for any of the foregoing, or any other
intellectual property of Borrower without Silicon's prior written consent.
2.4 Notwithstanding any provision of the Loan Agreement,
provided that no Event of Default is then pending or would result from such loan
by Borrower, Borrower shall be permitted to loan up to $3,000,000 to a limited
liability company owned by Borrower's management, to finance the acquisition by
such limited liability company of the stock in Borrower owned by Sundstrand
Corporation.
3. CONDITIONS PRECEDENT. This Loan Modification Agreement shall not
take effect until Borrower delivers to Silicon a Certified Resolution of
Borrower, an Acknowledgment of Guarantor by the guarantor of the Loan in the
form attached hereto, joint and several Continuing Guaranties executed by the
Page 1 - LOAN MODIFICATION AGREEMENT
<PAGE>
members of management of Borrower who are also direct or indirect shareholders
of Borrower, in the form attached hereto, and such other documents as Silicon
shall reasonably require to give effect to the terms of this Loan Modification
Agreement.
4. NO OTHER MODIFICATIONS. Except as expressly modified by this
Loan Modification Agreement, the terms of the Loan Agreement and the Exim
Loan Agreement shall remain unchanged and in full force and effect.
Silicon's agreement to modify the Loan Agreement and the Exim Loan Agreement
pursuant to this Loan Modification Agreement shall not obligate Silicon to
make any future modifications to the Loan Agreement, Exim Loan Agreement or
any other loan document. Nothing in this Loan Modification Agreement shall
constitute a satisfaction of any indebtedness of any Borrower to Silicon. It
is the intention of Silicon and Borrower to retain as liable parties all
makers and endorsers of the Loan Agreement, Exim Loan Agreement or any other
loan document. No maker, endorser, or guarantor shall be released by virtue
of this Loan Modification Agreement. The terms of this paragraph shall apply
not only to this Loan Modification Agreement, but also to all subsequent loan
modification agreements.
5. REPRESENTATIONS AND WARRANTIES.
5.1 The Borrower represents and warrants to Silicon that the
execution, delivery and performance of this Agreement are within the Borrower's
corporate powers, and have been duly authorized and are not in contravention of
law or the terms of the Borrower's articles of incorporation, bylaws or of any
undertaking to which the Borrower is a party or by which it is bound.
5.2 The Borrower understands and agrees that in entering into
this Agreement, Silicon is relying upon the Borrower's representations,
warranties and agreements as set forth in the Loan Agreement, Exim Loan
Agreement and other loan documents. Borrower hereby reaffirms all
representations and warranties in the Loan Agreement, all of which are true as
of the date of this Agreement.
BORROWER:
ADVANCED POWER TECHNOLOGY, INC.
By:
------------------------------
Title:
------------------------------
SILICON:
SILICON VALLEY BANK
By:
------------------------------
Title:
------------------------------
Page 2 - LOAN MODIFICATION AGREEMENT
<PAGE>
ACKNOWLEDGMENT OF GUARANTOR
The undersigned guarantor (1) consents to the modifications to the Loan
Agreement and Schedule and the Exim Loan Agreement and Schedule stated in the
attached Loan Modification Agreement between Silicon and the Borrower, and (2)
ratifies the provisions of the guaranty executed by such guarantor for the
benefit of Silicon and confirms that all provisions of such guaranty are in full
force and effect and apply to the $2,500,000 Term Loan (as defined in such
guaranty) notwithstanding the terms of the Loan Modification Agreement. Nothing
in this Acknowledgment of Guarantor increases the obligations of such guarantor
as stated in such guaranty.
ADVANCED ENERGY INDUSTRIES,
INC.
By:
--------------------------
Its:
------------------
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<PAGE>
[ATTACH FORM OF CONTINUING GUARANTY]
Page 4 - LOAN MODIFICATION AGREEMENT
<PAGE>
AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
Borrower: Advanced Power Technology, Inc.
Address: 405 S.W. Columbia Street
Bend, Oregon 97702
Date: December 18, 1997
SECURED ACCOUNTS RECEIVABLE LINE OF CREDIT
CREDIT LIMIT: An amount not to exceed the lesser of: (i) $3,000,000 at
any one time outstanding; or (ii) the amount of the
"Borrowing Base", as defined below.
For purposes of this Schedule, the "Borrowing Base" shall
mean the sum of (i) 80% of the Net Amount of Borrower's
eligible accounts receivable, plus (ii) 50% of Borrower's
"Eligible Inventory" (as defined below), up to a maximum
advance of $1,250,000 against Eligible Inventory.
Notwithstanding the foregoing, however, (a) the 50%
advance rate as stated in clause (i) above shall be
decreased to 25% beginning October 1, 1998, and
continuing thereafter; and (b) the $1,250,000 sublimit on
inventory advances as stated in clause (ii) above shall
be decreased to $500,000 beginning October 1, 1998, and
continuing thereafter. With respect to Borrower's
accounts, "Net Amount" means the gross amount of the
account, minus all applicable sales, use, excise and
other similar taxes and minus all discounts, credits and
allowances of any nature granted or claimed. Borrower's
"Eligible Inventory" means the Borrower's inventory held
for sale in the United States or Canada, valued at the
lower of wholesale cost or market value, which Silicon in
its reasonable discretion deems eligible for borrowing,
subject to the Backlog Covenant described below.
The amount of all letters of credit issued by Silicon at
the request of the Borrower shall reduce, dollar for
dollar, the amount otherwise available to be borrowed
under the Borrowing Base formula described above. The
amount otherwise available to be borrowed under the
Borrowing Base formula described above shall also be
reduced by one-half of the outstanding balance of Secured
Term Loan No. 3 described below.
Without limiting the fact that the determination of which
accounts are eligible for borrowing is a matter of
Silicon's discretion, the following shall not be deemed
eligible for borrowing: accounts outstanding for more
than 90 days from the invoice date unless otherwise
agreed to in writing by Silicon, accounts subject to any
contingencies, accounts owing from an account debtor
outside the United States or billed or payable outside
the United States (except for those backed by a letter of
credit satisfactory to Silicon), accounts owing from
governmental agencies unless otherwise agreed to in
writing by Silicon, accounts owing from one account
debtor to the extent they exceed 25% of the total
eligible accounts outstanding,
Page 1 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
accounts owing from an affiliate of the Borrower, and
accounts subject to setoff, recoupment, counterclaim or
any other demand by the account debtor. In addition, if
more than 50% of the accounts owing from an account
debtor are outstanding more than 90 days from the invoice
date or are otherwise not eligible accounts, then all
accounts owing from that account debtor shall be deemed
ineligible for borrowing.
Without limiting the fact that the determination of which
inventory is eligible for borrowing is a matter of
Silicon's discretion, the following shall not be deemed
eligible for borrowing: any inventory other than raw
materials, work-in-process and finished goods that are
owned by Borrower and located in Bend, Oregon; inventory
that is used, obsolete or returned goods; inventory that
is stored at a location other than the Borrowers' Address
or any location owned, leased or rented by Borrowers and
previously identified to Silicon; inventory that is
subject to a landlord's lien; and inventory that is not
in the possession of the Borrower.
INTEREST RATE: If Borrower's Debt to Tangible Net Worth ratio is
greater than 2.00:1.00, the interest rate applicable to
the Secured Accounts Receivable Line of Credit shall be a
rate equal to the "Prime Rate" in effect from time to
time, plus 1.25% per annum. If Borrower's Debt to
Tangible Net Worth ratio is 2.00:1.00 or less, the
interest rate applicable to the Secured Accounts
Receivable Line of Credit shall be a rate equal to the
"Prime Rate" in effect from time to time, plus 1.00% per
annum. Interest calculations shall be made on the basis
of a 360-day year and the actual number of days elapsed.
Changes in interest rate resulting from changes in
Borrower's Debt to Tangible Net Worth ratio shall be
effective on the first day of the month following the day
on which Silicon receives Borrower's quarterly financial
statement and calculation of its Debt to Tangible Net
Worth ratio. Interest is payable monthly.
"Prime Rate" means the rate announced from time to time
by Silicon as its "prime rate"; it is a base rate upon
which other rates charged by Silicon are based, and it is
not necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall change
on each date there is a change in the Prime Rate.
COMMITMENT FEE: $7,500, which is fully earned and payable at closing.
MATURITY DATE: December 17, 1998, at which time all unpaid principal and
accrued but unpaid interest shall be due and payable.
LETTERS OF CREDIT: Subject to the terms of this Agreement, as amended from
time to time, Silicon shall issue or cause to be issued
under the Credit Limit standby and commercial letters of
credit for the account of Borrower in an aggregate face
amount not to exceed $1,000,000. Each such letter of
credit shall have an expiry date of no later than the
Maturity Date. All such letters of credit shall be, in
form and substance, acceptable to Silicon in its sole
discretion and shall be subject to the terms and
conditions of Silicon's form application and letter of
credit agreement, as executed by the Borrower from time
to time.
Page 2 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
FEES: The Borrower shall pay Silicon the fees and costs
customarily charged by Silicon (at the time of issuance
of the letter of credit) with respect to the issuance of
letters of credit.
SECURED TERM LOAN NO. 1
CREDIT LIMIT: An amount not to exceed $2,500,000.
PURPOSE: Borrower shall use the proceeds of this Secured Term Loan
No. 1 to assist in financing the purchase of Sundstrand
Corporation's 49% ownership interest in Borrower by a
limited liability company owned by Borrower's management.
INTEREST RATE: If Borrower's Debt to Tangible Net Worth ratio is greater
than 2.00:1.00, the interest rate applicable to the
Secured Term Loan No. 1 shall be a rate equal to the
"Prime Rate" in effect from time to time, plus 1.50% per
annum. If Borrower's Debt to Tangible Net Worth ratio is
2.00:1.00 or less, the interest rate applicable to the
Secured Term Loan No. 1 shall be a rate equal to the
"Prime Rate" in effect from time to time, plus 1.25% per
annum. Interest calculations shall be made on the basis
of a 360-day year and the actual number of days elapsed.
"Prime Rate" means the rate announced from time to time
by Silicon as its "prime rate"; it is a base rate upon
which other rates charged by Silicon are based, and it is
not necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall change
on each date there is a change in the Prime Rate. Changes
in interest rate resulting from changes in Borrower's
Debt to Tangible Net Worth ratio shall be effective on
the first day of the month following the day on which
Silicon receives Borrower's quarterly financial statement
and calculation of its Debt to Tangible Net Worth ratio.
Interest is payable monthly.
MATURITY DATE: December 17, 1999, at which time all unpaid principal and
accrued but unpaid interest shall be due and payable.
COMMITMENT
FEE: $1,500, which is fully earned and payable at closing.
SECURED EQUIPMENT TERM LOAN NO. 2
CREDIT LIMIT: An amount not to exceed the lesser of (i) $500,000 at any
one time outstanding; or (ii) the amount of the
"Equipment Borrowing Base", as defined below. For
purposes of this Schedule, the "Equipment Borrowing Base"
shall mean 90% of the invoice value of equipment
purchased by Borrower after August 31, 1996. Silicon
shall have no obligation to advance against taxes,
freight charges, installation charges or other similar
amounts relating to Borrower's equipment, whether or not
such amounts are identified on the invoices submitted to
Silicon. Equipment to be included in the Equipment
Borrowing Base must be new equipment, at the time of
purchase by Borrower, owned by Borrower, in good working
order, must not be subject to any liens in favor of any
person or entity other than Silicon, and must be subject
to a first priority, perfected security interest
Page 3 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
in favor of Silicon. Silicon shall have no obligation to
make advances against non-standard equipment, such as
tooling, software and custom equipment. Silicon shall
have no obligation to make advances on this Secured
Equipment Term Loan after September 6, 1997. Silicon
shall make advances under this Secured Equipment Term
Loan No. 2 from time to time, based on invoices and other
documentation as shall be requested by Silicon to support
such advances. The Borrower's indebtedness to Silicon
with respect to this Secured Equipment Term Loan No. 2
shall be evidenced by this Schedule and the Loan
Agreement, not by a separate promissory note unless
required by Silicon.
Borrower shall submit to Silicon such invoices, advance
requests and other information, in form acceptable to
Silicon, as Silicon shall reasonably require from time to
time.
