UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 0-220-20
CASTELLE
(Name of small business issuer in its charter)
-------------------------------
California 77-0164056
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3255-3 Scott Boulevard, Santa Clara, California 95054
(Address of principal executive offices, including zip code)
Issuer's telephone number, including area code: (408) 496-0474
SECURITIES REGISTERED PURSUANT TO Section 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO Section 12(g) OF THE ACT:
COMMON STOCK NO PAR VALUE
(Title of Class)
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
The number of shares of Common Stock outstanding as of August 8, 1996 was
3,620,844.
CASTELLE
INDEX
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
Index of Exhibits
Amended and Restated Loan and Security Agreement
Export-Import Bank Amended and Restated Loan and Security Agreement
Collateral Assignment, Patent Mortgage and Security Agreement
Export-Import Bank of the United States Working Capital Guarantee
Program
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
Item Description
11.1* Statement re: computation of per share earnings
27* Financial Data Schedule
* Previously filed
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.
CASTELLE
By: /s/ Arthur H. Bruno Date: September 5, 1996
--------------------------
Arthur H. Bruno
Chief Executive Officer and President
(Principal Executive Officer)
By: /s/ Randall I. Bambrough Date: September 5, 1996
---------------------------------
Randall I. Bambrough
Vice President of Finance and Administration
Chief Financial Officer
(Principal Financial and Accounting Officer)
CASTELLE
INDEX OF EXHIBITS
11.1 * Computation of Net Income Per Share
* Previously filed
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the "Agreement") is
entered into as of June 20, 1996, by and between SILICON VALLEY BANK ("Bank")
and CASTELLE ("Borrower").
RECITALS
Bank and Borrower are parties to that certain Amended and Restated Loan and
Security Agreement dated February 9, 1994, as amended by those certain Loan
Modification Agreements dated as of March 31, 1995, August 31, 1995, September
20, 1995, February 8, 1996 and March 31, 1996 and as may be or may have been
further amended.
Borrower wishes to continue to borrow money from time to time from Bank,
and Bank desires to continue to lend money to Borrower. This Agreement sets
forth the terms on which Bank will lend money to Borrower, and Borrower will
repay the amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms shall have
the following definitions:
"Accounts" means all presently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods (including, without limitation, the licensing
of software and other technology) or the rendering of services by Borrower,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower and Borrower's Books relating to any of the foregoing.
"Advance" or "Advances" means an Advance under the Revolving Facility or
the Exim Sub-Facility.
"Affiliate" means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
and Bank's reasonable attorneys' fees and expenses incurred in amending,
enforcing or defending the Loan Documents, whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records including:
ledgers; records concerning Borrower's assets or liabilities, the Collateral,
business operations or financial condition; and all computer programs, or tape
files, and the equipment, containing such information.
"Borrowing Base" has the meaning set forth in Section 2.1 hereof.
"Business Day" means any day that is not a Saturday, Sunday, or other day
on which banks in the State of California are authorized or required to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached hereto.
"Committed Line" means Six Million Dollars ($6,000,000).
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Current Liabilities" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding Advances made
under this Agreement, including all Indebtedness that is payable upon demand or
within one year from the date of determination thereof unless such Indebtedness
is renewable or extendable at the option of Borrower or any Subsidiary to a date
more than one year from the date of determination, but excluding Subordinated
Debt.
"Daily Balance" means the amount of the Obligations owed at the end of a
given day.
"Eligible Accounts" means those Accounts that arise in the ordinary course
of Borrower's business that comply with all of Borrower's representations and
warranties to Bank set forth in Section 5.4, provided, that standards of
eligibility may be fixed and revised from time to time by Bank in Bank's
reasonable judgment and upon thirty (30) days' prior written notification
thereof to Borrower in accordance with the provisions hereof. Unless otherwise
agreed to by Bank, Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within ninety (90)
days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent (50%) of
whose Accounts the account debtor has failed to pay within ninety (90) days
of invoice date;
(c) Accounts with respect to which the account debtor is an officer,
employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, or other
terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is an Affiliate of
Borrower;
(f) Accounts with respect to which the account debtor does not have its
principal place of business in the United States;
(g) Accounts with respect to which the account debtor is the United States
or any department, agency, or instrumentality of the United States (unless
Borrower has complied with the Federal Assignment of Claims Act to Bank's
reasonable satisfaction);
(h) Accounts with respect to which Borrower is liable to the account debtor
for goods sold or services rendered by the account debtor to Borrower, but
only to the extent of any amounts owing to the account debtor against
amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including Subsidiaries and
Affiliates, whose total obligations to Borrower exceed twenty-five percent
(25%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except (i) for the Accounts of Ingram Micro D
and Macnica for which the applicable percentage shall be thirty-five
percent (35%), and (ii) as approved in writing by Bank;
(j) Accounts with respect to which the account debtor disputes liability or
makes any claim with respect thereto as to which Bank believes, in its
reasonable discretion, that there may be a basis for dispute (but only to
the extent of the amount subject to such dispute or claim), or is subject
to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(k) Accounts the collection of which Bank reasonably determines after
reasonable inquiry to be doubtful.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"Exim Sub-Facility" means the facility under which Borrower may request
Bank to issue cash advances, as specified in that certain Export-Import Bank
Amended and Restated Loan and Security Agreement of even date herewith between
Borrower and Bank.
"GAAP" means generally accepted accounting principles as in effect from
time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against any
person or entity under any provision of the United States Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law, including assignments
for the benefit of creditors, formal or informal moratoria, compositions,
extension generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Inventory" means all present and future inventory in which Borrower has
any interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above, and Borrower's Books relating to any of
the foregoing.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, security interest or other
encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or notes
executed by Borrower, and any other agreement entered into between Borrower and
Bank in connection with this Agreement including that certain Export-Import Bank
Amended and Restated Loan and Security Agreement of even date herewith and
related documents, all as amended or extended from time to time.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations, or (iii) the Collateral or the priority of Bank's lien on the
Collateral, taken as a whole.
"Maturity Date" means the date immediately preceding the first anniversary
of the date of this Agreement.
"Negotiable Collateral" means all of Borrower's present and future letters
of credit of which it is a beneficiary, notes, drafts, instruments, securities,
documents of title, and chattel paper, and Borrower's Books relating to any of
the foregoing.
"Net Income" means, on a consolidated basis, as at any date of
determination, for any period, net income (or loss) of Borrower as determined
and computed in accordance with GAAP; provided, however, that there shall be
excluded from the determination of Net Income the income (or loss) of any Person
accrued prior to the date it becomes a Subsidiary of Borrower or is merged into
or consolidated with Borrower or that Person's assets are acquired by Borrower.
"Obligations" means all debt, principal, interest, Bank Expenses and all
other amounts owed to the Bank by Borrower pursuant to this Agreement or any
other agreement, including, without limitation, that certain Export-Import Bank
Amended and Restated Loan and Security Agreement of even date herewith, whether
absolute or contingent, due or to become due, now existing or hereafter arising,
including any interest that accrues after the commencement of an Insolvency
Proceeding and including any debt, liability, or obligation owing from Borrower
to others that Bank may have obtained by assignment or otherwise.
"Periodic Payments" means all installments or similar recurring payments
that Borrower may now or hereafter become obligated to pay to Bank pursuant to
the terms and provisions of any instrument, or agreement now or hereafter in
existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this Agreement
or any other Loan Document;
(b) Existing Indebtedness disclosed on the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors and with respect to surety bonds and
similar obligations incurred in the ordinary course of business;
(e) Indebtedness of Borrower to any Subsidiary and Contingent Obligations
of Borrower with respect to obligations of any Subsidiary (provided that
the primary obligations are not prohibited hereby), and Indebtedness of any
Subsidiary to any other Subsidiary and Contingent Obligations of any
Subsidiary with respect to obligations of any other Subsidiary (provided
that the primary obligations are not prohibited hereby);
(f) Indebtedness secured by Permitted Liens;
(g) Capital leases or indebtedness incurred solely to purchase Equipment
which is secured in accordance with clause (c) of "Permitted Liens" below
and is not in excess of the lesser of the purchase price of such Equipment
or the fair market value of such equipment on the date of acquisition; and
(h) Extensions, refinancings, modifications, amendments and restatements of
any of items of Permitted Indebtedness (a) through (g) above, provided that
the principal amount thereof is not increased or the terms thereof are not
modified to impose more burdensome terms upon Borrower or its Subsidiary,
as the case may be.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the Schedule;
(b) (i) marketable direct obligations issued or unconditionally guaranteed
by the United States of America or any agency or any State thereof maturing
within one (1) year from the date of acquisition thereof, (ii) commercial
paper maturing no more than one (1) year from the date of creation thereof
and currently having the highest rating obtainable from either Standard &
Poor's Corporation or Moody's Investor Services, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank;
(c) Investments consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business;
(d) Investments (whether consisting of the purchase of securities, loans,
capital contributions, or otherwise) of Subsidiaries in or to other
Subsidiaries or in Borrower;
(e) Investments consisting of (i) compensation of employees, officers and
directors of Borrower or its Subsidiaries so long as the Board of Directors
of Borrower determines that such compensation is in the best interests of
Borrower, (ii) travel advances, employee relocation loans and other
employee loans and advances in the ordinary course of business; (iii) loans
to employees, officers or directors relating to the purchase of equity
securities of Borrower or its Subsidiaries;
(f) Investments (including debt obligations) received in connection with
the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers
or suppliers, arising in the ordinary course of business;
(g) Investments pursuant to or arising under currency agreements or
interest rate agreements entered into in the ordinary course of business;
(h) Investments consisting of notes receivable of, or prepaid royalties and
other credit extensions to, customers and suppliers who are not Affiliates
in the ordinary course of business; provided that this paragraph (h) shall
not apply to Investments by Borrower in any Subsidiary;
(i) Investments constituting acquisitions permitted under Section 7.3;
(j) Investments consisting of deposit accounts of Borrower in which Bank
has a Lien prior to any other Lien; and
(k) Investments accepted in connection with Transfers permitted by Section
7.1.
