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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 26, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 0-16473
SSE TELECOM, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1466297
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
47823 Westinghouse Drive
Fremont, California 94539
(Address of principal
executive office)
Registrant's telephone number, including area code:
(510) 657-7552
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
As of July 27, 1999, the number of shares outstanding of the registrant's common
stock, par value $.01 was 5,882,814.
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements
<S> <C>
Page
Condensed Consolidated Statements of Operations for the three months and nine months
ended June 26, 1999 and June 27, 1998 (unaudited) 3
Condensed Consolidated Balance Sheets as of June 26, 1999 (unaudited) and September 26, 1998 4
Condensed Consolidated Statements of Cash Flows for the nine months ended June 26, 1999
and June 27, 1998 (unaudited) 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosure about Market Risk 11
PART II - OTHER INFORMATION
Item 5. Other Events 11-12
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
SSE Telecom, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
For The Three Months and Nine Months Ended June 26, 1999 and June 27, 1998
(in thousands, except per share data)
Three Months Ended Nine Months Ended
June 26, June 27, June 26, June 27,
1999 1998 1999 1998
--------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue $4,758 $6,160 $17,180 $29,592
Cost of revenue 4,552 10,080 16,725 28,011
--------------- ------------- ------------- -------------
Gross margin 206 (3,920) 455 1,581
Operating expenses
Research and development 1,100 1,693 3,051 4,720
Marketing, general and
administrative 1,912 2,548 5,949 6,485
Restructuring charges -- 1,235 -- 1,235
--------------- ------------- ------------- -------------
Operating loss (2,806) (9,396) (8,545) (10,859)
Interest expense, net 47 146 96 477
Gain on sale of investment, net (935) (317) (4,134) (7,434)
Other expense (income) 27 (12) (183) 22
--------------- ------------- ------------- -------------
Loss before income taxes (1,945) (9,213) (4,324) (3,924)
Provision (benefit) for income taxes 1,131 (3,224) 97 (1,373)
--------------- ------------- ------------- -------------
Net loss ($3,076) ($5,989) ($4,421) ($2,551)
=============== ============= ============= =============
Basic and diluted loss per share ($0.53) ($1.04) ($0.76) ($0.44)
=============== ============= ============= =============
Shares used in computing basic and diluted loss per share 5,818 5,749 5,796 5,736
=============== ============= ============= =============
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SSE Telecom, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
June 26, 1999 September 26, 1998*
<S> <C> <C>
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $3,501 $3,327
Accounts receivable, net 3,980 5,702
Inventories 6,236 8,894
Deferred tax assets 3,170 2,762
Other current assets 198 198
--------------------------------------------
Total current assets 17,085 20,883
Property, plant, and equipment 12,106 11,692
Less accumulated depreciation 9,142 8,109
--------------------------------------------
Property, plant and equipment, net 2,964 3,583
Long-term investments 5,325 6,583
--------------------------------------------
Total Assets $25,374 $31,049
============================================
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $3,224 $3,745
Accrued salaries and employee benefits 1,014 1,217
Short-term debt 1,824 3,036
Other accrued liabilities 2,744 2,492
--------------------------------------------
Total current liabilities 8,806 10,490
Deferred tax liabilities 1,916 930
Long-term debt 229 1,451
Stockholders' equity;
Common stock and paid in capital 12,787 12,639
Treasury stock (1,782) (1,782)
Retained earnings 1,082 5,503
Net unrealized gain on available for sale investments 2,336 1,818
--------------------------------------------
Total stockholders' equity 14,423 18,178
--------------------------------------------
Total Liabilities & Stockholders' Equity $25,374 $31,049
============================================
o Derived from audited Financial Statements.
The Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SSE Telecom, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
For The Nine Months Ended June 26, 1999, and June 27, 1998
(dollars in thousands)
<S> <C> <C>
June 26, 1999 June 27, 1998
Cash used for operating activities:
Net loss $ (4,421) $ (2,551)
Adjustments to reconcile net loss to net cash used for:
Depreciation and amortization 1,033 1,101
Non-cash portion of restructuring charges -- 5,349
Gain on sale of investment, net (4,134) (7,434)
Deferred interest expense -- 137
Deferred income taxes 1,360 --
Changes in operating assets and liabilities:
Accounts receivable 1,722 6,422
Inventories 2,658 (660)
Other current assets 49 (953)
Accounts payable (521) (2,730)
Other accrued liabilities (1,060) (740)
---------------------------------------------
Net cash used for operating activities (3,316) (2,059)
---------------------------------------------
Cash provided by investing activities:
Purchases of equipment (414) (1,152)
Proceeds from sale of investment 6,188 8,186
Purchase of Media4 debenture/equity -- (1,667)
---------------------------------------------
Net cash provided by investing activities 5,774 5,367
---------------------------------------------
Cash used for financing activities:
Payments under debt obligations, Net (1,212) (865)
Payments on convertible notes payable, Net (1,220) (1,765)
Proceeds from issuance of common stock 148 93
Payments of debenture interest -- (232)
---------------------------------------------
Net cash used for financing activities (2,284) (2,769)
---------------------------------------------
Net increase in cash and cash equivalents 174 539
---------------------------------------------
Cash and cash equivalents beginning of period 3,327 408
---------------------------------------------
Cash and cash equivalents end of period $ 3,501 $ 947
=============================================
The Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
SSE TELECOM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The financial information at June 26, 1999, and for the three month and nine
month periods ended June 26, 1999 and June 27, 1998, is unaudited. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and changes in cash flows for the interim periods have been made.
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's September 26, 1998 Annual Report on Form
10-K. The interim results presented are not necessarily indicative of results
for any subsequent quarter or for the year ending September 25, 1999.
2. INVENTORIES
Inventories consist of manufacturing raw materials, work-in process and finished
goods. Inventories are valued at the lower of cost or market. Cost is based on
the average cost method, which approximates actual cost on the first-in,
first-out ("FIFO") basis. At June 26, 1999 and September 26, 1998, inventories
consisted of:
<TABLE>
<CAPTION>
<S> <C> <C>
(in thousands) June 26, 1999 September 26, 1998*
(unaudited)
Manufacturing raw materials $3,064 $3,440
Work-in-process 2,463 3,657
Finished goods 709 1,797
------------------------- --------------------------
Total $6,236 $8,894
========================= ==========================
</TABLE>
* Derived from audited financial statements.
3. INVESTMENTS
On March 30, 1999, the Company sold 40,000 shares of EchoStar Communications
Corp. (NASDAQ: DISH) common stock for approximately $2.8 million. As of June 26,
1999, the Company held 37,768 shares of EchoStar common stock, which have been
classified as an available-for-sale investment and were valued at $5.3 million.
4. LONG TERM DEBT
At June 26, 1999, the Company's long term portion of capital lease balance
outstanding was $228,604. During the first nine months of fiscal 1999 the
Company repaid $1.2 million of convertible subordinated debentures due Echostar
Communication Corporation.
<PAGE>
5. LOSS PER SHARE
<TABLE>
<CAPTION>
The following table sets forth the computation of basic and diluted net (loss)/income per shares:
(in thousands, except per share)
Three Months Ended Nine Months Ended
June 26, 1999 June 27, 1998 June 26, 1999 June 27, 1998
<S> <C> <C> <C> <C>
Net Loss ($3,076) ($5,989) ($4,421) ($2,551)
Numerator for basic and diluted net loss per share (3,076) (5,989) (4,421) (2,551)
Denominator for basic and diluted net loss per share-
weighted average shares 5,818 5,749 5,796 5,736
Basic and diluted loss per share ($0.53) ($1.04) ($0.76) ($0.44)
</TABLE>
Due to the Company's net losses, there were no additional dilutive securities
for the periods presented.
6. RELATED PARTY TRANSACTIONS
On May 6, 1999 Mr. Frank Trumbower, holder of 9% of the outstanding Common Stock
of the Company's as of July 28, 1999, was appointed Chairman of the Board of SSE
Telecom, Inc. In this capacity the Company entered into the following agreements
with Mr. Trumbower: (i) A Common Stock Purchase Agreement pursuant to which Mr.
Trumbower purchased 50,000 shares of the Company's Common Stock at $1.125 per
share for an aggregate purchase price of $56,250. The purchase price for the
shares represented the closing price of the stock on the date of sale, as
reported on the Nasdaq National Market; (ii) Nonqualified Stock Option
Agreements to purchase 70,000 shares of the Company's Common Stock at a purchase
price of $1.50 per share. The option was granted outside of any of the Company's
stock option or equity incentive plans; (iii) Nonqualified Stock Option
Agreement to purchase an aggregate of 10,000 shares of the Company's Common
Stock at a purchase price of $1.50 per share pursuant to the Company's Directors
Stock Option Plan; and (iv) Nonqualified Stock Option Agreements to purchase an
aggregate of 20,000 shares of the Company's Common Stock pursuant to the
Company's 1997 Equity Participation Plan at a purchase price of $1.50 per share.
7. SUBSEQUENT EVENTS
On July 19, 1999, Echostar Communication Corporation effected a 2-for-1 split of
common stock for stockholders of record at the close of business on July 1,
1999. All references to the shares of common stock of Echostar held by the
Company reflect pre-split numbers.
On August 2, 1999, the Company entered into a financing agreement with Silicon
Valley Bank for a $5,000,000 revolving line of credit. The agreement carries an
interest rate of prime plus 2% per annum and is for two years (see Exhibit 10.5)
and contains certain financial covenants. In lieu of $25,000 in fees the Company
issued a warrant to purchase 9,766 shares of Common Stock to Silicon Valley Bank
with a exercise price of $2.56 per share.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Information contained in this Form 10-Q that is not historical fact, including
any statements about expectations for the fiscal year and beyond, involve
certain risks and uncertainties. This Form 10-Q contains "forward-looking"
statements within the meaning of the Private Securities Litigation Reform Act of
1995, many of which can be identified by the use of forward-looking terminology
such as "may", "will", "believe", "expect", "anticipate", "estimate", "plan",
"intend", or "continue" or the negative thereof or other variations thereon or
comparable terminology. There are a number of important factors with respect to
such forward-looking statements that could cause actual results to differ
materially from those contemplated in such forward-looking statements. Numerous
factors, such as economic and competitive conditions, incoming order levels,
timing of product shipments, product margins, new product development, and
reliance on key vendors and consumers and international sales could cause actual
results to differ from those described in these statements and current and
prospective investors and stockholders should carefully consider these factors
in evaluating these forward-looking statements.
Overview
Sales for the quarter ended June 26, 1999 decreased from sales for the quarter
ending June 27, 1998 and were affected by adverse economic conditions in Asia,
Latin America, and Eastern Europe. Profitability was impacted by these poor
market conditions and continuing weakness in the world Satcom market. The
Company is concerned about continued operating losses and has undertaken a
number of strategic initiatives. These initiatives include outsourcing of
non-strategic activities and the development of a new product to address a
broader market.
On June 26, 1999, the Company's reduction in workforce was substantially
completed. The reduction was focused on the Company's operations and material
operations employees. During the quarter ended June 26, 1999, the Company
completed the outsourcing of its modem product line and commenced outsourcing
major subassemblies of its STAR radio products. This outsourcing enabled the
Company to reduce overhead expenses, and improve its speed and flexibility in
meeting customer requirements. During the quarter ended June 26, 1999, the
Company continued to focus and expend significant marketing and development
effort on a new product line in an effort to reposition the Company to address
the opportunities in the Internet over satellite market. The Company plans to
introduce its new product in the first quarter of the 2000 fiscal year.
The Company has addressed past production problems and product issues. Orders
for the third quarter in fiscal 1999 increased by more than 60% from second
quarter in fiscal 1999.
Results of Operations for the Three Months and Nine Months Periods Ended
June 26, 1999 and June 27, 1998
Revenue: Sales decreased to $4.8 million for the quarter ended June 26, 1999
from $6.2 million for the same period in fiscal 1998. Sales for the first nine
months of fiscal 1999 were $17.2 million as compared to $29.6 million for the
same period in fiscal 1998. The decline in sales is attributable, in part, to
past production flow problems, and an overall weakness in the Satcom market for
the Company's products.
Gross Margin: Gross margin was $206,000 in the quarter ended June 26, 1999,
compared to ($3.9) million for the same period in fiscal 1998. The loss in the
third quarter of fiscal 1998 included a $3.9 million charge related to the
reorganization and refocusing the Company. Gross margin for the first nine
months of fiscal year 1999 was $455,000 as compared to $1.6 million in fiscal
year 1998. The decline in gross margin was primarily due to reduced volume in
addition, pricing pressure, past production problems and higher warranty costs
negatively impacted margins.
Research and Development: Research and development expenses decreased to $1.1
million for the third quarter of fiscal 1999 from $1.7 million for the third
quarter of fiscal 1998. Research and development declined to $3.1 million for
the first nine months of fiscal 1999 from $4.7 million for the first nine months
of fiscal 1998. The decrease reflects an overall reduction in employees involved
in research and development and in materials and services related to research
and development in fiscal 1999. While the Company reduced research and
development expenditures in fiscal 1999, it has also refocused it efforts from
sustaining activities for current products to the development of new product
platforms and to the Company's outsourcing initiatives. The Company expects
research and development expenses to remain at the current level for the
remainder of fiscal 1999.
Marketing, General and Administrative: Marketing, general and administrative
expenses decreased to $1.9 million in the third quarter of fiscal 1999 as
compared to $2.5 million for the third quarter of fiscal 1998. For the first
nine months of fiscal year 1999 expenses were $5.9 million as compared to $6.4
million in fiscal year 1998. The marketing, general and administrative expenses
in the third quarter of 1998 included a $500,000 charge related to the
reorganization and refocusing the Company.
Interest Expense, net. Net interest expense was $47,000 in the third quarter of
fiscal 1999 as compared to $146,000 for the same period last year. For the first
nine months of fiscal year 1999 interest expense was $96,000 as compared to
$477,000 during the same period in fiscal year 1998. During fiscal 1999 the
Company retired $1.2 million of its 6 1/2% convertible debentures, substantially
reducing interest expense in fiscal 1999.
Gain on Sale of Investments, net. During the first nine months of fiscal 1999
the Company realized a gain of $3.2 million on sales of 118,905 shares of
Echostar Communication Corporation (NASDAQ: DISH) common stock at an average
selling price of $28.75 and a gain of $935,000 on sale of 40,000 shares at an
average selling price of $69.25. The proceeds generated from these sales were
used for repayment of convertible debentures payable to Echostar, repayment of
operating line of credit, and to fund operating expenditures. As of June 26,
1999 the Company holds a total of 37,768 shares of Echostar common stock valued
at $5.3 million.
Other Income/Expense. Other expense for the third quarter of fiscal 1999 was
$27,000 as compared to other income of $12,000 during the same period in fiscal
1998. For the first nine months of fiscal 1999 other income was $183,000 as
compared to other expense of $22,000 in fiscal 1998. Other income for the first
nine months in fiscal 1999 included a $100,000 payment to the Company under a
sublease agreement with Roche Industries for subleasing space at Westinghouse
Drive, and payment of a insurance claim for stolen property.
Provision/Benefit for Income Taxes. The Company has not recorded a benefit for
its losses for the nine months ended June 26, 1999 principally because of the
limitations on the net operating loss carrybacks. The Company recorded a tax
provision in the three months ended June 26, 1999 to reflect a change in
estimate in the tax benefit attributable to the Company's operations in 1999.
The effective tax benefit rate was 35% for the third quarter and the first nine
months of fiscal 1998.
Backlog. The Company's total backlog was approximately $3.7 million at the end
of the third quarter of fiscal 1999, as compared to backlog of approximately
$4.4 million at the end of the third quarter in fiscal 1998. Management expects
substantially all backlog to be delivered in fiscal 1999. Timing differences
from quarter to quarter as to the receipt of large orders and changes in factory
production make meaningful quarter to quarter comparisons of backlog difficult.
LIQUIDITY AND CAPITAL RESOURCES
At June 26, 1999, the Company had working capital of $8.3 million, including
$3.5 million in cash and cash equivalents, compared with working capital of
$10.4 million, including cash and cash equivalents of $3.3 million at September
26, 1998.
Net cash used by operating activities was $3.3 million during the first nine
months of fiscal 1999 as compared to net cash used of $2.1 million in the same
period of fiscal 1998. Cash was used principally to fund operating losses. The
Company expects continued operating losses for the remainder of fiscal 1999.
