<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 26, 1998 Commission file number 000-18404
--------------------------
TRUEVISION, INC.
(Exact name of registrant as specified in its charter)
--------------------------
DELAWARE 77-0161747
(State of Incorporation) (I.R.S. Employer Identification No.)
2500 WALSH AVENUE, SANTA CLARA, CALIFORNIA 95051
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 562-4200
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 .
----- ----
Number of shares of Common Stock outstanding as of September 26, 1998:
13,104,398
<PAGE>
INDEX
TRUEVISION, INC.
<TABLE>
<CAPTION>
Page
PART I - FINANCIAL INFORMATION Number
- ------------------------------ ------
<S> <C>
Item 1: Consolidated Interim Financial Statements
Consolidated Interim Balance Sheets -
September 26, 1998 and June 27, 1998 2
Consolidated Interim Statements of Operations-
Three months ended September 26, 1998
and September 27, 1997 3
Consolidated Interim Statements of Cash Flows -
Three months ended September 26, 1998
and September 27, 1997 4
Notes to Consolidated Interim Financial Statements 5
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II - OTHER INFORMATION
- ---------------------------
Item 4: Submission of Matters to a Vote of Security Holders 11
Item 6: Exhibits and Reports on Form 8-K 11
SIGNATURES 12
</TABLE>
1
<PAGE>
PART I - FINANCIAL INFORMATION
TRUEVISION, INC.
CONSOLIDATED INTERIM BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
Sept. 26, June 27,
1998 1998
- ------------------------------------------------------ --------- ---------
(In thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,630 $ 4,973
Accounts receivable, net 3,914 3,911
Inventory (Note 2) 4,733 4,551
Prepaid expenses and other assets 2,743 2,754
Income taxes receivable 35 32
-------- --------
Total current assets 15,055 16,221
Property and equipment, net (Note 3) 1,547 1,721
Other assets, net 129 112
-------- --------
Total assets $ 16,731 $ 18,054
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,804 $ 4,285
Accrued employee compensation 1,014 1,334
Accrued restructuring and other costs (Note 4) 273 403
Advances on inventory held by distributors 140 49
Other accrued liabilities 1,961 2,004
Current portion of long-term obligations 37 46
-------- --------
Total current liabilities 7,229 8,121
Long-term obligations 36 44
-------- --------
Total liabilities 7,265 8,165
-------- --------
Stockholders' equity:
Preferred stock -- --
Common stock 53,747 53,684
Accumulated deficit (44,281) (43,795)
-------- --------
Total stockholders' equity 9,466 9,889
-------- --------
Total liabilities and stockholders' equity $ 16,731 $ 18,054
-------- --------
-------- --------
</TABLE>
See accompanying notes to Consolidated Interim Financial Statements.
2
<PAGE>
TRUEVISION, INC.
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
----------------------
Sept. 26, Sept. 27,
1998 1997
- ---------------------------------------------------- --------- ---------
(In thousands, except per share data)
<S> <C> <C>
Net sales $ 7,510 $ 10,092
Cost of sales 4,644 5,857
-------- ---------
Gross profit 2,866 4,235
-------- ---------
Operating expenses:
Research and development 1,092 1,405
Selling, general and administrative 2,249 2,384
-------- ---------
Total operating expenses 3,341 3,789
-------- ---------
Income (loss) from operations (475) 446
Interest income 21 28
Interest expense (30) (89)
Other income (expense), net (2) (22)
-------- ---------
Income (loss) before provision for income taxes (486) 363
Provision for income taxes -- 11
-------- ---------
Net income (loss) $ (486) $ 352
-------- ---------
-------- ---------
Basic earnings per share:
Net income (loss) per share $ (0.04) $ 0.03
Diluted earnings per share:
Net income (loss) per share $ (0.04) $ 0.03
Weighted average common shares and equivalents:
Basic 13,080 12,760
Diluted 13,080 12,903
</TABLE>
See accompanying notes to Consolidated Interim Financial Statements.
3
<PAGE>
TRUEVISION, INC.
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
----------------------
Sept. 26, Sept. 27,
1998 1997
- ------------------------------------------------------- -------- ---------
(In thousands)
<S> <C> <C>
OPERATING CASH FLOWS:
Net income (loss) $ (486) $ 352
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Provision for doubtful accounts -- 75
Depreciation and other amortization 267 388
Loss on disposal of fixed assets -- 14
Changes in assets and liabilities:
Accounts receivable (3) 115
Inventory (193) 1,610
Prepaid expenses and other assets 11 (450)
Income taxes receivable (3) 40
Accounts payable (481) (336)
Accrued employee compensation (320) (71)
Accrued restructuring and other costs (130) (583)
Advances on inventory held by distributors 91 (296)
Other accrued liabilities (43) (208)
-------- --------
Net cash provided by (used in) operating activities (1,290) 650
-------- --------
INVESTING CASH FLOWS:
Acquisitions of property and equipment (82) (51)
Acquisitions of other assets (17) --
-------- --------
Net cash used in investing activities (99) (51)
-------- --------
FINANCING CASH FLOWS:
Payments on line of credit, net -- (3,738)
Borrowings (payments) on debt obligations, net (17) 4
Issuance of common stock, net 63 144
-------- --------
Net cash provided by (used in) financing activities 46 (3,590)
-------- --------
Net decrease in cash and cash equivalents (1,343) (2,991)
Cash and cash equivalents, beginning of period 4,973 4,549
-------- --------
Cash and cash equivalents, end of period $ 3,630 $ 1,558
-------- --------
-------- --------
SUPPLEMENTAL DISCLOSURE:
Cash paid during the period for:
Interest $ 31 $ 89
Income taxes $ 5 $ 3
Noncash investing and financing activities:
Property and equipment transferred from inventory $ 11 $ --
Property and equipment acquired under capital leases $ -- $ 27
</TABLE>
4
<PAGE>
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. Basis of Presentation
The consolidated interim financial statements presented in this Quarterly
Report on Form 10-Q are unaudited. However, in the opinion of management,
all adjustments have been made for a fair presentation of the interim periods
presented. The consolidated interim financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal
year ended June 27, 1998.
The results of operations for the three-month period ended September 26,
1998 are not necessarily indicative of the results that may be expected for
the fiscal year ending June 26, 1999.
The Company's fiscal calendar and its operating year ends on the Saturday
closest to June 30.
NOTE 2. Inventory
A summary of inventory follows (in thousands):
<TABLE>
<CAPTION>
Sept. 26, June 27,
1998 1998
--------- --------
<S> <C> <C>
Purchased parts and subassemblies $ 747 $ 398
Work-in-progress 1,281 2,398
Finished goods 1,981 1,125
Finished goods held by distributors 724 630
-------- --------
Total $ 4,733 $ 4,551
-------- --------
-------- --------
</TABLE>
NOTE 3. Property and Equipment
A summary of property and equipment follows (in thousands):
<TABLE>
<CAPTION>
Sept. 26, June 27,
1998 1998
--------- --------
<S> <C> <C>
Computer equipment and machinery $8,391 $8,298
Furniture and fixtures 688 688
Leasehold improvements 111 111
------- -------
Subtotal 9,190 9,097
Less: Accumulated depreciation (7,643) (7,376)
------- -------
Total $1,547 $1,721
------- -------
------- -------
</TABLE>
NOTE 4. Restructuring and Other Costs
During the quarter ended June 28, 1997, the Company recorded a charge
for restructuring and other costs of $1,680,000. This charge primarily
consisted of costs associated with downsizing facilities and reduction in
headcount. Also, as a result of the Company's decision to close its European
offices, the restructuring charge included costs associated with lease
terminations and write-off of fixed assets for the sales offices located in
France and the United Kingdom, and the write-off of the cumulative
translation adjustment.
5
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The Company had remaining reserves of $403,000 and $273,000 as of June 27,
1998 and September 26, 1998, respectively, relating to this restructuring. The
remaining balance at September 26, 1998 is expected to be utilized during fiscal
1999. A summary of restructuring activities along with the respective remaining
reserves follows (in thousands):
<TABLE>
<CAPTION>
Reserve Reserve
balance balance
June 27, Sept. 26,
1998 Payments 1998
-------- -------- ---------
<S> <C> <C> <C>
Downsizing facilities $ 356 $ (130) $ 226
Other 47 -- 47
-------- -------- ---------
Total $ 403 $ (130) $ 273
-------- -------- ---------
-------- -------- ---------
</TABLE>
NOTE 5. Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (SFAS 128), EARNINGS PER SHARE. The
Company has presented earnings per share for all periods in accordance with the
new standard. SFAS 128 requires the presentation of basic and diluted earnings
per share. Basic earnings per share is computed using the weighted average
number of common shares outstanding during the period. Diluted earnings per
share includes the effect of dilutive potential common shares (options) issued
during the period (using the treasury stock method). The following data is
presented in thousands, except per share data:
<TABLE>
<CAPTION>
Three months ended
----------------------
Sept. 26, Sept. 27,
1998 1997
--------- ---------
<S> <C> <C>
Net income (loss) $ (486) $ 352
-------- -------
Weighted average shares outstanding-basic 13,080 12,760
Dilutive options -- 143
-------- -------
Weighted average shares outstanding-diluted 13,080 12,903
-------- -------
-------- -------
Earnings per share
Basic (0.04) $ 0.03
Dilutive effect of outstanding options 0.00 0.00
-------- -------
Diluted $ (0.04) $ 0.03
-------- -------
-------- -------
</TABLE>
Options and warrants to purchase 3,228,238 and 1,255,060 shares of common
stock were outstanding at September 26, 1998 and September 27, 1997,
respectively, but were not included in the computations of diluted earnings per
share because the options' exercise prices were greater than the average market
price of the common shares, or because inclusion would have been antidilutive
to the Company's net loss per share.