"Permitted Liens" means the following:
(a) Any Liens existing as of the date hereof and disclosed in the Schedule
or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental charges or
levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of
Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired by Borrower or any of its
Subsidiaries to secure the purchase price of such Equipment or indebtedness
incurred solely for the purpose of financing the acquisition of such
Equipment, or (ii) existing on such Equipment at the time of its
acquisition, provided that the Lien is confined solely to such Equipment,
and the proceeds of such Equipment;
(d) Leases or subleases and license and sublicenses granted to others in
the ordinary course of Borrower's or its Subsidiaries' business not
interfering in any material respect with the business of Borrower and its
Subsidiaries taken as a whole, and any interest or title of a lessor,
licensor or under any lease or license;
(e) Liens on assets (including the proceeds thereof and accessions thereto)
that existed at the time such assets were acquired by Borrower or any
Subsidiary (including Liens on assets of any corporation that existed at
the time it became or becomes a Subsidiary); provided, such Liens are not
granted in contemplation of or in connection with the acquisition of such
asset by Borrower or a Subsidiary;
(f) Liens on Equipment leased by Borrower or any Subsidiary pursuant to an
operating lease in the ordinary course of business (including proceeds
thereof and accessions thereto) incurred solely for the purpose of
financing the lease of such Equipment (including Liens pursuant to leases
permitted pursuant to Section 7.1 and Liens arising from UCC financing
statements regarding leases permitted by this Agreement);
(g) Liens arising from judgments, decrees or attachments in circumstances
not constituting an Event of Default under Section 8.7;
(h) Easements, reservations, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances affecting
real property not constituting a Material Adverse Effect;
(i) Liens in favor of customs and revenue authorities arising as a matter
of law to secure payment of customs duties in connection with the
importation of goods entered into in the ordinary course of business;
(j) Liens that are not prior to the Lien of Bank which constitute rights of
set-off of a customary nature or bankers' Liens with respect to amounts on
deposit, whether arising by operation of law or by contract, in connection
with arrangements entered into with banks in the ordinary course of
business;
(k) Liens on insurance proceeds in favor of insurance companies granted
solely as security for financed premiums;
(l) Earn-out and royalty obligations existing on the date hereof or entered
into in connection with an acquisition permitted by Section 7.3; and
(m) Liens incurred in connection with the extension, renewal or refinancing
of the indebtedness secured by Liens of the type described in clauses
(a)(c)(d)(e)(f) and (l) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Potential Event of Default" means a condition or event that, after notice
or lapse of time or both, would constitute an Event of Default.
"Prime Rate" means the variable rate of interest, per annum, most recently
announced by Bank, as its "prime rate," whether or not such announced rate is
the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount thereof shall be
determined, the consolidated cash, cash-equivalents, accounts receivable and
investments, with maturities not to exceed 90 days, of Borrower and its
Subsidiaries determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer, the Chief
Financial Officer and the Controller of Borrower.
"Revolving Facility" means the facility under which Borrower may request
Bank to issue cash advances, as specified in Section 2.1 hereof.
"Schedule" means the schedule of exceptions attached hereto, if any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"Subsidiary" means any Person in which Borrower, directly or indirectly,
owns or controls more than 50% of the voting stock or other equity interests.
"Tangible Net Worth" means at any date as of which the amount thereof shall
be determined, the consolidated total assets of Borrower and its Subsidiaries
minus, without duplication, (i) the sum of any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) all reserves not already
deducted from assets, and (ii) Total Liabilities.
"Total Liabilities" means at any date as of which the amount thereof shall
be determined, all obligations that should, in accordance with GAAP be
classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness, except to the extent eliminated as a
consequence of consolidation.
1.2 Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP and all calculations made hereunder
shall be made in accordance with GAAP. When used herein, the terms "financial
statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
2.1 Advances. Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower in an aggregate amount not
to exceed the lesser of (i) the Committed Line minus the then outstanding
principal balance of the Advances minus the outstanding Obligations under the
Exim Sub-Facility or (ii) the Borrowing Base minus the then outstanding
principal balance of the Advances minus the outstanding Obligations under the
Exim Sub-Facility. For purposes of this Agreement, "Borrowing Base" shall mean
an amount equal to (i) One Million Dollars ($1,000,000), or (ii) seventy-five
percent (75%) of Eligible Accounts at any time the aggregate principal amount of
all Advances exceeds One Million Dollars ($1,000,000). Subject to the terms and
conditions of this Agreement, amounts borrowed pursuant to this Section 2.1 may
be repaid and reborrowed at any time during the term of this Agreement.
Whenever Borrower desires an Advance, Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. California time, on
the Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer, or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank shall be entitled to
rely on any telephonic notice given by a person who Bank reasonably believes to
be a Responsible Officer, and Borrower shall indemnify and hold Bank harmless
for any damages or loss suffered by Bank as a result of such reliance. Bank will
credit the amount of Advances made under this Section 2.1 to Borrower's deposit
account.
The Revolving Facility shall terminate on the Maturity Date, at which time
all Advances under this Section 2.1 and other amounts due under this Agreement
shall be immediately due and payable.
2.2 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Section 2.1 of this Agreement
and the Exim Sub-Facility is greater than the lesser of (i) the Committed Line
or (ii) the Borrowing Base, Borrower shall immediately pay to Bank, in cash, the
amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section 2.3(b), any Advances
shall bear interest, on the average Daily Balance, at a rate equal to the
Prime Rate.
(b) Default Rate. All Obligations shall bear interest, from and after the
occurrence of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on the nineteenth
calendar day of each month during the term hereof. Bank shall, at its
option, charge such interest, all Bank Expenses, and all Periodic Payments
against any of Borrower's deposit accounts or against the Committed Line,
in which case those amounts shall thereafter accrue interest at the rate
then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to time
hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is changed,
by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of Default,
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment shall be immediately applied to conditionally
reduce Obligations, but shall not be considered a payment on account unless such
payment is of immediately available federal funds or unless and until such check
or other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any payment (other than a wire
transfer of immediately available funds) received by Bank after 12:00 noon
California time shall be deemed to have been received by Bank as of the opening
of business on the immediately following Business Day. Whenever any payment to
Bank under the Loan Documents would otherwise be due (except by reason of
acceleration) on a date that is not a Business Day, such payment shall instead
be due on the next Business Day, and additional fees or interest, as the case
may be, shall accrue and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Financial Examination and Appraisal Fees. Bank's customary fees and
out-of-pocket expenses for Bank's audits of Borrower's Accounts, and for
each appraisal of Collateral and financial analysis and examination of
Borrower performed from time to time by Bank or its agents, provided, that
the amount charged to Borrower for the initial annual audit of Borrower's
Accounts performed by Bank shall not exceed Twelve Hundred Dollars
($1,200); and
(b) Bank Expenses. Upon the date hereof, all Bank Expenses incurred through
the date hereof, including reasonable attorneys' fees and expenses,
provided, that the payment of attorneys' fees and costs in excess of
Eighteen Hundred Dollars ($1,800) shall be made as reasonably agreed
between Bank and Borrower.
2.6 Additional Costs. In case any law, regulation, treaty or official
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of principal or
interest or any other amounts payable hereunder by Borrower or otherwise
with respect to the transactions contemplated hereby (except for taxes on
the overall net income of Bank imposed by the United States of America or
any political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance, reserve,
special deposit or similar requirement against assets held by, or deposits
in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its performance
under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error; provided, however, that the Borrower
shall not be liable for any such amount attributable to any period prior to 180
day prior to the date of such certificate.
2.7 Term. Subject to Section 12.7, this Agreement shall become effective
upon the date hereof and shall continue in full force and effect for a term
ending on the Maturity Date. Notwithstanding the foregoing, Bank shall have the
right to terminate its obligation to make Advances under this Agreement
immediately and without notice upon the occurrence and during the continuance of
an Event of Default. Borrower shall have the right to terminate this Agreement
upon payment in full of all Obligations. Notwithstanding termination, Bank's
Lien on the Collateral shall remain in effect for so long as any Obligations
(excluding Obligations under Sections 2.6 and 12.2 to the extent they remain
inchoate at the time outstanding payment Obligations are paid in full) are
outstanding.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Advance. The obligation of Bank to make
the initial Advance is subject to the condition precedent that Bank shall have
received, in form and substance satisfactory to Bank, the following:
(i) this Agreement;
(ii) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of
this Agreement;
(iii) certified articles of incorporation of Borrower;
(iv) certificates of good standing of Borrower;
(v) a collateral assignment, patent mortgage and security agreement;
(vi) financing statement (Forms UCC-1);
(vii) insurance certificate;
(viii) payment of the fees and Bank Expenses then due specified in
Section 2.6 hereof;
(ix) those agreements and fees as specified in Section 3.1 of the
Export-Import Bank Amended and Restated Loan and Security Agreement of
even date herewith; and
(x) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of Bank to make
each Advance, including the initial Advance, is further subject to the following
conditions:
(a) timely receipt by Bank of the Payment/Advance Form as provided in
Section 2.1; and
(b) the representations and warranties contained in Section 5 shall be true
and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Advance as though
made at and as of each such date (except to the extent they relate
specifically to any earlier date, in which case such representations and
warranties shall continue to have been true and accurate as of such date),
and no Potential Event of Default or Event of Default shall have occurred
and be continuing, or would result from such Advance.