The Company's investing activities provided $5.8 million during the first nine
months of fiscal 1999 as compared to cash provided of $5.4 million during the
same period in fiscal 1998. During the first nine months of fiscal 1999 $6.2
million was realized from the sale of Echostar shares which offset $414,000 in
capital expenditures.
The Company's financing activities used $2.3 million during the first nine
months of fiscal 1999 as compared to net cash used of $2.8 million during the
first nine months of fiscal year 1998. The Company reduced convertible
debentures by $1.2 million and made payments of debt obligations of $1.2
million.
At June 26, 1999, the Company's principal sources of liquidity consisted of $3.5
million in cash, a $2.5 million bank line of credit, $1.6 million of which was
outstanding as of June 26, 1999, and 37,768 shares of Echostar common stock. In
addition, the Company had a term loan with a principal balance of $135,000. The
line of credit and term loan requires the Company to be in compliance with
certain financial covenants. As of June 26, 1999, the Company was not in
compliance with the operating profitability and quick ratio covenants on this
line of credit or term loan. As of August 4, 1999 the Company has signed a new
line of credit for up to $5.0 million and has repaid the prior line-of-credit
balance and term loan. In addition, the Company has $337,000 outstanding under
capital lease financing.
Several factors could change the Company's capital requirements including,
lower than anticipated demand for the Company's products, the uncertainty of
the cost associated with the special warranty expense or unanticipated
limitations on debt financing. The Company believes that its current cash
position, funds generated from operations, funds available from its equity
holdings in Echostar common stock and its lines of credit will be adequate to
meet its requirements for working capital, capital expenditures, and debt
services for the near term. However, there can be no assurance that the
Company's predictions with respect to its operating expenses and its capital
expenditure requirements are accurate. Due to certain constraints on the
ability to sell Echostar shares and potential volatility of the value of the
stock, there could be a significant reduction in capital available from the
liquidation of Echostar stock. If these events occur, the Company may be
required to raise additional capital using other means to meet all of its
needs. There can be no assurance that additional financing will be available,
or if available, that they will be on reasonable terms, nor can there be any
assurance that these financings will not be dilutive to its stockholders.
Impact of Year 2000
The following constitutes a "Year 2000 Disclosure" under the Year 2000
Information and Readiness Disclosure Act of 1998.
The Company is aware that many existing Information Technology ("IT") systems,
such as computer and software products, as well as non-IT systems that included
embedded technology, were not designed to correctly process data after December
31, 1999. The Company has created a Year 2000 project team to review, and
evaluate the Company's products, computer systems, test equipment systems and
other non-IT systems. The Company has determined that it will be necessary to
modify or replace portions of its software so that its computer and non-IT
systems will properly utilize dates beyond 1999. The Company believes that with
modifications and conversions to new software, the Year 2000 issue can be
mitigated, and anticipates completion of all Year 2000 efforts by the end of
fiscal 1999. However, if such modifications and conversions are not made, or are
not completed in a timely manner, the Year 2000 issue could have a material
impact on the operations of the Company. The Company has also initiated
discussions with its suppliers regarding their plans to investigate and address
their Year 2000 problems, if any. Failures by the Company's suppliers' computer
systems could adversely affect the demand for the Company's products. There can
be no assurance that the systems of other companies on which the Company's
systems, services, and products rely will be timely converted, or that any such
failure to convert by another company would not have an adverse affect on the
Company's business financial conditions or results of operations.
The Company has been using both external and internal resources to upgrade its
commercial software programs for the Year 2000 issue. To date, the amounts
incurred and expensed for developing and carrying out the plan have not had a
material effect on the Company's operations. The Company plans to complete the
Year 2000 modifications, including testing, by the end of fiscal 1999. The total
remaining estimated cost for addressing the Year 2000 Issue of approximately
$50,000,which is based on management's current estimates, is not expected to be
material to the Company's operations. All remaining Year 2000 issue costs will
be funded through operating cash flows.
As the efforts of the Year 2000 project team continue, the Company may identify
situations that present material Year 2000 risks and/or that will require
substantial time and material expense to address. In addition, if any of the
Company's customers, suppliers or service providers fail to appropriately
address their Year 2000 issues, such failure could have a material adverse
effect on the Company's business, financial condition and results of operations.
For example, because a significant percentage of the purchase orders received
from the Company's customers are computer generated and electronically
transmitted, a failure of one or more of the computer systems of the Company's
customers could have a significant adverse effect on the level and timing of
orders from such customers. Similarly, if Year 2000 problems experienced by any
of the Company's significant suppliers or service providers cause or contribute
to delays or interruptions in the delivery of products or services to the
Company, such delay or interruptions could have a material adverse effect on the
Company's business, financial condition and results of operations. Finally,
disruption in the economy generally resulting from Year 2000 issues could also
materially adversely affect the Company. Although the Year 2000 project team has
not determined the most likely worst-case Year 2000 scenarios or quantified the
likely impact of such scenarios, it is clear that the occurrence of one or more
of the risks described above could have a material adverse effect on the
Company's business, financial conditions or results of operations.
The Company's Year 2000 project team's activities will include the development
of contingency plans in the event the Company has not completed all of its
remediation programs in a timely manner. In addition, the Year 2000 project team
will develop contingency plans in the event that any third parties who provide
goods and services essential to the Company's business fail to appropriately
address their Year 2000 issues. The Year 2000 project team expects to conclude
the development of these contingency plans by the end of fiscal 1999. Even if
these plans are completed on time and put in place, there can be no assurance
that such plans will be sufficient to address any third party failures or that
unresolved or undetected internal and external Year 2000 issues will not have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company is reviewing the material risk associated with the Year 2000 issue
on computer hardware and software. Computer systems are at risk where the date
using "00" is recognized as the year 1900 rather than the year 2000. The Company
is currently assessing its exposure and will have a plan in place by Q4 of FY
'99. While the Company doesn't anticipate costs for the Year 2000 issue to be
material final results of this review could be significantly different.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
On February 1, 1999, in connection with the purchase by EchoStar Communications
Corp. (NASDAQ: DISH) of MEDIA4 Inc., the Company sold its interest in MEDIA4 in
exchange for 77,768 shares of EchoStar common stock. On March 30, 1999 the
Company sold 40,000 shares of EchoStar common stock for $69.252 per share. As of
June 26, 1999, the Company holds 37,768 shares of EchoStar common stock the
value of which is subject to market risk and general economic conditions. As of
June 26, 1999, the 37,768 shares had a closing price of $141.00. The 52-week
range for Echostar's common stock as of July 27, 1999 was a low of $17.00 and a
high of $176.50.
At June 26, 1999, the Company was operating under a credit facility with
outstanding borrowings of $1.6 million. This facility allows for a $2.5 million
operating line-of-credit. Borrowings under this line-of-credit bear interest at
prime plus 1.50% (prime rate was 7.5% at June 26, 1999). At June 26, 1999 the
Company was in compliance with all covenants, except the profitability and quick
ratio covenants. The Company did not request waivers because it replaced the
facility with a line- of-credit that replaced the original line-of-credit. The
new line allows for up to $5.0 million at a rate of prime plus 2% and has a
two-year term.
The Company also had a term note outstanding at June 26, 1999. The total
principal outstanding on this note was $135,000 with interest payable at prime
plus 1.0%. Interest payments are made on a monthly basis. The term note has a
maturity date of August 31, 1999. Under the terms of the new line of credit, the
term loan has been retired.
The Company's exposure to market risk due to fluctuations in interest rates
primarily relates to the Company's credit facility and term note. If market
interest rates were to increase immediately and uniformly by 10% from levels
prevailing at June 26, 1998, the fair value of the debt obligations would not
change materially. The Company does not use derivative financial instruments to
mitigate interest rate risk.
Notwithstanding the foreign analysis of the direct effects of interest rate
risk, the indirect effects of fluctuations could have a material adverse effect
on the Company's business, financial condition and results of operations. For
example, worldwide demand for the Company's products could be effected by
interest rate fluctuations that could change the buying patterns of the
Company's customers.
PART II - OTHER INFORMATION
Item 5. OTHER EVENTS
On May 6, 1999 Mr. Frank Trumbower was appointed Chairman of the Board. In
connection with Mr. Trumbower's appointment and consultant responsibilities, the
Company and Mr. Trumbower entered into a common stock purchase agreement dated
May 13, 1999 pursuant to which Mr. Trumbower purchased and the Company sold an
aggregate of 50,000 shares of the Company's Common Stock at a purchase price of
$1.125 per share, the fair market value of the stock on the date of purchase.
The Company also granted Mr. Trumbower options to purchase an aggregate of
100,000 shares of its common stock. The purchase price for the options was $1.50
per share which represented a premium over the fair market value of the
Company's common stock on the date of grant. Of the 100,000 shares, options to
purchase 70,000 shares were granted outside of any of the Company's stock option
or equity incentive plans and were granted pursuant to a Nonqualified Stock
Option Agreement; options to purchase 10,000 shares were granted pursuant to the
Company's Director's Stock Option Plan and options to purchase 20,000 shares
were granted pursuant to the Company's 1997 Equity Incentive Plan.
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits included herein (numbered in accordance with Item 601 of Regulation
S-K)
<TABLE>
<CAPTION>
Exhibit Number Description Sequential Page Number
<S> <C> <C>
10.1 Stock Purchase Agreement by and between the Company
and Frank Trumbower dated May 13, 1999. Page 14
10.2 Non Qualified Stock Option Agreement by and
between the Company and Frank Trumbower
dated May 13, 1999.
Page 17
10.3 Offer Letter and Consultant agreement by and
between the Company and Frank Trumbower
dated May 13, 1999
Page 21
10.4 Sublease Agreement regarding SSE Technologies, Inc.
offices at 47835 Westinghouse Drive, Fremont, CA
between SSE Technologies and Streamsoft, Inc. dated
July 6, 1999. Page 22
10.5 Amendment to lease regarding SSE Technologies offices
at 47835 Westinghouse Drive, Fremont, CA between SSE
Technologies and Warm Springs Associates II Ltd.
Partnership. Page 26
10.6 Loan and Security Agreement by and between
the Company and Silicon Valley Bank dated
August 4, 1999.
Page 27
10.7 Warrant to Purchase Common Stock agreement by and
between the Company and Silicon Valley Bank dated
August 4, 1999. Page 43
10.8 Registration Rights Agreement by and between
the Company and Silicon Valley Bank dated
August 4, 1999.
Page 54
10.9 Antidilution Agreement by and between the
Company and Silicon Valley Bank dated August
4, 1999.
Page 62
27 Financial Data Schedule Page 67
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 10, 1999
SSE TELECOM, INC.
By: /s/ Leon F. Blachowicz
Leon F. Blachowicz,
Chief Executive Officer
By: /s/ James J. Commendatore
James J. Commendatore,
Chief Financial Officer
<PAGE>
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
This Agreement is made as of the 13th day of May, 1999 (the "Effective
Date"), by and between SSE Telecom, Inc., a Delaware corporation (the
"Corporation") and Frank Trumbower ("Purchaser").
Witnesseth:
Whereas, the Corporation desires to issue, and Purchaser desires to
acquire, stock of the Corporation as herein described, on the terms and
conditions hereinafter set forth;
Now, Therefore, It Is Agreed between the parties as follows:
1. Purchase and Sale of Stock. Purchaser hereby agrees to purchase from the
Company, and the Company agrees to sell to Purchaser an aggregate of 50,000
shares of the Corporation's Common Stock (the "Stock") at $1.125 per share, for
an aggregate purchase price of $56,250.00, payable in cash. The purchase price
for the Shares represents the closing price of the Stock on the date hereof, as
reported on the NASDAQ National Market, or if no such trading in the common
stock shall have taken place on that day, on the last preceding day on which
there was trading in the common stock. The closing hereunder, including payment
for and delivery of the Stock shall occur at the offices of the Company
immediately following the execution of this Agreement, or at such other time and
place as the parties may mutually agree.
2. Investment Representations. In connection with the purchase of the Stock,
Purchaser represents to the Company the following:
2.1 No Government Recommendation or Approval. The Purchaser understands that no
United States federal or state agency, or similar agency of any other
country, has passed upon or made any recommendation or endorsement of the
Company or the offering of the Stock.
2.2 Intent. The Purchaser is purchasing the Stock for its own account and not
with a view towards distribution and the Purchaser has no present
arrangement (whether or not legally binding) at any time to sell the Stock
to or through any person or entity; provided, however, that by making the
representations herein, the Purchaser does not agree to hold the Stock for
any minimum or other specific term and reserves the right to dispose of the
Stock at any time in accordance with Federal and state securities law
applicable to such disposition. The Purchaser understands that the Stock
must be held indefinitely unless such Stock is subsequently registered
under the Securities Act or an exemption from registration is available.
The Purchaser has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act.
2.3 Sophisticated Investor. The Purchaser is a sophisticated investor (as
described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor
(as defined in Rule 501 of Regulation D), and the Purchaser has such
experience in business and financial matters that it is capable of
evaluation the merits and risks of an investment in the Stock. The
Purchaser acknowledges that the investment in the Stock is speculative and
involves a high degree of risk.
2.4 Independent Investigation. The Purchaser, in making its decision to
purchaser the Stock subscribed for hereunder, has relied upon an
independent investigation made by it and/or its representatives and has not
relied on any oral or written representations or assurances from the
Company or any representative or agent of the Company, other than as set
forth in this Agreement and in the public filings of the Company. Prior to
the date hereof, the Purchaser has been furnished with and has reviewed the
Company's latest proxy statement and Annual Report on Form 10-K sent to the
Company's stockholders and all documents filed by the Company since March
31, 1999 pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (such documents are
collectively referred to in this Agreement as the "Exchange Act Reports").
The Purchaser has had a reasonable opportunity to ask questions of and
receive answers from the Company concerning the Company and the offering of
securities and has received satisfactory answers to all inquiries it has
made with respect to the Company and the Stock.
2.5 Authority. This Agreement has been duly authorized and validly executed,
and delivered by the Purchaser and is valid and binding agreement
enforceable in accordance with its terms, subject to general principles of
equity and to bankruptcy or other laws affecting the enforcement of
creditors' rights generally.
2.6 No Legal Advice From Company. The Purchaser acknowledges that it has had
the opportunity to review this Agreement and the transactions contemplated
by this Agreement with his or its own legal counsel and tax advisors.
Except for any statements or representations of the Company made in this
Agreement and in the Exchange Act Reports, the Purchaser is relying solely
on such counsel and advisors and not on any statements or representations
of the Company or any of its representative or agents for legal, tax or
investment advice with respect to this investment, the transactions
contemplated by this Agreement or the securities laws of any jurisdiction.
2.7 No Brokers. The Purchaser has taken no action which would give rise to any
claim by any person for brokerage commission, finder's fees or similar
payments by the Company relating to this Agreement or the transactions
contemplated hereby.
2.8 Reliance on Representations and Warranties. The Purchaser understands that
Stock is being offered and sold to it in reliance on specific
provisions of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Purchaser
set forth in this Agreement in order to determine the applicability of such
provisions.
3. Legends. Any certificate representing any shares of Stock subject to the
provisions of this Agreement shall have endorsed thereon the following legends:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND ARE "RESTRICTED
SECURITIES" AS DEFINED IN RULE 144 PROMULGATED UNDER THE ACT. THEY MAY NOT
BE SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED EXCEPT (i) IN
CONJUNCTION WITH AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE ACT, OR (ii) IN COMPLIANCE WITH RULE 144, or (iii) PURSUANT TO AN
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION
OR COMPLIANCE IS NOT REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION."
(b) Any legend required to be placed thereon by the Company's Bylaws.
(c) Any legend required to be placed thereon by appropriate Blue Sky officials.
4. Further Instruments. The parties agree to execute such further instruments
and to take such further action as may reasonably be necessary to carry out the
intent of this Agreement.
5. Notices. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or delivery by
express courier, or four (4) days after deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid, addressed
to the other party hereto at its address hereinafter shown below its signature
or at such other address as such party may designate by ten (10) days' advance
written notice to the other party hereto.
6. Choice of Law. This Agreement shall be governed by and construed under the
laws of the State of California, as such laws are applied by California courts
to contracts made and to be performed entirely in California by residents of
that state.