6
<PAGE>
NOTE 6. Comprehensive Income
Effective June 28, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 (SFAS 130), REPORTING COMPREHENSIVE INCOME.
SFAS 130 requires that all items recognized under accounting standards as
components of comprehensive earnings be reported in an annual financial
statement that is displayed with the same prominence as other annual
financial statements. SFAS 130 also requires that an entity classify items
of other comprehensive earnings by their nature in an annual financial
statement. Adoption of SFAS 130 did not have a material effect on the
Company's financial statements.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction with the
Consolidated Interim Financial Statements and the Notes thereto, and the
Annual Report on Form 10-K for the year ended June 27, 1998. The following
discussion contains forward-looking statements which are subject to certain
risks and uncertainties. Actual results may differ materially from those
described, depending on such factors as are described herein, and those
described under "Certain Factors That May Affect the Company's Future Results
of Operations" in the Company's Annual Report on Form 10-K for the year ended
June 27, 1998.
CURRENT QUARTER COMPARED TO PRIOR QUARTER AND PRIOR YEAR QUARTER
RESULTS OF OPERATIONS
NET SALES. Net sales were $7.5 million for the quarter ended September
26, 1998, compared to $10.1 million for the quarter ended September 27, 1997,
and $8.7 million for the quarter ended June 27, 1998. International net
sales represented 22% of net sales for the quarter ended September 26, 1998,
compared to 30% for the quarter ended September 27, 1997, and 29% for the
quarter ended June 27, 1998.
Net sales to the retail/distribution channel during the quarter ended
September 26, 1998 were $5.2 million, compared to $7.4 million for the
quarter ended September 27, 1997, and $6.3 million for the quarters ended
June 27, 1998. Sales to the retail/distribution channel decreased during the
quarters ended September 26, 1998 and June 27, 1998 primarily due to a
decline in international sales because of slower business in Asia and lower
sales of the Bravado 1000 product line, which has been discontinued. This
decrease was partially offset by increased unit sales of the TARGA 2000 RTX
product line made primarily through the Company's national network of
Signature VARs.
In January 1998, the Company began selling completely configured video
production workstations directly to end-users, and in June 1998 through its
dealer network, based on Avid's popular MCXpress NT non-linear editing
software, its own award winning TARGA products and IBM's newest
IntelliStation M Pro computer system. Net sales of workstations for the
quarters ended September 26, 1998 and June 27, 1998 were $0.6 million and
$0.5 million respectively.
In April 1998, the Company announced four new members of its
award-winning TARGA video card family: TARGA 2000 DDR, the first single-slot,
uncompressed, serial digital capture and output solution; TARGA 2000 RTX3D
and SDX3D, the first non-linear editing solution with a fully integrated
broadcast 3D DVE; and the TARGA DV2000 RTX, the first real-time, dual-stream
DV card fully supporting the consumer DV, DVCAM and DVCPRO formats. Net
sales from the initial shipments of TARGA 2000 RTX3D and SDX3D were $0.4
million for the quarter ended September 26, 1998. TARGA 2000 DDR and TARGA
DV2000 RTX are expected to ship in future quarters of fiscal 1999.
In April 1998, the Company began shipping its new BRAVADO 2000 for
Windows. BRAVADO 2000 is the next-generation video editing solution of the
BRAVADO 1000 designed to help first time non-linear video users create
professional quality content quickly and easily. Net sales of BRAVADO 2000
for the quarters ended September 26, 1998 and June 27, 1998 were $0.2 million
and $0.3 million, respectively.
In August 1998, the Company began shipping its new BRAVADO DV2000, a
complete firewire (IEEE 1394) video editing solution for Windows. BRAVADO
DV2000 includes a full version of Adobe Premiere-Registered Trademark- 5.1.
Net sales from the initial shipments of BRAVADO DV2000 were $0.3 million for
the quarter ended September 26, 1998.
8
<PAGE>
The volume and timing of recognition of revenue from distributors and
orders received from other direct customers during a quarter are difficult to
forecast. Truevision's non-OEM customers generally do not place scheduled
orders in advance and, as a result, backlog at the beginning of each quarter
represents only a portion of the product sales anticipated in that quarter.
Quarterly net sales and operating results therefore depend on the volume and
timing of bookings received during a quarter and sales made by distributors
during a quarter, which are difficult to forecast. The absence of backlog
has limited the Company's ability to predict appropriate production and
inventory levels, which has had and could have in the future an adverse
effect on operating results. Truevision's results of operations may
fluctuate from quarter to quarter due to these and other factors, such as
announcements by Truevision, its competitors or the manufacturers of
platforms with which Truevision's products are used.
OEM net sales were $2.3 million for the quarter ended September 26,
1998, compared to $2.7 million for the quarter ended September 27, 1997, and
$2.4 million for the quarter ended June 27, 1998
GROSS PROFIT. The Company had a gross profit of $2.9 million, or 38% of
net sales, for the quarter ended September 26, 1998, compared to $4.2
million, or 42% of net sales, for the quarter ended September 27, 1997, and
$3.8 million, or 44% of net sales, for the quarter ended June 27, 1998. The
decrease in the gross profit percentage from 44% for the quarter ended June
27, 1998 to 38% for the quarter ended September 26, 1998 was due primarily to
lower margins on OEM net sales and a price decrease in the TARGA 2000 RTX
product line.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
were $1.1 million for the quarter ended September 26, 1998, compared to $1.4
million for the quarter ended September 27, 1997, and $1.2 million for the
quarter ended June 27, 1998.
The Company believes that continued investment in research and
development is critical to its future growth and its competitive position in
the video products market and is directly related to timely development of
new and enhanced products. The Company, therefore, may incur increased
research and development spending in future periods. Because of the inherent
uncertainty of development projects, there can be no assurance that increased
research and development efforts will result in successful product
introductions or enable the Company to maintain or increase sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $2.3 million for the quarter ended September 26,
1998, compared to $2.4 million for the quarter ended September 27, 1997, and
$2.7 million for the quarter ended June 27, 1998. Although the Company has
reduced its sales and marketing promotions and believes that such promotions
are sufficient for the current sales level, there can be no assurance that
the current or increased sales and marketing promotions will enable the
Company to maintain or increase its current level of sales.
LIQUIDITY AND CAPITAL RESOURCES
At September 26, 1998, the Company had cash and cash equivalents of $3.6
million, a decrease of $1.4 million from the $5.0 million at June 27, 1998.
Working capital totaled $7.8 million at September 26, 1998, a decrease of
$0.3 million from $8.1 million at June 27, 1998.
Net cash used in operating activities was $1.3 million in the quarter
ended September 26, 1998, compared to net cash provided by operations of $0.7
million in the quarter ended September 27, 1997. In the quarter ended
September 26, 1998, the Company used cash flow from operations primarily due
to a net loss of $0.5 million, a decrease in accounts payable of $0.5 million
and a decrease in accrued employee compensation of $0.3 million. These
factors were partially offset by the non-cash effect from depreciation and
amortization of $0.3 million.
9
<PAGE>
Distributor revenue accounted for $1.9 million, or 25% of the Company's
net sales for the quarter ended September 26, 1998, compared to $3.3 million,
or 32%, for the quarter ended September 27, 1997, and $2.9 million or 34% for
the quarter ended June 27, 1998. While the Company intends to continue its
policy of careful inventory and receivables management, it believes that in
the future, somewhat greater levels of inventory and receivables relative to
sales may be needed to serve its distribution channels.
In August 1997, the Company entered into an agreement with a major
supplier to purchase $1.6 million of a certain component during fiscal 1998
and 1999. At September 26, 1998, $0.5 million remains to be purchased under
this agreement.
Net cash used in investing activities was $0.1 million in the quarter
ended September 26, 1998, compared to $0.1 million in the quarter ended
September 27, 1997. At September 26, 1998, the Company had no material
commitments for the purchase of capital equipment.
Net cash provided by financing activities was $46,000 in the quarter
ended September 26, 1998, compared to $3.6 million used in financing
activities in the quarter ended September 27, 1997. In the quarter ended
September 27, 1997, the Company repaid $3.7 million in borrowings under the
line of credit.
The Company has a one-year revolving line of credit agreement allowing
the Company to borrow up to $7 million based upon percentages of eligible
accounts receivable and inventory. The primary financial covenants of the
line of credit relate to quick ratio, tangible net worth, debt to tangible
net worth and profitability. As of September 26, 1998, the Company had no
borrowings and $2.4 million available under the line of credit. As of
November 10, 1998, the Company had no borrowings and $2.7 million available
under the line of credit.