The making of each Advance shall be deemed to be a representation and
warranty by Borrower on the date of such Advance as to the accuracy of the facts
referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower grants to Bank a continuing
security interest in all presently existing and hereafter acquired or arising
Collateral in order to secure prompt repayment of any and all Obligations and in
order to secure prompt performance by Borrower of each of its covenants and
duties under the Loan Documents. Except as set forth in the Schedule, such
security interest constitutes a valid, first priority security interest in the
presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof, in each case, to
the extent that a security interest in such Collateral can be perfected by the
filing of a financing statement, in the case of Collateral consisting of
instruments, documents, chattel paper or certificated securities, to the extent
that Bank takes possession of such Collateral.
4.2 Delivery of Additional Documentation Required. Borrower shall from time
to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary is a
corporation duly existing and in good standing under the laws of its state of
incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified except for states as to which any
failure so to qualify would not have a Material Adverse Effect..
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default would reasonably be expected to have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible title to the
Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
existing obligations. The property giving rise to such Eligible Accounts has
been delivered to the account debtor or to the account debtor's agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor the Accounts of which are included in any Borrowing Base
Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects of
good and marketable quality, free from all material defects.
5.6 Name; Location of Chief Executive Office. Except as disclosed in the
Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.
5.7 Litigation. Except as set forth in the Schedule, there are no actions
or proceedings pending (or, to Borrower's knowledge, threatened) by or against
Borrower or any Subsidiary before any court or administrative agency in which a
likely adverse decision would reasonably be expected to have a Material Adverse
Effect or a material adverse effect on Borrower's interest or Bank's security
interest in the Collateral.
5.8 No Material Adverse Change in Financial Statements. All consolidated
financial statements related to Borrower and any Subsidiary that have been
delivered by Borrower to Bank fairly present in all material respects Borrower's
consolidated financial condition as of the date thereof and Borrower's
consolidated results of operations for the period then ended. There has not been
a material adverse change in the consolidated financial condition of Borrower
since the date of the most recent of such financial statements submitted to
Bank.
5.9 Solvency. Borrower is solvent and able to pay its debts (including
trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that would reasonably be expected to have a Material Adverse
Effect. Borrower is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940.
Borrower is not engaged principally, or as one of the important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations G, T and U of the Board of
Governors of the Federal Reserve System). Borrower has complied with all the
provisions of the Federal Fair Labor Standards Act. Borrower has not violated
any statutes, laws, ordinances or rules applicable to it, violation of which
could have a Material Adverse Effect.
5.11 Environmental Condition. None of Borrower's or any Subsidiary's
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency concerning any action or
omission by Borrower or any Subsidiary resulting in the releasing, or otherwise
disposing of hazardous waste or hazardous substances into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or caused to be filed
all material tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein.
5.13 Subsidiaries. Borrower does not own any stock, partnership interest or
other equity securities of any Person, except for Permitted Investments.
5.14 Government Consents. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted except
where the failure to obtain any such consent, approval or authorization, to make
any such declaration or filing or to given any such notice would not reasonably
be expected to have Material Adverse Effect.
5.15 Intellectual Property. To Borrower's knowledge, Borrower possesses and
owns, free of any material infringement or other material claims by third
parties, all trademarks, trade names, copyrights, patent rights, patents,
licenses that are used in the conduct of its business as now operated. To
Borrower's knowledge, there is no material infringement by others of any
trademark, trade name, trade secret, service mark, patent, copyright, license or
other intellectual property right of Borrower.
5.16 Full Disclosure. No representation, warranty or other statement made
by Borrower in any certificate or written statement furnished to Bank by
Borrower in connection with the transactions contemplated by this Agreement,
taken as a whole, contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained in
such certificates or statements not misleading (it being recognized by Bank that
the projections and forecasts provided by Borrower are not be viewed as facts
and that actual results during the period or periods covered by any such
projections and forecasts may differ from the projected or forecasted results).
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain or cause to be maintained its
and each of its Subsidiaries' corporate existence and good standing in its
jurisdiction of incorporation and maintain qualification in each jurisdiction in
which the failure to so qualify would reasonably be expected to have a Material
Adverse Effect. Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, in force all licenses, approvals and agreements, the
loss of which would reasonably be expected to have a Material Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall deliver to
Bank: (a) as soon as available, but in any event within fifty (50) days after
the end of each of Borrower's fiscal quarters, a company prepared consolidated
balance sheet and income statement prepared in accordance with GAAP covering
Borrower's consolidated operations during such period, certified by an officer
of Borrower reasonably acceptable to Bank; (b) as soon as available, but in any
event within ninety-five (95) days after the end of Borrower's fiscal year,
audited consolidated financial statements of Borrower prepared in accordance
with GAAP, consistently applied, together with an unqualified opinion on such
financial statements of an independent certified public accounting firm
reasonably acceptable to Bank; (c) within five (5) Business Days upon becoming
available, copies of all statements, reports and notices sent or made available
generally by Borrower to its security holders or to any holders of Subordinated
Debt and all reports on Form 8-K, 10-K and 10-Q (without exhibits) filed with
the Securities and Exchange Commission; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against Borrower or
any Subsidiary that would reasonably be expected to result in damages or costs
to Borrower or any Subsidiary of One Hundred Thousand Dollars ($100,000) or
more; and (e) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time.
Within twenty (20) days after the last day of each month in which
outstanding Advances exceed One Million Dollars ($1,000,000), Borrower shall
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings of
accounts receivable and accounts payable.
Borrower shall deliver to Bank with the quarterly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects. Returns and allowances, if
any, as between Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist at
the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Two
Hundred Thousand Dollars ($200,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to make,
due and timely payment or deposit of all material federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrower will make, and will cause each Subsidiary to make,
timely payment or deposit of all material tax payments and withholding taxes
required of it by applicable laws, including, but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrower or a Subsidiary has made such payments or
deposits; provided that Borrower or a Subsidiary need not make any payment if
the amount or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by
Borrower.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the Collateral insured against
loss or damage by fire, theft, explosion, sprinklers, and all other hazards
and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain
insurance relating to Borrower's ownership and use of the Collateral in
amounts and of a type that are customary to businesses similar to
Borrower's.
(b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional
loss payee thereof and all liability insurance policies shall show the Bank
as an additional insured, and shall specify that the insurer must give at
least twenty (20) days notice to Bank before canceling its policy for any
reason. Upon Bank's request, Borrower shall deliver to Bank certified
copies of such policies of insurance and evidence of the payments of all
premiums therefor. So long as no Event of Default has occurred and is
continuing, Borrower shall have the option of applying the proceeds of any
casualty policy to the replacement or repair of destroyed or damaged
property; provided, that after the occurrence and during the continuance of
an Event of Default, all proceeds payable under any such casualty policy
shall, at the option of Bank, be payable to Bank for application to the
Obligations.
6.7 Principal Depository. Borrower shall maintain its principal depository
and operating accounts with Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last day of each of
Borrower's fiscal quarters, a ratio of Quick Assets to Current Liabilities less
deferred revenues of at least 1.25 to 1.00.
6.9 Debt-Tangible Net Worth Ratio. Borrower shall maintain, as of the last
day of each of Borrower's fiscal quarters, a ratio of Total Liabilities less
Subordinated Debt and deferred revenues to Tangible Net Worth plus Subordinated
Debt of not more than 1.50 to 1.00.
6.10 Tangible Net Worth. Borrower shall maintain, as of the last day of
each of Borrower's fiscal quarters, a Tangible Net Worth of not less than Seven
Million Dollars ($7,000,000).
6.11 Debt-Service Coverage. Borrower shall maintain, as of the last day of
each of Borrower's fiscal quarters, a ratio of (a) earnings before interest and
taxes plus depreciation and amortization to (b) interest plus current portion of
long term debt of at least 1.75 to 1.00.
6.12 Registration of Intellectual Property Rights. Borrower shall register
or cause to be registered (to the extent not already registered) with the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, those intellectual property rights listed on Exhibits A, B and C to
the Collateral Assignment, Patent Mortgage and Security Agreement delivered to
Bank by Borrower in connection with this Agreement within ninety (90) days of
the date of this Agreement. Borrower shall register or cause to be registered
with the United States Patent and Trademark Office or the United States
Copyright Office, as applicable, those additional material intellectual property
rights developed or acquired by Borrower from time to time in connection with
any product prior to the sale or licensing of such product to any third party,
including without limitation revisions or additions to the intellectual property
rights listed on such Exhibits A, B and C. Borrower shall execute and deliver
such additional instruments and documents from time to time as Bank shall
reasonably request to perfect Bank's security interest in such additional
intellectual property rights.
6.13 Further Assurances. At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, without the prior written consent of
Bank, which Bank may grant or withhold in its sole discretion, so long as any
credit hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than: (i) Transfers of Inventory
in the ordinary course of business; (ii) Transfers of non-exclusive licenses and
similar arrangements for the use of the property of Borrower or its
Subsidiaries; (iii) Transfers of worn-out or obsolete Equipment; or (iv)
Transfers which constitute liquidation of Investments permitted under Section
7.7.
7.2 Change in Business. Engage in any business, or permit any of its
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a material change in Borrower's ownership,
other than the sale by Borrower of equity securities of Borrower. Borrower will
not, without thirty (30) days prior written notification to Bank, relocate its
chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person, except
that Borrower may acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person provided
that (i) the aggregate amount of consideration of any type (including, but not
limited to, cash, cash equivalents, or stock) for such acquisitions shall not,
between the date of this Agreement and the Maturity Date, exceed Fifteen Million
Dollars ($15,000,000), and (ii) the aggregate amount of cash or cash equivalents
paid by Borrower for such acquisitions shall not exceed, between the date of
this agreement and the Maturity Date, Three Million Dollars ($3,000,000).