7. Assignment. This Agreement shall inure to the benefit of the successors and
assigns of the Corporation and, subject to the restrictions on transfer herein
set forth, shall be binding upon the Purchaser, its successors and assigns.
8. Complete Agreement. This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof.
<PAGE>
In Witness Whereof, the parties hereto have executed this Agreement as
of the Effective Date.
SSE Telecom, Inc.
By:
Name:
Title:
Address:
Purchaser:
Frank Trumbower
By:
Address:
<PAGE>
EXHIBIT 10.2
SSE TELECOM, INC.
NONQUALIFIED STOCK OPTION
This Stock Option Agreement (the "Option Agreement") is made this 13
day of May, 1999 (the "Date of Grant"), by and between SSE Telecom, Inc., a
Delaware corporation (hereinafter the "Company"), and Frank Trumbower
(hereinafter "Optionee").
Recitals
This option is not intended to qualify as and will not be treated as an
"incentive stock option" within the meaning of Section 422 of the Code. This
option is granted outside of, and is not subject to, the Company's 1997 Equity
Participation Plan.
Certain capitalized words and phrases used herein are defined in Section 13
hereof.
Now, Therefore, in an effort to induce Optionee to accept employment
with the Company and in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, and intending to be legally bound, the parties hereto
agree as follows:
1. Grant of Option. The Company hereby grants to Optionee the right and option
to purchase all or any part of an aggregate of seventy thousand (70,000) shares
of Company Common Stock on the terms and conditions of this Option Agreement,
such number of shares being subject to adjustment as provided in Section 8
hereof.
2. Purchase Price. The purchase price for the shares of Common Stock covered by
this option shall be $1.50 per share (the "Option Price"). Such amount is not
less than 100% of the Fair Market Value on the Date of Grant.
3. Term of Option. The term of this Option shall be for a period of ten (10)
years from the Date of Grant, subject to earlier termination as provided in
Sections 6 and 7 hereof.
4. Vesting. This option shall vest and become exercisable on a cumulative basis
as to twenty-five percent (25%) of the total number of shares covered thereby on
each of the first, second, third, and fourth anniversary dares of the Date of
Grant. Except as provided in Sections 6 and 7 hereof, this option may not be
exercised at any time unless Optionee shall have been in the continuous employ
of the Company, or of an Affiliate, from the Date of Grant to the date of the
exercise of this option. Optionee shall not have any of the rights of a
shareholder with respect to the shares of Common Stock covered by this option
except to the extent that one or more certificates for such shares shall be
delivered to Optionee upon the due exercise of this option. Notwithstanding the
foregoing, no shares of Common Stock of the Company shall be required to be
distributed until the Company shall have taken such action, if any, as is then
required to comply with the provisions of the Securities Act or any other then
applicable securities law.
5. Non-Transferability. During Optionee's lifetime, this option shall only be
exercisable by Optionee and shall not be transferable, other than by will or the
laws of descent and distribution. This option may not be pledged or hypothecated
in any way and shall not be subject to execution, attachment or similar process
except with the express consent of the Company.
6. Termination. If Optionee's employment with the Company or an Affiliate is
terminated for any reason other than death, Retirement or Total and Permanent
Disability, this option shall be exercisable only for three months following
such termination (or the expiration of the option term, if earlier) and only for
the number of shares of Common Stock that were exercisable on the date of such
termination. A termination of employment with the Company or an Affiliate to
accept immediate reemployment with the Company or an Affiliate shall not be
deemed to be a termination of employment for purposes of the Plan. The granting
of this option to Optionee does not alter in any way the existing rights of the
Company or the Affiliates to terminate such Optionee's employment at any time
for any reason, nor does it confer upon Optionee any rights or privileges except
as specifically provided in this Option Agreement.
7. Death, Retirement and Disability. If Optionee dies or becomes Totally and
Permanently Disabled, without having exercised this option in full, the
remaining portion of this option may be exercised, without regard to the
limitations in Section 4 hereof, within a period not to exceed (i) three years
from the date of any such death or Total and Permanent Disability or (ii) the
remaining period of this option, whichever is earlier. Upon Optionee's death,
this option may be exercised by the person or persons to whom Optionee's rights
under this option shall pass by will or by applicable law or, if no such person
bag such rights, by Optionee's executor or administrator. If Optionee Retires
without having exercised this option in full, the remaining portion of this
option may be exercised, without regard to the limitations Section 4 hereof,
within a period not to exceed (i) five years from the date of such event or (ii)
the remaining period of this option, whichever is earlier.
8. Adjustments. In the event there are any changes in the Common Stock or the
capitalization of the Company through a corporate transaction, such as any
merger, any acquisition through the issuance of capital stock of the Company,
any consolidation, any separation of the Company (including a spin-off or other
distribution of stock by the Company), any reorganization of the Company
(whether or not such reorganization comes within the definition of such term in
Section 369 of the Code), or any partial or complete liquidation by the Company,
recapitalization, stock dividend, stock split or other change in the corporate
structure, appropriate adjustments and changes shall be made by the Board, to
the extent necessary to preserve the benefit to Optionee, to reflect changes in
the number of shares and Option Price per share of all shares of Common Stock
subject to this option; provided, however that no such adjustment or change may
be made to the extent that such adjustment or change will result in the
disallowance of a deduction to the Company under Section 162(m) of the Code or
any successor section.
9. Purchase for Investment. It is contemplated that the Company will register
shares issued upon exercise of this option under the Securities Act. In the
absence of an effective registration, however, the Optionee may be required to
give a representation that he is acquiring such shares as an investment and not
with a view to distribution thereof.
10. Change of Control. In the event of a Change of Control, this option shall
become immediately vested and exercisable in full.
11. Withholding. The Optionee shall pay in cash any amount required to be
withheld under federal, state or local law with respect to the exercise of this
option or may elect to have any portion of the required federal, state or local
income tax withholding with respect to the option, not in excess of the minimum
amount of tax required to be withheld by law, satisfied by tendering to the
Company shares of Common Stock, which, in the absence of such an election would
have been issued to the Optionee in connection with such exercise. In the event
that the value of the shares of Common Stock tendered to satisfy the withholding
tax required with respect to an exercise exceeds the amount of such tax, the
excess of such market value over the amount of such tax shall be returned to the
Optionee, to the extent possible, in whole shares of Common Stock, and the
remainder in cash. The value of a share of Common Stock tendered pursuant to
this Section 11 shall be the Fair Market Value of the Common Stock on the date
on which such shares are tendered to the Company. An election pursuant to this
Section 11 shall be made in writing and signed by the Optionee and shall be
irrevocable. If, at the time he exercises this option, Optionee is required to
report to the Securities and Exchange Commission under Section 16(a) of the
Exchange Act, Optionee may satisfy the income tax withholding due in respect of
such exercise pursuant to this Section 11 by withholding shares under the option
only if he also satisfies an exemption under Section 16(a) of the exchange Act
(or the rules or regulations promulgated thereunder) for such withholding.
12. Method of Exercising Option. Subject to the terms and conditions of this
Option Agreement and the Plan, this option may be exercised by written notice to
the Company, at its principal executive offices. Such notice shall state the
election to exercise this option and the number of shares in respect of which it
is being exercised, and shall be signed by Optionee (or the person so exercising
this option on behalf of Optionee). Such notice shall be accompanied by payment
in full of the Option Price of such shares of Common Stock in which event the
Company shall deliver a certificate or certificates representing such shares as
soon as practical after the notice shall be received by the Company. Payment may
be made in cash, a check payable to the Company or in shares of Common Stock
transferable to the Company and having a Fair Market Value on the transfer date
equal to the amount payable to the Company. The date of exercise shall be deemed
to be the date the Company receives the written notice and payment for the
shares being purchased. The certificate or certificates for the shares as to
which this option shall have been so exercised shall he registered in the name
of Optionee (or the person so exercising this option on behalf of Optionee), or,
if this option shall be exercised by Optionee and if Optionee shall so request
in the notice exercising this option, shall be registered in the name of
Optionee and another person jointly, with the right of survivorship, and shall
be delivered as provided above to or upon the written order of the person
exercising this option. In the event this option is exercised by any person
other than Optionee, (i.e., pursuant to Section 5 hereof) such notice shall be
accompanied by appropriate proof of the right of such person to exercise this
option. All shares that shall be purchased upon the exercise of this option as
provided herein shall be fully paid and non-assessable.
13. Definitions.
"Affiliate" means any company in which the Company owns
20% or more of the equity interest (collectively, the "Affiliates").
"Board" means the Board of Directors of the Company.
"Change of Control" shall be deemed to have taken place if (i)
a third person, including a "group" as defined in Section 13(d)(3) of the
Exchange Act acquires shares of the Company having 15% or more of the total
number of votes that may be cast for the election of Directors of the Company;
or (ii) as the result of any cash tender or exchange offer, merger or other
business combination, sale of assets or contested election or any combination of
the foregoing transactions (a "Transaction"), the persons who were directors of
the Company before the Transaction shall cease to constitute a majority of the
Board of the Company or any successor to the Company.
"Code" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder, as amended from time to time.
"Common Stock" means the common stock, par value $0.01 per
share, of the Company and shall include both treasury shares and authorized but
unissued shares and shall also include any security of the Company issued in
substitution, in exchange for, or in lieu of the common stock.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, as amended from time to time.
"Fair Market Value" means the closing price of the Common
Stock, on the relevant date as reported on the NASDAQ National Market, or if no
such trading in the common stock shall have taken place on that day, on the last
preceding day on which there was such trading in the common stock.
"Retirement" and "Retire" means the termination of employment
on or after the date the Participant is entitled to receive immediate payments
under a qualified retirement plan of the Company or an Affiliate; provided,
however, if the Participant is not eligible to participate under a qualified
retirement plan of the Company or its Affiliates then such Participant shall be
deemed to have retired if his termination of employment is on or after the date
such Participant has attained age 55.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder, as amended from time to time.
14. Option Not A Service Contract. This option is not an employment contract and
nothing in this option shall be deemed to create in any way whatsoever any
obligation on Optionee's part to continue in the employ of the Company, or of
the Company to continue Optionee's employment with the Company. In addition,
nothing in this option shall obligate the Company or any Affiliate, or their
respective shareholders, Boards of Directors, officers or employees to continue
any relationship which Optionee might have as a director or consultant for the
Company or Affiliate.
By receiving this option, Optionee shall not acquire any right to
compensation or damages in consequence of the termination of Optionee's office
or employment for any reason whatsoever insofar as such rights may be claimed to
have otherwise arisen as a result of Optionee's ceasing to have any rights
(actual or prospective) under, or to be entitled to exercise, this option as a
result of such termination.
15. Amendment of the Option. The Board at any time, and from time to time, may
amend the terms of this option; provided, however, that the rights under this
option shall not be impaired by any such amendment unless the Company requests
Optionee's consent and Optionee consents in writing.
16. Notices. Any notices provided for in this option shall be given in writing
and shall be deemed effectively given upon receipt or, in the case of notices
delivered by the Company to Optionee, five (5) days after deposit in the United
States mail, postage prepaid, addressed to Optionee at his last known home
address or at such other address as Optionee hereafter designates by written
notice to the Company.
17. Choice of Law. This option shall be governed by, and construed in accordance
with the laws of the State of Delaware, as such laws are applied to contracts
entered into and performed in such State.
18. Governing Authority. This option is subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted by the Company. This authority shall be exercised by the Board, or by a
committee of one or more members of the Board in the event that the Board
delegates its authority to a committee. The Board, in the exercise of this
authority, may correct any defect, omission or inconsistency in this option in a
manner and to the extent the Board shall deem necessary or desirable to make
this option fully effective. References to the Board also include any committee
appointed by the Board to administer and interpret this option. Any
interpretations, amendments, rules and regulations promulgated by the Board
shall be final and binding upon the Company and its successors in interest as
well as Optionee and his heirs, assigns, and other successors in interest.
19. Counterparts. This stock option agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
agreement.
20. Binding Effect. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
In Witness Whereof, the parties hereto have executed this Agreement as
of the date set forth above.
Attest: SSE Telecom, Inc.
By:
Secretary Leon F. Blachowicz
Witness: Optionee:
<PAGE>
EXHIBIT 10.3
11 May 1999
Mr. Frank S. Trumbower
President
Cambridge Technology Partners, Inc.
1430 Spring Hill Road, Suite 200
McLean, VA 22102
Dear Mr. Trumbower,
On behalf of the Board of Directors of SSE Telecom, Inc., ("The Company") I am
pleased to confirm our offer of employment by The Company as Board Member,
Chairman of the Board, ex-officio member of the Nominating, Compensation and
Audit committees of the Board and consultant to The Company in the development
and implementation of its new positioning as a provider of Satellite Internet
solutions. This arrangement is "at will" and as we agreed, will take a
substantial amount of your time (approximately half-time).
As inducement to your acceptance of this offer, The Company offers the
following:
1. An option to purchase 100,000 shares of SSET stock at a price of $1.50 per
share, vesting to be over four years, in accordance with the approved option
plan documents.
2. The Company agrees to sell to you, and you agree to buy from The Company,
unregistered stock in the amount of 50,000 shares at the closing price of SSET
on the NASDAQ exchange on May 6th, 1999 ($1.1875 per share).
3. The Company agrees to reimburse you for all necessary and reasonable expenses
incurred by you in the performance of your Board and consulting duties.
On behalf of The Company and its Board, I welcome you to SSE Telcom.
Very truly yours,
Lee Blachowicz Accepted:
President and CEO
---------------------------
Frank S. Trumbower Date
<PAGE>
EXHIBIT 10.4
SUBLEASE AGREEMENT
This Sublease Agreement ("Sublease") is made and entered into this 6th day of
July, 1999, by and between SSE Technologies Inc., a Delaware corporation with
its principal business offices at 47823 Westinghouse Drive, Fremont, California
94539 ("SUBLANDLORD") and StreamSoft, Inc. a California corporation, with its
principal offices at 48511 Warm Springs Blvd., Fremont, California 94539
("SUBTENANT").
RECITALS
A. Whereas, Warms Springs Associates II hereinafter called
"MASTER LANDLORD", and SUBLANDLORD have entered into that
certain Lease Agreement dated February 19, 1991 as amended by
that certain Fourth Amendment, hereinafter ("Master Lease"),
a copy of which is attached hereto as Exhibit A, pursuant to
which SUBLANDLORD has leased from MASTER LANDLORD a building
("Building") and other real property ("Property") located at
47823,47829, and 47835 Westinghouse Drive, Fremont,
California 94539.
B. Whereas, SUBLANDLORD desires to lease to SUBTENANT a portion
of the Building leased by MASTER LANDLORD to SUBLANDLORD, and
SUBTENANT desires to lease a portion of the Building from
SUBLANDLORD.
C. Whereas, MASTER LANDLORD desires to consent to the Sublease
by executing the "Sixth Amendment" to the Master Lease shown
as Exhibit C.
THEREFORE, SUBLANDLORD AND SUBTENANT agree as follows:
1. Premises. Subject to the terms, conditions, and covenants
set forth in this Sublease, SUBLANDLORD hereby leases to
SUBTENANT and SUBTENANT hereby leases from SUBLANDLORD,
approximately 4,842 square feet in the Building at 47835
Westinghouse Drive ("Premises"). The Premises are shown on
the attached Exhibit B, which by this reference is
incorporated herein.
2. Term. The initial term of the Sublease will cover the period
beginning August 1, 1999 through June 30, 2001. If SUBTENANT
wishes to extend the term of the initial lease period they
must notifying the SUBLANDLORD in writing, of their desire to
extend said lease at least 90 (ninety) days prior to the end
of any lease period. SUBTENANT will be granted first right of
refusal from the SUBLANDLORD pursuant to the SUBLANDLORD's
requirements for a following time period to be determined, if
the SUBTENANT is not and has not been in default of this
agreement.
<PAGE>
3. Rent. SUBTENANT shall pay to SUBLANDLORD all Basic Rent as
defined below for the Premises according to the following
schedule:
Initial Term 1: 8/1/99-6/30/00 $3,438/month
7/1/00-6/30/01 $3,535/month
All such Basic Rent shall be payable in advance on the first
day of each calendar month during the Term. SUBTENANT shall
deposit with SUBLANDLORD upon execution of this Sublease the
sum of Three Thousand Five Hundred and Thirty-eight Dollars
($3,438) as Basic Rent for the first period that Basic Rent
is due under this Sublease, namely August 1, 1999 through
August 31, 1999. In addition to said Basic Rent, SUBTENANT
shall pay its pro rata share, which represents 9.4% of the
building's total space occupied by SUBTENANT, of all charges,
costs and expense obligations defined as Additional Rent as
set forth in Paragraph 12.2 of said MASTER LEASE. The current
charge for Additional Rent is Eight Hundred and Sixty Seven
Dollars ($860) per calendar month. This amount is subject to
adjustment as the amount paid by the SUBLANDLORD is adjusted.