Once the maximum amount of the principal has been
advanced under this Secured Equipment Term Loan No. 2,
Borrower is no longer entitled to further advances on
this Loan. Advances may be requested in writing by
Borrower or an authorized person. Silicon may, but need
not, require that all oral requests be confirmed in
writing. The unpaid principal balance owing on this
Secured Equipment Term Loan No. 2 at any time may be
evidenced by Silicon's internal records, including daily
computer print-outs (which Silicon shall provide to
Borrower periodically).
PURPOSE: Borrowers shall use the proceeds of this Secured
Equipment Term Loan No. 2 to finance the purchase of new
equipment.
INTEREST RATE: The interest rate applicable to the Secured Equipment
Term Loan shall be a rate equal to the "Prime Rate" (as
defined above) in effect from time to time, plus 1.50%
per annum. Interest calculations shall be made on the
basis of a 360-day year and the actual number of days
elapsed. The interest rate applicable to the Obligations
shall change on each date there is a change in the Prime
Rate.
AMORTIZATION: Borrower shall pay Silicon monthly payments of interest
only on the last day each month commencing with September
30, 1996. In addition, Borrower shall pay Silicon
commencing on October 6, 1997, and continuing on the same
day of each month thereafter, the amount necessary to
repay fully the amount of the Secured Equipment Term Loan
No. 2 in 30 equal month payments.
MATURITY DATE: March 6, 2000, at which time all unpaid principal and
accrued but unpaid interest, fees and other charges shall
be due and payable.
COMMITMENT
FEE: $1,000, was paid at closing. This fee is fully earned at
closing and is non-refundable.
Page 4 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
SECURED TERM LOAN NO. 3
CREDIT LIMIT: An amount not to exceed $500,000, in a single advance.
PURPOSE: Borrowers shall use the proceeds of this Secured Term
Loan No. 3 to assist in financing the purchase of
Sundstrand Corporation's 49% ownership interest in
Borrower by a limited liability company owned by
Borrower's management.
INTEREST RATE: If Borrower's Debt to Tangible Net Worth ratio is greater
than 2.00:1.00, the interest rate applicable to the
Secured Term Loan No. 3 shall be a rate equal to the
"Prime Rate" (as defined above) in effect from time to
time, plus 1.75% per annum. If Borrower's Debt to
Tangible Net Worth ratio is 2.00:1.00 or less, the
interest rate applicable to the Secured Term Loan No. 3
shall be a rate equal to the "Prime Rate" in effect from
time to time, plus 1.50% per annum Interest calculations
shall be made on the basis of a 360-day year and the
actual number of days elapsed. Changes in interest rate
resulting from changes in Borrower's Debt to Tangible Net
Worth ratio shall be effective on the first day of the
month following the day on which Silicon receives
Borrower's quarterly financial statement and calculation
of its Debt to Tangible Net Worth ratio. The interest
rate applicable to the Obligations shall change on each
date there is a change in the Prime Rate.
AMORTIZATION: Borrower shall pay Silicon monthly payments of interest
on the last day each month commencing with January, 1998.
In addition, Borrower shall pay Silicon on the last day
of each month, commencing with January, 1998, the amount
necessary to repay fully the amount of the Secured Term
Loan No. 3 in 36 equal monthly payments.
MATURITY DATE: December 17, 2000, at which time all unpaid principal and
accrued but unpaid interest, fees and other charges shall
be due and payable.
COMMITMENT
FEE: $1,250, payable at closing. This fee is fully earned at
closing and is non-refundable.
PRIOR NAMES OF
BORROWER: See Exhibit B
TRADE NAMES OF
BORROWER: See Exhibit B
OTHER LOCATIONS
AND ADDRESSES: See Exhibit B
MATERIAL ADVERSE
LITIGATION: See Exhibit B
Page 5 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
FINANCIAL
COVENANTS: The Borrower, exclusive of the results of operations of
Advanced Power Technology Europe, S.A. ("APT-Europe"),
shall comply with all of the following covenants, all of
which shall be determined and measured quarterly in
accordance with generally accepted accounting principles,
except as otherwise stated below:
TANGIBLE NET
WORTH: Borrower shall at all times maintain a Tangible Net Worth
(defined below) of not less than $2,250,000 (the "Initial
Minimum Tangible Net Worth) for the quarter ending
December 31, 1997, and increasing by $500,000 for each
quarter thereafter, measured quarterly.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall maintain a ratio of total book liabilities
(less the outstanding balance of Secured Term Loan No. 1
and accrued interest thereon, less debt, if any, that has
been subordinated to the Loans in a written subordination
agreement on terms satisfactory to Silicon, and accrued
interest thereon, less deferred revenue) to Tangible Net
Worth, measured quarterly, of:
- Not more than 3.50:1.00 for the quarter ending
December 31, 1997
- Not more than 3.25:1.00 for the quarter ending
March 31, 1998
- Not more than 2.75:1.00 for the quarter ending
June 30, 1998
- Not more than 2.00:1.00 for the quarter ending
September 30, 1998, and each quarter thereafter
QUICK RATIO: Borrower shall maintain a ratio of Quick Assets (defined
below) to current liabilities of not less than 0.50:1.00
through March 31, 1998, and not less than 0.60:1.00
thereafter, measured quarterly.
BACKLOG TO
INVENTORY RATIO: Borrower shall maintain a ratio of Backlog (as defined
below) to the book value of inventory of at least
2.00:1.00, measured monthly on a rolling three month
average. In the event that the ratio of Backlog to book
value of inventory is less than 2.00:1.00 for two
consecutive months, the definition of Borrowing Base for
the Secured Accounts Receivable Line of Credit shall be
revised to prohibit borrowing against Eligible Inventory
for a period of 30 consecutive days each year.
PROFITABILITY: Borrower shall not incur a loss in any amount for any
quarter. For purposes of this paragraph, "loss" means
net book income, plus any loss from APT-Europe, plus
depreciation and amortization, less any income from
APT-Europe.
DEBT SERVICE
COVERAGE RATIO: Borrower shall maintain on an annualized basis a Debt
Service Coverage Ratio of not less than 2.00:1.00,
measured as of the end of each fiscal quarter of
Borrower.
Page 6 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
LOANS TO
SUBSIDIARY: Borrower shall limit its loans to its wholly owned
subsidiary, APT-Europe, to a maximum of $950,000 plus 25%
of any new equity at any one time, measured monthly.
RELEASE OF
GUARANTIES: At such time as Silicon releases the Continuing
Guaranties provided by direct or indirect shareholders of
Borrower, as a result of additional equity contributions
to Borrower of at least $2,000,000 after the date hereof,
the Initial Minimum Tangible Net Worth stated above would
immediately increase by 75% of such additional equity,
the Debt to Tangible Net Worth covenant would immediately
reduce to not more than 2.00:1.00, and the Quick Ratio
would immediately increase to not less than 0.60:1.00.
DEFINITIONS: "Backlog" is defined as the book value of orders received
by Borrower, backed by purchase orders, for shipment of
product within 12 months.
"Debt Service Coverage Ratio" means quarterly net book
income, plus any loss from APT-Europe, plus depreciation
and amortization, less any income from APT-Europe, plus
interest, plus taxes (EBITDA) multiplied by four (4),
divided by the Current Maturities of Long-Term Debt
(CMLTD) plus interest for that quarter multiplied by
four (4).
"Quick Assets" means cash on hand or on deposit in banks,
readily marketable securities issued by the United
States, readily marketable commercial paper rated "A-I"
by Standard & Poor's Corporation (or a similar rating by
a similar rating organization), certificates of deposit
and banker's acceptances, and accounts receivable
(including accounts owing to Borrower's affiliate
APT-Europe) net of allowance for doubtful accounts.
"Tangible Net Worth" means stockholders' equity plus the
outstanding balance of the Secured Term Loan No. 1 and
accrued interest thereon, plus debt, if any, that has
been subordinated to the Loans in a written subordination
agreement on terms satisfactory to Silicon, and accrued
interest thereon, plus the amount of Borrower's negative
equity investment in Borrower's affiliate APT-Europe,
less goodwill, patents, capitalized software costs,
deferred organizational costs, tradenames, trademarks,
and all other assets which would be classified as
intangible assets under generally accepted accounting
principles, less the note receivable from Tremoliere LLC,
less the note receivable from Borrower's affiliate
APT-Europe, less the amount of Borrower's positive equity
investment in APT-Europe.
OTHER COVENANTS: Borrower shall at all times comply with all of the
following additional covenants:
BANKING RELATIONSHIP. Borrower shall at all times
maintain its primary banking relationship with Silicon.
FINANCIAL STATEMENTS AND REPORTS. The Borrower shall
provide Silicon: (a) within 30 days after the end of
each month, a monthly financial statement for Borrower
and APT-Europe (consisting of a income statement and a
balance sheet)
Page 7 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
prepared by the Borrower in accordance with generally
accepted accounting principles; (b) within 20 days after
the end of each month, an accounts receivable aging
report, an inventory report and an accounts payable aging
report, in such form as Silicon shall reasonably specify;
(c) within 20 days after the end of each month, a
Borrowing Base Certificate in the form attached to this
Agreement as Exhibit A, as Silicon may reasonably modify
such Certificate from time to time, signed by the Chief
Financial Officer of the Borrower; (d) within 30 days
after the end of each month, a Compliance Certificate in
such form as Silicon shall reasonably specify, signed by
the Chief Financial Officer of the Borrower, setting
forth calculations showing compliance (at the end of each
such calendar month) with the financial covenants set
forth on the Schedule, and certifying that throughout
such month the Borrower was in full compliance with all
other terms and conditions of this Agreement and the
Schedule, and providing such other information as Silicon
shall reasonably request; and (e) within 90 days
following the end of the Borrower's fiscal year, complete
annual CPA-audited financial statements, such audit being
conducted by independent certified public accountants
reasonably acceptable to Silicon, together with an
unqualified opinion of such accountants.
CONDITIONS TO
CLOSING: Without in any way limiting the discretionary nature of
advances under this Agreement, before requesting any such
advance, the Borrower shall satisfy each of the following
conditions:
1. LOAN DOCUMENTS:
Silicon shall have received this Agreement, the Schedule,
joint and several Continuing Guaranties and such other
loan documents as Silicon shall require, each duly
executed and delivered by the parties thereto.
2. DOCUMENTS RELATING
TO AUTHORITY, ETC.:
Silicon shall have received each of the following in form
and substance satisfactory to it:
(a) Certified Copies of the Articles of Incorporation
and Bylaws of the Borrower;
(b) A Certificate of Good Standing issued by the
Secretary of State of the Borrower's state of
incorporation and such other states as Silicon may
reasonably request with respect to the Borrower;
(c) A certified copy of a Resolution adopted by the
Board of Directors of the Borrower authorizing the
execution, delivery and performance of this Agreement,
and any other documents or certificates to be executed by
the Borrower in connection with this transaction; and
Page 8 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
(d) Incumbency Certificates describing the office and
identifying the specimen signatures of the individuals
signing all such loan documents on behalf of the
Borrower.
3. PERFECTION AND
PRIORITY OF SECURITY: Silicon shall have received evidence satisfactory to it
that its security interest in the Collateral has been
duly perfected and that such security interest is prior
to all other liens, charges, security interests,
encumbrances and adverse claims in or to the Collateral
other than Permitted Liens, which evidence shall include,
without limitation, a certificate from the Oregon
Secretary of State showing the due filing and first
priority of the UCC Financing Statements to be signed by
the Borrower covering the Collateral.
4. INSURANCE: Silicon shall have received evidence satisfactory to it
that all insurance required by this Agreement is in full
force and effect, with loss payee designations and
additional insured designations as required by this
Agreement.
5. OTHER INFORMATION:
Silicon shall have received such other statements,
opinions, certificates, documents and information with
respect to matters contemplated by this Agreement as it
may reasonably request, all of which must be reasonably
acceptable to Silicon.
Silicon shall have conducted an examination of the
Borrower's books, records, ledgers, journals, and
registers, as Silicon may deem necessary, and shall be
satisfied with the results of such examination in its
sole discretion.
Silicon and the Borrower agree that the terms of this Schedule supplement
the Loan and Security Agreement between Silicon and the Borrower and agree to be
bound by the terms of this Schedule.
BORROWER:
ADVANCED POWER TECHNOLOGY, INC.
By:
---------------------------------------
Title:
------------------------------------
SILICON:
SILICON VALLEY BANK
By:
--------------------------------------
Title:
-----------------------------------
Page 9 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
EXHIBIT A
[INSERT BORROWING BASE CERTIFICATE]
Page 10 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
EXHIBIT B
[DISCLOSURES BY BORROWER]
Page 11 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
(EXIM PROGRAM)
Borrower: Advanced Power Technology, Inc.