7.4 Indebtedness. Create, incur, assume or be or remain liable with respect
to any Indebtedness, or permit any Subsidiary so to do, other than Permitted
Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien with
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock except for repurchases of stock from former employees of Borrower in
accordance with the terms of repurchase or similar agreements between Borrower
and such employees in an aggregate amount in any fiscal year not to exceed Fifty
Thousand Dollars ($50,000).
7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
(i) for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person, (ii)
transactions with a Subsidiary that are upon fair and reasonable terms and
transactions constituting Permitted Investments, and (iii) transactions with
Affiliates who in addition to being Affiliates are also customers of the
Borrower and who receive, as customers, terms more favorable than the general
public.
7.9 Subordinated Debt. Make any payment in respect of any Subordinated
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any provision
contained in any documentation relating to the Subordinated Debt without Bank's
prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman, or similar
party unless Bank has received a pledge of the warehouse receipt covering such
Inventory. Except for Inventory sold in the ordinary course of business or
demonstration Inventory that is stored at the location of the customer of the
Borrower not to exceed Two Hundred and Fifty Thousand Dollars ($250,000) and
except for such other locations as Bank may approve in writing, Borrower shall
keep the Inventory only at the location set forth in Section 10 hereof or in the
Schedule and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the
Federal Fair Labor Standards Act or violate any law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay the principal of, or any
interest on, any Advances when due and payable; or fails to pay any portion of
any other Obligations not constituting such principal or interest, including
without limitation Bank Expenses, within thirty (30) days of receipt by Borrower
of an invoice therefor;
8.2 Covenant Default. If Borrower fails to perform any obligation under any
of Sections 6.7, 6.8, 6.9, 6.10, 6.11 or 6.12 or violates any of the covenants
contained in Article 7 of this Agreement, or fails or neglects to perform, keep,
or observe any other material term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Bank and as to any default
under such other term, provision, condition, covenant or agreement that can be
cured, has failed to cure such default within thirty (30) days after Borrower
receives notice thereof or any Responsible Officer of Borrower becomes aware
thereof; provided, however, that if the default cannot by its nature be cured
within the ten (10) day period or cannot after diligent attempts by Borrower be
cured within such ten (10) day period, and such default is likely to be cured
within a reasonable time, then Borrower shall have an additional reasonable
period (which shall not in any case exceed thirty (30) days) to attempt to cure
such default, and within such reasonable time period the failure to have cured
such default shall not be deemed an Event of Default (provided that no Advances
will be required to be made during such cure period);
8.3 Material Adverse Change. If there occurs a material adverse change in
Borrower's business or financial condition, or if there is a material impairment
of the prospect of repayment of any portion of the Obligations or a material
impairment of the value or priority of Bank's security interests in the
Collateral;
8.4 Attachment. If any material portion of Borrower's assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within fifteen (15) days, or if Borrower
is enjoined, restrained, or in any way prevented by court order from continuing
to conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within fifteen (15)
days after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that would reasonably be expected to have a Material Adverse
Effect;
8.7 Judgments. If a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of forty-five (45) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or
8.8 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the continuance of
an Event of Default, Bank may, at its election, without notice of its election
and without demand, do any one or more of the following, all of which are
authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by any of
the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable
without any action by Bank);
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement or under any other agreement between Borrower
and Bank;
(c) Settle or adjust disputes and claims directly with account debtors for
amounts, upon terms and in whatever order that Bank reasonably considers
advisable;
(d) Without notice to or demand upon Borrower, make such payments and do
such acts as Bank considers necessary or reasonable to protect its security
interest in the Collateral. Borrower agrees to assemble the Collateral if
Bank so requires, and to make the Collateral available to Bank as Bank may
designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral,
or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien which in Bank's determination appears to be
prior or superior to its security interest and to pay all expenses incurred
in connection therewith. With respect to any of Borrower's owned premises,
Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, for up to one hundred
twenty (120) days in order to exercise any of Bank's rights or remedies
provided herein, at law, in equity, or otherwise;
(e) Without notice to Borrower, set off and apply to the Obligations any
and all (i) balances and deposits of Borrower held by Bank, or (ii)
indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or
any property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral
and, in connection with Bank's exercise of its rights under this Section
9.1, Borrower's rights under all licenses and all franchise agreements
shall inure to Bank's benefit;
(g) Sell the Collateral at either a public or private sale, or both, by way
of one or more contracts or transactions, for cash or on terms, in such
manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and Bank's
obligation to provide Advances hereunder is terminated.
9.3 Accounts Collection. Upon the occurrence and during the continuation of
an Event of Default, Bank may notify any Person owing funds to Borrower of
Bank's security interest in such funds. Borrower shall collect all amounts owing
to Borrower for Bank, receive in trust all payments as Bank's trustee, and
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following: (a)
make payment of the same or any part thereof; (b) set up such reserves in the
Collateral Account or under the Revolving Facility as Bank deems necessary to
protect Bank from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type discussed in Section 6.6 of this
Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with its
obligations under Section 9207 of the Code, Bank shall not in any way or manner
be liable or responsible for: (a) the safekeeping of the Collateral; (b) any
loss or damage thereto occurring or arising in any manner or fashion from any
cause; (c) any diminution in the value thereof; or (d) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other person whomsoever.
Subject to the foregoing, all risk of loss, damage or destruction of the
Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this Agreement,
the Loan Documents, and all other agreements shall be cumulative. Bank shall
have all other rights and remedies not inconsistent herewith as provided under
the Code, by law, or in equity. No exercise by Bank of one right or remedy shall
be deemed an election, and no waiver by Bank of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be
effective unless made in a written document signed on behalf of Bank.
9.7 Demand; Protest. Borrower waives demand, protest, notice of protest,
notice of dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: Castelle
3255-3 Scott Boulevard
Santa Clara, CA 95054
Attn: Mr. Randall Bambrough
FAX: (408) 496-0502
If to Bank: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Attn: Mr. Peter Kidder
FAX: (408) 727-8728
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVES ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
12.1 Successors and Assigns.
(a) This Agreement shall bind and inure to the benefit of the respective
successors and permitted assigns of each of the parties; provided, however,
that neither this Agreement nor any rights hereunder may be assigned by
Borrower without Bank's prior written consent, which consent may be granted
or withheld in Bank's sole discretion. Bank shall have the right without
the consent of or notice to Borrower to sell, transfer, negotiate, or grant
participations in all or any part of, or any interest in Bank's
obligations, rights and benefits hereunder.
(b) Bank may sell, negotiate or grant participations to other financial
institutions in all or part of the obligations of the Borrower outstanding
under the Loan Agreements, without notice to or the approval of Borrower;
provided that any such sale, negotiation or participation shall be in
compliance with the applicable federal and state securities laws and the
other requirements of this Section 12.1. Notwithstanding the sale,
negotiation or grant of participations, Bank shall remain solely
responsible for the performance of its obligations under this Agreement,
Bank shall remain the holder of the Note for all purposes under this
Agreement and Borrower shall continue to deal solely and directly with Bank
in connection with this Agreement and the other Loan Documents.
(c) The grant of a participation interest shall be on such terms as the
Bank determines are appropriate, provided only that (i) the holder of such
participation interest shall not have any of the rights of Bank under this
Agreement except, if the participation agreement so provides, rights to
demand the payment of costs of the type described in Section 2.7, provided
that the aggregate amount that the Borrower shall be required to pay under
Section 2.7 with respect to any ratable share of the Committed Line or any
Advance (including amounts paid to participants) shall not exceed the
amount that Borrower would have had to pay if no participation agreements
had been entered into, and (ii) the consent of the holder of such a
participation interest shall not be required for amendments or waivers of
provisions of the Loan Agreement other than those which (A) increase the
amount of the Committed Line, (B) extend the term of this Agreement, (C)
decrease the rate of interest or the amount of any fee or any other amount
payable to Bank under this Agreement, (D) reduce the principal amount
payable under this Agreement, or (E) extend the date fixed for the payment
of principal or interest or any other amount payable under this Agreement.
(d) The Bank may assign, from time to time, all or any portion of its pro
rata share of the Committed Line and the Note to an Affiliate of the Bank
or, subject to the prior written approval of Borrower (which approval will
not be unreasonably withheld), to any other financial institution;
provided, that (i) the amount the Committed Line being assigned pursuant to
each such assignment shall in no event be less than Three Million Dollars
($3,000,000) and shall be an integral multiple of Five Hundred Thousand
Dollars ($500,000) and (ii) the parties to each such assignment shall
execute and deliver to Borrower an assignment agreement in a form
reasonably acceptable to each. Upon such execution and delivery, from and
after the effective date specified in such assignment agreement (x) the
assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such
assignment agreement, have the rights and obligations of a Bank hereunder
and (y) Bank shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such assignment agreement, relinquish
its rights and be released from its obligations under this Agreement (other
than pursuant to this Section 12.1(d), and, in the case of an assignment
agreement covering all or the remaining portion of Bank's rights and
obligations under this Agreement, Bank shall cease to be a party hereto. In
the event of an assignment hereunder, the parties agree to amend this
Agreement to the extent necessary to reflect the mechanical changes which
are necessary to document such assignment and which are standard for a
multi-bank credit facility. Each party shall bear its own expenses
(including without limitation attorneys' fees and costs) with respect to
such an amendment, provided that Borrower shall not be required to incur
expenses for any amendment requested solely by Bank.