All Basic and Additional Rent ("Rent") shall be paid to
SUBLANDLORD at its address indicated below:
SSE Telecom, Inc.
47823 Westinghouse Drive
Fremont, California 94539
Rent shall be payable without notice or demand and without
any deduction, offset, or abatement. Rent payable for any
portion of a calendar month shall be a pro rata portion of
the installment payable for a full calendar month.
4. Security Deposit. A Security Deposit of $4500 is required.
5. Late Charge. SUBTENANT shall pay to SUBLANDLORD as Additional
Rent, a late charge equal to five percent (5%) of any
installment of Basic Rent which is not received by
SUBLANDLORD within ten (10) days after the due date for such
installment.
6. Use. SUBTENANT shall use the Premises only for general
offices, research and development, light manufacturing,
storage and for no other purposes. SUBTENANT shall not permit
the premises or any part thereof to be used for any purpose
or use in violation of any law or ordinance, or of the
regulation of any governmental authority, or in any manner
that will constitute a nuisance. SUBTENANT shall not allow
any use in violation of any existing restriction on the
Premises. SUBTENANT shall conform its use of the Premises in
every respect to all laws, statutes, ordinances, and
regulations now enforced or hereafter enacted affecting the
use of occupancy of the Premises.
7. Acceptance of Premises. SUBTENANT acknowledges that the
Premises contain certain existing tenant improvements with
which SUBTENANT is familiar. SUBTENANT agrees that its act
of taking possession of the Premises will constitute its
acknowledgment and acceptance that the Premises are in
rentable and good condition. SUBTENANT is subleasing the
subject Premises strictly on an "as is" basis, and that
SUBLANDLORD makes no representation or warranties relating
to the suitability of the Premises for SUBTENANT's intended
use or whether said Premises are in compliance with all
applicable building codes, governmental laws, statues,
ordinances and regulations (e.g. ADA and Title 24 statutes
and laws).
8. Parking. Twenty-two (22) parking spaces will be made
available per separate agreement.
9. Incorporation of Master Lease, Assumption, Termination of
Master Lease.
9.1 This Sublease is expressly subject and subordinate to
the terms and conditions of "The Master Lease"
attached hereto as Exhibit A. All terms and
conditions of the Master Lease are incorporated
herein and are deemed a part of this Sublease.
References to Landlord and Tenant in the Master Lease
shall, for purposes of this Sublease, be deemed to
refer to both MASTER LANDLORD and SUBLANDLORD, and
SUBTENANT, respectively.
9.2 Except as otherwise provided herein, SUBTENANT hereby
expressly assumes and agrees to perform and comply
with all obligations required to be kept or performed
by SUBLANDLORD pursuant to the provisions of the
Master Lease. SUBTENANT shall not commit or permit to
be committed on the Premises any act or omission
which shall violate any terms or condition of the
Master Lease. SUBTENANT agrees to indemnify, defend,
and hold harmless SUBLANDLORD from any and all
claims, damages, costs, and expenses (including
reasonable attorney's fees) with respect to
SUBTENANT's non-performance or non-observance of any
such term and condition.
9.3 If the Master Lease is terminated, this Sublease
shall terminate simultaneously and the SUBLANDLORD
and SUBTENANT shall thereafter be released from all
obligations under this Sublease, and SUBLANDLORD
shall refund to SUBTENANT any unreturned Rent paid in
advance, except as otherwise provided in this
Sublease.
10. Utilities/Services. SUBTENANT shall obtain, contract for, and
pay 100% of all expenses relating to its personal electronic
communications, data and telephone services, its private
security systems, trash, and janitorial services provided to
the SUBTENANT's Premises.
11. Obligations of SUBLANDLORD. SUBLANDLORD agrees to maintain the
Master Lease during the Term of this Sublease, subject,
however, to any termination of the Master Lease without the
fault of SUBLANDLORD. SUBLANDLORD agrees to comply with or
perform all of its obligations under the Master Lease that
SUBTENANT has not assumed under this Sublease. Provided,
however, SUBLANDLORD, does not assume the obligations required
to be kept or performed by the MASTER LANDLORD under the
Master Lease.
12. Alterations, Additions or Improvements. Except as otherwise
provided for in the Master Lease, SUBTENANT shall not make
any alterations, additions or improvements on or to the
Premises without first obtaining the written consent of
SUBLANDLORD, which SUBLANDLORD may withhold in its absolute
and sole discretion. All permitted alterations, additions and
improvements shall be made at the sole expense of SUBTENANT.
At the expiration of the sublease term, SUBTENANT may be
required to remove any improvements at 47829 Westinghouse
Drive at the discretion of both SUBLANDLORD and MASTER
LANDLORD. Should SUBLANDLORD desire to retain any or all of
the improvements to the premises as SUBTENANT vacates it, then
SUBLANDLORD will assume the obligation of the SUBTENANT to
restore the premises to their original condition and to the
reasonable satisfaction of the MASTER LANDLORD. SUBTENANT
shall keep the Premises free and clear from all liens arising
out of any work performed, materials furnished or obligations
incurred by SUBTENANT.
12.1 SUBTENANT's Alterations. Anything to the contrary
contained herein notwithstanding, SUBLANDLORD and
SUBTENANT will investigate the feasibility of
installing an awning to cover the brick walkway along
the front of the building. The final design and
expense of the awning will be mutually agreed to by
both SUBLANDLORD and TENANT with final approval from
the MASTER LANDLORD. Upon MASTER LANDLORD's approval,
the purchase and installation of said awning will be
at SUBTENANT's sole expense. Periodic cleaning and
maintenance of said awning, including removal at the
end of SUBLANDLORD's lease, will be at SUBLANDLORD's
sole expense.
13. Signs. SUBTENANT shall not be entitled to place or install any
additional signs about the subject Premises without obtaining
SUBLANDLORD's prior written consent, which may be given or
withheld in SUBLANDLORD's sole discretion.
14. Hazardous Materials. Notwithstanding anything contained in
Paragraph 44 of the Master Lease, SUBTENANT shall not be
entitled to use or store any Hazardous Materials or Substances
on or about the Subject Premises without first obtaining the
express written consent of SUBLANDLORD, which may be given or
withheld in SUBLANDLORD's absolute and sole discretion.
15. Consent of Master Landlord. This sublease is made and entered
into with the full knowledge and agreement of MASTER LANDLORD,
who consented to this sublease by executing an amendment to
the Master Lease on July 6, 1999.
IN WITNESS WHEREOF, the parties have executed this Sublease Agreement
on the date indicated below.
SSE Technologies, Inc. StreamSoft, Inc.
(SUBLANDLORD) (SUBTENANT)
BY_____________________________ BY_____________________________
Date: __________________________ Date: ___________________________
<PAGE>
EXHIBIT 10.5
SIXTH AMENDMENT
This Sixth Amendment to Lease ("Amendment") is entered into as of July 6, 1999
by and between WARM SPRINGS ASSOCIATES II, a California General Partnership,
herein referred to as "Landlord" and SSE Technologies, Inc., a Delaware
Corporation, herein referred to as "Tenant".
RECITALS
WHEREAS, Landlord and Tenant entered into a Net Lease Agreement dated February
19, 1991, and further modified by First Amendment to Lease dated March 21, 1991,
and further modified by Second Amendment to Lease dated March 28, 1991, and
further modified by Third Amendment to Lease dated August 7, 1995, and further
modified by Fourth Amendment to Lease dated January 5, 1996 and again further
modified by Fifth Amendment to Lease dated February 23, 1999, hereinafter
referred to as the "Lease", for the premises commonly known as 47823
Westinghouse Drive, Fremont, California, more fully described in the Lease.
AGREEMENT
Landlord hereby acknowledges and consents to StreamSoft, Inc. subleasing from
SSE Technologies approximately 4,842 square feet at 47835 Westinghouse Drive,
Fremont, CA.
EXCEPT AS MODIFIED HEREIN, all other terms, covenants and conditions of said
Lease remain in full force and effect and unmodified.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Sixth Amendment to
Lease as of the day and year set forth below.
LANDLORD TENANT
WARM SPRINGS ASSOCIATES II, SSE TECHNOLOGIES, INC.,
a California General Partnership a Delaware Corporation
By________________________ By_______________________
Its General Partner Its _______________________
Date: 7/13/99 Date: _____________________
<PAGE>
EXHIBIT 10.6
Silicon Valley Bank
Loan and Security Agreement
Borrower: SSE Telecom, Inc.
Address: 47823 Westinghouse Drive
Fremont, California 94539
Date: July 30, 1999
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK, COMMERCIAL FINANCE DIVISION ("Silicon"), whose address is
3003 Tasman Drive, Santa Clara, California 95054 and the borrower(s) named above
(jointly and severally, the "Borrower"), whose chief executive office is located
at the above address ("Borrower's Address"). The Schedule to this Agreement (the
"Schedule") shall for all purposes be deemed to be a part of this Agreement, and
the same is an integral part of this Agreement. (Definitions of certain terms
used in this Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 Loans. Silicon will make loans to Borrower (the "Loans"), in amounts
determined by Silicon in its good faith business judgement, up to the amounts
(the "Credit Limit") shown on the Schedule, provided no Default or Event of
Default has occurred and is continuing, and subject to deduction of any
Reserves for accrued interest and such other Reserves as Silicon deems proper
from time to time.
1.2 Interest. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Silicon's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans. Silicon may, in its discretion, charge interest to
Borrower's Deposit Accounts maintained with Silicon.
1.3 Overadvances. If at any time or for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit (an
"Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay
Silicon interest on the outstanding amount of any Overadvance, on demand, at a
rate equal to the interest rate which would otherwise be applicable to the
Overadvance, plus an additional 2% per annum.
1.4 Fees. Borrower shall pay Silicon the fee(s) shown on the Schedule, which
are in addition to all interest and other sums payable to Silicon and are not
refundable.
1.5 Letters of Credit. [Not Applicable]
2. SECURITY INTEREST.
2.1 Security Interest. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Silicon a security interest in
all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located: All Inventory, Equipment, Receivables, and
General Intangibles, including, without limitation, all of Borrower's Deposit
Accounts, and all money, and all property now or at any time in the future in
Silicon's possession (including claims and credit balances), and all proceeds
(including proceeds of any insurance policies, proceeds of proceeds and claims
against third parties), all products and all books and records related to any of
the foregoing (all of the foregoing, together with all other property in which
Silicon may now or in the future be granted a lien or security interest, is
referred to herein, collectively, as the "Collateral").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants:
3.1 Corporate Existence and Authority. Borrower, if a corporation, is and
will continue to be, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. Borrower is and will continue
to be qualified and licensed to do business in all jurisdictions in which any
failure to do so would have a material adverse effect on Borrower. The
execution, delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (i) have been duly and validly authorized, (ii)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (iii) do not violate Borrower's articles or certificate
of incorporation, or Borrower's by-laws, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.
3.2 Name; Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Silicon 30 days' prior written notice before changing its
name or doing business under any other name. Borrower has complied, and will in
the future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3 Place of Business; Location of Collateral. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give Silicon at least 30 days prior
written notice before opening any additional place of business, changing its
chief executive office, or moving any of the Collateral to a location other than
Borrower's Address or one of the locations set forth on the Schedule.
3.4 Title to Collateral; Permitted Liens. Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for Permitted Liens. Silicon now has, and will
continue to have, a first-priority perfected and enforceable security interest
in all of the Collateral, subject only to the Permitted Liens, and Borrower will
at all times defend Silicon and the Collateral against all claims of others.
None of the Collateral now is or will be affixed to any real property in such a
manner, or with such intent, as to become a fixture. Borrower is not and will
not become a lessee under any real property lease pursuant to which the lessor
may obtain any rights in any of the Collateral and no such lease now prohibits,
restrains, impairs or will prohibit, restrain or impair Borrower's right to
remove any Collateral from the leased premises. Whenever any Collateral is
located upon premises in which any third party has an interest (whether as
owner, mortgagee, beneficiary under a deed of trust, lien or otherwise),
Borrower shall, whenever requested by Silicon, use its best efforts to cause
such third party to execute and deliver to Silicon, in form *acceptable to
Silicon, such waivers and subordinations as Silicon shall specify, so as to
ensure that Silicon's rights in the Collateral are, and will continue to be,
superior to the rights of any such third party. Borrower will keep in full force
and effect, and will comply with all the terms of, any lease of real property
where any of the Collateral now or in the future may be located.
*reasonably
3.5 Maintenance of Collateral. Borrower will maintain the Collateral in good
working condition, and Borrower will not use the Collateral for any unlawful
purpose. Borrower will immediately advise Silicon in writing of any material
loss or damage to the Collateral.
3.6 Books and Records. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 Financial Condition, Statements and Reports. All financial statements now
or in the future delivered to Silicon have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and accurately reflect the financial condition of
Borrower, at the times and for the periods therein stated. Between the last date
covered by any such statement provided to Silicon and the date hereof, there has
been no material adverse change in the financial condition or business of
Borrower. Borrower is now and will continue to be solvent.
3.8 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Silicon in
writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or takes any other steps required to keep the
contested taxes from becoming a lien upon any of the Collateral. Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.
3.9 Compliance with Law. Borrower has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to Borrower, including, but not limited to, those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, and all environmental matters.
3.10 Litigation. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Silicon in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower involving any single claim of
$50,000 or more, or involving $100,000 or more in the aggregate.
3.11 Use of Proceeds. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
4. Receivables.
4.1 Representations Relating to Receivables. Borrower represents and warrants
to Silicon as follows: Each Receivable with respect to which Loans are requested
by Borrower shall, on the date each Loan is requested and made, (i) represent an
undisputed bona fide existing unconditional obligation of the Account Debtor
created by the sale, delivery, and acceptance of goods or the rendition of
services in the ordinary course of Borrower's business, and (ii) meet the
Minimum Eligibility Requirements set forth in Section 8 below.
4.2 Representations Relating to Documents and Legal Compliance. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and endorsements on all documents, instruments, and agreements
relating to all Receivables are and shall be genuine, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms.
4.3 Schedules and Documents relating to Receivables. Borrower shall deliver
to Silicon transaction reports and loan requests, schedules and assignments of
all Receivables, and schedules of collections, all on Silicon's standard forms;
provided, however, that Borrower's failure to execute and deliver the same shall
not affect or limit Silicon's security interest and other rights in all of
Borrower's Receivables, nor shall Silicon's failure to advance or lend against a
specific Receivable affect or limit Silicon's security interest and other rights
therein. Loan requests received after 12:00 Noon will not be considered by
Silicon until the next Business Day. Together with each such schedule and
assignment, or later if requested by Silicon, Borrower shall furnish Silicon
with copies (or, at Silicon's request, originals) of all contracts, orders,
invoices, and other similar documents, and all original shipping instructions,
delivery receipts, bills of lading, and other evidence of delivery, for any
goods the sale or disposition of which gave rise to such Receivables, and
Borrower warrants the genuineness of all of the foregoing. Borrower shall also
furnish to Silicon an aged accounts receivable trial balance in such form and at
such intervals as Silicon shall request. In addition, Borrower shall deliver to
Silicon the originals of all instruments, chattel paper, security agreements,
guarantees and other documents and property evidencing or securing any
Receivables, immediately upon receipt thereof and in the same form as received,
with all necessary endorsements, all of which shall be with recourse. Borrower
shall also provide Silicon with copies of all credit memos within two days after
the date issued.
4.4 Collection of Receivables. Borrower shall have the right to collect all
Receivables, unless and until a Default or an Event of Default has occurred*.
Borrower shall hold all payments on, and proceeds of, Receivables in trust for
Silicon, and Borrower shall immediately deliver all such payments and proceeds
to Silicon in their original form, duly endorsed in blank, to be applied to the
Obligations in such order as Silicon shall determine. Silicon may, in its
discretion, require that all proceeds of Collateral be deposited by Borrower
into a lockbox account, or such other "blocked account" as Silicon may specify,
pursuant to a blocked account agreement in such form as Silicon may specify.