Address: 405 S.W. Columbia Street
Bend, Oregon 97702
Date: December 18, 1997
NON-EXIM AGREEMENT;
CROSS-COLLATERALIZATION;
CROSS-DEFAULT:
Silicon and the Borrower are parties to that certain
other Loan and Security Agreement of even date (the
"Non-Exim Agreement"). Both this Agreement and the
Non-Exim Agreement shall continue in full force and
effect, and all rights and remedies under this
Agreement and the Non-Exim Agreement are cumulative.
The term "Obligations" as used in this Agreement and in
the Non-Exim Agreement shall include without limitation
the obligation to pay when due all Loans made pursuant
to this Agreement (the "Exim Loans") and all interest
thereon and the obligation to pay when due all Loans
made pursuant to the Non-Exim Agreement (the "Non-Exim
Loans") and all interest thereon. Without limiting the
generality of the foregoing, all "Collateral" as
defined in this Agreement and as defined in the
Non-Exim Agreement shall secure all Exim Loans and all
Non-Exim Loans and interest thereon, and all other
Obligations. Any Event of Default under this Agreement
shall constitute an Event of Default under the Non-Exim
Agreement, and any Event of Default under the Non-Exim
Agreement shall also constitute an Event of Default
under this Agreement. In the event Silicon assigns its
rights under this Agreement and/or under any Note
evidencing Exim Loans and/or its rights under the
Non-Exim Agreement and/or under any Note evidencing
Non-Exim Loans, to any third party, including without
limitation the Export-Import Bank of the United States
("Exim Bank"), whether before or after the occurrence
of any Event of Default, Silicon shall have the right
(but not any obligation), in its sole discretion, to
allocate and apportion Collateral to the Agreement
and/or Note assigned and to specify the priorities of
the respective security interests in such Collateral
between itself and the assignee, all without notice to
or consent of the Borrower.
This Agreement is subject to all of the terms and
conditions of the Borrower Agreement attached hereto as
Exhibit A, and all documents attached to such Borrower
Agreement (collectively, the "Exim Documents"), all of
which are hereby incorporated herein by this reference.
Borrower shall perform all of the obligations and
comply with all of the affirmative and negative
covenants and all other terms and conditions set forth
in the Exim Documents as though such
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<PAGE>
obligations and covenants were expressly set forth
herein, and all of which are hereby incorporated herein
by this reference. In the event of any conflict
between the terms of the Exim Documents and the terms
of the Exim Loan Agreement or the Schedule or any
related promissory note, whichever terms are more
restrictive on Borrower shall apply.
EXPORT LINE OF CREDIT
CREDIT LIMIT:
(Section 1. 1)
EXIM LOANS: An amount not to exceed the lesser of:
(a) $1,750,000 at any one time outstanding; or
(b) a total of (i) 90% of the value of Borrower's
eligible export receivables, which are eligible for
borrowing as provided below, plus (ii) 70% of the value
of Borrower's eligible exportable inventory which is
eligible for borrowing as provided below, which Silicon
in its reasonable discretion deems eligible for
borrowing.
Without limiting the fact that the determination of
which accounts are eligible for borrowing is a matter
of Silicon's discretion, the following shall not be
deemed eligible for borrowing: accounts outstanding
for more than 90 days from the invoice date unless
otherwise agreed to in writing by Silicon, accounts
subject to any contingencies, accounts billed or
payable outside the United States (except for those
backed by a letter of credit satisfactory to Silicon),
accounts owing from governmental agencies unless
otherwise agreed to in writing by Silicon, accounts
owing from one account debtor to the extent they exceed
25% of the total eligible accounts outstanding,
accounts owing from an affiliate of the Borrower,
accounts subject to setoff, recoupment, counterclaim or
any other demand by the account debtor. In addition,
if more than 50% of the accounts owing from an account
debtor are outstanding more than 90 days from the
invoice date or are otherwise not eligible accounts,
then all accounts owing from that account debtor shall
be deemed ineligible for borrowing.
Without limiting the fact that the determination of
which inventory is eligible for borrowing is a matter
of Silicon's discretion, the following shall not be
deemed eligible for borrowing: any inventory other than
raw materials, work-in-process and finished goods that
are owned by Borrower and located in Bend, Oregon;
inventory that is used, obsolete or returned goods;
inventory that is stored at a location other than the
Borrowers' Address or any location owned, leased or
rented by Borrowers and previously identified to
Silicon; inventory that is subject to a landlord's
lien; and inventory that is not in the possession of
the Borrower.
AGREEMENT SUBJECT
TO EXIM GUARANTEE;
COSTS: This Agreement is subject to all of the terms and
conditions of the Exim Guarantee (including without
limitation the Transaction Attachment thereto and
Special Conditions thereto) which are hereby
incorporated herein by this reference. Borrower
expressly agrees to perform all of the obligations and
comply with all of
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<PAGE>
the affirmative and negative covenants and all other
terms and conditions set forth in the Exim Guarantee as
though the same were expressly set forth herein, and
all of the same are hereby incorporated herein by this
reference. In the event of any conflict between the
terms of the Exim Guarantee and the other terms of this
Agreement, whichever terms are more restrictive shall
apply. Borrower shall reimburse Silicon for all fees
and out of pocket expenses incurred by Silicon with
respect to the Exim Guarantee, including without
limitation all facility fees and usage fees, and
Silicon is authorized to debit Borrower's account with
Silicon for such fees, costs and expenses when paid by
Silicon.
INTEREST RATE: If Borrower's Debt to Tangible Net Worth ratio is
greater than 2.00:1.00, the interest rate applicable to
the Export Line of Credit shall be a rate equal to the
"Prime Rate" in effect from time to time, plus 1.25%
per annum. If Borrower's Debt to Tangible Net Worth
ratio is 2.00:1.00 or less, the interest rate
applicable to the Export Line of Credit shall be a rate
equal to the "Prime Rate" in effect from time to time,
plus 1.00% per annum. Interest calculations shall be
made on the basis of a 360-day year and the actual
number of days elapsed. Changes in interest rate
resulting from changes in Borrower's Debt to Tangible
Net Worth ratio shall be effective on the first day of
the month following the day on which Silicon receives
Borrower's quarterly financial statement and
calculation of its Debt to Tangible Net Worth ratio.
Interest is payable monthly.
"Prime Rate" means the rate announced from time to time
by Silicon as its "prime rate"; it is a base rate upon
which other rates charged by Silicon are based, and it
is not necessarily the best rate available at Silicon.
The interest rate applicable to the Obligations shall
change on each date there is a change in the Prime
Rate.
LOAN ORIGINATION
FEE: $26,250, which is fully earned and payable at closing.
MATURITY DATE: December 17, 1998, at which time all unpaid principal
and accrued but unpaid interest shall be due and
payable.
PRIOR NAMES OF
BORROWER: See Exhibit B
TRADE NAMES OF
BORROWER: See Exhibit B
OTHER LOCATIONS
AND ADDRESSES: See Exhibit B
MATERIAL ADVERSE
LITIGATION: See Exhibit B
FINANCIAL
COVENANTS: The Borrower, exclusive of the results of operations of
Advanced Power Technology Europe, S.A. ("APT-Europe")
shall comply with all of the following
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<PAGE>
covenants, all of which shall be determined and
measured quarterly in accordance with generally
accepted accounting principles, except as otherwise
stated below:
TANGIBLE NET
WORTH: Borrower shall at all times maintain a Tangible Net
Worth (defined below) of not less than $2,250,000 (the
"Initial Minimum Tangible Net Worth") for the quarter
ending December 31, 1997, and increasing by $500,000
for each quarter thereafter, measured quarterly.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall maintain a ratio of total book
liabilities (less the outstanding balance of Secured
Term Loan No. 1 and accrued interest thereon, less
debt, if any, that has been subordinated to the Loans
in a written subordination agreement on terms
satisfactory to Silicon, and accrued interest thereon,
less deferred revenue) to Tangible Net Worth, measured
quarterly, of:
- Not more than 3.50:1.00 for the quarter ending
December 31, 1997
- Not more than 3.25:1.00 for the quarter ending
March 31, 1998
- Not more than 2.75:1.00 for the quarter ending
June 30, 1998
- Not more than 2.00:1.00 for the quarter ending
September 30, 1998, and each quarter thereafter
QUICK RATIO: Borrower shall maintain a ratio of Quick Assets
(defined below) to current liabilities of not less than
0.50:1.00 through March 31, 1998, and not less than
0.60:1.00 thereafter, measured quarterly.
BACKLOG TO
INVENTORY RATIO: Borrower shall maintain a ratio of Backlog (as defined
below) to the book value of inventory of at least
2.00:1.00, measured monthly on a rolling three month
average. In the event that the ratio of Backlog to
book value of inventory is less than 2.00:1.00 for two
consecutive months, the definition of Borrowing Base
for the Secured Accounts Receivable Line of Credit
shall be revised to prohibit borrowing against Eligible
Inventory for a period of 30 consecutive days each
year.
PROFITABILITY: Borrower shall not incur a loss in any amount for any
quarter. For purposes of this paragraph, "loss" means
net book income, plus any loss from APT-Europe, plus
depreciation and amortization, less any income from
APT-Europe.
DEBT SERVICE
COVERAGE RATIO: Borrower shall maintain on an annualized basis a Debt
Service Coverage Ratio of not less than 2.00:1.00,
measured as of the end of each fiscal quarter of
Borrower.
LOANS TO
SUBSIDIARY: Borrower shall limit its loans to its wholly owned
subsidiary, APT-Europe, to a maximum of $950,000 plus
25% of any new equity at any one time, measured
monthly.
RELEASE OF
Page 4
<PAGE>
GUARANTIES: At such time as Silicon releases the Continuing
Guaranties provided by direct or indirect shareholders
of Borrower, as a result of additional equity
contributions to Borrower of at least $2,000,000 after
the date hereof, the Initial Minimum Tangible Net Worth
stated above would immediately increase by 75% of such
additional equity, the Debt to Tangible Net Worth
covenant would immediately reduce to not more than
2.00:1.00, and the Quick Ratio would immediately
increase to not less than 0.60:1.00.
DEFINITIONS: "Backlog" is defined as the book value of orders
received by Borrower, backed by purchase order, for
shipment of product within 12 months.
"Debt Service Coverage Ratio" means quarterly net book
income, plus any loss from APT-Europe, plus
depreciation and amortization, less any income from
APT-Europe, plus interest, plus taxes (EBITDA)
multiplied by four (4), divided by the Current
Maturities of Long-Term Debt (CMLTD) plus interest for
that quarter multiplied by four (4).
"Quick Assets" means cash on hand or on deposit in
banks, readily marketable securities issued by the
United States, readily marketable commercial paper
rated "A-I" by Standard & Poor's Corporation (or a
similar rating by a similar rating organization),
certificates of deposit and banker's acceptances, and
accounts receivable (including accounts owing to
Borrower's affiliate of APT-Europe) net of allowance
for doubtful accounts.
"Tangible Net Worth" means stockholders' equity plus
the outstanding balance of the Secured Term Loan No. 1
and accrued interest thereon, plus debt, if any, that
has been subordinated to the Loans in a written
subordination agreement on terms satisfactory to
Silicon, and accrued interest thereon, plus the amount
of Borrower's negative equity investment in Borrower's
affiliate APT-Europe, less goodwill, patents,
capitalized software costs, deferred organizational
costs, tradenames, trademarks, and all other assets
which would be classified as intangible assets under
generally accepted accounting principles, less the note
receivable from Tremoliere LLC, less the note
receivable from Borrower's affiliate APT-Europe, less
the amount of Borrower's positive equity investment in
APT-Europe.
OTHER COVENANTS: Borrower shall at all times comply with all of the
following additional covenants:
BANKING RELATIONSHIP. Borrower shall at all times
maintain its primary banking relationship with Silicon.
EXIM BANK REQUIREMENTS. Borrower shall at all times
conform the rules and regulations of the Export-Import
Bank of the United States.