12.2 Indemnification. Borrower shall defend, indemnify and hold harmless
Bank and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by this Agreement; and (b) all
losses or Bank Expenses in any way suffered, incurred, or paid by Bank as a
result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance of all
obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be amended
or terminated orally. All prior agreements, understandings, representations,
warranties, and negotiations between the parties hereto with respect to the
subject matter of this Agreement, if any, are merged into this Agreement and the
Loan Documents except for that certain Amended and Restated Promissory Note
evidencing a Five Hundred Thousand Dollar ($500,000) equipment line of credit of
even date herewith, any financing statements filed by Bank to secure any
Obligations of Borrower to Bank, and filing by Bank relating to the Borrower's
intellectual property to secure any Obligations of Borrower to Bank, which
documents, statements and filings shall remain in full force and effect.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in this
Agreement shall continue in full force and effect so long as any Obligations
(excluding Obligations under Sections 2.6 and 12.2 to the extent they remain
inchoate at the time that outstanding payment Obligations are paid in full)
remain outstanding. The obligations of Borrower to indemnify Bank with respect
to the expenses, damages, losses, costs and liabilities described in Section
12.2 shall survive until all applicable statute of limitations periods with
respect to actions that may be brought against Bank have run, provided that so
long as the obligations set forth in the first sentence of this Section 12.7
have been satisfied, and Bank has no commitment to make any Advances or to make
any other loans to Borrower, Bank shall release all security interests granted
hereunder and redeliver all Collateral held by it in accordance with applicable
law.
12.8 Effect of Amendment and Restatement. Subject to Section 12.5, this
Agreement is intended to and does completely amend and restate, without
novation, that certain Amended and Restated Loan and Security Agreement dated as
of February 9, 1994, between Borrower and Bank, as amended, (the "Original
Agreement"). All advances or loans outstanding under the Original Agreement are
and shall continue to be outstanding under this Agreement. All security
interests granted under the Original Agreement are hereby confirmed and ratified
and shall continue to secure all Obligations under this Agreement.
12.9 Confidentiality. In handling any confidential information Bank shall
exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Loans, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower, (iii) as required by law, regulations, rule or order, subpoena,
judicial order or similar order and (iv) as may be required in connection with
the examination, audit or similar investigation of Bank. Confidential
information hereunder shall not include information that either: (a) is in the
public domain or in the knowledge or possession of Bank when disclosed to Bank,
or becomes part of the public domain after disclosure to Bank through no fault
of Bank; or (b) is disclosed to the Bank by a third party, provided the Bank
does not have actual knowledge that such third party is prohibited from
disclosing such information. Notwithstanding any provision of this Agreement to
the contrary, neither Borrower nor any of its Subsidiaries will be required to
disclose, permit the inspection, examination, copying or making extracts of, or
discussions of, any document, information or other matter that (i) prior to the
occurrence of an Event of Default constitutes non-financial trade secrets, or
(ii) in respect to which disclosure to the Banks (or designated representative)
is then prohibited by (a) law, or (b) an agreement binding upon Borrower or any
Subsidiary that was not entered into by Borrower or such Subsidiary for the
primary purpose of concealing information from Banks.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
CASTELLE
By: /s/ Randall I. Bambrough
---------------------------------
Randall I. Bambrough
Title: Vice President of Finance
--------------------------------
SILICON VALLEY BANK
By: /s/ Peter A. Kidder
-------------------------
Peter A. Kidder
Title: Vice President
------------------
EXHIBIT A
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor
vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of any
of the foregoing and any documents of title representing any of the above,
and Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, service
marks, trade styles, trade names, patents, patent applications, leases,
license agreements, franchise agreements, blueprints, drawings, purchase
orders, customer lists, route lists, infringements, claims, computer
programs, computer discs, computer tapes, literature, reports, catalogs,
design rights, income tax refunds, payments of insurance and rights to
payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods, the licensing of
technology or the rendering of services by Borrower, whether or not earned
by performance, and any and all credit insurance, guaranties, and other
security therefor, as well as all merchandise returned to or reclaimed by
Borrower and Borrower's Books relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities (other than
securities of foreign Subsidiaries), letters of credit, certificates of
deposit, instruments and chattel paper now owned or hereafter acquired and
Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work
thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar
rights available for the protection of semiconductor chips, now owned or
hereafter acquired; all claims for damages by way of any past, present and
future infringement of any of the foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
-------------------------
FAX#: (408) 432-3249 TIME:
-------------------------
FROM:
Castelle
CLIENT NAME (BORROWER)
REQUESTED
BY:
AUTHORIZED SIGNER'S NAME
AUTHORIZED
SIGNATURE:
PHONE
NUMBER:
FROM ACCOUNT # TO ACCOUNT#
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE)
PRINCIPAL PAYMENT (ONLY)
INTEREST PAYMENT (ONLY
PRINCIPAL AND INTEREST (PAYMENT)
OTHER INSTRUCTIONS:
All representations and warranties of Borrower stated in the Loan Agreement
are true, correct and complete in all material respects as of the date of the
telephone request for and Advance confirmed by this Borrowing Certificate;
provided, however, that those representations and warranties expressly referring
to another date shall be true, correct and complete in all material respects as
of such date.
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
___________________________ ______________________
Authorized Requester Phone #
___________________________ ______________________
Received By (Bank) Phone #
___________________________
Authorized Signature (Bank)
EXHIBIT C
BORROWING BASE CERTIFICATE
(Borrowings in Excess of $1,000,000)
- --------------------------------------------------------------------------------
Borrower: Castelle Lender: Silicon Valley Bank
Commitment Amount: $6,000,000
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 (75% of #14)
BALANCES
16. Maximum Loan Amount $6,000,000
17. Total Funds Available [Lesser of #15 or 16]
18. Present balance owing on Line of Credit
(including amount under Exim Sub-Facility)
19. RESERVE POSITION (#17 minus #18)
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
________________________________________ Rec'd By:
Auth. Signer
Date:
By:____________________________________
Authorized Signer Verified:
Auth. Signer
Date:
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: CASTELLE
The undersigned authorized officer of Castelle hereby certifies that in
accordance with the terms and conditions of the Amended and Restated Loan and
Security Agreement between Borrower and Bank dated as of June 20, 1996 (the
"Agreement"), (i) Borrower is in complete compliance for the period ending with
all required covenants except as noted below and (ii) all representations and
warranties of Borrower stated in the Agreement are true and correct in all
material respects as of the date hereof. Attached herewith are the required
documents supporting the above certification. The Officer further certifies that
these are prepared in accordance with Generally Accepted Accounting Principles
(GAAP) and are consistently applied from one period to the next except as
explained in an accompanying letter or footnotes.
Please indicate compliance status by circling Yes/No under "Complies"
column.
Reporting Covenant Required Complies
Quarterly financial statements Quarterly within 50 days Yes No
Annual (CPA Audited) FYE within 95 days Yes No
A/R & A/P Agings Monthly within 20 days Yes No
A/R Audit Annual Yes No
Financial Covenant Required Actual Complies
Maintain on a Quarterly Basis:
Minimum Quick Ratio 1.25:1.00 _____:1.00 Yes No
Minimum Tangible Net Worth $7,000,000 $__________ Yes No
Maximum Debt/Tangible Net Worth 1.50:1.00 _____:1.00 Yes No
Debt Service Coverage 1.75:1.0 _____:1.00 Yes No
BANK USE ONLY
Received by:_________________
authorized signer
Date:________________________
Verified:____________________
authorized signer
Date:________________________
Compliance Status: Yes No
Comments Regarding Exceptions: See Attached.
Sincerely,
____________________________________________
Signature
____________________________________________
Title
____________________________________________
Date
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: Castelle Bank: Silicon Valley Bank
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $6,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working
Capital.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line
Amount paid to Borrower directly:
Undisbursed Funds
Principal $6,000,000
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Prepaid Finance Charges Paid in Cash:
$ N/A Loan Fee
$ Accounts Receivables Audit
Other Charges Paid in Cash:
$ UCC Search Fees
$ UCC Filing Fees
$ Patent Filing Fees
$ Trademark Filing Fees
$ Copyright Filing Fees
$ 1800 Outside Counsel Fees and Expenses
Total Charges Paid in Cash
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered the amount of any loan payment. If the funds in the
account are insufficient to cover any payment, Bank shall not be obligated to
advance funds to cover the payment. At any time and for any reason, Borrower or
Bank may voluntarily terminate Automatic Payments.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF JUNE 20, 1996.
BORROWER:
CASTELLE
- ----------------------------
Authorized Officer
AGREEMENT TO PROVIDE INSURANCE
Grantor: Castelle Bank: Silicon Valley Bank
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INSURANCE REQUIREMENTS. Castelle, Inc. ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or the
providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with
stipulation that coverage will not
be cancelled or diminished without
a minimum of twenty (20) days'
prior written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Bank. Grantor understands
that credit may not be denied solely because insurance was not purchased through
Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of June 20, 1996, or earlier. Grantor acknowledges and agrees
that if Grantor fails to provide any required insurance or fails to continue
such insurance in force, Bank may do so at Grantor's expense as provided in the
Loan and Security Agreement. The cost of such insurance, at the option of Bank,
shall be payable on demand or shall be added to the indebtedness as provided in
the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JUNE 20,
1996.