The Company's cumulative operating losses have resulted in the need to
address the Company's liquidity position. Truevision's plans include cost
reductions and the introduction of new products during fiscal 1999.
Management believes that these plans, when coupled with available credit
facilities as discussed above, will enable the Company to continue as a going
concern at least through June 26, 1999.
The Company believes that success in its industry requires substantial
capital in order to maintain the flexibility to take advantage of
opportunities as they may arise. The Company may, from time to time, as
market and business conditions warrant, invest in or acquire complementary
businesses, products or technologies. The Company may require additional
equity or debt financing to fund such activities. However, there can be no
assurance that the Company will be able to obtain these funds on terms and
conditions acceptable to the Company. In addition, the sale of additional
equity or convertible debt securities could result in additional dilution in
the equity ownership of the Company's stockholders.
IMPACT OF YEAR 2000
Like many other companies, Year 2000 computer issues create certain
risks for Truevision. If the Company's internal management information
systems do not correctly recognize and process date information beyond the
Year 1999, there could be an adverse impact on the Company's operations. To
address these Year 2000 issues with its internal systems, the Company has
initiated a program to evaluate its internal systems. Assessment and
remediation are proceeding in parallel and the Company currently plans to
have changes to these information systems completed and tested by January
1999. These activities are intended to encompass all major categories of
internal systems used by the Company, including manufacturing, sales and
financial systems. An initial assessment indicates that certain internal
systems should be upgraded or replaced as part of a solution to the Year 2000
problem. Certain of the costs related to upgrades of such hardware and
software systems are covered by ongoing maintenance agreements. Additional
costs of purchasing, installing, modifying and testing the internal systems
are not expected to exceed $250,000.
To assist customers in evaluating their Year 2000 issues, the Company
has completed a program to assess the capability of its current products to
handle the Year 2000. The Company believes that all current products
shipping, which run under Microsoft Windows NT, Windows 95/98 or Apple
Macintosh OS, are "Year 2000 Compliant". Testing of older products, which
are no longer shipping, will not be performed. The Company is also working
with key suppliers of products and services to determine that their
operations and products are Year 2000 Compliant or to monitor their progress
toward Year 2000 compliance, as appropriate. In addition, the Company has
begun internal discussions concerning contingency planning to address
potential problem areas with internal systems and with suppliers and other
third parties. It is expected that assessment, remediation and contingency
planning activities will be on-going throughout calendar year 1998 and 1999
and with the goal of appropriately resolving all material internal systems
and third party issues.
Except as implied in any limited product warranty, the Company does not
believe it is legally responsible for costs incurred by customers related to
ensuring Year 2000 compliance. Nevertheless, the Company is incurring various
costs to provide customer support and customer satisfaction services
regarding Year 2000 issues and it is anticipated that these expenditures will
continue through calendar year 1999 and thereafter. As used by Truevision,
"Year 2000 Compliant" means that when used properly and in conformity with
the product information provided by the Company, and when used with "Year
2000 Compliant" computer systems, the product will accurately store, display,
process, provide, and/or receive data from, into, and between the twentieth
and twenty-first centuries, including leap year calculations, provided that
all other technology used in combination with the Truevision product properly
exchanges date data with the Truevision product. There can be no assurance
that (i) third party technologies used in combination with Truevision products
will be Year 2000 Compliant and (ii) Truevision products will not be
adversely affected when used with such third party technologies, nor can the
Company represent that any modifications to its products made by a party
other than Truevision will be Year 2000 Compliant. The costs incurred to date
related to these programs have not been material. The cost which will
be incurred by the Company regarding the testing of current products for
Year 2000 compliance, and answering and responding to customer requests
related to Year 2000 issues, including both incremental spending and
redeployed resources, is currently not expected to exceed $100,000. The total
cost estimate does not include potential costs related to any customer or
other claims or the cost of internal software and hardware replaced in the
normal course of business. In some instances, the installation schedule of
new software and hardware in the normal course of business is being
accelerated to also afford a solution to Year 2000 compliance issues. The
total cost estimate is based on the current assessment of the projects and
is subject to change as the project progress. Based on currently available
information, the Company does not believe that the Year 2000 matters
discussed above related to internal systems or products sold to customers
will have a material adverse impact on its financial condition or overall
trends in results of operations; however, it is still uncertain to what
extent the Company may be affected by such matters. In addition, customers
may delay purchase decisions because of uncertainty about Year 2000 issues.
There also can be no assurance that the failure to ensure Year 2000
compliance by a supplier or another third party would not have a material
adverse effect on the Company.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on October 21, 1998,
pursuant to the Notice of Annual Meeting of Stockholders and Proxy
Statement dated September 23, 1998, the following matters were submitted to
the Company's stockholders. Set forth after each nominee for director are
the number of votes for and the number of votes withheld and for each other
matter presented are the number of votes for, the number of votes against,
the number of abstentions, and the number of broker non-votes,
respectively:
(1) the election of Walter W. Bregman (10,344,755 : 105,885), Louis J.
Doctor, (10,343,451 : 107,189), William H. McAleer (10,346,155 :
104,485), Kieth E. Sorenson (10,300,220 : 150,420), and Conrad J.
Wredberg (10,346,505 : 104,135) as directors of the Company for the
ensuing year and until their successors have been duly elected and
qualified; and
(2) the approval of an amendment to the Company's Amended 1997 Equity
Incentive Plan, as amended, to increase the aggregate number of shares
of Common Stock authorized for issuance under such plan by 450,000
shares (3,597,551 : 628,916 : 19,154 : 6,205,019); and
(3) the approval of an amendment to the Company's Amended 1990 Employee
Stock Purchase Plan, as amended, to increase the aggregate number of
shares of Common Stock authorized for issuance under such plan by
200,000 shares (4,007,779 : 218,738 : 19,104 : 6,205,019); and
(4) the ratification of the appointment of PricewaterhouseCoopers LLP as
the Company's independent accountants for the fiscal year ending June
26, 1999 (10,413,304 : 21,236 : 16,100 : 0).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.33 Streamline Facility Agreement by and between the Company and
Silicon Valley Bank dated September 24, 1998.
10.34 Streamline Facility Agreement (Exim Program) by and between
the Company and Silicon Valley Bank dated September 24, 1998.
10.35 Export-Import Bank of the United States Working Capital
Guarantee Program Borrower Agreement by and between the
Company and Silicon Valley Bank.
10.36 Loan Authorization Notice by and between Silicon Valley Bank
and Export-Import Bank dated September 25, 1998.
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended September 26,
1998.
11
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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 thereunto duly authorized.
Date: November 10, 1998 by: /s/ R. JOHN CURSON
--------------------------------------------
R. John Curson
Senior Vice President, Chief Financial
Officer and Secretary
(signing as duly authorized signatory on
behalf of the registrant and in his
capacity as principal financial officer of
the registrant.)
12
<PAGE>
Streamline Facility Agreement
September 24, 1998
Truevision, Inc.
2500 Walsh Avenue
Santa Clara, CA 95051
Gentlemen:
Reference is made to the Loan and Security Agreement between you
("Borrower") and us ("Silicon") dated September 19, 1997 (as amended, the "Loan
Agreement"). (This letter agreement, the Loan Agreement, and all other written
documents and agreements between us are referred to herein collectively as the
"Loan Documents". Capitalized terms used but not defined in this agreement,
shall have the meanings set forth in the Loan Agreement.)
This will confirm our agreement that the following provisions shall apply,
effective on the date hereof:
1. MONTHLY BORROWING BASE. Prior to the initial Loan hereunder and at
all times when any Obligations remain outstanding, within 30 days after the end
of each month, Borrower shall deliver to Silicon a Borrowing Base Certificate
signed by the Chief Executive Officer, President, Chief Financial Officer or
Controller of Borrower in substantially the form of Exhibit A hereto, together
with aged listings of accounts receivable and accounts payable.
2. DAILY DELIVERY OF PROCEEDS OF RECEIVABLES NOT REQUIRED. Borrower
shall not be required to deliver the proceeds of Receivables to Silicon upon
receipt as provided in Section 4.4 of the Loan Agreement; provided that if any
Event of Default has occurred and is continuing, without limiting its other
rights and remedies, Silicon shall have the right to require that all proceeds
of all Receivables be delivered to Silicon upon receipt and in the form
received.
3. CHANGES TO REPORTING REQUIREMENTS.
(a) Daily delivery to Silicon of transaction reports, schedules
and assignments of Receivables, and schedules of collections, and delivery to
Silicon of copies of credit memos within two days after the date issued, as
called for by Section 4.3 of the Loan Agreement, will not be required.
(b) The first sentence of Section 4.6, which requires that
Borrower promptly notify Silicon of all disputes or claims relating to
Receivables, is replaced by the following: "Borrower shall promptly notify
Silicon of all returns and recoveries and of all disputes and claims, where
the return, recovery, dispute or claim involves more than $50,000".
-1-
<PAGE>
(c) Borrower shall provide to Silicon, within five (5) days of
filing, copies of all reports on Form 10-K and 10-Q filed with the Securities
and Exchange Commission.