Silicon or its designee may, at any time, notify Account Debtors that the
Receivables have been assigned to Silicon.
*and is continuing
4.5. Remittance of Proceeds. All proceeds arising from the disposition of any
Collateral shall be delivered, in kind, by Borrower to Silicon in the original
form in which received by Borrower not later than the following Business Day
after receipt by Borrower, to be applied to the Obligations in such order as
Silicon shall determine; provided that, if no Default or Event of Default has
occurred, Borrower shall not be obligated to remit to Silicon the proceeds of
the sale of worn out or obsolete equipment disposed of by Borrower in good faith
in an arm's length transaction for an aggregate purchase price of $25,000 or
less (for all such transactions in any fiscal year). Borrower agrees that it
will not commingle proceeds of Collateral with any of Borrower's other funds or
property, but will hold such proceeds separate and apart from such other funds
and property and in an express trust for Silicon. Nothing in this Section limits
the restrictions on disposition of Collateral set forth elsewhere in this
Agreement.
4.6 Disputes. Borrower shall notify Silicon promptly of all disputes or
claims relating to Receivables. Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in full,
or agree to do any of the foregoing, except that Borrower may do so, provided
that: (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm's length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit. Silicon may, at any time after the
occurrence of an Event of Default, settle or adjust disputes or claims directly
with Account Debtors for amounts and upon terms which Silicon considers
advisable in its reasonable credit judgment and, in all cases, Silicon shall
credit Borrower's Loan account with only the net amounts received by Silicon in
payment of any Receivables.
4.7 Returns. Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower in the ordinary course of
its business, Borrower shall promptly determine the reason for such return and
promptly issue a credit memorandum to the Account Debtor in the appropriate
amount (sending a copy to Silicon). In the event any attempted return occurs
after the occurrence of any Event of Default, Borrower shall (i) hold the
returned Inventory in trust for Silicon, (ii) segregate all returned Inventory
from all of Borrower's other property, (iii) conspicuously label the returned
Inventory as Silicon's property, and (iv) immediately notify Silicon of the
return of any Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on Silicon's request deliver such
returned Inventory to Silicon.
4.8 Verification. Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.
4.9 No Liability. Silicon shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction of,
any goods, the sale or other disposition of which gives rise to a Receivable, or
for any error, act, omission, or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Receivable, or for
settling any Receivable in good faith for less than the full amount thereof, nor
shall Silicon be deemed to be responsible for any of Borrower's obligations
under any contract or agreement giving rise to a Receivable. Nothing herein
shall, however, relieve Silicon from liability for its own gross negligence or
willful misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 Financial and Other Covenants. Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.
5.2 Insurance. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require, and Borrower shall provide evidence of such insurance to
Silicon, so that Silicon is satisfied that such insurance is, at all times, in
full force and effect. All such insurance policies shall name Silicon as an
additional loss payee, and shall contain a lenders loss payee endorsement in
form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such
insurance, Silicon shall apply such proceeds in reduction of the Obligations as
Silicon shall determine in its sole discretion, except that, provided no Default
or Event of Default has occurred and is continuing, Silicon shall release to
Borrower insurance proceeds with respect to Equipment totaling less than
$100,000, which shall be utilized by Borrower for the replacement of the
Equipment with respect to which the insurance proceeds were paid. Silicon may
require reasonable assurance that the insurance proceeds so released will be so
used. If Borrower fails to provide or pay for any insurance, Silicon may, but is
not obligated to, obtain the same at Borrower's expense. Borrower shall promptly
deliver to Silicon copies of all reports made to insurance companies.
5.3 Reports. Borrower, at its expense, shall provide Silicon with the written
reports set forth in the Schedule, and such other written reports with respect
to Borrower (including budgets, sales projections, operating plans and other
financial documentation), as Silicon shall from time to time reasonably specify.
5.4 Access to Collateral, Books and Records. At reasonable times, and on one
Business Day's notice, Silicon, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy Borrower's books and records.
Silicon shall take reasonable steps to keep confidential all information
obtained in any such inspection or audit, but Silicon shall have the right to
disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $500 per person per day plus reasonable out of pocket expenses.
Borrower will not enter into any agreement with any accounting firm, service
bureau or third party to store Borrower's books or records at any location
other than Borrower's Address, without first obtaining Silicon's
written consent, which may be conditioned upon such accounting firm, service
bureau or other third party agreeing to give Silicon the same rights with
respect to access to books and records and related rights as Silicon has under
this Loan Agreement. *Borrower waives the benefit of any accountant-client
privilege or other evidentiary privilege precluding or limiting the disclosure,
divulgence or delivery of any of its books and records (except that Borrower
does not waive any attorney-client privilege).
*With respect to Silicon,
5.5 Negative Covenants. Except as may be permitted in the Schedule, Borrower
shall not, without Silicon's prior written consent, do any of the following: (i)
merge or consolidate with another corporation or entity; (ii) acquire any
assets, except in the ordinary course of business; (iii) enter into any other
transaction outside the ordinary course of business*; (iv) sell or transfer any
Collateral, except for the sale of finished Inventory in the ordinary course of
Borrower's business, and except for the sale of obsolete or unneeded Equipment
in the ordinary course of business**; (v) store any Inventory or other
Collateral with any warehouseman or other third party; (vi) sell any Inventory
on a sale-or-return, guaranteed sale, consignment, or other contingent basis;
(vii) make any loans of any money or other assets; (viii) incur any debts,
outside the ordinary course of business***, which would have a material, adverse
effect on Borrower or on the prospect of repayment of the Obligations; (ix)
guarantee or otherwise become liable with respect to the obligations of another
party or entity; (x) pay or declare any dividends on Borrower's stock (except
for dividends payable solely in stock of Borrower); (xi) redeem, retire,
purchase or otherwise acquire, directly or indirectly, any of Borrower's
stock****; (xii) make any change in Borrower's capital structure which would
have a material adverse effect on Borrower or on the prospect of repayment of
the Obligations; or (xiii) dissolve or elect to dissolve. Transactions
permitted by the foregoing provisions of this Section are only permitted if no
Default or Event of Default would occur as a result of such transaction.
*except as permitted herein
**and except for the 37,768 shares of Echostar Communications, Inc. which
shares are owned by Borrower
***,except for Permitted Liens
****except that Borrower may repurchase shares of Borrower's stock pursuant
to any employee stock purchase or benefit plan, provided that the total amount
paid by Borrower for such stock does not exceed $100,000 in any fiscal year,
provided, further, that, after giving effect thereto, no Event of Default has
occurred and no event has occurred which, with notice or passage of time or
both, would constitute an Event of Default
5.6 Litigation Cooperation. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to Silicon, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Silicon may deem them reasonably necessary in order
to prosecute or defend any such suit or proceeding.
5.7 Further Assurances. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may deem
reasonably necessary or useful in order to perfect and maintain Silicon's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
6. TERM.
6.1 Maturity Date. This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the "Maturity Date"), subject to Section 6.3
below*.
*; provided that the Maturity Date shall automatically be extended, and this
Agreement shall automatically and continuously renew, for successive additional
terms of one year each, unless one party gives written notice to the other, not
less than sixty days prior to the next Maturity Date, that such party elects to
terminate this Agreement effective on the next Maturity Date
6.2 Early Termination. This Agreement may be terminated prior to the Maturity
Date as follows: (i) by Borrower, effective three Business Days after written
notice of termination is given to Silicon; or (ii) by Silicon at any time after
the occurrence of an Event of Default, without notice, effective immediately. If
this Agreement is terminated by Borrower or by Silicon under this Section 6.2,
Borrower shall pay to Silicon a termination fee in an amount equal to one
percent (1.0%) of the Maximum Credit Limit, provided that no termination fee
shall be charged if the credit facility hereunder is replaced with a new
facility from another division of Silicon Valley Bank. The termination fee shall
be due and payable on the effective date of termination and thereafter shall
bear interest at a rate equal to the highest rate applicable to any of the
Obligations.
6.3 Payment of Obligations. On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Without
limiting the generality of the foregoing, if on the Maturity Date, or on any
earlier effective date of termination, there are any outstanding Letters of
Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to the face amount of all such Letters of Credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said Letters of Credit, pursuant to Silicon's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Silicon's security interests in all of the Collateral and all
of the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Silicon, Silicon may, in its sole discretion, refuse to make any further Loans
after termination. No termination shall in any way affect or impair any right or
remedy of Silicon, nor shall any such termination relieve Borrower of any
Obligation to Silicon, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, Silicon shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be required to fully terminate Silicon's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 Events of Default. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect*; or (b) Borrower shall fail to pay
when due any Loan or any interest thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any time shall exceed
the Credit Limit; or (d) Borrower shall fail to comply with any of the financial
covenants set forth in the Schedule or shall fail to perform any other
non-monetary Obligation which by its nature cannot be cured; or (e) Borrower
shall fail to perform any other non-monetary Obligation, which failure is not
cured within 5 Business Days after the date due; or (f) any levy, assessment,
attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not cured within 10 days after the
occurrence of the same; or (g) any default or event of default occurs under any
obligation secured by a Permitted Lien, which is not cured within any applicable
cure period or waived in writing by the holder of the Permitted Lien; or (h)
Borrower breaches any material contract or obligation, which has or may
reasonably be expected to have a material adverse effect on Borrower's business
or financial condition; or (i) Dissolution, termination of existence, insolvency
or business failure of Borrower; or appointment of a receiver, trustee or
custodian, for all or any part of the property of, assignment for the benefit of
creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower or
any guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, which is not cured
by the dismissal thereof within 30 days after the date commenced; or (k)
revocation or termination of, or limitation or denial of liability upon, any
guaranty of the Obligations or any attempt to do any of the foregoing, or
commencement of proceedings by any guarantor of any of the Obligations under any
bankruptcy or insolvency law; or (l) revocation or termination of, or limitation
or denial of liability upon, any pledge of any certificate of deposit,
securities or other property or asset of any kind pledged by any third party to
secure any or all of the Obligations, or any attempt to do any of the foregoing,
or commencement of proceedings by or against any such third party under any
bankruptcy or insolvency law; or (m) Borrower makes any payment on account of
any indebtedness or obligation which has been subordinated to the Obligations
other than as permitted in the applicable subordination agreement, or if any
Person who has subordinated such indebtedness or obligations terminates or in
any way limits his subordination agreement; or (n) there shall be a change in
the record or beneficial ownership of an aggregate of more than 50% of the
outstanding shares of stock of Borrower, in one or more transactions, compared
to the ownership of outstanding shares of stock of Borrower in effect on the
date hereof, without the prior written consent of Silicon; or (o) Borrower shall
generally not pay its debts as they become due, or Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or (p) there shall be a material adverse change in Borrower's business or
financial condition; or (q) Silicon, acting in good faith and in a commercially
reasonable manner, deems itself insecure because of the occurrence of an event
prior to the effective date hereof of which Silicon had no knowledge on the
effective date or because of the occurrence of an event on or subsequent to the
effective date. Silicon may cease making any Loans hereunder during any of the
above cure periods, and thereafter if an Event of Default has occurred**.
*when made or deemed made
**and is continuing
7.2 Remedies. Upon the occurrence of any Event of Default, and* at any time
thereafter, Silicon, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement; (b) Accelerate
and declare all or any part of the Obligations to be immediately due, payable,
and performable, notwithstanding any deferred or installment payments allowed by
any instrument evidencing or relating to any Obligation; (c) Take possession of
any or all of the Collateral wherever it may be found, and for that purpose
Borrower hereby authorizes Silicon without judicial process to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge for so long as Silicon deems it reasonably necessary in order to
complete the enforcement of its rights under this Agreement or any other
agreement; provided, however, that should Silicon seek to take possession of any
of the Collateral by Court process, Borrower hereby irrevocably waives: (i) any
bond and any surety or security relating thereto required by any statute, court
rule or otherwise as an incident to such possession; (ii) any demand for
possession prior to the commencement of any suit or action to recover possession
thereof; and (iii) any requirement that Silicon retain possession of, and not
dispose of, any such Collateral until after trial or final judgment; (d) Require
Borrower to assemble any or all of the Collateral and make it available to
Silicon at places designated by Silicon which are reasonably convenient to
Silicon and Borrower, and to remove the Collateral to such locations as Silicon
may deem advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Silicon shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its
condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Silicon shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Silicon deems reasonable, or on Silicon's premises, or elsewhere and
the Collateral need not be located at the place of disposition. Silicon may
directly or through any affiliated company purchase or lease any Collateral at
any such public disposition, and if permissible under applicable law, at any
private disposition. Any sale or other disposition of Collateral shall not
relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Receivables and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes Silicon to endorse or sign Borrower's name on all collections,
receipts, instruments and other documents, to take possession of and open mail
addressed to Borrower and remove therefrom payments made with respect to any
item of the Collateral or proceeds thereof, and, in Silicon's sole discretion,
to grant extensions of time to pay, compromise claims and settle Receivables and
the like for less than face value; (h) Offset against any sums in any of
Borrower's general, special or other Deposit Accounts with Silicon; and (i)
Demand and receive possession of any of Borrower's federal and state income tax
returns and the books and records utilized in the preparation thereof or
referring thereto. All reasonable attorneys' fees, expenses, costs, liabilities
and obligations incurred by Silicon with respect to the foregoing shall be added
to and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. Without limiting any of Silicon's rights and remedies, from and
after the occurrence of any Event of Default, the interest rate applicable to
the Obligations shall be increased by an additional four percent per annum.
*and during the continuance thereof,
7.3 Standards for Determining Commercial Reasonableness. Borrower and Silicon
agree that a sale or other disposition (collectively, "sale") of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable: (i) Notice of the sale is given to Borrower at least
seven days prior to the sale, and, in the case of a public sale, notice of the
sale is published at least seven days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted; (ii) Notice of the
sale describes the collateral in general, non-specific terms; (iii) The sale is
conducted at a place designated by Silicon, with or without the Collateral being
present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m; (v)
Payment of the purchase price in cash or by cashier's check or wire transfer is
required; (vi) With respect to any sale of any of the Collateral, Silicon may
(but is not obligated to) direct any prospective purchaser to ascertain directly
from Borrower any and all information concerning the same. Silicon shall be free
to employ other methods of noticing and selling the Collateral, in its
discretion, if they are commercially reasonable.
7.4 Power of Attorney. *Effective only upon the occurrence, and during the
continuance,of any Event of Default, without limiting Silicon's other rights
and remedies, Borrower grants to Silicon an irrevocable power of attorney
coupled with an interest, authorizing and permitting Silicon (acting
through any of its employees, attorneys or agents) at any time, at its option,
but without obligation, with or without notice to Borrower, and at
Borrower's expense, to do any or all of the following, in Borrower's name
or otherwise, but Silicon agrees to exercise the following powers in a
commercially reasonable manner: (a) Execute on behalf of Borrower any.
documents that Silicon may, in its sole discretion, deem advisable in order
to perfect and maintain Silicon's security interest in the Collateral, or in
order to exercise a right of Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
present and future agreements; (b) Execute on behalf of Borrower any document
exercising, transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property which
is part of Silicon's Collateral or in which Silicon has an interest; (c) Execute
on behalf of Borrower, any invoices relating to any Receivable, any draft
against any Account Debtor and any notice to any Account Debtor, any proof of
claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or
other lien, or assignment or satisfaction of mechanic's, materialman's or other
lien; (d) Take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into Silicon's
possession; (e) Endorse all checks and other forms of remittances received by
Silicon; (f) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; (g)
Grant extensions of time to pay, compromise claims and settle Receivables and
General Intangibles for less than face value and execute all releases and other
documents in connection therewith; (h) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (j) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give Silicon the same rights of access and other rights with respect
thereto as Silicon has under this Agreement; and (k) Take any action or pay any
sum required of Borrower pursuant to this Agreement and any other present or
future agreements. Any and all reasonable sums paid and any and all reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon with respect to the foregoing shall be added to and become part
of the Obligations, shall be payable on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.
In no event shall Silicon's rights under the foregoing power of attorney or any
of Silicon's other rights under this Agreement be deemed to indicate that
Silicon is in control of the business, management or properties of Borrower.