GRANTOR:
CASTELLE
/s/ Randall I. Bambrough
Randall I. Bambrough
--------------------
Authorized Officer
================================================================================
INSURANCE VERIFICATION
DATE:
------------------------
PHONE:
------------------------
AGENT'S NAME:
------------------------
INSURANCE COMPANY:
------------------------
POLICY NUMBER:
------------------------
EFFECTIVE DATES:
------------------------
COMMENTS:
------------------------
================================================================================
CORPORATE RESOLUTIONS TO BORROW
- --------------------------------------------------------------------------------
Borrower: Castelle
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I, the undersigned Secretary or Assistant Secretary of Castelle (the
"Corporation"), HEREBY CERTIFY that the Corporation is organized and existing
under and by virtue of the laws of the State of California.
I FURTHER CERTIFY that the Articles of Incorporation and Bylaws previously
delivered to Bank remain in full force and effect and have not been amended or
restated.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation (or
by other duly authorized corporate action in lieu of a meeting), duly called and
held, at which a quorum was present and voting, the following resolutions were
adopted.
BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAME POSITION ACTUAL SIGNATURE
Randall I. Bambrough Vice President of Finance /s/ Randall I. Bambrough
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acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
Borrow Money. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated as of June 20, 1996 (the "Loan
Agreement").
Execute Notes. To execute and deliver to Bank the promissory note or notes
of the Corporation, on Lender's forms, at such rates of interest and on such
terms as may be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of the Corporation to Bank, and also to execute and deliver to
Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion of
the notes.
Grant Security. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
Negotiate Items. To draw, endorse, and discount with Bank all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the account of the Corporation with Bank, or to cause such other disposition
of the proceeds derived therefrom as they may deem advisable.
Issue Warrant. To issue a warrant to purchase capital stock of the
Corporation.
Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on June 20, 1996 and attest
that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
/s/ Randall I. Bambrough
Randall I. Bambrough
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CASTELLE
EXPORT-IMPORT BANK
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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This AMENDED AND RESTATED EXPORT-IMPORT BANK LOAN AND SECURITY AGREEMENT
(the "Exim Agreement") is entered into as of June 20, 1996, by and between
SILICON VALLEY BANK ("Bank") and CASTELLE, INC. ("Borrower").
RECITALS
A. Bank and Borrower are parties to that certain Amended and Restated Loan
and Security Agreement dated February 9, 1994, as amended by those certain Loan
Modification Agreements dated as of March 31, 1995, August 31, 1995, September
20, 1995, February 8, 1996 and March 31, 1996 and as may have been and may be
further amended (the "Original Agreement").
B. Borrower and Bank are entering into concurrently herewith an Amended and
Restated Loan and Security Agreement of even date herewith with Bank (the
"Domestic Agreement"), together with related documents.
C. Borrower and Bank desire in this Exim Agreement to set forth their
agreement with respect to a working capital sub-facility to be guaranteed by
Export-Import Bank of the United States and to amend and restate in its entirety
without novation the Original Agreement in accordance with the provisions
herein.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. Except as otherwise defined, terms that are capitalized in
this Exim Agreement shall have the meaning assigned in the Domestic Loan
Documents. As used in this Exim Agreement, the following terms shall have the
following definitions:
"Borrower Agreement" means the Export-Import Bank of the United States
Working Capital Guarantee Program Borrower Agreement between Borrower and Bank.
"Borrowing Base" has the meaning set forth in Section 2.1 hereof.
"Domestic Agreement" has the meaning set forth in recital paragraph B.
"Domestic Loan Documents" means the Domestic Agreement and the instruments
and documents executed in connection with that Agreement.
"Eligible Foreign Inventory" means Inventory purchased or manufactured by
Borrower for resale located in the United States, other than Inventory that is
excluded under the Borrower Agreement and this Exim Agreement. Eligible Foreign
Inventory shall not include 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;
(g) any Inventory which is to be incorporated into items destined for
shipment to a country in which Exim Bank is legally prohibited from doing
business;
(h) any Inventory which is to be incorporated into items destined for
shipment to a country in which Exim Bank coverage is not available for
commercial reasons, except to the extent such items are sold to such
country on terms of a letter of credit confirmed by a bank acceptable to
Exim Bank; and
(i) any Inventory which is to be incorporated into items whose sale would
result in an ineligible Account Receivable.
"Exim Bank" means Export-Import Bank of the United States.
"Exim Bank Expenses" means all: reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents,
including any costs incurred in relation to opposing or seeking to obtain relief
from any stay or restructuring order prohibiting Bank from exercising its rights
as a secured creditor, foreclosing upon or disposing of Collateral, or such
related matters; fees that Bank pays to Exim Bank in consideration of the
issuance of the Exim Guarantee; and Bank's reasonable attorneys' fees and
expenses incurred in amending, enforcing or defending the Loan Documents,
whether or not suit is brought.
"Exim Committed Line" means Three Million Dollars ($3,000,000).
"Exim Eligible Foreign Accounts" means those Accounts payable in United
States Dollars that arise in the ordinary course of Borrower's business from
Borrower's sale of Eligible Foreign Inventory (i) with respect to which the
account debtor is not a resident of the United States; and (ii) that have been
validly assigned and comply with all of Borrower's representations and
warranties to Bank; and (iii) that are supported by the Exim Insurance Policy;
provided, that standards of eligibility may be fixed and revised from time to
time by Bank in Bank's reasonable judgment and upon notification thereof to the
Borrower in accordance with the provisions hereof. Exim Eligible Foreign
Accounts shall not include the following:
(a) Accounts with a term in excess of ninety (90) days;
(b) Accounts that the account debtor has failed to pay within sixty (60)
calendar days of the original due date of the invoice unless such Accounts
are insured through Exim Bank export credit insurance for comprehensive
commercial and political risk, or through Exim Bank approved private
insurers for comparable coverage, in which case ninety (90) calendar days
shall apply;
(c) Accounts with respect to an account debtor, fifty percent (50%) of
whose Accounts the account debtor has failed to pay within ninety (90) days
of the original date of invoice;
(d) Accounts evidenced by a letter of credit until the date of shipment of
the items covered by the subject letter of credit;
(e) Accounts with respect to which the account debtor is an Affiliate of
Borrower;
(f) Accounts with respect to which the account debtor is located in a
country in which Exim Bank is legally prohibited from doing business;
(g) Accounts with respect to which the account debtor is located in a
country in which Exim Bank coverage is not available for commercial
reasons;
(h) Accounts with respect to which Borrower is liable to the account debtor
for goods sold or services rendered by the account debtor to Borrower, but
only to the extent of Borrower's liability to such account debtor;
(i) Accounts with respect to which the account debtor disputes liability or
makes any claim with respect thereto (but only to the extent of the amount
subject to such dispute or claim), or is subject to any Insolvency
Proceeding, or becomes insolvent, or goes out of business;
(j) Accounts with respect to an account debtor, including Subsidiaries and
Affiliates, whose total obligations to Borrower exceed twenty-five percent
(25%) of all Accounts, to the extent such obligations exceed such
percentage, except as approved in writing by Bank;
(k) Accounts generated by the sale of products purchased for military
purposes;
(l) Accounts generated by sales of Inventory which constitutes defense
articles or defense services;
(m) Accounts payable in currency other than Dollars;
(n) Accounts which are due and owing and the collection of which must be
made outside the United States;
(o) Accounts the collection of which Bank or Exim Bank determines in its
reasonable judgment to be doubtful; and
(p) Accounts that are excluded from the Borrowing Base under the Borrower
Agreement.
"Exim Guarantee" means that certain Master Guarantee Agreement or other
agreement, as amended from time to time, the terms of which are incorporated by
reference into this Exim Agreement, pursuant to which Exim Bank guarantees
Borrower's obligations under this Exim Agreement.
"Exim Insurance Policy" means that certain Short Term Comprehensive Multi-
Buyer Export Credit Insurance Policy No. naming Borrower the "insured".
"Exim Loan Documents" means, collectively, this Exim Agreement, the
Domestic Loan Documents, any note or notes executed by Borrower, and any other
agreement entered into between Borrower and Bank in connection with this Exim
Agreement, all as amended or extended from time to time.
"Exim Maturity Date" means the earlier of (i) the Maturity Date under the
Domestic Loan Documents or (ii) the date immediately preceding the first
anniversary of the date hereof.
"Original Agreement" has the meaning set forth in recital paragraph A.
2. LOAN AND TERMS OF PAYMENT
2.1 Revolving Advances. Subject to the terms and conditions of this Exim
Agreement, Bank agrees to make Advances to Borrower in an amount not to exceed
the lesser of the Exim Committed Line or the Borrowing Base. For purposes of
this Exim Agreement "Borrowing Base" shall mean an amount equal to (i) ninety
percent (90%) of the Exim Eligible Foreign Accounts and (ii) forty percent (40%)
of Eligible Foreign Inventory.
To evidence the Advances, Borrower shall execute and deliver to Bank on the
date hereof a promissory note (the "Note") in substantially the form attached
hereto as Exhibit B.
Whenever Borrower desires an Advance, Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. California time, on
the Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit C hereto. In addition to the procedure set forth in the preceding
sentence, Bank is authorized to make Advances under this Exim Agreement, based
upon written instructions received from a Responsible Officer or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank will credit the amount
of Advances made under this Section 2.1 to Borrower's deposit account. Amounts
borrowed pursuant to this Section 2.1 may be repaid and re-borrowed at any time
during the term of this Exim Agreement so long as no Event of Default has
occurred and is continuing.
2.2 Overadvances. If, at any time or for any reason, the amount of
Obligations pursuant to this Exim Agreement owed by Borrower to Bank pursuant to
Section 2.1 of this Exim Agreement is greater than the lesser of (i) the
Borrowing Base or (ii) the Exim Committed Line, at the option of Bank, (i)
Borrower shall immediately pay to Bank, in cash, the amount of such excess, or
(ii) Borrower shall furnish additional collateral to Bank in form and amount
satisfactory to Bank and Exim Bank.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as specified to the contrary in any Loan
Document, the Obligations under this Exim Agreement shall bear interest, on
the average Daily Balance, at a rate equal to the Prime Rate.