(d) Borrower's Compliance Certificate and report of all
distributor sell-throughs and return sales, set forth in Section 5.3 of the
Loan Agreement, shall be required within 30 days of each fiscal quarter
ending after the date hereof
(e) Collateral audits, as provided for in Section 5.4 of the Loan
Agreement, shall be conducted as follows: (i) annually if no Loans have been
made to Borrower or (ii) semi-annually if Loans have been made to Borrower.
If Borrower requests a Loan and no Loans have been made to Borrower in the
six (6) months preceding Borrower's request, a collateral audit shall be
conducted within 30 days of the Borrower's request and must be completed with
results satisfactory to Silicon in its sole discretion prior to any Loans
being made by Silicon to Borrower.
4. CHANGE IN CREDIT LIMIT. The Credit Limit set forth in the Loan
Agreement is hereby amended to read as follows (provided, no changes are being
made to the various sublimits of the Credit Limit):
"An amount not to exceed the lesser of:
(i) $5,000,000 or
(11) the sum of:
(a) 75% of the amount of Borrower's Eligible Receivables (as
defined in Section 8 above) that constitute non-Distributor Receivables, @us
(b) 60% of the amount of Borrower's Eligible Receivables that
constitute Distributor Receivables.
For the purposes hereof, the term "Distributor Receivables" shall mean
those Receivables arising in the ordinary course of Borrower's business from the
sale of goods or rendition of services to any customer identified by the Bank as
a distributor of the Borrower due to, among other things, such customer's rights
of product return, price protection credits and/or cooperative advertising
credits."
5. CHANGE IN INTEREST RATE. The Interest Rate set forth in the Loan
Agreement is hereby amended to read as follows:
"A rate equal to the "Prime Rate" in effect from time to time, plus 0.50%
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
-2-
<PAGE>
applicable to the Obligations shall change on each date there is a change in the
Prime Rate."
6. CHANGE IN MATURITY DATE. Section 6.1 of the Loan Agreement is hereby
amended in its entirety to read as follows: "This Agreement shall continue in
effect until SEPTEMBER 24,1999."
7. CHANGES IN FINANCIAL COVENANTS.
(a) TANGIBLE NET WORTH. Borrower shall not be required to comply
with the Tangible Net Worth financial covenant set forth in the Loan
Agreement.
(b) QUICK RATIO. Borrower shall maintain, as of the last day of
the fiscal quarter ending September 30, 1998, a ratio of quick assets to
current liabilities of at least 0.80 to 1.0; and Borrower shall maintain, as
of the last day of each fiscal quarter ending thereafter, a ratio of quick
assets to current liabilities of at least 1.0 TO 1.0.
(c) DEBT-NET WORTH RATIO. Borrower shall maintain, as of the last
day of each calendar month, a ratio of total liabilities to tangible net
worth of not more than 1.0 TO 1.0.
(d) PROFITABILITY. Borrower shall be profitable for the fiscal
quarter ending September 30, 1998 and for each fiscal quarter and each fiscal
year ending thereafter; provided, however, Borrower shall be permitted to
incur a loss (after taxes) for one fiscal quarter in each fiscal year
provide, further, that such loss (after taxes) does not exceed $500,000.
(e) The term "quick assets" means, as of any applicable date, the
consolidated cash, cash equivalents, accounts receivable and investments with
maturities of fewer than 90 days of Borrower determined in accordance with
generally accepted accounting principles.
8. LOAN FEE. Borrower shall pay Silicon a loan fee in the amount of
$25,000, which fee shall be in addition to all interest and other sums payable
to Silicon and shall be nonrefundable.
This Agreement, the Loan Agreement, and the other Loan Documents set forth
in full all of the representations and agreements of the parties with respect to
the subject matter hereof and supersede all prior discussions, oral
representations, oral agreements and oral understandings between the parties
with respect to the subject hereof. Except as herein expressly amended, all of
the terms and provisions of the Loan Agreement, and all other Loan Documents
shall continue in full force and effect and the same are hereby ratified and
confirmed.
-3-
<PAGE>
If the foregoing correctly sets forth our agreement, please sign the
enclosed copy of this Agreement and return it to us.
Sincerely yours,
Silicon Valley Bank
By [ILLEGIBLE]
------------------------------------------
Title SVP
------------------------------------
Accepted and agreed:
Borrower:
TRUEVISION, INC.
By [ILLEGIBLE]
--------------------------------
President or Vice President
-4-
<PAGE>
EXHIBIT A
BORROWING BASE CERTIFICATE
<TABLE>
<CAPTION>
<S><C>
Borrower: TrueVision, Inc. Bank: Silicon Valley Bank
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ___ $__________
2. Additions (please explain on reverse) $__________
3. TOTAL ACCOUNTS RECEIVABLE $__________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $__________
5. Balance of 50% over 90 day accounts $__________
6. Concentration Limits $__________
7. Foreign Accounts $__________
8. Governmental Accounts $__________
9. Contra Accounts $__________
10. Promotion or Demo Accounts $__________
11. Intercompany/Employee Accounts $__________
12. Other (please explain on reverse) $__________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $__________
14. Eligible Accounts (#3 minus #13) $__________
15. LOAN VALUE OF ACCOUNTS (__% of #14) $__________
INVENTORY
16. Inventory Value as of ________ $__________
17. LOAN VALUE OF INVENTORY (__% of #16) $__________
BALANCES
18. Maximum Loan Amount $__________
19. Total Funds Available [Lesser of #18 or (#15 plus #17)] $__________
20. Present balance owing on Line of Credit $__________
21. Outstanding under Sublimits ( ) $__________
22. RESERVE POSITION (#19 minus #20 and #21) $__________
</TABLE>
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE FOREGOING IS TRUE, COMPLETE AND
CORRECT, AND THAT THE INFORMATION REFLECTED IN THIS BORROWING BASE CERTIFICATE
COMPLIES WITH THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE LOAN AND
SECURITY AGREEMENT BETWEEN THE UNDERSIGNED AND SILICON VALLEY BANK.
COMMENTS:
BANK USE ONLY
RECEIVED BY:__________________
DATE:__________________
REVIEWED BY:__________________
COMPLIANCE STATUS: YES / NO
TRUEVISION, INC.
By:
------------------------
Authorized Signer
<PAGE>
Streamline Facility Agreement
(Exim Program)
September 24, 1998
TrueVision, Inc.
2500 Walsh Avenue
Santa Clara, CA 95051
Gentlemen:
Reference is made to the Loan and Security Agreement (Exim Program) between
you ("Borrower") and us ("Silicon") dated September 19, 1997 (as amended, the
"Loan Agreement"). (This letter agreement, the Loan Agreement, and all other
written documents and agreements between us are referred to herein collectively
as the "Loan Documents". Capitalized terms used but not defined in this
agreement, shall have the meanings set forth in the Loan Agreement.)
This will confirm our agreement that the following provisions shall apply,
effective on the date hereof:
1. MONTHLY BORROWING BASE. Prior to the initial Loan hereunder and at
all times when any Obligations remain outstanding, within 30 days after the end
of each month, Borrower shall deliver to Silicon a Borrowing Base Certificate
signed by the Chief Executive Officer, President, Chief Financial Officer or
Controller of Borrower in substantially the form of Exhibit A hereto, together
with aged listings of accounts receivable and accounts payable.
2. DAILY DELIVERY OF PROCEEDS OF RECEIVABLES NOT REQUIRED. Borrower
shall not be required to deliver the proceeds of Receivables to Silicon upon
receipt as provided in Section 4.4 of the Loan Agreement; provided that if any
Event of Default has occurred and is continuing, without limiting its other
rights and remedies, Silicon shall have the right to require that all proceeds
of all Receivables be delivered to Silicon upon receipt and in the form
received.
3. CHANGES TO REPORTING REQUIREMENTS.
(a) Daily delivery to Silicon of transaction reports, schedules and
assignments of Receivables, and schedules of collections, and delivery to
Silicon of copies of credit memos within two days after the date issued, as
called for by Section 4.3 of the Loan Agreement, will not be required.
(b) The first sentence of Section 4.6, which requires that Borrower
promptly notify Silicon of all disputes or claims relating to Receivables, is
replaced by the following: "Borrower shall promptly notify Silicon of all
returns and recoveries and of all disputes and claims, where the return,
recovery, dispute or claim involves more than $50,000".
-1-
<PAGE>
(c) Borrower shall provide to Silicon, within five (5) days of filing,
copies of all reports on Form 10-K and 10-Q filed with the Securities and
Exchange Commission.
(d) Borrower's Compliance Certificate and report of all distributor
sell-throughs and return sales, set forth in Section 5.3 of the Loan
Agreement, shall be required within 30 days of each fiscal quarter ending
after the date hereof.
(e) Collateral audits, as provided for in Section 5.4 of the Loan
Agreement, shall be conducted as follows: (i) annually if no Loans have been
made to Borrower or (ii) semi-annually if Loans have been made to Borrower.
If Borrower requests a Loan and no Loans have been made to Borrower in the
six (6) months preceding Borrower's request, a collateral audit shall be
conducted within 30 days of the Borrower's request and must be completed with
results satisfactory to Silicon in its sole discretion prior to any Loans
being made by Silicon to Borrower.