7.5 Application of Proceeds. All proceeds realized as the result of any sale
of the Collateral shall be applied by Silicon first to the reasonable costs,
expenses, liabilities, obligations and attorneys' fees incurred by Silicon in
the exercise of its rights under this Agreement, second to the interest due upon
any of the Obligations, and third to the principal of the Obligations, in such
order as Silicon shall determine in its sole discretion. Any surplus shall be
paid to Borrower or other persons legally entitled thereto; Borrower shall
remain liable to Silicon for any deficiency. If, Silicon, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Silicon shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of purchase price or deferring
the reduction of the Obligations until the actual receipt by Silicon of the cash
therefor.
7.6 Remedies Cumulative. In addition to the rights and remedies set forth in
this Agreement, Silicon shall have all the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
8. Definitions. As used in this Agreement, the following terms have the
following meanings: "Account Debtor" means the obligor on a Receivable.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Business Day" means a day on which Silicon is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
"Default" means any event which with notice or passage of time or both, would
constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the Code.
"Eligible Inventory" [NOT APPLICABLE].
"Eligible Receivables" means Receivables arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services, which
Silicon, in its sole judgment, shall deem eligible for borrowing, based on such
considerations as Silicon may from time to time deem appropriate. Without
limiting the fact that the determination of which Receivables are eligible for
borrowing is a matter of Silicon's discretion, the following (the "Minimum
Eligibility Requirements") are the minimum requirements for a Receivable to be
an Eligible Receivable: (i) the Receivable must not be outstanding for more than
90 days from its invoice date, (ii) the Receivable must not represent progress
billings, or be due under a fulfillment or requirements contract with the
Account Debtor, (iii) the Receivable must not be subject to any contingencies
(including Receivables arising from sales on consignment, guaranteed sale or
other terms pursuant to which payment by the Account Debtor may be conditional),
(iv) the Receivable must not be owing from an Account Debtor with whom the
Borrower has any dispute (whether or not relating to the particular Receivable),
(v) the Receivable must not be owing from an Affiliate of Borrower, (vi) the
Receivable must not be owing from an Account Debtor which is subject to any
insolvency or bankruptcy proceeding, or whose financial condition is not
acceptable to Silicon, or which, fails or goes out of a material portion of its
business, (vii) the Receivable must not be owing from the United States or any
department, agency or instrumentality thereof (unless there has been compliance,
to Silicon's satisfaction, with the United States Assignment of Claims Act),
(viii) the Receivable must not be owing from an Account Debtor located outside
the United States or Canada (unless pre-approved by Silicon in its discretion in
writing, or backed by a letter of credit satisfactory to Silicon, or FCIA
insured satisfactory to Silicon), (ix) the Receivable must not be owing from an
Account Debtor to whom Borrower is or may be liable for goods purchased from
such Account Debtor or otherwise. Receivables owing from one Account Debtor will
not be deemed Eligible Receivables to the extent they exceed 25% of the total
Receivables outstanding. In addition, if more than 50% of the Receivables owing
from an Account Debtor are outstanding more than 90 days from their invoice date
(without regard to unapplied credits) or are otherwise not eligible Receivables,
then all Receivables owing from that Account Debtor will be deemed ineligible
for borrowing. Silicon may, from time to time, in its discretion, revise the
Minimum Eligibility Requirements, upon written notice to the Borrower.
"Equipment" means all of Borrower's present and hereafter acquired machinery,
molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dyes, jigs, goods and other tangible
personal property (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"Event of Default" means any of the events set forth in Section 7.1 of this
Agreement.
"General Intangibles" means all general intangibles of Borrower, whether now
owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against Silicon, rights to purchase or sell
real or personal property, rights as a licensor or licensee of any kind,
royalties, telephone numbers, proprietary information, purchase orders, and all
insurance policies and claims (including without limitation life insurance, key
man insurance, credit insurance, liability insurance, property insurance and
other insurance), tax refunds and claims, computer programs, discs, tapes and
tape files, claims under guaranties, security interests or other security held
by or granted to Borrower, all rights to indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Inventory" means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including without limitation
all raw materials, work in process, finished goods and goods in transit), and
all materials and supplies of every kind, nature and description which are or
might be used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all warehouse receipts, documents of
title and other documents representing any of the foregoing.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Silicon in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, termination fees, minimum interest
charges and any other sums chargeable to Borrower under this Agreement or under
any other present or future instrument or agreement between Borrower and
Silicon.
"Permitted Liens" means the following: (i) purchase money security interests
in specific items of Equipment; (ii) leases of specific items of Equipment;
(iii) liens for taxes not yet payable; (iv) additional security interests and
liens consented to in writing by Silicon, which consent shall not be
unreasonably withheld; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. Silicon will have
the right to require, as a condition to its consent under subparagraph (iv)
above, that the holder of the additional security interest or lien sign an
intercreditor agreement on Silicon's then standard form*, acknowledge that the
security interest is subordinate to the security interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
*or such other form as is acceptable to Silicon
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, securities accounts, investment
property, documents and all other forms of obligations at any time owing to
Borrower, all guaranties and other security therefor, all merchandise returned
to or repossessed by Borrower, and all rights of stoppage in transit and all
other rights or remedies of an unpaid vendor, lienor or secured party.
"Reserves" means, as of any date of determination, such amounts as Silicon
may from time to time establish and revise in good faith reducing the amount of
Loans, Letters of Credit and other financial accommodations which would
otherwise be available to Borrower under the lending formula(s) provided in the
Schedule: (a) to reflect events, conditions, contingencies or risks which, as
determined by Silicon in good faith, do or may affect (i) the Collateral or any
other property which is security for the Obligations or its value (including
without limitation any increase in delinquencies of Receivables), (ii) the
assets, business or prospects of Borrower or any Guarantor, or (iii) the
security interests and other rights of Silicon in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect Silicon's
good faith belief that any collateral report or financial information furnished
by or on behalf of Borrower or any Guarantor to Silicon is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which Silicon determines in good faith constitutes an
Event of Default or may, with notice or passage of time or both, constitute an
Event of Default.
Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 Interest Computation. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Silicon (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by Silicon on account of the Obligations three Business Days after
receipt by Silicon of immediately available funds, and, for purposes of the
foregoing, any such funds received after 12:00 Noon on any day shall be deemed
received on the next Business Day. Silicon shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to Silicon in its sole discretion, and Silicon may charge
Borrower's loan account for the amount of any item of payment which is returned
to Silicon unpaid.
9.2 Application of Payments. All payments with respect to the Obligations may
be applied, and in Silicon's sole discretion reversed and re-applied, to the
Obligations, in such order and manner as Silicon shall determine in its sole
discretion.
9.3 Charges to Accounts. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable to the Loans. Silicon may also, in its discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.
9.4 Monthly Accountings. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within thirty days after each
account is rendered, describing the nature of any alleged errors or admissions.
9.5 Notices. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or
by regular first-class mail, or certified mail return receipt requested,
addressed to Silicon or Borrower at the addresses shown in the heading to this
Agreement, or at any other address designated in writing by one party to the
other party. Notices to Silicon shall be directed to the Commercial Finance
Division, to the attention of the Division Manager or the Division Credit
Manager. All notices shall be deemed to have been given upon delivery in the
case of notices personally delivered, or at the expiration of one Business Day
following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.
9.6 Severability. Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.
9.7 Integration. This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between Borrower and Silicon and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.
9.8 Waivers. The failure of Silicon at any time or times to require Borrower
to strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Borrower and Silicon shall not waive or
diminish any right of Silicon later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Silicon shall be deemed to have been
waived by any act or knowledge of Silicon or its agents or employees, but only
by a specific written waiver signed by an authorized officer of Silicon and
delivered to Borrower. Borrower waives demand, protest, notice of protest and
notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time held
by Silicon on which Borrower is or may in any way be liable, and notice of any
action taken by Silicon, unless expressly required by this Agreement.
9.9 No Liability for Ordinary Negligence. Except as set forth herein,
neither Silicon, nor any of its directors, officers, employees, agents,
attorneys or any other Person affiliated with or representing Silicon *shall be
liable for any claims, demands, losses or damages, of any kind whatsoever,
made, claimed, incurred or suffered by Borrower or any other party through the
ordinary negligence of Silicon, or any of its directors, officers, employees,
agents, attorneys or any other Person affiliated with or representing
Silicon, but nothing herein shall relieve Silicon from liability for its own
gross negligence or willful misconduct.
*acting in such capacity
9.10 Amendment. The terms and provisions of this Agreement may not be waived
or amended, except in a writing executed by Borrower and a duly authorized
officer of Silicon.
9.11 Time of Essence. Time is of the essence in the performance by Borrower
of each and every obligation under this Agreement.
9.12 Attorneys Fees and Costs. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and the documents relating to this Agreement; obtain legal advice in
connection with this Agreement or Borrower; enforce, or seek to enforce, any of
its rights; prosecute actions against, or defend actions by, Account Debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim; examine,
audit, copy, and inspect any of the Collateral or any of Borrower's books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon's security interest in, the Collateral; and otherwise represent Silicon
in any litigation relating to Borrower. In satisfying Borrower's obligation
hereunder to reimburse Silicon for attorneys fees, Borrower may, for
convenience, issue checks directly to Silicon's attorneys, Levy, Small & Lallas,
but Borrower acknowledges and agrees that Levy, Small & Lallas is representing
only Silicon and not Borrower in connection with this Agreement. If either
Silicon or Borrower files any lawsuit against the other predicated on a breach
of this Agreement, the prevailing party in such action shall be entitled to
recover its reasonable costs and attorneys' fees, including (but not limited to)
reasonable attorneys' fees and costs incurred in the enforcement of, execution
upon or defense of any order, decree, award or judgment. All attorneys' fees and
costs to which Silicon may be entitled pursuant to this Paragraph shall
immediately become part of Borrower's Obligations, shall be due on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations.
9.13 Benefit of Agreement. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and Silicon; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Silicon, and any prohibited assignment
shall be void. No consent by Silicon to any assignment shall release Borrower
from its liability for the Obligations.
9.14 Joint and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.15 Limitation of Actions. Any claim or cause of action by Borrower against
Silicon, its directors, officers, employees, agents, accountants or attorneys,
based upon, arising from, or relating to this Loan Agreement, or any other
present or future document or agreement, or any other transaction contemplated
hereby or thereby or relating hereto or thereto, or any other matter, cause or
thing whatsoever, occurred, done, omitted or suffered to be done by Silicon, its
directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by Borrower by the commencement of an action or
proceeding in a court of competent jurisdiction by the filing of a complaint
within eighteen months after the first act, occurrence or omission upon which
such claim or cause of action, or any part thereof, is based, and the service of
a summons and complaint on an officer of Silicon, or on any other person
authorized to accept service on behalf of Silicon, within thirty (30) days
thereafter. Borrower agrees that such eighteen month period is a reasonable and
sufficient time for Borrower to investigate and act upon any such claim or cause
of action. The eighteen month period provided herein shall not be waived,
tolled, or extended except by the written consent of Silicon in its sole
discretion. This provision shall survive any termination of this Loan
Agreement or any other present or future agreement.
9.16 Paragraph Headings; Construction. Paragraph headings are only used in
this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Silicon or Borrower under any rule
of construction or otherwise.
9.17 Governing Law; Jurisdiction; Venue. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Santa Clara County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.18 Mutual Waiver of Jury Trial. Borrower and Silicon each hereby waive the
right to trial by jury in any action or proceeding based upon, arising out of,
or in any way relating to, this Agreement or any other present or future
instrument or agreement between Silicon and Borrower, or any conduct, acts or
omissions of Silicon or Borrower or any of their directors, officers, employees,
agents, attorneys or any other persons affiliated with Silicon or Borrower, in
all of the foregoing cases, whether sounding in contract or tort or otherwise.
Borrower:
SSE Telecom, Inc.
By
President or Vice President
By
Secretary or Ass't Secretary
Silicon:
SILICON VALLEY BANK
By
Title
Form 3/24/99
Version -1
<PAGE>
Silicon Valley Bank
Schedule to
Loan and Security Agreement
Borrower: SSE Telecom, Inc.
Address: 47823 Westinghouse Drive
Fremont, California 94539
Date: July 30, 1999
This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.
================================================================================
1. Credit Limit
(Section 1.1): An amount not to exceed the lesser of:
(i) $5,000,000 at any one time
outstanding (the "Maximum Credit Limit")
; or (ii) 85% of the amount of
Borrower's Eligible Receivables
(as defined in Section 8 above).
2. Interest.
================================================================================
Interest Rate (Section 1.2):
A rate equal to the "Prime Rate" in
effect from time to time, plus 2.0% per
annum. Interest shall be calculated on
the basis of a 360-day year for the
actual number of days elapsed. "Prime
Rate" means the rate announced from time
to time by Silicon as its "prime rate;"
it is a base rate upon which other rates
charged by Silicon are based, and it is
not necessarily the best rate available
at Silicon. The interest rate applicable
to the Obligations shall change on each
date there is a change in the Prime
Rate.
Minimum Monthly
Interest (Section 1.2): Not Applicable.
================================================================================
3. Fees (Section 1.4):
Loan Fee: $25,000, payable concurrently herewith,
plus warrants to purchase stock for a
number of common or preferred stock, the
type of stock to be agreed to between
Borrower and Silicon,the value of which
is equivalent to $25,000 based on the
per share price of such stock at the
close of the business day for the date
of this Agreement. The aforementioned
warrants shall consist of the terms and
provisions of Silicon's standard form
Warrant to Purchase Stock and related
documents, with such changes therein as
Silicon shall agree.
Collateral Monitoring
Fee: $900, per month, payable in arrears
(prorated for any partial month at the
beginning and at termination of this
Agreement).
================================================================================
4. Maturity Date
(Section 6.1): Two years from the date of this
Agreement, subject to automatic renewal
as provided in Section 6.1 above, and
early termination as provided in Section
6.2 above.
================================================================================
5. Financial Covenants
(Section 5.1): Borrower shall comply with each of
the following covenant(s). Compliance
shall be determined as of the end of
each month, except as otherwise
specifically provided below:
Minimum Tangible
Net Worth: Borrower shall maintain a Tangible Net
Definitions. Worth of not less than $7,000,000.
For purposes of the foregoing financial
covenants, the following terms shall
have the following meanings:
"Current assets", "current liabilities"
and "liabilities" shall have the
meanings ascribed to them by generally
accepted accounting principles.
"Tangible Net Worth" shall mean the
excess of total assets over total
liabilities, determined in accordance
with generally accepted accounting
principles, with the following
adjustments:
(A) there shall be excluded from
assets: (i) notes, accounts
receivable and other obligations
owing to the Borrower from its
officers or other Affiliates, and
(ii) all assets which would be
classified as intangible assets
under generally accepted accounting
principles, including without
limitation goodwill, licenses,
patents, trademarks, trade names,
copyrights, capitalized software and
organizational costs, licenses and
franchises (B) there shall be
excluded from liabilities: all
indebtedness which is subordinated
to the Obligations under a
subordination agreement in form
specified by Silicon or by language
in the instrument evidencing the
indebtedness which is acceptable to
Silicon in its discretion.
================================================================================
6. Reporting.
(Section 5.3):
Borrower shall provide Silicon with the
following:
1. Monthly Receivable agings, aged by
invoice date, within fifteen days after
the end of each month.
2. Monthly accounts payable agings, aged by
invoice date, and outstanding or held
check registers, if any, within fifteen
days after the end of each month.
3. Monthly reconciliations of Receivable
agings (aged by invoice date),
transaction reports, and general ledger,
within fifteen days after the end of
each month.
4. Monthly perpetual inventory reports for
the Inventory valued on a first-in,
first-out basis at the lower of cost or
market (in accordance with generally
accepted accounting principles) or such
other inventory reports as are
reasonably requested by Silicon, all
within fifteen days after the end of
each month.
5. Monthly unaudited financial statements,
as soon as available, and in any event
within thirty days after the end of each
month.
6. Monthly Compliance Certificates, within
thirty days after the end of each month,
in such form as Silicon shall reasonably
specify, signed by the Chief Financial
Officer of Borrower, certifying that as
of the end of such month Borrower was in
full compliance with all of the terms
and conditions of this Agreement, and
setting forth calculations showing
compliance with the financial covenants
set forth in this Agreement and such
other information as Silicon shall
reasonably request, including, without
limitation, a statement that at the end
of such month there were no held checks.