FINANCIAL STATEMENTS AND REPORTS. The Borrower shall
provide Silicon: (a) within 30 days after the end of
each month, a monthly financial statement for Borrower
and APT-Europe (consisting of a income statement and a
balance sheet) prepared by the Borrower in accordance
with generally accepted accounting principles; (b)
within 20 days after the end of each month, an accounts
receivable aging report, an inventory report and an
accounts payable aging report, in such
Page 5
<PAGE>
form as Silicon shall reasonably specify; (c) within 20
days after the end of each month, a Borrowing Base
Certificate in the form attached to this Agreement as
Exhibit A, as Silicon may reasonably modify such
Certificate from time to time, signed by the Chief
Financial Officer of the Borrower; (d) within 30 days
after the end of each month, a Compliance Certificate
in such form as Silicon shall reasonably specify,
signed by the Chief Financial Officer of the Borrower,
setting forth calculations showing compliance (at the
end of each such calendar month) with the financial
covenants set forth on the Schedule, and certifying
that throughout such month the Borrower was in full
compliance with all other terms and conditions of this
Agreement and the Schedule, and providing such other
information as Silicon shall reasonably request; and
(e) within 90 days following the end of the Borrower's
fiscal year, complete annual CPA-audited financial
statements, such audit being conducted by independent
certified public accountants reasonably acceptable to
Silicon, together with an unqualified opinion of such
accountants.
CONDITIONS TO
CLOSING: Without in any way limiting the discretionary nature of
advances under this Agreement, before requesting any
such advance, the Borrower shall satisfy each of the
following conditions:
1. LOAN DOCUMENTS:
Silicon shall have received this Agreement, the
Schedule, joint and several Continuing Guaranties, and
such other loan documents as Silicon shall require,
each duly executed and delivered by the parties
thereto.
2. DOCUMENTS RELATING
TO AUTHORITY, ETC.:
Silicon shall have received each of the following in
form and substance satisfactory to it:
(a) Certified Copies of the Articles of Incorporation
and Bylaws of the Borrower;
(b) A Certificate of Good Standing issued by the
Secretary of State of the Borrower's state of
incorporation and such other states as Silicon may
reasonably request with respect to the Borrower;
(c) A certified copy of a Resolution adopted by the
Board of Directors of the Borrower authorizing the
execution, delivery and performance of this Agreement,
and any other documents or certificates to be executed
by the Borrower in connection with this transaction;
and
(d) Incumbency Certificates describing the office and
identifying the specimen signatures of the individuals
signing all such loan documents on behalf of the
Borrower.
3. PERFECTION AND
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<PAGE>
PRIORITY OF SECURITY: Silicon shall have received evidence satisfactory to it
that its security interest in the Collateral has been
duly perfected and that such security interest is prior
to all other liens, charges, security interests,
encumbrances and adverse claims in or to the Collateral
other than Permitted Liens, which evidence shall
include, without limitation, a certificate from the
Oregon Secretary of State showing the due filing and
first priority of the UCC Financing Statements to be
signed by the Borrower covering the Collateral.
4. INSURANCE: Silicon shall have received evidence satisfactory to it
that all insurance required by this Agreement is in
full force and effect, with loss payee designations and
additional insured designations as required by this
Agreement.
5. OTHER INFORMATION:
Silicon shall have received such other statements,
opinions, certificates, documents and information with
respect to matters contemplated by this Agreement as it
may reasonably request, all of which must be acceptable
to Silicon.
Silicon shall have conducted an examination of the
Borrower's books, records, ledgers, journals, and
registers, as Silicon may deem necessary, and shall be
satisfied with the results of such examination in its
sole discretion.
Exim Bank shall have agreed to guarantee payment of
ninety percent (90%) of the Loan and all interest
accrued thereon, subject to the terms of a master
guarantee agreement between Exim Bank and Silicon.
Silicon and the Borrower agree that the terms of this Schedule supplement
the Loan and Security Agreement between Silicon and the Borrower and agree to be
bound by the terms of this Schedule.
BORROWER:
ADVANCED POWER TECHNOLOGY, INC.
By:
----------------------------------
Title:
-------------------------------
SILICON:
SILICON VALLEY BANK
By:
----------------------------------
Title:
-------------------------------
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<PAGE>
EXHIBIT A
[INSERT EXIM BORROWER AGREEMENT]
Page 8
<PAGE>
EXHIBIT B
[INSERT BORROWER DISCLOSURES]
Page 9
<PAGE>
LOAN MODIFICATION AGREEMENT
BETWEEN: Advanced Power Technology, Inc., a Delaware corporation ("Borrower"),
whose address is 405 S.W. Columbia Street, Bend, Oregon 97702;
AND: Silicon Valley Bank ("Silicon"), whose address is 3003 Tasman Drive,
Santa Clara, California 95054;
DATE: January 6, 2000
This Loan Modification Agreement is entered into on the above date by
Borrower and Silicon.
1. BACKGROUND. Borrower entered into a Loan and Security Agreement (as
amended from time to time, the "Loan Agreement") and a Loan and Security
Agreement (Exim Program) (as amended from time to time, the "Exim Loan
Agreement") with Silicon in December, 1997. Capitalized terms used in this Loan
Modification Agreement shall, unless otherwise defined in this Agreement, have
the meaning given to such terms in the Loan Agreement and the Exim Loan
Agreement.
Silicon and Borrower are entering into this Agreement to state the terms
and conditions of certain modifications to the Loan Agreement and Schedule
thereto, and the Exim Loan Agreement and Schedule thereto.
2. MODIFICATIONS TO LOAN AGREEMENT AND SCHEDULE, AND EXIM LOAN AGREEMENT
AND SCHEDULE.
2.1 The Schedule to the Loan Agreement is hereby deleted and replaced
by the Amended and Restated Schedule to Loan and Security Agreement attached to
this Agreement as EXHIBIT A.
2.2 The Schedule to the Exim Loan Agreement is hereby deleted and
replaced by the Amended and Restated Schedule to Loan and Security Agreement
(Exim Program) attached to this Agreement as EXHIBIT B.
2.3 Borrower acknowledges and agrees that all Obligations, including
without limitation Borrower's obligation to repay amounts advanced by Silicon to
Borrower on the terms of the Loan Agreement and Schedule, and the Exim Loan
Agreement and Schedule, as modified by this Loan Modification Agreement, are
secured by all liens and security interests granted by Borrower to Silicon in
the Loan Agreement and the Exim Loan Agreement. Borrower shall not grant a lien
on, or security interest in, any of its patents, maskworks, copyrights,
trademarks, tradenames, or service marks (in each case whether registered or
not), or any applications for any of the foregoing, or any other intellectual
property of Borrower without Silicon's prior written consent.
3. CONDITIONS PRECEDENT. This Loan Modification Agreement shall not take
effect until Borrower delivers to Silicon a Certified Resolution of Borrower, an
Acknowledgment of Guarantor by all of the guarantors of the Loan in the form
attached hereto, in the form attached hereto, and such other documents as
Silicon shall reasonably require to give effect to the terms of this Loan
Modification Agreement.
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<PAGE>
4. NO OTHER MODIFICATIONS. Except as expressly modified by this Loan
Modification Agreement, the terms of the Loan Agreement and the Exim Loan
Agreement shall remain unchanged and in full force and effect. Silicon's
agreement to modify the Loan Agreement and the Exim Loan Agreement pursuant
to this Loan Modification Agreement shall not obligate Silicon to make any
future modifications to the Loan Agreement, Exim Loan Agreement or any other
loan document. Nothing in this Loan Modification Agreement shall constitute
a satisfaction of any indebtedness of any Borrower to Silicon. It is the
intention of Silicon and Borrower to retain as liable parties all makers and
endorsers of the Loan Agreement, Exim Loan Agreement or any other loan
document. No maker, endorser, or guarantor shall be released by virtue of
this Loan Modification Agreement. The terms of this paragraph shall apply
not only to this Loan Modification Agreement, but also to all subsequent loan
modification agreements.
5. REPRESENTATIONS AND WARRANTIES.
5.1 The Borrower represents and warrants to Silicon that the
execution, delivery and performance of this Agreement are within the Borrower's
corporate powers, and have been duly authorized and are not in contravention of
law or the terms of the Borrower's articles of incorporation, bylaws or of any
undertaking to which the Borrower is a party or by which it is bound.
5.2 The Borrower understands and agrees that in entering into this
Agreement, Silicon is relying upon the Borrower's representations, warranties
and agreements as set forth in the Loan Agreement, Exim Loan Agreement and other
loan documents. Borrower hereby reaffirms all representations and warranties in
the Loan Agreement, all of which are true as of the date of this Agreement.
BORROWER:
ADVANCED POWER TECHNOLOGY, INC.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
SILICON:
SILICON VALLEY BANK
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
Page 2
<PAGE>
EXHIBIT A
AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
Borrower: Advanced Power Technology, Inc.
Address: 405 S.W. Columbia Street
Bend, Oregon 97702
Date: January 6, 2000
SECURED ACCOUNTS RECEIVABLE LINE OF CREDIT
CREDIT LIMIT: An amount not to exceed the lesser of: (i) $3,000,000 at any
one time outstanding; or (ii) the amount of the "Borrowing
Base", as defined below.
For purposes of this Schedule, the "Borrowing Base" shall
mean the sum of (i) 80% of the Net Amount of Borrower's
eligible accounts receivable, plus (ii) 50% of Borrower's
"Eligible Inventory" (as defined below), up to a maximum
advance of $1,250,000 against Eligible Inventory. With
respect to Borrower's accounts, "Net Amount" means the gross
amount of the account, minus all applicable sales, use,
excise and other similar taxes and minus all discounts,
credits and allowances of any nature granted or claimed.
Borrower's "Eligible Inventory" means the Borrower's
inventory held for sale in the United States or Canada,
valued at the lower of wholesale cost or market value, which
Silicon in its reasonable discretion deems eligible for
borrowing, subject to the Backlog Covenant described below.
The amount of all letters of credit issued by Silicon at the
request of the Borrower shall reduce, dollar for dollar, the
amount otherwise available to be borrowed under the
Borrowing Base formula described above. The amount
otherwise available to be borrowed under the Borrowing Base
formula described above shall also be reduced by one-half of
the outstanding balance of Secured Term Loan No. 3 described
below.
Without limiting the fact that the determination of which
accounts are eligible for borrowing is a matter of Silicon's
discretion, the following shall not be deemed eligible for
borrowing: accounts outstanding for more than 90 days from
the invoice date unless otherwise agreed to in writing by
Silicon, accounts subject to any contingencies, accounts
owing from an account debtor outside the United States or
billed or payable outside the United States (except for
those backed by a letter of credit satisfactory to Silicon),
accounts owing from governmental agencies unless otherwise
agreed to in writing by Silicon, accounts owing from one
account debtor to the extent they exceed 25% of the total
eligible accounts outstanding, accounts owing from an
affiliate of the Borrower, and accounts subject to setoff,
recoupment, counterclaim or any other demand by the account
debtor. In addition, if more than 50% of the accounts owing
from an account debtor are outstanding
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<PAGE>
more than 90 days from the invoice date or are otherwise
then all accounts owing from that account debtor shall be
deemed ineligible for borrowing.
Without limiting the fact that the determination of which
inventory is eligible for borrowing is a matter of Silicon's
discretion, the following shall not be deemed eligible for
borrowing: any inventory other than raw materials,
work-in-process and finished goods that are owned by
Borrower and located in Bend, Oregon; inventory that is
used, obsolete or returned goods; inventory that is stored
at a location other than the Borrowers' Address or any
location owned, leased or rented by Borrowers and previously
identified to Silicon; inventory that is subject to a
landlord's lien; and inventory that is not in the possession
of the Borrower.
INTEREST RATE: If Borrower's Debt to Tangible Net Worth ratio is greater
than 2.00:1.00, the interest rate applicable to the Secured
Accounts Receivable Line of Credit shall be a rate equal to
the "Prime Rate" in effect from time to time, plus 1.25% per
annum. If Borrower's Debt to Tangible Net Worth ratio is
2.00:1.00 or less, the interest rate applicable to the
Secured Accounts Receivable Line of Credit shall be a rate
equal to the "Prime Rate" in effect from time to time, plus
1.00% per annum. Interest calculations shall be made on the
basis of a 360-day year and the actual number of days
elapsed. Changes in interest rate resulting from changes in
Borrower's Debt to Tangible Net Worth ratio shall be
effective on the first day of the month following the day on
which Silicon receives Borrower's quarterly financial
statement and calculation of its Debt to Tangible Net Worth
ratio. Interest is payable monthly.