4. CHANGE IN CREDIT LIMIT. The Credit Limit set forth in the Loan
Agreement is hereby amended to read as follows (provided, no changes are being
made to the remaining provisions of the Credit Limit, including, without
limitation, the definition of "Value"):
"The unpaid principal balance of all Exim Loans and all accrued
interest thereon from time to time outstanding may not exceed the lesser of
(i) or (ii) as follows:
(i) $2,000,000 at any one time outstanding; or
(ii) the sum of (a), (b) and (c):
(a) 80% of the value of Borrower's eligible export
Receivables, which Silicon in its discretion deems eligible for borrowing,
that constitute Foreign non-Distributor Receivables; plus
(b) 65% of the value of Borrower's eligible export
Receivables, which Silicon in its discretion deems eligible for borrowing,
that constitute Foreign Distributor Receivables; plus
(c) up to 60% of the Value of Borrower's export inventory
which Silicon in its discretion deems eligible for borrowing, up to a maximum
of $1,000,000 total at any one time outstanding.
The term "Foreign Distributor Receivables" shall mean those
Receivables arising in the ordinary course of Borrower's business from the
sale of goods or rendition of services to any customer located outside of the
United States and who is identified by the Bank as a distributor of the
Borrower due to, among other things, such customer's rights of product
return, price protection credits and/or cooperative advertising credits."
-2-
<PAGE>
5. CHANGE IN INTEREST RATE. The Interest Rate set forth in the Loan
Agreement is hereby amended to read as follows:
"A rate equal to the "Prime Rate" in effect from time to time, plus
0.25% 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."
6. CHANGE IN MATURITY DATE. Section 6.1 of the Loan Agreement is
hereby amended in its entirety to read as follows: "This Agreement shall
continue in effect until SEPTEMBER 24, 1999."
7. CHANGES IN FINANCIAL COVENANTS.
(a) TANGIBLE NET WORTH. Borrower shall not be required to comply
with the Tangible Net Worth financial covenant set forth in the Loan
Agreement.
(b) QUICK RATIO. Borrower shall maintain, as of the last day of
the fiscal quarter ending September 30, 1998, a ratio of quick assets to
current liabilities of at least 0.80 TO 1.0; and Borrower shall maintain, as
of the last day of each fiscal quarter ending thereafter, a ratio of quick
assets to current liabilities of at least 1.0 TO 1.0.
(c) DEBT-NET WORTH RATIO. Borrower shall maintain, as of the last
day of each calendar month, a ratio of total liabilities to tangible net
worth of not more than 1.0 TO 1.0.
(d) PROFITABILITY. Borrower shall be profitable for the fiscal
quarter ending September 30, 1998 and for each fiscal quarter and each fiscal
year ending thereafter; provided, however, Borrower shall be permitted to
incur a loss (after taxes) for one fiscal quarter in each fiscal year
provide, further, that such loss (after taxes) does not exceed $500,000.
(e) The term "quick assets" means, as of any applicable date, the
consolidated cash, cash equivalents, accounts receivable and investments with
maturities of fewer than 90 days of Borrower determined in accordance with
generally accepted accounting principles.
8. LOAN FEE. Borrower shall pay Silicon a loan fee in the amount of
$30,000, which fee shall be in addition to all interest and other sums
payable to Silicon and shall be nonrefundable.
This Agreement, the Loan Agreement, and the other Loan Documents set forth
in full all of the representations and agreements of the parties with respect to
the subject matter hereof and supersede all prior discussions, oral
representations, oral agreements and oral understandings between the parties
with respect to the subject hereof. Except
-3-
<PAGE>
as herein expressly amended, all of the terms and provisions of the Loan
Agreement, and all other Loan Documents shall continue in full force and effect
and the same are hereby ratified and confirmed.
If the foregoing correctly sets forth our agreement, please sign the
enclosed copy of this Agreement and return it to us.
Sincerely yours,
Silicon Valley Bank
By [ILLEGIBLE]
------------------------------------------
Title [ILLEGIBLE]
------------------------------------
Accepted and agreed:
Borrower:
TRUEVISION, INC.
By [ILLEGIBLE]
-----------------------------
President or Vice President
-4-
<PAGE>
EXHIBIT A
BORROWING BASE CERTIFICATE
<TABLE>
<CAPTION>
<S><C>
Borrower: TrueVision, Inc. Bank: Silicon Valley Bank
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ___ $__________
2. Additions (please explain on reverse) $__________
3. TOTAL ACCOUNTS RECEIVABLE $__________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $__________
5. Balance of 50% over 90 day accounts $__________
6. Concentration Limits $__________
7. Foreign Accounts $__________
8. Governmental Accounts $__________
9. Contra Accounts $__________
10. Promotion or Demo Accounts $__________
11. Intercompany/Employee Accounts $__________
12. Other (please explain on reverse) $__________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $__________
14. Eligible Accounts (#3 minus #13) $__________
15. LOAN VALUE OF ACCOUNTS (__% of #14) $__________
INVENTORY
16. Inventory Value as of ________ $__________
17. LOAN VALUE OF INVENTORY (__% of #16) $__________
BALANCES
18. Maximum Loan Amount $__________
19. Total Funds Available [Lesser of #18 or (#15 plus #17)] $__________
20. Present balance owing on Line of Credit $__________
21. Outstanding under Sublimits ( ) $__________
22. RESERVE POSITION (#19 minus #20 and #21) $__________
</TABLE>
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE FOREGOING IS TRUE, COMPLETE AND
CORRECT, AND THAT THE INFORMATION REFLECTED IN THIS BORROWING BASE CERTIFICATE
COMPLIES WITH THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE LOAN AND
SECURITY AGREEMENT BETWEEN THE UNDERSIGNED AND SILICON VALLEY BANK.
COMMENTS:
BANK USE ONLY
RECEIVED BY:__________________
DATE:__________________
REVIEWED BY:__________________
COMPLIANCE STATUS: YES / NO
TRUEVISION, INC.
By:
------------------------
Authorized Signer
<PAGE>
ANNEX B
EXPORT-IMPORT BANK OF THE UNITED STATES
WORKING CAPITAL GUARANTEE PROGRAM
BORROWER AGREEMENT
THIS BORROWER AGREEMENT (this "Agreement") is made and entered into by
the entity identified as the Borrower on the signature page hereof (the
"Borrower") and is acknowledged by the institution identified as the Lender
on the signature page hereof (the "Lender").
RECITALS
A. The Lender shall make a loan (the "Loan") to the Borrower for the
purpose of providing the Borrower with pre-export working capital to finance
the manufacture, production or purchase and subsequent export sale of the
Items (as hereinafter defined).
B. The Loan shall be in a principal amount (the "Loan Amount") not to
exceed at any time outstanding the amount specified in Section (5)(A) of the
Loan Authorization Agreement between the Lender and the Export-Import Bank of
the United States ("Eximbank") which is attached hereto as Annex A1 or Annex
A2 and incorporated herein as a part of this Agreement. If the Loan is being
made pursuant to the Lender's Delegated Authority from Eximbank, all
references herein to the Loan Authorization Agreement shall be deemed to be
to the Loan Authorization Notice provided to Eximbank and the Borrower by the
Lender.
C. The Loan shall be evidenced by a valid and enforceable promissory
note payable by the Borrower to the order of the Lender (the "Note") and
shall be made pursuant to a written agreement related solely thereto between
the Borrower and the Lender (the "Loan Agreement").
D. A condition precedent to the making of the Loan by the Lender is that
Eximbank guarantee the payment of ninety percent (90%) of the Loan Amount and
all interest accrued thereon, subject to the terms and conditions of a master
guarantee agreement (the "Master Guarantee Agreement") between Eximbank and the
Lender.
E. In consideration for and as a condition precedent to the Lender's
making the Loan and Eximbank's entering into the Master Guarantee Agreement, the
Borrower shall execute this Agreement for the benefit of the Lender and
Eximbank.
NOW, THEREFORE, the Borrower hereby agrees as follows:
<PAGE>
ARTICLE I
DEFINITIONS
"Accounts Receivable" shall mean those trade accounts from the sale of
the Items due and payable to the Borrower in the United States and any notes,
drafts, letters of credit or insurance proceeds supporting payment thereof.
"Availability Date" shall mean the last date on which the Lender may
make a Disbursement as set forth in Section (10) of the Loan Authorization
Agreement or, if such date is not a Business Day, the next Business Day
thereafter.
"Borrowing Base" shall mean the Collateral Value as discounted by the
applicable Disbursement Rate(s).
"Borrowing Base Certificate" shall mean the certificate in form provided
by the Lender and executed by the Borrower setting forth the Borrowing Base
supporting one or more Disbursements.
"Business Day" shall mean any day on which the Federal Reserve Bank of
New York is open for business.
"Buyer" shall mean an entity which has entered into one or more Export
Orders with the Borrower.
"Closing Date" shall mean the date on which the Loan Documents are
executed by the Borrower.
"Collateral" shall mean the property of the Borrower in which the
Borrower has granted to the Lender a valid and enforceable4e security interest
as security for the payment of all principal and interest due under the Loan,
and which is identified in Section (6) of the Loan Authorization Agreement,
including all proceeds (cash and non-cash) thereof.