7. Quarterly unaudited financial
statements, as soon as available, and in
any event within forty-five days after
the end of each fiscal quarter of
Borrower.
8. Annual operating budgets (including
income statements, balance sheets and
cash flow statements, by month) for the
upcoming fiscal year of Borrower within
thirty days prior to the end of each
fiscal year of Borrower.
9. Annual financial statements, as soon as
available, and in any event within 120
days following the end of Borrower's
fiscal year, certified by independent
certified public accountants acceptable
to Silicon.
===============================================================================
7. Compensation
(Section 5.5): Not Applicable.
===============================================================================
8. Borrower Information:
Prior Names of
Borrower
(Section 3.2): See Representations and Warranties
dated June 18, 1999.
Prior Trade
Names of Borrower
(Section 3.2): See Representations and Warranties
dated June 18, 1999.
Existing Trade
Names of Borrower
(Section 3.2): See Representations and Warranties
dated June 18, 1999.
Other Locations and
Addresses (Section 3.3): See Representations and Warranties
dated June 18, 1999.
Material Adverse
Litigation (Section 3.10): None.
================================================================================
9. Other Covenants
(Section 5.1): Borrower shall at all times comply with
all of the following additional
covenants:
(1) Banking Relationship. Borrower
shall at all times maintain its
primary bank relationship with
Silicon.
(2) Subordination of Inside Debt. All
present and future indebtedness
of the Borrower to its officers,
directors and shareholders
("Inside Debt") shall, at all
times, be subordinated to the
Obligations pursuant to a
subordination agreement on
Silicon's standard form. Borrower
represents and warrants that
there is no Inside Debt presently
outstanding. Prior to incurring
any Inside Debt in the future,
Borrower shall cause the person
to whom such Inside Debt will be
owed to execute and deliver to
Silicon a subordination agreement
on Silicon's standard form.
Borrower: Silicon:
SSE Telecom, Inc. SILICON VALLEY BANK
By_______________________________ By________________________
President or Vice President Title_____________________
By_______________________________
Secretary or Ass't Secretary
Form 3/24/99
EXHIBIT 10.7
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE COMMON STOCK
Corporation: SSE Telecom, Inc., a Delaware corporation
Number of Shares: 9,766 Shares
Class of Stock: Common Stock
Initial Exercise Price: $2.56 per share, $0.01 par value
Issue Date: July 30, 1999
Expiration Date: July 30, 2004
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
coomon stock (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth in this Warrant.
ARTICLE 1. EXERCISE.
1.1 Method of Exercise. Holder may exercise this Warrant by
delivering a duly executed Notice of Exercise in substantially the form attached
as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as
specified in Section 1.1, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise issuable
upon exercise of this Warrant minus the aggregate Warrant Price of such Shares
by (b) the fair market value of one Share. The fair market value of the Shares
shall be determined pursuant to Section 1.4.
1.3 Intentionally Omitted
1.4 Fair Market Value. If the Shares are traded in a public
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not traded in a public
market, the Board of Directors of the Company shall determine fair market value
in its reasonable good faith judgment. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking firm to undertake such valuation. If the valuation of such
investment banking firm is greater than that determined by the Board of
Directors, then all fees and expenses of such investment banking firm shall be
paid by the Company. In all other circumstances, such fees and expenses shall be
paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after
Holder exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the
Company.
1.7.1. "Acquisition". For the purpose of this
Warrant, "Acquisition" means any sale, license, or other disposition of all
or substantially all of the assets of the Company, or anyreorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2. Assumption of Warrant. Upon the closing of
any Acquisition the successor entity shall assume the obligations of this
Warrant, and this Warrant shall be exercisable for the same securities, cash,
and property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were outstanding on
the record date for the Acquisition and subsequent closing *
* provided, however, if in connection with such Acquisition all other warrants
and options then outstanding (not including employee, consultant or director
options) are expiring, are automatically required by the acquiror to be
exercised and/or terminated and are in fact so exercised and/or terminated, then
the Company shall provide at least 30 days' prior written notice of the
foregoing to Holder at the address set forth in Section 4.5 hereof, Attention
Mr. Chris Hill with a copy to Levy, Small & Lallas, 815 Moraga Drive, Los
Angeles, California 90049, Attention: Angel F. Castillo, Esq., together with
details of the proposed Acquisition as are reasonably requested by the Holder,
and the Holder shall thereupon be deemed to have exercised this Warrant under
section 1.2 hereof unless Holder otherwise exercises this Warrant under section
1.1 at such time.
1.7.3. n/a
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If, prior to the expiration
of this Warrant, the Company declares or pays a dividend on its common stock
payable in common stock, or other securities or rights convertible into common
stock, subdivides the outstanding common stock into a greater amount of common
stock, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of
securities to which Holder would have been entitled had Holder owned the Shares
of record as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. The provisions of this Section 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the Company shall
at any time after the date hereof, but prior to the expiration of this
Warrant, combine its outstanding securities as to which purchase rights under
this Warrant exist, the number of Shares as to which this Warrant is
exercisable as of the date of such combination shall be proportionately
decreased and the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and
the number of Shares issuable upon exercise of this Warrant or, if the Shares
are Preferred Stock, the number of shares of common stock issuable upon
conversion of the Shares, shall be subject to adjustment, from time to time in
the manner set forth on Exhibit A in the event of Diluting Issuances (as defined
on Exhibit A).
2.5 No Impairment. The Company shall not, by amendment of its*
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment.
*Certificate
2.6 Fractional Shares. No fractional Shares shall be issuable
upon exercise or conversion of the Warrant *and the number of Shares to be
issued shall be rounded down to the nearest whole Share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying Holder amount computed
by multiplying the fractional interest by the fair market value of a full Share.
*as a consequence of any adjustment pursuant hereto
2.7 Certificate as to Adjustments. Upon each adjustment of the
Warrant Price*, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based.
The Company shall, upon written request, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date thereof and the series of
adjustments leading to such Warrant Price.
*pursuant to this Section 2
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby
represents and warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the
first page of this Warrant is not greater than (i) the price per share at
which the Shares were last issued in an arms-length transaction in which
at least $500,000 of the Shares were sold and (ii) the fair market value of the
Shares as of the date of this Warrant.
(b) All Shares which may be issued upon the
exercise of the purchase right represented by this Warrant, and all securities,
if any, issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any
liens and encumbrances except for restrictions on transfer provided for herein
or under applicable federal and state securities laws.
(c) The capitalization table attached to this
Warrant* is true and complete as of the Issue Date.
*as Exhibit
3.2 Notice of Certain Events. If the Company proposes at any
time (a) to declare any dividend or distribution upon its common stock, whether
in cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of common
stock; (d) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the company's
securities for cash, then, in connection with each such event, the Company shall
give Holder (1) at least 20 days prior written notice of the date on which a
record will be taken for such dividend, distribution, or subscription rights
(and specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Information Rights. So long as the Holder holds this
Warrant and/or any of the Shares, the Company shall deliver to the Holder (a)
promptly after mailing, copies of all notices or other written communications to
the shareholders of the Company, (b) within one hundred and twenty (120) days
after the end of each fiscal year of the Company, the annual audited financial
statements of the Company certified by independent public accountants of
recognized standing and (c) such other financial statements required under and
in accordance with any loan documents between Holder and the Company
(or if there are no such requirements [or if the subject loan(s) no longer
are outstanding]), then within forty-five (45) days after the end of each of the
first three quarters of each fiscal year, the Company's quarterly, unaudited
financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The
Company agrees that the Shares shall be subject to the registration rights
set forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS.
4.1 n/a
4.2 Legends. This Warrant and the Shares shall be imprinted
with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant
and the Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions* reasonably satisfactory to the Company**, as
reasonably by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as
referenced in Rule 144(c), Holder represents that it has complied with Rule
144(d) and (e) in reasonable detail, the selling broker represents that it has
complied with Rule 144(f), and the Company is provided with a copy of Holder s
notice of proposed sale.
*in form and substance
**to the effect that such transfer will not require registration of such Warrant
or Shares under the applicable federal and state securities laws
4.4 Transfer Procedure. Subject to the provisions of Section
4.3, Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering the Warrant to
the Company for reissuance to the transferee(s) (and Holder, if applicable);
provided, however, that Holder may transfer all or part of this Warrant to its
affiliates, including, without limitation, Silicon Valley Bancshares and The
Silicon Valley Bank Foundation, at any time without notice to the Company. The
terms and conditions of this Warrant shall inure to the benefit of, and be
binding upon, the Company and the holders hereof and their respective permitted
successors and assigns.*
*4.4.5 No Stockholder Rights. This Warrant in and of
itself shall not entitle the Holder to any voting rights as a stockholder of the
Company.
4.5 Notices. All notices and other communications from the
Company to the Holder, or vice versa, shall be deemed delivered and effective
when given personally or mailed by first-class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company or
the Holder, as the case may be, in writing by the Company or such holder from
time to time. All notices to Holder should be sent to the following address:
Treasury Department
Silicon Valley Bank
3003 Tasman Drive HG110
Santa Clara, CA 95054
4.6 Waiver. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
4.7 Attorneys Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees
4.8 Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to its principles regarding conflicts of law.
"COMPANY"
SSE Telecom, Inc.
By: ______________________________
Name: ______________________________
(Print)
Title: Chairman of the Board,
President or Vice President
By: ______________________________
Name: ______________________________
(Print)
Title: Chief Financial Officer,
Secretary, Assistant Treasurer
or Assistant Secretary
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase shares of the
Common/Series ______ Preferred [strike one] Stock of __________________________
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to _____________________ of the Shares covered by the
Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
-------------------------------------------
(Name)
-------------------------------------------
-------------------------------------------
(Address)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
------------------------------------
(Signature)
- --------------------
(Date)
<PAGE>
EXHIBIT A
Anti-Dilution Provisions
(For Preferred Stock or Common Stock Warrants Where
Anti-Dilution Protection is Inadequate or Non-existent)
In the event of the issuance (a "Diluting Issuance") by the Company,
after the Issue Date of the Warrant, of Additional Common Shares (as defined in
the Antidilution Agreement by and between Holder and Company dated the date
herof) at a price per share less than the Warrant Price, then the number of
shares of common stock issuable upon conversion of the Shares, or if the Shares
are common stock, the number of Shares issuable upon exercise of the Warrant,
shall be adjusted as a result of Diluting Issuances in accordance with the
Holder's standard form of Anti-Dilution Agreement in effect on the Issue Date.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
<PAGE>
EXHIBIT B
Registration Rights
The Shares (if common stock) shall be deemed "registrable securities"
or otherwise entitled to "piggy back" registration rights in accordance with the
terms of the following agreement (the "Agreement") between the Company and its
investor(s):
_________NONE___________________________________________________
[Identify Agreement by date, title and parties. If no Agreement
exists, indicate by "none".]
The Company agrees that no amendments will be made to the Agreement
which would have an adverse impact on Holder's registration rights thereunder
without the consent of Holder. By acceptance of the Warrant to which this
Exhibit B is attached, Holder shall be deemed to be a party to the Agreement,
unless Holder otherwise elects not to become or to cease being a party thereto.
If no Agreement exists, then the Company and the Holder shall enter
into Holder's standard form of Registration Rights Agreement as in effect on the
Issue Date of the Warrant.
<PAGE>
EXHIBIT C
Capitalization Table
<PAGE>
EXHIBIT 10.8
SILICON VALLEY BANK
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is entered into as of July 30, 1999,
by and between SILICON VALLEY BANK ("Purchaser") and SSE Telecom, Inc.
RECITALS
A. Concurrently with the execution of this Agreement, the Purchaser is
purchasing from the Company a Warrant to Purchase Common Stock (the "Warrant")
pursuant to which Purchaser has the right to acquire from the Company the Shares
(as defined in the Warrant).
B. By this Agreement, the Purchaser and the Company desire to set forth
the registration rights of the Shares all as provided herein.
NOW, THEREFORE, in consideration of the mutual promises,
covenants and conditions hereinafter set forth, the parties hereto mutually
agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Securities
Act of 1933, as amended (the "Securities Act"), and the declaration or
ordering of effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means
(i) the Shares (ii) any Common Stock of the Company issued as (or issuable upon
the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, any stock referred to in (i).
(c) The terms "Holder" or "Holders" means the
Purchaser or qualifying transferees under subsection 1.8 hereof who hold
Registrable Securities.
(d) The term "SEC" means the Securities and
Exchange Commission.
1.2 Company Registration.
(a) Registration. If at any time or from time
to time, the Company shall determine to register any of its securities, for
its own account or the account of any of its shareholders, other than a
registration on Form S-1 or S-8 relating solely to employee stock option or
purchase plans, or a registration on Form S-4 relating solely to an SEC Rule
145 transaction, or a registration on any other form (other than Form S-1,
S-2, S-3 or S-18, or their successor forms) or any successor to such forms,
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of Registrable
Securities, the Company will:
(i) notify each Holder in writing atleast
15 days prior to the filing of any such registration statement (which shall
(include a list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable blue sky or other state securities
laws); and
(ii) include in such registration
(and compliance), and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests, made
within 15 days after receipt of such written notice from the Company, by any
Holder or Holders, except as set forth in subsection 1.2(b) below.
(b) Underwriting. If the registration of
which the Company gives notice is for a registered public offering involving
an underwriting, the Company shall so advise the Holders as a part of the
written notice given pursuant to subsection 1.2(a)(i). In such event the right
of any Holder to registration pursuant to this subsection 1.2 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other
shareholders distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company.*
*Notwithstanding any other provision of this Agreement, if the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares to be underwritten, the number of shares that may be included
in the underwriting shall be allocated, first, to the Company; second, to the
Holders on a pro rata basis based on the total number of Registrable Securities
held by the Holders; and third, to any shareholder of the Company (other than a
Holder) on a pro rata basis. No such reduction shall (i) reduce the securities
being offered by the Company for its own account to be included in the
registration and underwriting, or (ii) reduce the amount of securities of the
selling Holders included in the registration below fifteen percent (15%) of the
total amount of securities included in such registration. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter,
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from registration. For any
Holder which is a partnership or corporation, the partners, retired partners and
shareholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing person shall be deemed to be a single "Holder", and any pro rata
reduction with respect to such "Holder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "Holder," as defined in this sentence.
1.3 Expenses of Registration. All expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Section 1 including without limitation, all registration, filing and
qualification fees, printing expenses, fees and disbursements of counsel for the
Company and expenses of any special audits incidental to or required by such
registration, shall be borne by the Company except the Company shall not be
required to pay underwriters' fees, discounts or commissions relating to
Registrable Securities. All expenses of any registered offering not otherwise
borne by the Company shall be borne pro rata among the Holders participating in
the offering and the Company*.
*on the basis of the number of shares so registered
1.4 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this
Registration Rights Agreement, the Company will keep each Holder participating
therein advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. Except as
otherwise provided in subsection 1.3, at its expense the Company will:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to 90 days or
earlier until the Holder or Holders have completed the distribution
related thereto. The Company shall not be required to file, cause to become
effective or maintain the effectiveness of any registration statement that
contemplates a distribution of securities on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act.
(b) Prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement*.
*for the period set forth in (a) above
(c) Furnish to the Holders such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to facilitate the disposition
of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of
such offering. Each Holder participating in such underwriting shall also
enter into and perform its obligations under such an agreement.
(f) Notify each Holder of Registrable
Securities covered by such registration statement at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act or the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing.
1.5 Indemnification.*
*In the event any Registrable Securities are included in a registration
statement under Section 1.2:
(a) To the extent permitted by law, the Company
will indemnify each Holder of Registrable Securities and each of its officers,
directors and partners, and each person controlling such Holder*, with respect
to which such registration, qualification or compliance has been effected
pursuant to this Rights Agreement, and each underwriter, if any, and each person
who controls any underwriter of the Registrable Securities held by or issuable
to such Holder, against all claims, losses, expenses, damages and liabilities
(or actions in respect thereto) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statement therein not misleading, or any violation or alleged violation by
the Company of the Securities Act, the Securities Exchange Act of 1934, as
amended, ("Exchange Act") or any state securities law applicable to the Company
or any rule or regulation promulgated under the Securities Act, the Exchange Act
or any such state law and relating to action or inaction required of the Company
in connection with any such registration, qualification of compliance, and will
reimburse each such Holder, each of its officers, directors and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, within a reasonable amount of time after incurred
for any reasonable legal and any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection 1.5(a) shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability, or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld);
and provided further, that the Company will not be liable in any such case to
the extent that any such claim, loss, damage or liability arises out of or is
based on any untrue statement or omission based upon written information
furnished to the Company by an instrument duly executed by such Holder or
underwriter specifically for use therein.