(b) Default Rate. All Obligations shall bear interest, from and after the
occurrence of an Event of Default, at a rate equal to five (5) percentage
points above the rate that applied immediately prior to the occurrence of
the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on the nineteenth
Business Day of each calendar month during the term hereof. Bank shall, at
its option, charge such interest, all Exim Bank Expenses, and all Periodic
Payments against Borrower's deposit account or against the Exim Committed
Line, in which case those amounts shall thereafter accrue interest at the
rate then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to time
hereafter, the applicable rate of interest hereunder shall be increased or
decreased contemporaneously with such change by an amount equal to such
change in the Prime Rate. All interest chargeable under the Exim Loan
Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.
2.4 Crediting Payments. The receipt by Bank of any wire transfer of funds,
check, or other item of payment shall be immediately applied to conditionally
reduce Obligations, but shall not be considered a payment on account unless such
wire transfer is of immediately available federal funds and is made to the
appropriate deposit account of Bank or unless and until such check or other item
of payment is honored when presented for payment. Notwithstanding anything to
the contrary contained herein, any payment (other than a wire transfer of
immediately available funds) received by Bank after 12:00 noon California time
shall be deemed to have been received by Bank as of the opening of business on
the immediately following Business Day.
2.5 Fees. Borrower shall pay to Bank the following fees:
(a) Financial Examination and Appraisal Fees. Bank's reasonable fees and
reasonable out-of-pocket expenses for Bank's initial audit of Borrower's
Accounts and Inventory, and for each subsequent appraisal of Collateral and
financial analysis and examination of Borrower performed from time to time
by Bank or its agents;
(b) Exim Fee. A facility fee equal to One and One Half Percent (1 1/2%) of
the Exim Committed Line, which fee shall be due and fully earned upon
Bank's receipt of the Exim Guarantee;
(c) Exim Bank Expenses. On the Closing Date, Exim Bank Expenses incurred
through the Closing Date and, after the Closing Date, all Exim Bank
Expenses as they become due.
2.6 Increased Costs. In case any law, regulation, treaty or official
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of principal or
interest or any other amounts payable hereunder by Borrower or otherwise
with respect to the transactions contemplated hereby (except for taxes on
the overall net income of Bank imposed by the United States of America or
any political subdivision thereof); or
(b) imposes, modifies or deems applicable any deposit insurance, reserve,
special deposit or similar requirement against assets held by, or deposits
in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to their performance
under this Exim Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation all in reasonable detail by Bank of a statement in the amount and
setting forth Bank's calculation thereof, which statement shall be deemed true
and correct absent manifest error; provided, however, that the Borrower shall
not be liable for any such amount attributable to any period prior to 180 day
prior to the date of such certificate.
2.7 Term. Subject to Section 13.6, this Exim Agreement shall become
effective once duly executed and authorized by Borrower and Bank and shall
continue in full force and effect for a term ending on the Exim Maturity Date,
on which date all Obligations shall become immediately due and payable.
Notwithstanding the foregoing, Bank shall have the right to terminate this Exim
Agreement immediately and without notice upon the occurrence of an Event of
Default and Borrower shall have the right to terminate this Exim Agreement
immediately upon payment in full of its Obligations then outstanding hereunder.
Notwithstanding any termination of this Exim Agreement, all of Bank's security
interest in all of the Collateral and all of the terms and provisions of this
Exim Agreement shall continue in full force and effect until all Obligations
(excluding Obligations under Sections 2.6 and 10.3 to the extent they remain
inchoate at the time outstanding payment Obligations are paid in full) have been
paid and performed in full, and no termination shall impair any right or remedy
of Bank, nor shall any such termination relieve Borrower of any Obligation to
Bank until all of the Obligations have been paid and performed in full.
2.8 Use of Proceeds. Borrower will use the proceeds of Advances only for
the purposes specified in the Borrower Agreement. Borrower shall not use the
proceeds of the Advances for any purpose prohibited by the Borrower Agreement.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Advance. The obligation of Bank to make
the initial Advance is subject to the condition precedent that Bank shall have
received, in form and substance satisfactory to Bank, the following:
(a) this Exim Agreement, the Borrower Agreement and the Note, each duly
executed by Borrower;
(b) a certificate of the secretary of Borrower with respect to incumbency
and resolutions authorizing the execution and delivery of this Exim
Agreement;
(c) the Exim Guarantee;
(d) payment of the fees and Exim Bank Expenses then due and specified in
Section 2.5 hereof;
(e) documents and agreements as specified in Section 3.1 of the Domestic
Agreement; and
(f) such other documents, and completion of such other matters, as Bank may
deem reasonably necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of Bank to make
each Advance, including the initial Advance, is further subject to the following
conditions:
(a) timely receipt by Bank of the Payment/Advance Form as provided in
Section 2.1;
(b) timely receipt by Bank of a copy of the executed firm written export
purchase order relating to the requested Advance, the payment terms of
which shall be acceptable to Bank;
(c) timely receipt by Bank of an Export Order and Borrowing Base
Certificate as defined in the Borrower Agreement;
(d) the Exim Guarantee shall be in full force and effect; and
(e) the representations and warranties contained in Section 5 hereof shall
be true and accurate in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Advance as though
made at and as of each such date (except to the extent they relate
specifically to an earlier date, in which case such representations and
warranties shall continue to have been true and accurate as of such date),
and no Potential Event of Default or Event of Default shall have occurred
and be continuing, or would result from such Advance.
The making of each Advance shall be deemed to be a representation and
warranty by Borrower on the date of such Advance as to the accuracy of the facts
referred to in subsection (e) of this Section 3.2.
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants to Bank a continuing
security interest in all presently existing and hereafter acquired or arising
Collateral in order to secure prompt repayment of any and all Obligations and in
order to secure prompt performance by Borrower of each of its covenants and
duties under the Exim Loan Documents.
4.2 Delivery of Additional Documentation Required. Borrower shall from time
to time execute and deliver to Bank, at the request of Bank, all financing
statements and other documents that Bank may reasonably request, in form
satisfactory to Bank, to perfect and continue perfected Bank's security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under the Exim Loan Documents.
4.3 Power of Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney, with power to: (a) send requests for verification of Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign the name of Borrower on any of
the documents described in Section 4.2 (regardless of whether an Event of
Default has occurred); (d) sign Borrower's name on any invoice or bill of lading
relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (e) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (f) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable. The appointment of Bank
as Borrower's attorney-in-fact, and each of Bank's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully repaid and Bank's obligation to provide Advances hereunder is terminated.
4.4 Right to Inspect. Each of Bank and Exim Bank (through any of their
respective officers, employees, or agents) shall have the right, upon reasonable
prior notice, from time to time during Borrower's usual business hours, to
inspect Borrower's Books, facilities and activities, and to check, test, and
appraise the Collateral in order to verify Borrower's financial condition or the
amount, condition of, or any other matter relating to, the Collateral. Bank
shall conduct semi-annual accounts receivable audits and physical inspections of
the Inventory, the results of which audits shall be satisfactory to Bank.
Borrower will cause its officers and employees to give their full cooperation
and assistance in connection therewith.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents, warrants and covenants as follows:
5.1 Domestic Loan Documents. The representations and warranties contained
in the Domestic Loan Documents are true and correct.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of the
Obligations, Borrower shall do all of the following:
6.1 Domestic Loan Documents. Borrower shall comply in all respects with the
provisions of the Domestic Loan Documents.
6.2 Terms of Sale. Borrower shall cause all sales of products upon which
Advances are based either to be (i) supported by one or more irrevocable letters
of credit in an amount and of a tenor, naming a beneficiary and issued by a
financial institution acceptable to Bank or (ii) on open account to creditworthy
buyers that have been preapproved in writing by Bank and Exim Bank.
6.3 Borrower Agreement. Borrower shall comply with all of the terms of the
Borrower Agreement. In the event of any conflict or inconsistency between any
provision contained in the Borrower Agreement with any provision contained in
this Exim Agreement, the more strict provision, with respect to Borrower, shall
control.
6.4 Notice in Event of Filing of Action for Debtor's Relief. Borrower shall
notify Bank in writing within five (5) days of the occurrence of any of the
following: (1) Borrower begins or consents in any manner to any proceeding or
arrangement for its liquidation in whole or in part or to any other proceeding
or arrangement whereby any of its assets are subject generally to the payment of
its liabilities or whereby any receiver, trustee, liquidator or the like is
appointed for it or any substantial part of its assets (including without
limitation the filing by Borrower of a petition for appointment as a
debtor-in-possession under Title 11 of the U.S. Code); (2) Borrower fails to
obtain the dismissal or stay on appeal within thirty (30) calendar days of the
commencement of any proceeding arrangement referred to in (1) above; (3)
Borrower begins any other procedure for the relief of financially distressed or
insolvent debtors, or such procedure has been commenced against it, whether
voluntarily or involuntarily, and such procedure has not been effectively
terminated, dismissed or stayed within thirty (30) calendar days after the
commencement thereof, or (4) Borrower begins any procedure for its dissolution,
or a procedure therefor has been commenced against it.
6.5 Payment in Dollars. Borrower shall require payment in United States
Dollars for the products, unless Exim Bank otherwise agrees in writing.
6.6 Further Assurances. At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Exim Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, without the prior written consent of
the Bank, which Bank may grant or withhold in its sole discretion, so long as
any credit hereunder shall be available and until payment in full of the
Obligations, Borrower will not do any of the following, or enter into any
agreement to do any of the following:
7.1 Domestic Loan Documents. Violate or otherwise fail to comply with any
provision of the Domestic Loan Documents.