"Prime Rate" means the rate announced from time to time by
Silicon as its "prime rate"; it is a base rate upon which
other rates charged by Silicon are based, and it is not
necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall change on
each date there is a change in the Prime Rate.
LOAN FEE: No new fee.
MATURITY DATE: March 31, 2000, at which time all unpaid principal and
accrued but unpaid interest shall be due and payable.
LETTERS OF CREDIT: Subject to the terms of this Agreement, as amended from time
to time, Silicon shall issue or cause to be issued under the
Credit Limit standby and commercial letters of credit for
the account of Borrower in an aggregate face amount not to
exceed $1,000,000. Each such letter of credit shall have an
expiry date of no later than the Maturity Date. All such
letters of credit shall be, in form and substance,
acceptable to Silicon in its sole discretion and shall be
subject to the terms and conditions of Silicon's form
application and letter of credit agreement, as executed by
the Borrower from time to time.
FEES: The Borrower shall pay Silicon the fees and costs
customarily charged by Silicon (at the time of issuance of
the letter of credit) with respect to the issuance of
letters of credit.
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<PAGE>
SECURED TERM LOAN NO. 1
CREDIT LIMIT: An amount not to exceed $2,500,000.
PURPOSE: Borrower used the proceeds of this Secured Term Loan No. 1
to assist in financing the purchase of Sundstrand
Corporation's 49% ownership interest in Borrower by a
limited liability company owned by Borrower's management.
INTEREST RATE: If Borrower's Debt to Tangible Net Worth ratio is greater
than 2.00:1.00, the interest rate applicable to the Secured
Term Loan No. 1 shall be a rate equal to the "Prime Rate" in
effect from time to time, plus 1.50% per annum. If
Borrower's Debt to Tangible Net Worth ratio is 2.00:1.00 or
less, the interest rate applicable to the Secured Term Loan
No. 1 shall be a rate equal to the "Prime Rate" in effect
from time to time, plus 1.25% per annum. Interest
calculations shall be made on the basis of a 360-day year
and the actual number of days elapsed. "Prime Rate" means
the rate announced from time to time by Silicon as its
"prime rate"; it is a base rate upon which other rates
charged by Silicon are based, and it is not necessarily the
best rate available at Silicon. The interest rate
applicable to the Obligations shall change on each date
there is a change in the Prime Rate. Changes in interest
rate resulting from changes in Borrower's Debt to Tangible
Net Worth ratio shall be effective on the first day of the
month following the day on which Silicon receives Borrower's
quarterly financial statement and calculation of its Debt to
Tangible Net Worth ratio. Interest is payable monthly.
MATURITY DATE: March 31, 2000, at which time all unpaid principal and
accrued but unpaid interest shall be due and payable.
CONTINUING
GUARANTY: This facility is guaranteed by Advanced Energy Industries,
Inc., pursuant to that certain Amended and Restated Guaranty
and Subordination Agreement dated as of December 22, 1997.
SECURED EQUIPMENT TERM LOAN NO. 2
CREDIT LIMIT: An amount not to exceed the lesser of (i) $500,000 at any
one time outstanding; or (ii) the amount of the "Equipment
Borrowing Base," as defined below. For purposes of this
Schedule, the "Equipment Borrowing Base" meant 90% of the
invoice value of equipment purchased by Borrower after
August 31, 1996. Silicon had no obligation to advance
against taxes, freight charges, installation charges or
other similar amounts relating to Borrower's equipment,
whether or not such amounts were identified on the invoices
submitted to Silicon. Equipment included in the Equipment
Borrowing Base was required to be new equipment, at the time
of purchase by Borrower, owned by Borrower, in good working
order, not subject to any liens in favor of any person or
entity other than Silicon, and were subject to a first
priority, perfected security interest in favor of Silicon.
Silicon had no obligation to make advances against
non-standard equipment, such as tooling, software and custom
equipment. Silicon had no obligation to make advances on
this Secured Equipment Term Loan after September 6, 1997.
Silicon made
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<PAGE>
advances under this Secured Equipment Term Loan No. 2 from
time to time, based on invoices and other documentation as
requested by Silicon to support such advances. The
Borrower's indebtedness to Silicon with respect to this
Secured Equipment Term Loan No. 2 shall be evidenced by this
Schedule and the Loan Agreement, not by a separate
promissory note unless required by Silicon.
Borrower shall submit to Silicon such invoices, advance
requests and other information, in form acceptable to
Silicon, as Silicon shall reasonably require from time to
time.
Once the maximum amount of the principal was advanced under
this Secured Equipment Term Loan No. 2, Borrower was no
longer entitled to further advances on this Loan. Advances
were to be requested in writing by Borrower or an authorized
person. Silicon may, but need not, require that all oral
requests be confirmed in writing. The unpaid principal
balance owing on this Secured Equipment Term Loan No. 2 at
any time may be evidenced by Silicon's internal records,
including daily computer print-outs (which Silicon shall
provide to Borrower periodically).
PURPOSE: Borrowers used the proceeds of this Secured Equipment Term
Loan No. 2 to finance the purchase of new equipment.
INTEREST RATE: The interest rate applicable to the Secured Equipment Term
Loan shall be a rate equal to the "Prime Rate" (as defined
above) in effect from time to time, plus 1.50% per annum.
Interest calculations shall be made on the basis of a
360-day year and the actual number of days elapsed. The
interest rate applicable to the Obligations shall change on
each date there is a change in the Prime Rate.
AMORTIZATION: Borrower shall pay Silicon monthly payments of interest only
on the last day each month commencing with September 30,
1996. In addition, Borrower shall pay Silicon commencing on
October 6, 1997, and continuing on the same day of each
month thereafter, the amount necessary to repay fully the
amount of the Secured Equipment Term Loan No. 2 in 30 equal
month payments.
MATURITY DATE: March 6, 2000, at which time all unpaid principal and
accrued but unpaid interest, fees and other charges shall be
due and payable.
COMMITMENT
FEE: $1,000, was paid at closing. This fee was fully earned
at closing and is non-refundable.
SECURED TERM LOAN NO. 3
CREDIT LIMIT: An amount not to exceed $500,000, in a single advance.
PURPOSE: Borrowers used the proceeds of this Secured Term Loan No. 3
to assist in financing the purchase of Sundstrand
Corporation's 49% ownership interest in Borrower by a
limited liability company owned by Borrower's management.
INTEREST RATE: If Borrower's Debt to Tangible Net Worth ratio is greater
than 2.00:1.00, the interest rate applicable to the Secured
Term Loan No. 3 shall be a rate equal to the
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<PAGE>
"Prime Rate" (as defined above) in effect from time to time,
plus 1.75% per annum. If Borrower's Debt to Tangible Net
Worth ratio is 2.00:1.00 or less, the interest rate
applicable to the Secured Term Loan No. 3 shall be a rate
equal to the "Prime Rate" in effect from time to time, plus
1.50% per annum Interest calculations shall be made on the
basis of a 360-day year and the actual number of days
elapsed. Changes in interest rate resulting from changes in
Borrower's Debt to Tangible Net Worth ratio shall be
effective on the first day of the month following the day on
which Silicon receives Borrower's quarterly financial
statement and calculation of its Debt to Tangible Net Worth
ratio. The interest rate applicable to the Obligations
shall change on each date there is a change in the Prime
Rate.
AMORTIZATION: Borrower shall pay Silicon monthly payments of interest on
the last day each month commencing with January, 1998. In
addition, Borrower shall pay Silicon on the last day of each
month, commencing with January, 1998, the amount necessary
to repay fully the amount of the Secured Term Loan No. 3 in
36 equal monthly payments.
MATURITY DATE: December 17, 2000, at which time all unpaid principal and
accrued but unpaid interest, fees and other charges shall be
due and payable.
COMMITMENT
FEE: $1,250, was paid at closing. This fee was fully earned at
closing and is non-refundable.
SECURED TERM LOAN NO. 4
The Borrower may choose one of the following term loan options:
A. RE-FINANCE OF EXISTING LEASE:
CREDIT LIMIT: An amount not to exceed the lesser of (i) $500,000 at any
one time outstanding; or (ii) the amount of the "Equipment
Borrowing Base," as defined below. For purposes of this
Schedule, the "Equipment Borrowing Base" shall mean 80% of
the fair market value ("FMV") of certain equipment subject
to an existing lease from Finova Capital. FMV shall be
determined by Finova Capital, pursuant to the terms of the
lease agreement between Borrower and Finova Capital. This
facility may only be drawn in one advance, and Silicon shall
have no obligation to make an advance on this facility after
January 31, 2000. The Borrower's indebtedness to Silicon
with respect to this facility shall be evidenced by this
Schedule and the Loan Agreement, not by a separate
promissory note unless required by Silicon.
Borrower shall not have the right to reborrow any amount on
this facility that has been repaid by Borrower. The advance
may be requested in writing by Borrower or an authorized
person. Silicon may, but need not, require that an oral
request be confirmed in writing. The unpaid principal
balance owing on this facility at any time may be evidenced
by Silicon's internal records, including daily computer
print-outs (which Silicon shall provide to Borrower
periodically).
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<PAGE>
PURPOSE: Borrowers shall use the proceeds of this facility to
refinance an existing lease from Finova Capital.
INTEREST RATE: The applicable interest rate shall be either:
(a) A floating rate equal to the "Prime Rate" (as defined
above) in effect from time to time, plus 1.75% per
annum. Interest calculations shall be made on the
basis of a 360-day year and the actual number of days
elapsed. The interest rate applicable to the
Obligations shall change on each date there is a change
in the Prime Rate; or
(b) A fixed rate equivalent to the rate for three-year
Treasury bills as of the date of advance, plus 4.00%
per annum. Interest calculations shall be made on the
basis of a 360-day year and the actual number of days
elapsed.
If Borrower selects the floating rate option, Borrower shall
make thirty-six (36) equal monthly payments of principal,
plus interest, sufficient to fully amortize the facility in
thirty-six (36) months. If Borrower selects the fixed rate
option, Borrower shall make thirty-six (36) equal monthly
payments, including both principal and interest, sufficient
to fully amortize the facility in thirty-six (36) months.
MATURITY DATE: December , 2002, at which time all unpaid principal
and accrued but unpaid interest, fees and other charges
shall be due and payable.
COMMITMENT FEE: $5,000, payable at closing. This fee is fully earned at
closing and is non-refundable. (Any Commitment Fee
previously paid by the Borrower in connection with this loan
shall be credited against this Fee.).
---OR---
B. NEW SECURED EQUIPMENT TERM LOAN:
CREDIT LIMIT: An amount not to exceed the lesser of (i) $500,000 at any
one time outstanding; or (ii) the amount of the Equipment
Borrowing Base," as defined below. For purposes of this
Schedule, the "Equipment Borrowing Base" shall mean 90% of
the invoice value of equipment, software and leasehold
improvements purchased by Borrower after
, 2000. Up to 25% of the amount
outstanding under this facility may be used to fund the
purchase of software and leasehold improvements. Silicon
shall have no obligation to advance against taxes, freight
charges, installation charges or other similar amounts
relating to Borrower's equipment, software or leasehold
improvements, whether or not such amounts are identified on
the invoices submitted to Silicon. Equipment to be included
in the Equipment Borrowing Base must be new equipment, at
the time of purchase by Borrower, owned by Borrower, in good
working order, must not be subject to any liens in favor of
any person or entity other than Silicon, and must be subject
to a first priority, perfected security interest in favor of
Silicon. Silicon shall have no obligation to make advances
against non-standard equipment, such as tooling and custom
equipment. Silicon shall have no obligation to make
advances on this
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<PAGE>
facility after January , 2001. Silicon shall make
advances under this facility from time to time during the
twelve (12) month period between the date of this Agreement
and January , 2001 (the "Draw Period"), based on
invoices and other documentation as shall be requested by
Silicon to support such advances. The Borrower's
indebtedness to Silicon with respect to this facility shall
be evidenced by this Schedule and the Loan Agreement, not by
a separate promissory note unless required by Silicon.
Borrower shall submit to Silicon such invoices, advance
requests and other information, in form acceptable to
Silicon, as Silicon shall reasonably require from time to
time.
Once the maximum amount of the principal has been advanced
under this facility, Borrower is no longer entitled to
further advances on this Loan. Borrower shall not have the
right to reborrow any amount on this facility that has been
repaid by Borrower. Advances may be requested in writing by
Borrower or an authorized person. Silicon may, but need
not, require that all oral requests be confirmed in writing.