*within the meaning of the Securities Act or the Exchange Act(as defined herein)
(b) To the extent permitted by law, each Holder
will, if Registrable Securities held by or issuable to such Holder are included
in the securities as to which such registration, qualification or compliance is
being effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company within the meaning of the
Securities Act, and each other such Holder, each of its officers, directors and
partners and each person controlling such Holder, against all claims, losses,
expenses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document (including any related registration statement, notification
or the like), any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company, such Holders, such
directors***, persons or underwriters**** for any reasonable legal or any other
expenses incurred in connection with investigating, defending or settling any
such claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder specifically for use therein; provided, however,
that the indemnity agreement contained in this subsection 1.5(b) shall not apply
to amounts paid in settlement of any such claim, loss, damage, liability or
action if such settlement is effected without the consent of the Holder, (which
consent shall not be unreasonably withheld); and provided further, that the
total amount for which any Holder shall be liable under this subsection 1.5(b)
shall not in any event exceed the aggregate proceeds received by such Holder
from the sale of Registrable Securities held by such Holder in such
registration.
incident to the any such registration, qualification or compliance, or based on
***and officers of the Company, such
****within a reasonable amount of time after incurred,
(c) Each party entitled to indemnification
under this subsection 1.5 (the "Indemnified Party") shall give notice to the
party required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom;
provided that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld), and the Indemnified Party may
participate in such defense at such party's expense; and provided further, that
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations hereunder, unless such failure
resulted in prejudice to the Indemnifying Party; and provided further, that an
Indemnified Party (together with all other Indemnified Parties which may be
represented without conflict by one counsel) shall have the right to retain one
separate counsel, with the fees and expenses to be paid by the Indemnifying
Party, if representation of such Indemnified Party by the counsel retained by
the Indemnifying Party would be inappropriate due to actual or potential
differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation.
1.6 Information by Holder. Any Holder or Holders of Registrable
Securities included in any registration shall promptly furnish to the Company
such information regarding such Holder or Holders and the distribution proposed
by such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to herein.
1.7 Rule 144 Reporting. With a view to making available to
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees*:
*to use its best efforts to:
(a) make and keep public information
available, as those terms are understood and defined in SEC Rule 144, after
90 days after the effective date of the first registration filed by the Company
for an offering of its securities to the general public;
(b) file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act
and the Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) so long as a Holder owns any Registrable
Securities, to furnish to such Holder forthwith upon request a written
statement by the Company as to its compliance with the reporting
requirements of said Rule 144* (at any time after 90 days after the
effective date of the first registration statement filed by the Company for an
offering of its securities to the general public), a copy of the most recent
annual or quarterly report of the Company, and such other reports and
documents so filed by the Company as the Holder may reasonably request in
complying with any rule or regulation of the SEC allowing the Holder to sell
any such securities without registration.
*of the Securities Act, and of the Exchange Act
1.8 Transfer of Registration Rights. Holders' rights to cause
the Company to register* and keep information available, granted to them by
the Company under subsections 1.2 may be assigned to a transferee or assignee of
a Holder's Registrable Securities** provided, that the Company is given written
notice by such Holder at the time of or within a reasonable time after said
transfer, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights
are being assigned. The Company may prohibit the transfer of any Holders'
rights under this subsection 1.8 to any proposed transferee or assignee
who the Company reasonably believes is a competitor of the Company.
*Registrable Securities
**which (a) is a subsidiary, parent, general partner, limited partner, retired
partner, member or retired member of a Holder, (b) is a Holder's family member
or trust for the benefit of an individual Holder, or (c) acquires at least 4,880
shares of Registrable Securities (as adjusted for stock splits and
combinations);
2. General.
2.1 Waivers and Amendments. With the written consent of the
record or beneficial holders of at least a majority of the Registrable
Securities, the obligations of the Company and the rights of the Holders of the
Registrable Securities under this agreement may be waived (either generally or
in a particular instance, either retroactively or prospectively, and either for
a specified period of time or indefinitely),* and with the same consent the
Company, when authorized by resolution of its Board of Directors,** may enter
into a supplementary agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement;
provided, however, ***without the consent of all of the Holders of the
Registrable Securities. Upon the effectuation of each such waiver, consent,
agreement of amendment or modification, the Company shall promptly give written
notice thereof to the record holders of the Registrable Securities who have
not previously consented thereto in writing. This Agreement or any provision
hereof may be changed, waived, discharged or terminated only by a statement in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, except to the extent provided in this
subsection 2.1.
*and shall be binding upon each Holder and the Company
**the Company and the Holders
***that this Section 2.1 cannot be modified, amended or waived
2.2 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California.
2.3 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto*.
*provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price
2.4 Entire Agreement. Except as set forth below, this Agreement
and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
2.5 Notices, etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by first class
mail, postage prepaid, certified or registered mail, return receipt requested,
addressed (a) if to Holder, at such Holder's address as set forth below, or at
such other address as such Holder shall have furnished to the Company in
writing, or (b) if to the Company, at the Company's address set forth below, or
at such other address as the Company shall have furnished to the Holder in
writing.
2.6 Severability. In case any provision of this Agreement shall
be invalid, illegal, or unenforceable, the validity, legality and enforceability
of the remaining provisions of this Agreement or any provision of the other
Agreement s shall not in any way be affected or impaired thereby.
2.7 Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
2.8 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
<PAGE>
PURCHASER COMPANY
SILICON VALLEY BANK SSE Telecom, Inc.
By: ________________________________ By: _______________________________
Name: ________________________________ Name: _____________________________
(print) (print)
Title: ________________________________ Title: Chairman of the Board,
President or Vice President
Address: ________________________________ Address: ____________________________
=============================== ===========================
<PAGE>
EXHIBIT 10.9
SILICON VALLEY BANK
ANTIDILUTION AGREEMENT
THIS ANTIDILUTION AGREEMENT is entered into as of July 30, 1999, by and
between SILICON VALLEY BANK ("Purchaser") and SSE Telecom, Inc.
RECITALS
A. Concurrently with the execution of this Antidilution Agreement, the
Purchaser is purchasing from the Company a Warrant to Purchase Common Stock (the
"Warrant') pursuant to which Purchaser has the right to acquire from the Company
the Shares (as defined in the Warrant).
B. By this Antidilution Agreement, the Purchaser and the Company desire
to set forth the adjustment in the number of Shares issuable upon exercise of
the Warrant as a result of a Diluting Issuance (as defined in Exhibit A to the
Warrant).
C. Capitalized terms used herein shall have the same meaning as
set forth in the Warrant.
NOW, THEREFORE, in consideration of the mutual promises,
covenants and conditions hereinafter set forth, the parties hereto mutually
agree as follows:
1. Definitions. As used in this Antidilution
Agreement, the following terms have the following respective meanings:
(a) "Option" means any right, option, or
warrant to subscribe for, purchase, or otherwise acquire common stock or
Convertible Securities.
(b) "Convertible Securities" means any evidences
of indebtedness, shares of stock, or other securities directly or indirectly
convertible into or exchangeable for common stock.
(c) "Issue" means to grant, issue, sell,
or fix a record date for determining persons entitled to receive, any security
(including Options), whichever of the foregoing is the first to occur.
(d) "Additional Common Shares" means all common
stock (including reissued shares) issued (or deemed to be issued pursuant to
Section 2) after the* date of the Warrant. Additional Common Shares does
not include, however, any common stock issued in a transaction
described in Sections 2.1 and 2.2 of the Warrant; any common stock Issued upon
conversion of preferred stock outstanding on the date of the Warrant; the
Shares; or**
*issue
*shares of common stock and/or options, warrants or other common stock purchase
rights, and the common stock issued pursuant to such options, warrants or other
rights (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like) after the issue date of the Warrant to
employees, officers or directors of, or consultants or advisors to the Company
or any subsidiary pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board of Directors of the Company; shares
of common stock issued pursuant to the exercise of options, warrants or
convertible securities outstanding as of the issue date of the Warrant.
(e) n/a
2. Deemed Issuance of Additional Common Shares. The shares of
common stock ultimately Issuable upon exercise of an Option (including the
shares of common stock ultimately Issuable upon conversion or exercise of a
Convertible Security Issuable pursuant to an Option) are deemed to be Issued
when the Option is Issued. The shares of common stock ultimately Issuable
upon conversion or exercise of a Convertible Security (other than a
Convertible Security Issued pursuant to an Option) shall be deemed Issued
upon Issuance of the Convertible Security. The maximum amount of common stock
Issuable is determined without regard to any future adjustments permitted
under the instrument creating the Options or Convertible Securities.
3. Adjustment of Warrant Price for Diluting Issuances.
3.1 Weighted Average Adjustment. If the Company issues
Additional Common Shares after the date of the Warrant and the consideration per
Additional Common Share (determined pursuant to Section 9) is less than the
Warrant Price in effect immediately before such Issue, the Warrant Price shall
be reduced, concurrently with such Issue, to a price (calculated to the nearest
hundredth of a cent) determined by multiplying the Warrant Price by a fraction:
(a) the numerator of which is the amount of such common stock
outstanding immediately before such Issue plus the amount of common stock that
the aggregate consideration received by the Company for the Additional Common
Shares* would purchase at the Warrant Price in effect immediately before such
Issue, and
*(determined pursuant to Section 9)
(b) the denominator of which is the amount of
common stock* outstanding immediately before such Issue plus the number of
such Additional Common Shares.
*deemed outstanding (as defined in Section 3.3 below)
3.2 Adjustment of Number of Shares. Upon each adjustment of
the Warrant Price, the number of Shares issuable upon exercise of the Warrant
shall be increased to equal the quotient obtained by dividing (a) the product
resulting from multiplying (i) the number of Shares issuable upon exercise of
the Warrant and (ii) the Warrant Price, in each case as in effect immediately
before such adjustment, by (b) the adjusted Warrant Price.
3.3 Securities Deemed Outstanding. For the purpose of
Section 3.1(b), the amount of common stock outstanding shall be the sum of (A)
the number of shares of common stock actually outstanding, (B)the number of
shares of common stock into which the then outstanding shares of preferred
stock (if any) could be converted if fully converted on the day
immediately preceding the given date, and (C) the number of shares of common
stock which could be obtained through the exercise or conversion of all other
rights, options and convertible securities outstanding on the day immediately
preceding the given date.
4. No Adjustment for Issuances Following Deemed Issuances. No
adjustment to the Warrant Price shall be made upon the exercise of Options or
conversion of Convertible Securities.
5. Adjustment Following Changes in Terms of Options or Convertible
Securities. If the consideration payable to, or the amount of common stock
Issuable by, the Company increases or decreases, respectively, pursuant to the
terms of any outstanding Options or Convertible Securities, the Warrant Price
shall be recomputed to reflect such increase or decrease. The recomputation
shall be made as of the time of the Issuance of the Options or Convertible
Securities. Any changes in the Warrant Price that occurred after such Issuance
because other Additional Common Shares were Issued or deemed Issued shall also
be recomputed.
6. Recomputation Upon Expiration of Options or Convertible Securities.
The Warrant Price computed upon the original Issue of any Options or Convertible
Securities, and any subsequent adjustments based thereon, shall be recomputed
when any Options or rights of conversion under Convertible Securities expire
without having been exercised. In the case of Convertible Securities or Options
for common stock, the Warrant Price shall be recomputed as if the only
Additional Common Shares Issued were the shares of common stock actually Issued
upon the exercise of such securities, if any, and as if the only consideration
received therefor was the consideration actually received upon the Issue,
exercise or conversion of the Options or Convertible Securities. In the case of
Options for Convertible Securities, the Warrant Price shall be recomputed as if
the only Convertible Securities Issued were the Convertible Securities actually
Issued upon the exercise thereof, if any, and as if the only consideration
received therefor was the consideration actually received by the Company
(determined pursuant to Section 9), if any, upon the Issue of the Options for
the Convertible Securities.
7. Limit on Readjustments. No readjustment of the Warrant Price
pursuant to Sections 5 or 6 shall increase the Warrant Price more than the
amount of any decrease made in respect of the Issue of any Options or
Convertible Securities.
8. 30 Day Options. In the case of any Options that expire by their
terms not more than 30 days after the date of Issue thereof, no adjustment of
the Warrant Price shall be made until the expiration or exercise of all such
Options.
9. Computation of Consideration. The consideration received by the
Company for the Issue of any Additional Common Shares shall be computed as
follows:
(a) Cash shall be valued at the amount of cash received by the
Corporation, excluding amounts paid or payable for accrued interest or accrued
dividends.
(b) Property. Property other than cash shall be computed at the
fair market value thereof at the time of the Issue as determined in good faith
by the Board of Directors of the Company.
(c) Mixed Consideration. If Additional Common Shares,
Convertible Securities or rights or options to purchase either Additional
Common Shares or Convertible Securities are issued or sold together with other
stock or securities or other assets of the Company for a consideration which
covers both, the consideration received by the Company shall be computed as
the portion of the consideration so received that may be reasonably determined
in good faith by the Board of Directors to be allocable to such Additiona Common
Shares, Convertible Securities or rights or options.
(d) Options and Convertible Securities. The
consideration per Additional Common Share for Options and Convertible
Securities shall be determined by dividing:
(i) the total amount, if any, received or
receivable by the Company for the Issue of the Options or Convertible
Securities, plus the minimum amount of additional consideration (as set forth
in the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
Company upon exercise of the Options or conversion of the Convertible
Securities, by
(ii) the maximum amount of common stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) ultimately
Issuable upon the exercise of such Options or the conversion of such Convertible
Securities.
10. General.
10.1 Governing Law. This Antidilution Agreement shall be
governed in all respects by the laws of the State of California as such laws are
applied to agreements between California residents entered into and to be
performed entirely within California.
10.2 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
10.3 Entire Agreement. Except as set forth below, this
Antidilution Agreement and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
10.4 Notices, etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by first class
mail, postage prepaid, certified or registered mail, return receipt requested,
addressed (a) if to Purchaser at Purchaser's address as set forth below, or at
such other address as Purchaser shall have furnished to the Company in writing,
or (b) if to the Company, at the Company's address set forth below, or at such
other address as the Company shall have furnished to the Purchaser in writing.
10.5 Severability. In case any provision of this Antidilution
Agreement shall be invalid, illegal, or unenforceable, the validity, legality
and enforceability of the remaining provisions of this Antidilution Agreement
shall not in any way be affected or impaired thereby.
10.6 Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Antidilution Agreement.
10.7 Counterparts. This Antidilution Agreement may be executed
in any number of counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.
PURCHASER COMPANY
SILICON VALLEY BANK SSE Telecom, Inc.
By: _________________________________ By: _______________________________
Name: _______________________________ Name:_______________________________
(print) (print)
Title: ______________________________ Title: Chairman of the Board,
President or Vice President
Address: _____________________________ Address:_____________________________
=============================== ============================
<PAGE>
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<S> <C>
<FISCAL-YEAR-END> Sep-25-1999
<PERIOD-START> Sep-27-1998
<PERIOD-END> Jun-26-1999
<PERIOD-TYPE> 9-MOS
<CASH> 3,501
<SECURITIES> 0
<RECEIVABLES> 4,652
<ALLOWANCES> 672
<INVENTORY> 6,236
<CURRENT-ASSETS> 17,085
<PP&E> 12,106
<DEPRECIATION> 9,142
<TOTAL-ASSETS> 25,374
<CURRENT-LIABILITIES> 8,806
<BONDS> 0
0
0
<COMMON> 61
<OTHER-SE> 14,362
<TOTAL-LIABILITY-AND-EQUITY> 25,374
<SALES> 0
<TOTAL-REVENUES> 17,180
<CGS> 16,725
<TOTAL-COSTS> 9,000
<OTHER-EXPENSES> (4,317)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96
<INCOME-PRETAX> (4,324)
<INCOME-TAX> 97
<INCOME-CONTINUING> (4,421)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,421)
<EPS-BASIC> (0.76)
<EPS-DILUTED> (0.76)
</TABLE>