"Collateral Value" shall mean at any given time the value of all
Collateral against which Disbursements may be made as set forth in Section
(5)(C) of the Loan Authorization Agreement, valued according to GAAP.
"Country Limitation Schedule" shall mean the most recent schedule published
by Eximbank and provided to the Borrower by the Lender which sets forth on a
country by country basis whether and under what conditions Eximbank will provide
coverage for the financing of export transactions to countries listed therein.
"Debarment Regulations" shall have the meaning set forth in Section 2.16.
<PAGE>
"Disbursed Amount" shall mean the aggregate outstanding amount of the
Disbursements.
"Disbursement" shall mean an advance of the Loan from the Lender to the
Borrower under the Loan Agreement.
"Disbursement Rate" shall mean the rate specified in Section (5)(C) of
the Loan Authorization Agreement for each category of Collateral.
"Dollars" or "$" shall mean the lawful money of the United States of
America.
"Export Order" shall mean a written export order or contract for the
purchase by the Buyer from the Borrower of any of the Items.
"GAAP" shall mean the generally accepted accounting principles issued by
the American Institute of Certified Public Accountants.
"Guarantor" shall mean each person or entity, if any, identified in
Section (3) of the Loan Authorization Agreement who shall guarantee (jointly
and severally if more than one) the Borrower's obligation to repay all
amounts outstanding under the Note.
"Inventory" shall mean the raw materials, work-in-process and finished
goods purchased or manufactured by the Borrower for resale and located in the
United States.
"Items" shall mean the finished goods or services which are intended for
export, as specified in Section (4)(A) of the Loan Authorization Agreement.
"Letter of Credit" shall mean an irrevocable letter of credit subject to
UCP 500, payable in the United States or at the issuing bank and issued for
the benefit of the Borrower on behalf of a Buyer in connection with the
purchase of the Items.
"Loan Documents" shall mean the Note, the Loan Agreement, this Agreement
and any other instrument, agreement or document previously, simultaneously or
hereafter executed by the Borrower or any Guarantors evidencing, securing,
guaranteeing or in connection with the Loan.
"Principals" shall have the meaning set forth in Section 2.16.
"Revolving Loan" shall mean a Loan under which amounts disbursed and
repaid may be disbursed on a continuous basis during the term of the Loan.
"Transaction Specific Loan" shall mean a Loan under which amounts disbursed
and repaid may not be disbursed again.
<PAGE>
"U.S." or "United States" shall mean the United States of America and its
territorial possessions.
"U.S. Content" shall mean with respect to any Item all the labor, materials
and services which are of U.S. origin or manufacture, and which are incorporated
into an Item in the United States.
ARTICLE II
OBLIGATIONS OF THE BORROWER
Until payment in full of the Loan, the Borrower agrees to the following:
Section 2.1 USE OF DISBURSEMENTS. The Borrower shall use Disbursements
only for the purpose of enabling the Borrower to finance the cost of
manufacturing, producing, purchasing or selling the Items. The Borrower may
not use Disbursements for the purpose of: (a) servicing any of the Borrower's
pre-existing or future indebtedness unrelated to the Loan; (b) acquiring
fixed assets or capital goods for use in the Borrower's business; (c)
acquiring, equipping or renting commercial space outside of the United
States; (d) paying the salaries of non-U.S. citizens or non-U.S. permanent
residents who are located in offices outside the United States; or (e)
serving as a retainage or warranty bond.
In addition, Disbursements may not be used to finance the manufacture,
purchase or sale of any of the following:
(a) Items to be sold to a Buyer located in a country in which Eximbank
is legally prohibited from doing business as designated in the Country
Limitation Schedule;
(b) that part of the cost of the Items which is not U.S. Content unless
such part is not greater than fifty percent (50%) of the cost of the Items
and is incorporated into the Items in the United States;
(c) defense articles or defense services; or
(d) without Eximbank's prior written consent, any Items to be used in
the construction, alteration, operation or maintenance of nuclear power,
enrichment, reprocessing, research or heavy water production facilities.
Section 2.2 BORROWING BASE CERTIFICATES AND EXPORT ORDERS. In order to
receive a Disbursement under the Loan, the Borrower shall deliver to the
Lender a Borrowing Base Certificate current within the past five (5) Business
Days and a copy of the Export Order(s) (or, for Revolving Loans, if permitted
by the Lender, a written summary of the Export Orders) against which the
Borrower is requesting a Disbursement. If the Lender permits summaries of
Export Orders, the Borrower shall also deliver promptly to the Lender copies
of any Export Orders requested by the Lender. Additionally, the Borrower
shall deliver to the Lender at
<PAGE>
least once every thirty (30) calendar days a Borrowing Base Certificate current
within the past five (5) Business Days, which requirement may be satisfied by
submission of a Borrowing Base Certificate when requesting a Disbursement.
Section 2.3 EXCLUSIONS FROM THE BORROWING BASE. In determining the amount
of a requested Disbursement, the Borrower shall exclude from the Borrowing Base
the following:
(a) any Inventory which is not located in the United States;
(b) any demonstration Inventory or Inventory sold on consignment;
(c) any Inventory consisting of proprietary software;
(d) any Inventory which is damaged, obsolete, returned, defective,
recalled or unfit for further processing;
(e) any Inventory which has been previously exported from the United
States;
(f) any Inventory which constitutes defense articles or defense
services or any Accounts Receivable generated by sales of such Inventory;
(g) any Inventory which is to be incorporated into Items destined for
shipment to, and any Account Receivable in the name of a Buyer located in, a
country in which Eximbank is legally prohibited from doing business as
designated in the Country Limitation Schedule;
(h) any Inventory which is to be incorporated into Items destined for
shipment to, and any Account Receivable in the name of a Buyer located in, a
country in which Eximbank coverage is not available for commercial reasons as
designated in the Country Limitation Schedule, unless and only to the extent
that such Items are to be sold to such country on terms of a Letter of Credit
confirmed by a bank acceptable to Eximbank;
(i) any Inventory which is to be incorporated into Items whose sale would
result in an ineligible Account Receivable;
(j) any Account Receivable with a term in excess of net one hundred eighty
(180) days;
(k) any Account Receivable which is more than sixty (60) calendar days
past the original due date, unless it is insured through Eximbank export
credit insurance for comprehensive commercial and political risk, or through
Eximbank approved private insurers for comparable coverage, in which case
ninety (90) calendar days shall apply;
(l) any intra-company Account Receivable or any Account Receivable from a
subsidiary of the Borrower, from a person or entity with a controlling interest
in the Borrower or from an entity which shares common controlling ownership with
the Borrower;
<PAGE>
(m) any Account Receivable evidenced by a Letter of Credit, until the
date of shipment of the Items covered by the subject Letter of Credit;
(n) any Account Receivable which the Lender or Eximbank, in its
reasonable judgment, deems uncollectible for any reason;
(o) any Account Receivable payable in a currency other than Dollars,
except as may be approved in writing by Eximbank;
(p) any Account Receivable from a military Buyer, except as may be
approved in writing by Eximbank; and
(q) any Account Receivable due and collectible outside the United
States, except as may be approved in writing by Eximbank.
Section 2.4 SCHEDULES, REPORTS AND OTHER STATEMENTS. The Borrower shall
submit to the Lender in writing each month (a) an Inventory schedule for the
preceding month and (b) an Accounts Receivable aging report for the preceding
month detailing the terms of the amounts due from each Buyer. The Borrower
shall also furnish to the Lender promptly upon request such information,
reports, contracts, invoices and other data concerning the Collateral as the
Lender may from time to time specify.
Section 2.5 ADDITIONAL SECURITY OR PAYMENT. The Borrower shall at all
times ensure that the Borrowing Base exceeds the Disbursed Amount. If
informed by the Lender or if the Borrower otherwise has actual knowledge that
the Borrowing Base is at any time less than the Disbursed Amount, the
Borrower shall, within five (5) Business Days, either (a) furnish additional
security to the Lender, in form and amount satisfactory to the Lender and
Eximbank, or (b) pay to the Lender an amount equal to the difference between
the Disbursed Amount and the Borrowing Base.
Section 2.6 CONTINUED SECURITY INTEREST. The Borrower shall notify the
Lender in writing within five (5) Business Days if (a) the Borrower changes
its name or identity in any manner, (b) the Borrower changes the location of
its principal place of business, (c) the nature of any of the Collateral is
changed or any of the Collateral is transferred to another location or (d)
any of the books or records related to the Collateral are transferred to
another location. The Borrower shall execute such additional financing
statements or other documents as the Lender may reasonably request in order
to maintain its perfected security interest in the Collateral.
Section 2.7 INSPECTION OF COLLATERAL. The Borrower shall permit the
representatives of the Lender and Eximbank to make at any time during normal
business hours reasonable inspections of the Collateral and of the Borrower's
facilities, activities, and books and records, and shall cause its officers
and employees to give full cooperation and assistance in connection therewith.