The unpaid principal balance owing on this facility at any
time may be evidenced by Silicon's internal records,
including daily computer print-outs (which Silicon shall
provide to Borrower periodically).
PURPOSE: Borrowers hall use the proceeds of this facility to finance
the purchase of new equipment.
INTEREST RATE: During the Draw Period, the applicable interest rate shall
be the floating rate option below. After the Draw Period,
the applicable interest rate shall be either:
(a) A floating rate equal to the "Prime Rate" (as defined
above) in effect from time to time, plus 1.75% per
annum. Interest calculations shall be made on the
basis of a 360-day year and the actual number of days
elapsed. The interest rate applicable to the
Obligations shall change on each date there is a change
in the Prime Rate; or
(b) a fixed rate equivalent to the rate for two-year
Treasury bills as of the date of advance, plus 4.00%
per annum. Interest calculations shall be made on the
basis of a 360-day year and the actual number of days
elapsed.
Borrower shall pay interest only on a monthly basis during
the Draw Period. If Borrower selects the floating rate
option after the Draw Period, Borrower shall make
twenty-four (24) equal monthly payments of principal, plus
interest, beginning on January , 2001, or on the
first day of the first full month following that month in
which the full $500,000 has been advanced, sufficient to
fully amortize the facility in twenty-four (24) months. If
Borrower selects the fixed rate option after the Draw
Period, Borrower shall make twenty-four (24) equal monthly
payments, including both principal and interest, sufficient
to fully amortize the facility in twenty-four (24) months.
MATURITY DATE: December , 2002, at which time all unpaid principal
and accrued but unpaid interest, fees and other charges
shall be due and payable.
Page 7 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
COMMITMENT FEE: $5,000, payable at closing. This fee is fully earned at
closing and is non-refundable. (Any Commitment Fee
previously paid by the Borrower in connection with this loan
shall be credited against this Fee.)
PRIOR NAMES OF
BORROWER: See Exhibit B
TRADE NAMES OF
BORROWER: See Exhibit B
OTHER LOCATIONS
AND ADDRESSES: See Exhibit B
MATERIAL ADVERSE
LITIGATION: See Exhibit B
FINANCIAL
COVENANTS: The Borrower, exclusive of the results of operations of
Advanced Power Technology Europe, S.A. ("APT-Europe"), shall
comply with all of the following covenants, all of which
shall be determined and measured quarterly in accordance
with generally accepted accounting principles, except as
otherwise stated below:
TANGIBLE NET
WORTH: Borrower shall at all times maintain a Tangible Net Worth
(defined below) of not less than $3,000,000.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall maintain a ratio of total book liabilities
(less the outstanding balance of Secured Term Loan No. 1 and
accrued interest thereon, less debt, if any, that has been
subordinated to the Loans in a written subordination
agreement on terms satisfactory to Silicon, and accrued
interest thereon, less deferred revenue) to Tangible Net
Worth, measured quarterly, of not more than 2.50:1.00.
QUICK RATIO: Borrower shall maintain a ratio of Quick Assets (defined
below) to current liabilities of not less than 0.45:1.00,
measured quarterly.
PROFITABILITY: Borrower shall earn net income of not less than $250,000 for
each quarterly period.
DEBT SERVICE
COVERAGE RATIO: Borrower shall maintain, on an annualized basis, a Debt
Service Coverage Ratio of not less than 2.00:1.00.
LOANS OR EQUITY
CONTRIBUTIONS TO
SUBSIDIARY: Borrower shall limit its loans or equity contributions to
its wholly-owned subsidiary, APT-Europe, to a maximum of
$1,250,000 plus 25% of any new equity at any one time,
measured quarterly.
Page 8 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
RELEASE OF
GUARANTIES: Silicon shall release the Continuing Guaranties provided by
direct or indirect shareholders of Borrower at such time as
the Borrower satisfies all of the criteria described below:
(i) Borrower raises a minimum of $2,000,000 in new equity
after April 1, 1999;
(ii) Borrower achieves a Debt to Tangible Net Worth Ratio
of not more than 2.00:1.00;
(iii) Borrower achieves a Quick Ratio of not less than
0.60:1.00; and
(iv) Borrower is able to reduce its reliance on
inventory-secured borrowings such that the advance
rate against inventory for purposes of the Borrowing
Base for the Secured Accounts Receivable Line of
Credit may be reduced from 50% to 25%, and the maximum
advance against Eligible Inventory may be reduced from
$1,250,000 to $500,000.
DEFINITIONS: "Debt Service Coverage Ratio" means quarterly net book
income, plus any loss from APT-Europe, plus depreciation and
amortization, less any income from APT-Europe, plus
interest, plus taxes (EBITDA) multiplied by four (4),
divided by the Current Maturities of Long-Term Debt (CMLTD)
plus interest for that quarter multiplied by four (4).
"Quick Assets" means cash on hand or on deposit in banks,
readily marketable securities issued by the United States,
readily marketable commercial paper rated "A-I" by Standard
& Poor's Corporation (or a similar rating by a similar
rating organization), certificates of deposit and banker's
acceptances, and accounts receivable (including accounts
owing to Borrower's affiliate APT-Europe) net of allowance
for doubtful accounts.
"Tangible Net Worth" means stockholders' equity plus the
outstanding balance of the Secured Term Loan No. 1 and
accrued interest thereon, plus debt, if any, that has been
subordinated to the Loans in a written subordination
agreement on terms satisfactory to Silicon, and accrued
interest thereon, plus the amount of Borrower's negative
equity investment in Borrower's affiliate APT-Europe, less
goodwill, patents, capitalized software costs, deferred
organizational costs, tradenames, trademarks, and all other
assets which would be classified as intangible assets under
generally accepted accounting principles, less the note
receivable from Tremoliere LLC, less the note receivable
from Borrower's affiliate APT-Europe, less the amount of
Borrower's positive equity investment in APT-Europe.
OTHER COVENANTS: Borrower shall at all times comply with all of the following
additional covenants:
BANKING RELATIONSHIP. Borrower shall at all times maintain
its primary banking relationship with Silicon.
FINANCIAL STATEMENTS AND REPORTS. The Borrower shall
provide Silicon: (a) within 30 days after the end of each
month, a monthly financial statement for
Page 9 - AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
<PAGE>
Borrower and APT-Europe (consisting of an income statement
and a balance sheet) prepared by the Borrower in accordance
with generally accepted accounting principles; (b) within 20
days after the end of each month, an accounts receivable
aging report, an inventory report and an accounts payable
aging report, in such form as Silicon shall reasonably
specify; (c) within 20 days after the end of each month, a
Borrowing Base Certificate in the form attached to this
Agreement as Exhibit A, as Silicon may reasonably modify
such Certificate from time to time, signed by the Chief
Financial Officer of the Borrower; (d) within 30 days after
the end of each quarter, a Compliance Certificate in such
form as Silicon shall reasonably specify, signed by the
Chief Financial Officer of the Borrower, setting forth
calculations showing compliance (at the end of each such
calendar month) with the financial covenants set forth on
the Schedule, and certifying that throughout such month the
Borrower was in full compliance with all other terms and
conditions of this Agreement and the Schedule, and providing
such other information as Silicon shall reasonably request;
and (e) within 90 days following the end of the Borrower's
fiscal year, complete annual CPA-audited financial
statements, such audit being conducted by independent
certified public accountants reasonably acceptable to
Silicon, together with an unqualified opinion of such
accountants.
CONDITIONS TO
CLOSING: Without in any way limiting the discretionary nature of
advances under this Agreement, before requesting any such
advance, the Borrower shall satisfy each of the following
conditions:
1. LOAN DOCUMENTS:
Silicon shall have received this Agreement, the Schedule,
joint and several Continuing Guaranties and such other loan
documents as Silicon shall require, each duly executed and
delivered by the parties thereto.
2. DOCUMENTS RELATING
TO AUTHORITY, ETC.:
Silicon shall have received each of the following in form
and substance satisfactory to it:
(a) Certified Copies of the Articles of Incorporation and
Bylaws of the Borrower;
(b) A Certificate of Good Standing issued by the Secretary
of State of the Borrower's state of incorporation and
such other states as Silicon may reasonably request
with respect to the Borrower;
(c) A certified copy of a Resolution adopted by the Board
of Directors of the Borrower authorizing the
execution, delivery and performance of this Agreement,
and any other documents or certificates to be executed
by the Borrower in connection with this transaction;
and
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<PAGE>
(d) Incumbency Certificates describing the office and
identifying the specimen signatures of the individuals
signing all such loan documents on behalf of the
Borrower.
3. PERFECTION AND
PRIORITY OF SECURITY: Silicon shall have received evidence satisfactory to it
that its security interest in the Collateral has been duly
perfected and that such security interest is prior to all
other liens, charges, security interests, encumbrances and
adverse claims in or to the Collateral other than
Permitted Liens, which evidence shall include, without
limitation, a certificate from the Oregon Secretary of
State showing the due filing and first priority of the UCC
Financing Statements to be signed by the Borrower covering
the Collateral.
4. INSURANCE: Silicon shall have received evidence satisfactory to it
that all insurance required by this Agreement is in full
force and effect, with loss payee designations and
additional insured designations as required by this
Agreement.
5. OTHER INFORMATION:
Silicon shall have received such other statements,
opinions, certificates, documents and information with
respect to matters contemplated by this Agreement as it
may reasonably request, all of which must be reasonably
acceptable to Silicon.
Silicon shall have conducted an examination of the
Borrower's books, records, ledgers, journals, and
registers, as Silicon may deem necessary, and shall be
satisfied with the results of such examination in its sole
discretion.
Silicon and the Borrower agree that the terms of this Schedule supplement
the Loan and Security Agreement between Silicon and the Borrower and agree to be
bound by the terms of this Schedule.
BORROWER:
ADVANCED POWER TECHNOLOGY, INC.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
SILICON:
SILICON VALLEY BANK
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
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<PAGE>
EXHIBIT A
[INSERT BORROWING BASE CERTIFICATE]
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<PAGE>
EXHIBIT B
[DISCLOSURES BY BORROWER]
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<PAGE>
EXHIBIT B
AMENDED AND RESTATED SCHEDULE TO LOAN AND SECURITY AGREEMENT
(EXIM PROGRAM)
Borrower: Advanced Power Technology, Inc.
Address: 405 S.W. Columbia Street
Bend, Oregon 97702
Date: January ____, 2000
NON-EXIM AGREEMENT;
CROSS-COLLATERALIZATION;
CROSS-DEFAULT:
Silicon and the Borrower are parties to that certain
other Loan and Security Agreement of even date (the
"Non-Exim Agreement"). Both this Agreement and the
Non-Exim Agreement shall continue in full force and
effect, and all rights and remedies under this
Agreement and the Non-Exim Agreement are cumulative.
The term "Obligations" as used in this Agreement and
in the Non-Exim Agreement shall include without
limitation the obligation to pay when due all Loans
made pursuant to this Agreement (the "Exim Loans")
and all interest thereon and the obligation to pay
when due all Loans made pursuant to the Non-Exim
Agreement (the "Non-Exim Loans") and all interest
thereon. Without limiting the generality of the
foregoing, all "Collateral" as defined in this
Agreement and as defined in the Non-Exim Agreement
shall secure all Exim Loans and all Non-Exim Loans
and interest thereon, and all other Obligations. Any
Event of Default under this Agreement shall
constitute an Event of Default under the Non-Exim
Agreement, and any Event of Default under the
Non-Exim Agreement shall also constitute an Event of
Default under this Agreement. In the event Silicon
assigns its rights under this Agreement and/or under
any Note evidencing Exim Loans and/or its rights
under the Non-Exim Agreement and/or under any Note
evidencing Non-Exim Loans, to any third party,
including without limitation the Export-Import Bank
of the United States ("Exim Bank"), whether before or
after the occurrence of any Event of Default, Silicon
shall have the right (but not any obligation), in its
sole discretion, to allocate and apportion Collateral
to the Agreement and/or Note assigned and to specify
the priorities of the respective security interests
in such Collateral between itself and the assignee,
all without notice to or consent of the Borrower.
This Agreement is subject to all of the terms and
conditions of the Borrower Agreement attached hereto
as Exhibit A, and all documents attached to such
Borrower Agreement (collectively, the "Exim
Documents"), all of which are hereby incorporated
herein by this reference. Borrower shall perform all
of the obligations and comply with all of the
affirmative and negative covenants and all other
terms and conditions set forth in the Exim Documents
as though such
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(EXIM PROGRAM)
<PAGE>
obligations and covenants were expressly set forth
herein, and all of which are hereby incorporated
herein by this reference. In the event of any
conflict between the terms of the Exim Documents and
the terms of the Exim Loan Agreement or the Schedule
or any related promissory note, whichever terms are
more restrictive on Borrower shall apply.
EXPORT LINE OF CREDIT
CREDIT LIMIT:
(Section 1. 1)
EXIM LOANS: An amount not to exceed the lesser of:
(a) $2,000,000 at any one time outstanding; or
(b) a total of (i) 90% of the value of Borrower's
eligible export receivables, which are eligible for
borrowing as provided below, plus (ii) 70% of the
value of Borrower's eligible exportable inventory
which is eligible for borrowing as provided below,
which Silicon in its reasonable discretion deems
eligible for borrowing.
Without limiting the fact that the determination of
which accounts are eligible for borrowing is a matter
of Silicon's discretion, the following shall not be
deemed eligible for borrowing: accounts outstanding
for more than 90 days from the invoice date unless
otherwise agreed to in writing by Silicon, accounts
subject to any contingencies, accounts billed or
payable outside the United States (except for those
backed by a letter of credit satisfactory to
Silicon), accounts owing from governmental agencies
unless otherwise agreed to in writing by Silicon,
accounts owing from one account debtor to the extent
they exceed 25% of the total eligible accounts
outstanding, accounts owing from an affiliate of the
Borrower, accounts subject to setoff, recoupment,
counterclaim or any other demand by the account
debtor. In addition, if more than 50% of the accounts
owing from an account debtor are outstanding more
than 90 days from the invoice date or are otherwise
not eligible accounts, then all accounts owing from
that account debtor shall be deemed ineligible for
borrowing.
Without limiting the fact that the determination of
which inventory is eligible for borrowing is a matter
of Silicon's discretion, the following shall not be
deemed eligible for borrowing: any inventory other
than raw materials, work-in-process and finished
goods that are owned by Borrower and located in Bend,
Oregon; inventory that is used, obsolete or returned
goods; inventory that is stored at a location other
than the Borrowers' Address or any location owned,
leased or rented by Borrowers and previously
identified to Silicon; inventory that is subject to a
landlord's lien; and inventory that is not in the
possession of the Borrower.
AGREEMENT SUBJECT
TO EXIM GUARANTEE;
COSTS: This Agreement is subject to all of the terms and
conditions of the Exim Guarantee (including without
limitation the Transaction Attachment thereto and
Special Conditions thereto) which are hereby
incorporated herein by this reference. Borrower
expressly agrees to perform all of the obligations
and comply with all of
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(EXIM PROGRAM)
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the affirmative and negative covenants and all other
terms and conditions set forth in the Exim Guarantee
as though the same were expressly set forth herein,
and all of the same are hereby incorporated herein by
this reference. In the event of any conflict between
the terms of the Exim Guarantee and the other terms
of this Agreement, whichever terms are more
restrictive shall apply. Borrower shall reimburse
Silicon for all fees and out of pocket expenses
incurred by Silicon with respect to the Exim
Guarantee, including without limitation all facility
fees and usage fees, and Silicon is authorized to
debit Borrower's account with Silicon for such fees,
costs and expenses when paid by Silicon.
INTEREST RATE: If Borrower's Debt to Tangible Net Worth ratio is
greater than 2.00:1.00, the interest rate applicable
to the Export Line of Credit shall be a rate equal to
the "Prime Rate" in effect from time to time, plus
1.25% per annum. If Borrower's Debt to Tangible Net
Worth ratio is 2.00:1.00 or less, the interest rate
applicable to the Export Line of Credit shall be a
rate equal to the "Prime Rate" in effect from time to
time, plus 1.00% per annum. Interest calculations
shall be made on the basis of a 360-day year and the
actual number of days elapsed. Changes in interest
rate resulting from changes in Borrower's Debt to
Tangible Net Worth ratio shall be effective on the
first day of the month following the day on which
Silicon receives Borrower's quarterly financial
statement and calculation of its Debt to Tangible Net
Worth ratio. Interest is payable monthly.
"Prime Rate" means the rate announced from time to
time by Silicon as its "prime rate"; it is a base
rate upon which other rates charged by Silicon are
based, and it is not necessarily the best rate
available at Silicon. The interest rate applicable to
the Obligations shall change on each date there is a
change in the Prime Rate.
LOAN FEE: $30,000, was paid at closing. This fee was fully
earned at closing and is non-refundable.
MATURITY DATE: March 31, 2000, at which time all unpaid principal
and accrued but unpaid interest shall be due and
payable.
PRIOR NAMES OF
BORROWER: See Exhibit B
TRADE NAMES OF
BORROWER: See Exhibit B
OTHER LOCATIONS
AND ADDRESSES: See Exhibit B
MATERIAL ADVERSE
LITIGATION: See Exhibit B
FINANCIAL
COVENANTS: The Borrower, exclusive of the results of operations
of Advanced Power Technology Europe, S.A.
("APT-Europe") shall comply with all of the following
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(EXIM PROGRAM)
<PAGE>
covenants, all of which shall be determined and
measured quarterly in accordance with generally
accepted accounting principles, except as otherwise
stated below:
TANGIBLE NET
WORTH: Borrower shall at all times maintain a Tangible Net
Worth (defined below) of not less than $3,000,000.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall maintain a ratio of total book
liabilities (less the outstanding balance of
Secured Term Loan No. 1 and accrued interest thereon,
less debt, if any, that has been subordinated to the
Loans in a written subordination agreement on terms
satisfactory to Silicon, and accrued interest
thereon, less deferred revenue) to Tangible Net
Worth, measured quarterly, of not more than
2.50:1.00.
QUICK RATIO: Borrower shall maintain a ratio of Quick Assets
(defined below) to current liabilities of not less
than 0.45:1.00, measured quarterly.
PROFITABILITY: Borrower shall earn net income of not less than
$250,000 for each quarterly period.
DEBT SERVICE
COVERAGE RATIO: Borrower shall maintain, on an annualized basis, a
Debt Service Coverage Ratio of not less than
2.00:1.00.
LOANS OR EQUITY
CONTRIBUTIONS TO
SUBSIDIARY: Borrower shall limit its loans or equity
contributions to its wholly owned subsidiary,
APT-Europe, to a maximum of $1,250,000 plus 25% of
any new equity at any one time, measured quarterly.
RELEASE OF
GUARANTIES: Silicon shall release the Continuing Guaranties
provided by direct or indirect shareholders of
Borrower at such time as the Borrower satisfies all
of the criteria described below:
(i) Borrower raises a minimum of $2,000,000 in
new equity after April 1, 1999;
(ii) Borrower achieves a Debt to Tangible Net
Worth Ratio of not more than 2.00:1.00;
(iii) Borrower achieves a Quick Ratio of not less
than 0.60:1.00; and
(iv) Borrower is able to reduce its reliance on
inventory-secured borrowings such that the
advance rate against inventory for purposes
of the Borrowing Base for the Secured
Accounts Receivable Line of Credit may be
reduced from 50% to 25%, and the maximum
advance against Eligible Inventory may be
reduced from $1,250,000 to $500,000.
DEFINITIONS: "Debt Service Coverage Ratio" means quarterly net
book income, plus any loss from APT-Europe, plus
depreciation and amortization, less any income from
APT-
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(EXIM PROGRAM)
<PAGE>
Europe, plus interest, plus taxes (EBITDA) multiplied
by four (4), divided by the Current Maturities of
Long-Term Debt (CMLTD) plus interest for that quarter
multiplied by four (4).
"Quick Assets" means cash on hand or on deposit in
banks, readily marketable securities issued by the
United States, readily marketable commercial paper
rated "A-I" by Standard & Poor's Corporation (or a
similar rating by a similar rating organization),
certificates of deposit and banker's acceptances, and
accounts receivable (including accounts owing to
Borrower's affiliate of APT-Europe) net of allowance
for doubtful accounts.
"Tangible Net Worth" means stockholders' equity plus
the outstanding balance of the Secured Term Loan No.
1 and accrued interest thereon, plus debt, if any,
that has been subordinated to the Loans in a written
subordination agreement on terms satisfactory to
Silicon, and accrued interest thereon, plus the
amount of Borrower's negative equity investment in
Borrower's affiliate APT-Europe, less goodwill,
patents, capitalized software costs, deferred
organizational costs, tradenames, trademarks, and all
other assets which would be classified as intangible
assets under generally accepted accounting
principles, less the note receivable from Tremoliere
LLC, less the note receivable from Borrower's
affiliate APT-Europe, less the amount of Borrower's
positive equity investment in APT-Europe.
OTHER COVENANTS: Borrower shall at all times comply with all of the
following additional covenants:
BANKING RELATIONSHIP. Borrower shall at all times
maintain its primary banking relationship with
Silicon.
EXIM BANK REQUIREMENTS. Borrower shall at all times
conform the rules and regulations of the
Export-Import Bank of the United States.
FINANCIAL STATEMENTS AND REPORTS. The Borrower shall
provide Silicon: (a) within 30 days after the end of
each month, a monthly financial statement for
Borrower and APT-Europe (consisting of an income
statement and a balance sheet) prepared by the
Borrower in accordance with generally accepted
accounting principles; (b) within 20 days after the
end of each month, an accounts receivable aging
report, an inventory report and an accounts payable
aging report, in such form as Silicon shall
reasonably specify; (c) within 20 days after the end
of each month, a Borrowing Base Certificate in the
form attached to this Agreement as Exhibit A, as
Silicon may reasonably modify such Certificate from
time to time, signed by the Chief Financial Officer
of the Borrower; (d) within 30 days after the end of
each quarter, a Compliance Certificate in such form
as Silicon shall reasonably specify, signed by the
Chief Financial Officer of the Borrower, setting
forth calculations showing compliance (at the end of
each such calendar month) with the financial
covenants set forth on the Schedule, and certifying
that throughout such month the Borrower was in full
compliance with all other terms and conditions of
this Agreement and the Schedule, and providing such
other information as Silicon shall reasonably
request; and (e) within 90 days following the end of
the Borrower's fiscal year, complete annual
CPA-audited financial statements, such audit being
conducted by independent certified public accountants
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(EXIM PROGRAM)
<PAGE>
reasonably acceptable to Silicon, together with an
unqualified opinion of such accountants.
CONDITIONS TO
CLOSING: Without in any way limiting the discretionary nature
of advances under this Agreement, before requesting
any such advance, the Borrower shall satisfy each of
the following conditions:
1. LOAN DOCUMENTS:
Silicon shall have received this Agreement, the
Schedule, joint and several Continuing Guaranties,
and such other loan documents as Silicon shall
require, each duly executed and delivered by the
parties thereto.
2. DOCUMENTS RELATING
TO AUTHORITY, ETC.:
Silicon shall have received each of the following in
form and substance satisfactory to it:
(a) Certified Copies of the Articles of
Incorporation and Bylaws of the Borrower;
(b) A Certificate of Good Standing issued by the
Secretary of State of the Borrower's state
of incorporation and such other states as
Silicon may reasonably request with respect
to the Borrower;
(c) A certified copy of a Resolution adopted by
the Board of Directors of the Borrower
authorizing the execution, delivery and
performance of this Agreement, and any other
documents or certificates to be executed by
the Borrower in connection with this
transaction; and
(d) Incumbency Certificates describing the
office and identifying the specimen
signatures of the individuals signing all
such loan documents on behalf of the
Borrower.
3. PERFECTION AND
PRIORITY OF SECURITY: Silicon shall have received evidence satisfactory
to it that its security interest in the Collateral
has been duly perfected and that such security
interest is prior to all other liens, charges,
security interests, encumbrances and adverse claims
in or to the Collateral other than Permitted Liens,
which evidence shall include, without limitation, a
certificate from the Oregon Secretary of State
showing the due filing and first priority of the
UCC Financing Statements to be signed by the
Borrower covering the Collateral.
4. INSURANCE: Silicon shall have received evidence satisfactory to
it that all insurance required by this Agreement is
in full force and effect, with loss payee
designations and additional insured designations as
required by this Agreement.