<PAGE>
Section 2.8 NOTICE OF DEBTOR'S RELIEF, DISSOLUTION AND LITIGATION. The
Borrower shall notify the Lender in writing within five (5) Business Days
of the occurrence of any of the following:
(a) a proceeding in bankruptcy or an action for debtor's relief is
filed by, against, or on behalf of the Borrower;
(b) the Borrower fails to obtain the dismissal or termination within
thirty (30) calendar days of the commencement of any proceeding or action
referred to in (a) above;
(c) the Borrower begins any procedure for its dissolution or
liquidation, or a procedure therefore has been commenced against it; or
(d) any material litigation is filed against the Borrower.
Section 2.9 INSURANCE. The Borrower shall maintain insurance coverage
in the manner and to the extent customary in businesses of similar character.
Section 2.10 MERGER OR CONSOLIDATION. Without the prior written
consent of Eximbank and the Lender, the Borrower shall not (a) merge or
consolidate with any other entity, (b) sell, lease, transfer or otherwise
dispose of any substantial part of its assets, or any part of its assets
which are essential to the conduct of its business or operations, (c) make
any material change in its organizational structure or identity, or (d) enter
into any agreement to do any of the foregoing.
Section 2. 11 REBORROWINGS AND REPAYMENT TERMS. (a) If the Loan is a
Revolving Loan, provided that the Borrower is not in default under any of the
Loan Documents, the Borrower may borrow, repay and reborrow amounts under
the Loan until the close of business on the Availability Date. Unless the
Revolving Loan is renewed or extended by the Lender, the Borrower shall pay
in full the outstanding Loan Amount and all accrued and unpaid interest
thereon no later than the first Business Day after the Availability Date.
(b) If the Loan is a Transaction Specific Loan, the Borrower shall,
within two (2) Business Days of the receipt thereof, pay to the Lender (for
application against the outstanding Loan Amount and accrued and unpaid
interest thereon) all checks, drafts, cash and other remittances it may
receive in payment or on account of the Accounts Receivable or any other
Collateral, in precisely the form received (except for the endorsement of the
Borrower where necessary). Pending such deposit, the Borrower shall not
commingle any such items of payment with any of its other funds or property,
but will hold them separate and apart.
Section 2.12 CROSS DEFAULT. The Borrower shall be deemed in default
under the Loan if the Borrower fails to pay when due any amount payable to
the Lender under any loan to the Borrower not guaranteed by Eximbank.
<PAGE>
Section 2.13 FINANCIAL STATEMENTS. The Borrower shall provide quarterly
financial statements to the Lender no later than forty-five (45) days after the
end of each quarter. This is in addition to any other financial statements that
may be required by the Lender under the Loan Agreement.
Section 2.14 TAXES, JUDGMENTS AND LIENS. The Borrower shall remain
current on all of its federal, state and local tax obligations. In addition,
the Borrower shall notify the Lender in the event (i) any judgment is
rendered against the Borrower, or (ii) any lien is filed against any of the
assets of the Borrower.
Section 2.15 MUNITIONS LIST. If any of the Items are articles,
services, or related technical data that are listed on the United States
Munitions List (part 121 of title 22 of the Code of Federal Regulations), the
Borrower shall send a written notice promptly to the Lender describing the
Item(s) and the corresponding invoice amount.
Section 2.16 SUSPENSION AND DEBARMENT, ETC. On the date of this
Agreement neither the Borrower nor its Principals (as defined below) are (A)
debarred, suspended, proposed for debarment with a final determination still
pending, declared ineligible or voluntarily excluded (as such terms are
defined under any of the Debarment Regulations referred to below) from
participating in procurement or nonprocurement transactions with any United
States federal government department or agency pursuant to any of the
Debarment Regulations (as defined below) or (B) indicted, convicted or had a
civil judgment rendered against the Borrower or any of its Principals for any
of the offenses listed in any of the Debarment Regulations. Unless
authorized by Eximbank, the Borrower will not knowingly enter into any
transactions in connection with the Items with any person who is debarred,
suspended, declared ineligible or voluntarily excluded from participation in
procurement or nonprocurement transactions with any United States federal
government department or agency pursuant to any of the Debarment Regulations.
The Borrower will provide immediate written notice to the Lender if at any
time it learns that the certification set forth in this Section 2.16 was
erroneous when made or has become erroneous by reason of changed
circumstances. For the purposes hereof, (1) "Principals" shall mean any
officer, director, owner, partner, key employee, or other person with primary
management or supervisory responsibilities with respect to the Borrower; or
any other person (whether or not an employee) who has critical influence on
or substantive control over the transaction covered by this Agreement and (2)
the Debarment Regulations shall mean (x) the Govemmentwide Debarment and
Suspension (Nonprocurement) regulations (Common Rule), 53 Fed. Reg. 19204
(May 26, 1988), (y) Subpart 9.4 (Debarment, Suspension, and Ineligibility) of
the Federal Acquisition Regulations, 48 C.F.R. 9.400-9.409 and (z) the
revised Governmentwide Debarment and Suspension (Nonprocurement) regulations
(Common Rule), 60 Fed. Reg. 33037 (June 26, 1995).
<PAGE>
Section 2.17 SPECIAL CONDITIONS. The Borrower shall comply with all
Special Conditions, if any, referenced in Section (11) of the Loan
Authorization Agreement or the Loan Authorization Notice.
ARTICLE III
RIGHTS AND REMEDIES
Section 3.1 INDEMNIFICATION. Upon Eximbank's payment of a claim to the
Lender in connection with the Loan pursuant to the Master Guarantee
Agreement, Eximbank shall assume all rights and remedies of the Lender under
the Loan Documents and may enforce any such rights or remedies against the
Borrower, the Collateral and any Guarantors. Additionally, the Borrower
shall hold Eximbank and the Lender harmless from and indemnify them against
any and all liabilities, damages, claims, costs and losses incurred or
suffered by either of them resulting from (a) any materially incorrect
certification or statement knowingly made by the Borrower or its agent to
Eximbank or the Lender in connection with the Loan, this Agreement or any of
the other Loan Documents or (b) any material breach by the Borrower of the
terms and conditions of this Agreement or any of the other Loan Documents.
The Borrower also acknowledges that any statement, certification or
representation made by the Borrower in connection with the Loan is subject to
the penalties provided in Article 18 U.S. C. Section 1001.
ARTICLE IV
MISCELLANEOUS
Section 4.1 GOVEMING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York, United States
of America.
Section 4.2 NOTIFICATION. All notifications required by this Agreement
shall be given in the manner provided in the Loan Agreement.
Section 4.3 PARTIAL INVALIDITY. If at any time any of the provisions of
this Agreement becomes illegal, invalid or unenforceable in any respect under
the law of any jurisdiction, neither the legality, the validity nor the
enforceability of the remaining provisions hereof shall in any way be
affected or impaired.
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly
executed as of the __ day of ____________, 199__.
TRUEVISION
---------------------
(Name of Borrower)
By [ILLEGIBLE]
---------------------
(Signature)
Name
-------------------
(Print or Type)
Title C. F. O.
-------------------
(Print or Type)
ACKNOWLEDGED:
Silicon Valley Bank
- -------------------
(Name of Lender)
By [ILLEGIBLE]
-------------------
Name [ILLEGIBLE]
-------------------
(Print or Type)
Title SVP
-------------------
(Print or Type)
Guaranteed Loan No.
--------------------
ANNEXES:
A1 - Loan Authorization Agreement or
A2 - Loan Authorization Notice
(Revised April 1, 1996)
<PAGE>
ANNEX A2
TO: EXPORT-IMPORT BANK OF THE UNITED STATES
811 VERMONT AVENUE, N.W.
WASHINGTON, D.C. 20571
ATTENTION: VICE PRESIDENT - UNITED STATES DIVISION
LOAN AUTHORIZATION NOTICE
We hereby notify the Export-Import Bank of the United States ("Eximbank")
that, pursuant to the delegated authority granted by Eximbank to the undersigned
institution (the "Lender") under the Delegated Authority Letter Agreement
referred to below between the Lender and Eximbank, we have issued an Eximbank
Guarantee under the Master Guarantee Agreement between Eximbank and the Lender,
of the loan identified below from the Lender to the Borrower (the "Loan"). The
Loan is subject to the specific terms and conditions set forth below. Unless
otherwise defined, the capitalized terms used herein shall have the meanings set
forth in the Master Guarantee Agreement.
(1) DOCUMENTATION AND LOCATION OF LOAN DOCUMENTS:
Name of Lender: Silicon Valley Bank
-----------------------------------
Delegated Authority Letter Agreement Number: CA - DA - 96 - AA - 003
------------------------
Master Guarantee Agreement Number: CA - MGA - 96 - 003
-------------------
Borrower Agreement Date: September 19, 1998
------------------------------------
Location of Loan Documents for Loan: 3003 Tasman Drive
------------------------
Santa Clara, CA 95054
------------------------
If the Borrower was assisted by a city/state export agency, please provide
the name of the agency, contact person, and telephone number.
None.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
1
<PAGE>
(2) BORROWER'S NAME AND ADDRESS: The full name, address, contact person,
telephone and telefax number of the Borrower are as follows:
Truevision, Inc.
2500 Walsh Avenue
Santa Clara, CA 95051
Contact: Mr. R. John Curson, Chief Financial Officer
Phone (408) 562-4200
Fax #: (408) 562-4066
IS THE BORROWER A SMALL BUSINESS AS STIPULATED BY SBA GUIDELINES?