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<PAGE>
5. OTHER INFORMATION:
Silicon shall have received such other statements,
opinions, certificates, documents and information
with respect to matters contemplated by this
Agreement as it may reasonably request, all of which
must be acceptable to Silicon.
Silicon shall have conducted an examination of the
Borrower's books, records, ledgers, journals, and
registers, as Silicon may deem necessary, and shall
be satisfied with the results of such examination in
its sole discretion.
Exim Bank shall have agreed to guarantee payment of
ninety percent (90%) of the Loan and all interest
accrued thereon, subject to the terms of a master
guarantee agreement between Exim Bank and Silicon.
Silicon and the Borrower agree that the terms of this Schedule
supplement the Loan and Security Agreement between Silicon and the Borrower and
agree to be bound by the terms of this Schedule.
BORROWER:
ADVANCED POWER TECHNOLOGY, INC.
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
SILICON:
SILICON VALLEY BANK
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
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(EXIM PROGRAM)
<PAGE>
EXHIBIT A
[INSERT EXIM BORROWER AGREEMENT]
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(EXIM PROGRAM)
<PAGE>
EXHIBIT B
[INSERT BORROWER DISCLOSURES]
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(EXIM PROGRAM)
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of April 7, 2000 by
and between Advanced Power Technology, Inc. ("Borrower") and Silicon Valley Bank
("Silicon") whose address is 3003 Tasman Drive, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which
may be owing by Borrower to Silicon, Borrower is indebted to Silicon pursuant
to, among other documents, a Loan and Security Agreement, dated September 6,
1995, together with any and all Schedules attached thereto, as amended from time
to time, (the "Loan Agreement"). The Loan Agreement provided for, among other
things, a Secured Accounts Receivable Line of Credit in the original principal
amount of Two Million Five Hundred Dollars ($2,500,000) (the "Line of Credit").
The Loan Agreement has been modified pursuant to among other documents, an
Amended and Restate Schedule to Loan and Security Agreement dated December 18,
1997, which the Line of Credit was increased to Three Million Dollars
($3,000,000). Additionally, Borrower is indebted to Silicon pursuant to, among
other documents, a Loan and Security Agreement (and Schedules thereto), dated
September 6, 1995, as may be amended from time to time (the "Exim Loan
Agreement"). The Exim Loan Agreement provided for, among other things, an Export
Line of Credit in the original principal amount of One Million Seven Hundred
Fifty Thousand Dollars ($1,750,000) (the "Exim Line of Credit"). The Exim Loan
Agreement has been modified pursuant to among other documents, an Amended and
Restated Schedule to Loan and Security Agreement, dated April 1, 1999, which the
Exim Line of Credit was increased to Two Million Dollars ($2,000,000). Defined
terms used but not otherwise defined herein shall have the same meanings as in
the Loan Agreement and the Exim Loan Agreement, respectively.
Hereinafter, all indebtedness owing by Borrower to Silicon shall be referred to
as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness
is secured by, among other things, the Collateral as described in the Loan
Agreement. In addition, repayment of the Indebtedness is guaranteed by Advanced
Energy Industries, Inc., Russell J. Crecraft, Marla K. Crecraft, John I. Hess,
Kimberly A. Hess, Patrick P. Sireta, Dah-Wen D. Tsang, Yvonne S. Tsang, Thomas
A. Loder, Patricia D. Loder, Greg M. Haugen and Bettina Haugen (each a
"Guarantor"), pursuant to 1 Amended and Restated Guaranty and Subordination
Agreement (executed by Advanced Energy Industries, Inc. and guaranteeing only
the Indebtedness under the Secured Term Loan No. 1) and 6 Continuing Guaranty
agreement (each a "Guaranty")
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATION(S) TO LOAN AGREEMENT.
1. The "Secured Accounts Receivable Line of Credit" in
the Amended and Restated Schedule to Loan and
Security Agreement, dated January, 6, 2000, is hereby
amended in part as follows:
(A) The first 3 paragraphs under the term "Credit
Limit" are amended to read as follows:
An amount not to exceed the lesser of (i) $3,500,000
at any one time outstanding; or (ii) the amount of
the "Borrowing Base", as defined below:
1
<PAGE>
For purposes of this Schedule, the "Borrowing Base"
shall mean the sum of (i) 80% of the Net Amount of
Borrower's eligible accounts receivable, plus (ii)
50% of Borrower's "Eligible Inventory" (as defined
below), up to a maximum advance of $875,000 against
Eligible Inventory. Notwithstanding the foregoing,
effective July 1, 2000, item "(ii)" of the preceding
paragraph shall read as 25% of Borrower's "Eligible
Inventory" (as defined below), up to a maximum
advance of $500,000 against Eligible Inventory. "Net
Amount" means the gross amount of the account, minus
all applicable sales, use, excise and other similar
taxes and minus all discounts, credits and allowances
of any nature granted or claimed. Borrower's
"Eligible Inventory" means the Borrower's inventory
held for sale in the United States or Canada, valued
at the lower of wholesale cost or market value, which
Silicon in its reasonable discretion deems eligible
for borrowing.
The amount of all letters of credit issued by Silicon
at the request of the Borrower shall reduce, dollar
for dollar, the amount otherwise available to be
borrowed under the Borrowing Base formula described
above.
(B) The item entitled "Maturity Date" under the term
"Credit Limit" is amended to read as follows:
May 31, 2001, at which time all unpaid principal and
accrued but unpaid interest shall be due and payable.
2. The item entitled "Maturity Date" under the term
"Credit Limit" under "Secured Term Loan No. 1" in the
Amended and Restated Schedule to Loan and Security
Agreement, dated January, 6, 2000, amended to read as
follows:
Borrower will pay 6 equal installments of principal
(each principal payment to be equal to 1/48th of the
outstanding principal balance of the Secured Term
Loan No. 1 as of the date of this Loan Modification
Agreement) plus Interest (the "Secured Term Loan No.
1 Payment"). Each Secured Term Loan No. 1 Payment is
payable on the last day of each month during the term
of the loan. Borrower's final Secured Term Loan No. 1
Payment, due on September 30, 2000, includes all
outstanding Secured Term Loan No. 1 principal and
accrued but unpaid interest.
B. MODIFICATION(S) TO EXIM LOAN AGREEMENT.
1. Item "(a)" under the Section entitled "Export Line of
Credit, Credit Limit (Section 1.1) Exim Loans" in the
"Amended and Restated Schedule to Loan and Security
Agreement (Exim Program)" is hereby amended to read
as follows:
(a) $2,500,000 at any one time outstanding; or
2. The item entitled "Maturity Date" under the Section
entitled "Export Line of Credit, Credit Limit
(Section 1.1) Exim Loans" in the "Amended and
Restated Schedule to Loan and Security Agreement
(Exim Program)" is hereby amended to read as follows:
May 31, 2001, at which time all unpaid principal and
accrued but unpaid interest shall be due and payable.
C. MODIFICATION(S) TO LOAN AGREEMENT AND EXIM LOAN AGREEMENT.
1. The "Financial Covenants" Section entitled "Tangible
Net Worth" is hereby amended to read as follows:
2
<PAGE>
Borrower shall at all times maintain a Tangible Net
Worth (defined below) of not less than $3,500,000, on
a quarterly basis.
2. The Section entitled "Debt to Tangible Net Worth
Ratio" is hereby amended to read as follows:
Borrower shall maintain a ratio of total book
liabilities (less the outstanding balance of Secured
Term Loan No. 1 and accrued interest thereon, less
debt, if any, that has been subordinated to the Loans
in a written subordination agreement on terms
satisfactory to Silicon, and accrued interest
thereon, less deferred revenue) to Tangible Net
Worth, measured quarterly, of not more than 2.25 to
1.00, decreasing to 2.00 to 1.00 beginning with the
quarter ending December 31, 2000 and quarterly
thereafter.
3. The Section entitled "Quick Ratio" is hereby amended
to read as follows:
Borrower shall maintain a ratio of Quick Assets
(defined below) to current liabilities (excluding the
current portion of long term debt of Secured Term
Loan No. 1) of not less than 0.50 to 1.00, measured
quarterly.
4. The Section entitled "Profitability" is hereby
deleted.
5. The Section entitled "Loans or Equity Contributions
to Subsidiary" is hereby amended to read as follows:
Borrower shall limit its loans or equity
contributions to its wholly-owned subsidiary,
APT-Europe, to a maximum of $375,000 plus 25% of any
new equity at any one time, measured quarterly.
6. The following Section is hereby incorporated under
"Financial Covenants":
Maximum Loans to Tremoliere LLC. Borrower shall limit
its loans to Tremoliere to a maximum of $4,500,000 at
any one time, measured quarterly.
7. The defined term "Debt Service Coverage Ratio" is
hereby amended to read as follows:
"Debt Service Coverage Ratio" means quarterly net
book income, plus any loss from APT-Europe, plus
depreciation and amortization, less any income from
APT-Europe, plus interest, plus taxes (EBITDA)
multiplied by four (4), divided by the sum of Current
Maturities of Long Term Debt (CMLTD) (excluding CMLTD
associated with the Secured Term Loan No. 1) plus the
interest for that quarter including interest under
the Secured Term Loan No. 1, multiplied by four (4).
8. Borrower's fiscal year end complete annual
CPA-audited financial statements shall be due within
120 (rather than 90) days after the end of each
fiscal year end.
D. MODIFICATION(S) TO GUARANTY.
1. Notwithstanding the terms and conditions contained in
each Guaranty, each Guarantor shall deliver to
Silicon complete and current financial statements as
requested and tax returns within 15 days of filing
and such other financial information about Guarantor
as Silicon may reasonably request.
3
<PAGE>
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay to Silicon a fee in the amount
of Nine Thousand Four Hundred Eighty Dollars ($9,480) (the "Domestic Loan Fee")
plus Forty Thousand Six Hundred Twenty Five Dollars ($40,625) (the "Exim Loan
Fee") (collectively, the "Loan Fee") plus all out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor
signing below) agrees that, as of the date hereof, it has no defenses against
the obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
below) understands and agrees that in modifying the existing Indebtedness,
Silicon is relying upon Borrower's representations, warranties, and agreements,
as set forth in the Existing Loan Documents. Except as expressly modified
pursuant to this Loan Modification Agreement, the terms of the Existing Loan
Documents remain unchanged and in full force and effect. Silicon's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Silicon to make any future modifications to
the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Silicon and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Silicon in writing. No maker,
endorser, or guarantor will be released by virtue of this Loan Modification
Agreement. The terms of this paragraph apply not only to this Loan Modification
Agreement, but also to all subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon Borrower's payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: SILICON:
ADVANCED POWER TECHNOLOGY, INC. SILICON VALLEY BANK
By: By:
----------------------------- ------------------------------
Name: Name:
--------------------------- ----------------------------
Title: Title:
-------------------------- ---------------------------
4
<PAGE>
The undersigned hereby consent to the modifications to the Indebtedness pursuant
to this Loan Modification Agreement, hereby ratify all the provisions of the
GUARANTY and confirms that all provisions of that document are in full force and
effect.
GUARANTOR:
Advanced Energy Industries, Inc.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
----------------------------------
Russell J. Crecraft
----------------------------------
Marla K. Crecraft
----------------------------------
John I. Hess
----------------------------------
Kimberly A. Hess
----------------------------------
Patrick P. Sireta
----------------------------------
Dah-Wen D. Tsang
----------------------------------
Yvonne S. Tsang
----------------------------------
Thomas A. Loder
----------------------------------
Patricia D. Loder
----------------------------------
Greg M. Haugen
----------------------------------
Bettina Haugen
5
<PAGE>
[LOGO]
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: ADVANCE POWER TECHNOLOGY, INC.
LOAN OFFICER: RON SHERMAN
DATE: APRIL 7, 2000
DOMESTIC LINE OF CREDIT $9,480.00
EXIM LINE OF CREDIT 40,625.00
DOCUMENTATION FEE 750.00
TOTAL FEE DUE $50,855.00
------------- ==========
PLEASE INDICATE THE METHOD OF PAYMENT:
{ } A CHECK FOR THE TOTAL AMOUNT IS ATTACHED.
{ } DEBIT DDA # __________________ FOR THE TOTAL AMOUNT.
{ } LOAN PROCEEDS
------------------------------- ----------------------------
(DATE) (DATE)
-------------------------------
SILICON VALLEY BANK (DATE)
ACCOUNT OFFICER'S SIGNATURE
6