X YES NO
----- -----
(3) GUARANTOR'S NAME AND ADDRESS: The full name, address, telephone and telefax
numbers of each guarantor is as follows:
"NONE"
[If there are no guarantors, the word "None" must be inserted above in
order for this Notice to be considered complete.
(4) THE ITEMS TO BE FINANCED:
A. The items: (Complete description of goods and services to be
exported, e.g. machine tools, electronic components, logs, etc.)
Digital video production and imaging products for personal computers.
SIC Code(s) 3671
----
B. Are Performance Guarantees (e.g. bid bonds, performance bonds, advance
payment guarantees in the form stand-by letters of credit) to be
issued under this Loan?
/ / Yes If yes, approximately what percentage of the Loan will be
utilized for performance guarantees? ______________
/X/ No
2
<PAGE>
(5) LOAN AMOUNT, DISBURSEMENT TERMS AND CONDITIONS AND DISBURSEMENT RATES:
A. Loan Amount: US$2,000,000 (Two Million U.S. Dollars),
B. Disbursement Terms and Conditions:
/X/ *Disbursements will be made against multiple Export Orders.
/ / Disbursements will be made against a specific contract.
* Disbursements against export-related inventory shall be based upon a
percentage of export versus domestic sales as determined by Borrower's prior
six-month sales mix.
C. Disbursement Rates by Categories of Collateral:
1 . INVENTORY: The Disbursement Rate for Collateral categorized
as Inventory shall be as follows:
60 percent (Inventory disbursements limited to US$1,000,000)
--
2. ACCOUNTS RECEIVABLE: The Disbursement Rate for Collateral
categorized as Accounts Receivable shall be as follows:
80 percent advance rate against eligible Foreign Accounts
--
Receivable (Non Distributor).
65 percent advance rate against eligible Foreign Accounts
--
Receivable (Distributor).
3. Other (specify)____________________________________________
___ percent
D. Type of Loan:
/X/ The Loan is a Revolving Loan.
For Revolving Loans identify the top three countries of export:
United Kingdom
-----------------------------
Ireland
-----------------------------
France
-----------------------------
Estimated Total Export Sales to be supported by this Loan: $20,000,000
-----------
3
<PAGE>
/ / The Loan is a Transaction Specific Loan.
For Transaction Specific Loans identify contract or purchase order:
Country of Export: _____________________________________
Contract Price: $____________________________________
Contract Number: _____________________________________
Contract Date: _____________________________________
Parties: _____________________________________
(6) SECURITY INTERESTS IN THE LOAN COLLATERAL:
Valid and enforceable, perfected security interests in the following
Collateral, and the proceeds thereof.
A. FIRST PRIORITY IN THE FOLLOWING:
/ / All Inventory.
/X/ All export-related Inventory.
/ / Contract-related Inventory.
/ / All Accounts Receivable.
/X/ All Export-related Accounts Receivable.
/ / Contract-related Accounts Receivable.
/X/ Other Collateral please specify.
Junior lien to Lender on all of the Borrower's other assets securing
the non-Eximbank guaranteed loan(s).
4
<PAGE>
B. ADDITIONAL COLLATERAL:
Other, please specify. ___________________________________________
TO THE EXTENT APPLICABLE, "EXPORT-RELATED INVENTORY" SHALL MEAN ALL OF THE
BORROWER'S INVENTORY WHICH IS INTENDED TO BE SOLD PURSUANT TO EXPORT
ORDERS. UNLESS THE EXPORT-RELATED INVENTORY CAN BE EFFECTIVELY SEGREGATED,
FOR PURPOSES OFC[SIM RECOVERIES UNDER THE MASTER GUARANTEE AGREEMENT, THE
EXPORT-RELATED INVENTORY WILL BE DETERMINED ON A PRO-RATA BASIS COMPARING
AS OF THE DATE OF DEFAULT THE AMOUNT OUTSTANDING UNDER THE LOAN WITH THE
AGGREGATE AMOUNT OUTSTANDING UNDER ALL OTHER SHORT TERM INVENTORY FINANCING
OF THE BORROWER. IF THE LENDER ELECTS TO SEPARATELY COLLATERALIZE THE TEN
PERCENT (10%) PORTION OF THE LOAN NOT GUARANTEED BY EXIMBANK, THE LENDER
SHALL FULLY DESCRIBED SUCH SEPARATE COLLATERAL IN SECTION 8 OF THIS NOTICE
IN ORDER FOR THIS NOTICE TO BE CONSIDERED COMPLETE.
(7) TERMS OF Sale (not to exceed 90 days; check all that apply; at least one
must be checked in order for this Notice to be considered complete):
/X/ Confirmed Irrevocable letters of credit.
/X/ Irrevocable letters of credit.
/ / Open account insured through Eximbank export credit insurance for
comprehensive and political risk.
/ / Open account insured through non-Eximbank export credit insurance for
comprehensive commercial and political risk.
/ / Cash payment received prior to shipment.
/X/ Open account uninsured (pre-approved by Silicon Valley Bank).
/ / Sight drafts documents against payment (also known as "documentary
collections").
/ / Other terms. [If checked, any SLICII terms of sale must be fully
described on an attached addendum in order for this Notice to be
considered complete.]
(8) LENDER'S INTEREST RATE: SVB-PRIME RATE + 0.25% PER ANNUM.
Other Fees: None.
-----
Are you separately collateralizing the 10% portion of this Loan? No X
---
5
<PAGE>
___ Yes If yes, please specify separate collateral. _____________
_______________________________________________________
Note: The Lender cannot collateralize its retained 10% risk with cash,
cash equivalents or marketable securities from either the Borrower, any
Guarantor, or any of the Exporter's Affiliates (as defined in Section 7(b)
of the Delegated Authority Letter Agreement) or any third party guarantors.
(9) FACILITY FEE:
/X/ Loan Amount is for less than or equal to $2,000,000: In connection
with the commitment of the Guarantee, the Lender shall charge the
Borrower a Facility Fee equal to 75 basis points of the total Loan
Amount for a term of up to six (6) months or less, or 150 basis
points of the total Loan Amount for a term of greater than six (6)
and up to twelve (12) months. In all cases, the Lender shall remit
25 basis points of the total Loan Amount TO Eximbank within five (5)
Business Days after the Closing Date.
Facility Fee remitted: $5,000
------
/ / Loan amount is for more than $2,000,000: In connection with the
commitment of the Guarantee, the Lender shall charge the Borrower a
Facility Fee as shown below: Not Applicable.
Facility Fee on first $2,000,000 $30,000
------------
Facility Fee on portion over $2,000,000 +0
------------
Total Facility Fee remitted: $5,000
------------
(10) AVAILABILITY DATE: September 18, 1999
-------------------
(11) COUNTRY LIMITATIONS: From time to time, Eximbank will provide updated
Country Limitation Schedules to all Lenders active in the Working
Capital Guarantee Program, and to all Delegated Authority Lenders.
It is the Lender's responsibility to provide a copy to the Exporter
within seven (7) Business Days of receipt. The updated Country
Limitation Schedule will supersede the previous Country Limitation
Schedule.
6
<PAGE>
IN WITNESS WHEREOF, the Lender has caused this instrument to be
sealed this 25th day of September, 1998.
LENDER: SILICON VALLEY BANK
By: /s/ MIKE SELFRIDGE By: /s/ RUPY AHLUWALIA
---------------------------- ----------------------------
(SIGNATURE) (SIGNATURE)
Name: MIKE SELFRIDGE Name: RUPY AHLUWALIA
---------------------------- ----------------------------
Title: SENIOR VICE PRESIDENT Title: ASSISTANT VICE PRESIDENT
---------------------------- ----------------------------
Address: Telephone: 408-654-7158
---------------------
3003 TASMAN DRIVE
-----------------
SANTA CLARA, CA 95054 Telefax: 408-496-2418
---------------------
Receipt acknowledged by:
EXPORT-IMPORT BANK OF THE UNITED STATES
By:
---------------------------------
(SIGNATURE)
Name:
---------------------------------
Title:
---------------------------------
Date:
---------------------------------
Eximbank hereby designates the Loan referred to in this Notice as
Guaranteed Loan No. ______________________. (Revised April 1, 1996)
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-26-1999
<PERIOD-START> JUN-28-1998
<PERIOD-END> SEP-26-1998
<CASH> 3,630
<SECURITIES> 0
<RECEIVABLES> 4,060
<ALLOWANCES> 146
<INVENTORY> 4,733
<CURRENT-ASSETS> 15,055
<PP&E> 9,190
<DEPRECIATION> 7,643
<TOTAL-ASSETS> 16,731
<CURRENT-LIABILITIES> 7,229
<BONDS> 0
0
0
<COMMON> 53,747
<OTHER-SE> (44,281)
<TOTAL-LIABILITY-AND-EQUITY> 16,731
<SALES> 7,510
<TOTAL-REVENUES> 7,531
<CGS> 4,644
<TOTAL-COSTS> 4,644
<OTHER-EXPENSES> 3,373
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> (486)
<INCOME-TAX> 0
<INCOME-CONTINUING> (486)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (486)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