7.2 Loans to Shareholders or Affiliates. Without Exim Bank's prior written
consent, make any loans to any shareholder or entity affiliated with Borrower.
As used in this Section 7.2, the term "loan" does not include salary, rent paid
to an affiliated entity owned by the shareholders, or to other expenses incurred
in the ordinary course of Borrower's business.
7.3 Borrower Agreement. Violate or otherwise fail to comply with any
provision of the Borrower Agreement.
7.4 Exim Guarantee. Take any action, or permit any action to be taken, that
causes or, with the passage of time, could reasonably be expected to cause, the
Exim Guarantee to cease to be in full force and effect.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Exim Agreement:
8.1 Payment Default. If Borrower fails to pay the principal of, or any
interest on, any Advances when due and payable; or fails to pay any portion of
any other Obligations not constituting such principal or interest, including
without limitation Exim Bank Expenses (or any interest but for the provisions of
the United States Bankruptcy Code, would have occurred on any accounts), within
thirty (30) days of receipt by Borrower of an invoice therefor;
8.2 Covenant Default; Cross Default. If Borrower fails or neglects to
perform, keep, or observe any material term, provision, condition, covenant, or
agreement contained in this Exim Agreement, in any of the Domestic Loan
Documents, the Borrower Agreement or the Exim Loan Documents, or an Event of
Default occurs under any of the Domestic Loan Documents or the Borrower
Agreement; or
8.3 Exim Guarantee. If the Exim Guarantee ceases for any reason to be in
full force and effect, or if the Exim Bank declares the Exim Guarantee void or
revokes or purports to revoke any obligations under the Exim Guarantee.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence of an Event of Default, Bank
may, at is election, without notice and without demand, do any one or more of
the following:
(a) Declare all Obligations, whether evidenced by this Exim Agreement, by
any of the other Exim Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Exim Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors for
amounts, upon terms and in whatever order that Bank reasonably considers
advisable;
(d) Notify customers of Borrower or other third parties to pay any amounts
owing to Borrower directly to Bank;
(e) Without notice to or demand upon Borrower, make such payments and do
such acts as Bank considers necessary or reasonable to protect its security
interest in the Collateral. Borrower agrees to assemble the Collateral if
Bank so requires, and to make the Collateral available to Bank as Bank may
designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral,
or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien which in Bank's determination appears to be
prior or superior to its security interest and to pay all expenses incurred
in connection therewith. With respect to any of Borrower's owned premises,
Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, for up to one hundred
twenty (120) days in order to exercise any of Bank's rights or remedies
provided herein, at law, in equity, or otherwise;
(f) Set off and apply to the Obligations any and all (i) balances and
deposits of Borrower held by Bank, or (ii) indebtedness at any time owing
to or for the credit or the account of Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or
any property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral
and, in connection with Bank's exercise of its rights under this section
9.1, Borrower's rights under all licenses and all franchise agreements
shall inure to Bank's benefit;
(h) Sell the Collateral at either a public or private sale, or both, by way
of one or more contracts or transactions, for cash or on terms, in such
manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable;
(i) Bank may credit bid and purchase at any public sale; and
(j) Any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by Borrower.
9.2 Exim Direction. Upon the occurrence of an Event of Default, Exim Bank
shall have a right to: (i) direct Bank to exercise the remedies specified in
section 9.1 and (ii) request that Bank accelerate the maturity of any other
loans to Borrower as to which Bank has a right to accelerate.
9.3 Exim Notification. Bank shall have the right to immediately notify Exim
Bank in writing if it has knowledge of the occurrence of any of the following
events: (1) any failure to pay any amount due under this Loan Exim Agreement or
the Note; (2) the Borrowing Base is less than the sum of outstanding Advances
hereunder; (3) any failure to pay when due any amount payable to Bank by the
Borrower under any loan(s) extended by Bank to Borrower; (4) the filing of an
action for debtor's relief by, against, or on behalf of Borrower; or (5) any
threatened or pending material litigation against Borrower, or any material
dispute involving Borrower.
In the event that it sends such a notification to Exim Bank, Bank shall
have the right to thereafter send Exim Bank a written report on the status of
the events covered by said notification on each Business Day which occurs every
thirty (30) calendar days after the date of said notification, until such time
as Bank files a claim with Exim Bank or said default or other events have been
cured. Bank shall not have any obligation to make any Advances following said
notification to Exim Bank, unless Exim Bank gives its written approval thereto.
If directed to do so by Exim Bank, Bank shall have a right promptly to exercise
any rights it may have against Borrower to demand the immediate repayment of all
amounts outstanding under the Exim Loan Documents.
9.4 Remedies Cumulative. Bank's rights and remedies under this Exim
Agreement, the Exim Loan Documents, the Domestic Loan Documents and all other
agreements shall be cumulative. Bank shall have all other rights and remedies
not inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by Bank of one right or remedy shall be deemed an election, and no
waiver by Bank of any Event of Default on Borrower's part shall be deemed a
continuing waiver. No delay by Bank shall constitute a waiver, election, or
acquiescence by it.
10. WAIVERS; INDEMNIFICATION
10.1 Demand; Protest. Borrower waives demand, protest, notice of protest,
notice of dishonor, notice of payment and nonpayment, notice of any default,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by Bank on which Borrower may in any way be liable.
10.2 Bank's Liability for Inventory. So long as Bank complies with its
obligations, if any, under Section 9207 of the Code, Bank shall not in any way
or manner be liable or responsible for: (a) the safekeeping of the Collateral;
(b) any loss or damage thereto occurring or arising in any manner or fashion
from any cause; (c) any diminution in the value thereof; or (d) any act or
default of any carrier, warehouseman, bailee, forwarding agency, or other person
whomsoever. All risk of loss, damage or destruction of the Collateral shall be
borne by Borrower.
10.3 Indemnification. Borrower agrees to defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Exim Agreement,
and (b) all losses or Exim Bank Expenses in any way suffered, incurred, or paid
by Bank as a result of or in any way arising out of, following, or consequential
to transactions between Bank and Borrower whether under this Exim Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
11. NOTICES
Unless otherwise provided in this Exim Agreement, all notices or demands by
any party relating to this Exim Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by certified mail, postage
prepaid, return receipt requested, or by telefacsimile to Borrower or to Bank,
as the case may be, at the address set forth in the Domestic Loan Documents. The
parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.
12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
This Exim Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE EXIM LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS.
13. GENERAL PROVISIONS
13.1 Successors and Assigns. This Exim Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Exim Agreement nor any rights
hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participations in all or any part of, or any interest in
Bank's rights and benefits hereunder.
13.2 Time of Essence. Time is of the essence for the performance of all
obligations set forth in this Exim Agreement.
13.3 Severability of Provisions. Each provision of this Exim Agreement
shall be severable from every other provision of this Exim Agreement for the
purpose of determining the legal enforceability of any specific provision.
13.4 Amendments in Writing. This Exim Agreement cannot be changed or
terminated orally. Without the prior written consent of Exim Bank, no material
amendment of or deviation from the terms of this Exim Agreement or the Note
shall be made that would adversely affect the interests of Exim Bank under the
Exim Guarantee, including without limitation the rescheduling of any payment
terms provided for in this Exim Agreement. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Exim Agreement, if any, are merged into
this Exim Agreement, provided that any UCC-1 financing statements, or amendments
thereto, or filings with respect to Borrower's intellectual property, filed by
Bank to secure the Obligations of Borrower shall remain in full force and
effect.
13.5 Counterparts. This Exim Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Exim
Agreement.
13.6 Survival. All covenants, representations and warranties made in this
Exim Agreement shall continue in full force and effect so long as any
Obligations (excluding Obligations under Sections 2.6 and 10.3 to the extent
they remain inchoate at the time that outstanding payment Obligations are paid
in full) remain outstanding. The obligations of Borrower to indemnify Bank with
respect to the expenses, damages, losses, costs and liabilities described in
Section 10.3 shall survive until all applicable statute of limitations periods
with respect to actions that may be brought against Bank have run.
13.7 Effect of Amendment and Restatement. This Exim Agreement is intended
to and does completely amend and restate, without novation, the Original
Agreement. All advances or loans outstanding under the Original Agreement are
and shall continue to be outstanding under this Exim Agreement. All security
interests granted under the Original Agreement are hereby confirmed and ratified
and shall continue to secure all Obligations under this Exim Agreement.
13.8 Confidentiality. In handling any confidential information Bank shall
exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Exim
Agreement except that disclosure of such information may be made (i) to the
subsidiaries or affiliates of Bank in connection with their present or
prospective business relations with Borrower, (ii) to prospective transferees or
purchasers of any interest in the Loans, provided that they have entered into a
comparable confidentiality agreement in favor of Borrower and have delivered a
copy to Borrower, (iii) as required by law, regulations, rule or order,
subpoena, judicial order or similar order and (iv) as may be required in
connection with the examination, audit or similar investigation of Bank.
Confidential information hereunder shall not include information that either:
(a) is in the public domain or in the knowledge or possession of Bank when
disclosed to Bank, or becomes part of the public domain after disclosure to Bank
through no fault of Bank; or (b) is disclosed to the Bank by a third party,
provided the Bank does not have actual knowledge that such third party is
prohibited from disclosing such information. Notwithstanding any provision of
this Exim Agreement to the contrary, neither Borrower nor any of its
Subsidiaries will be required to disclose, permit the inspection, examination,
copying or making extracts of, or discussions of, any document, information or
other matter that (i) prior to the occurrence of an Event of Default constitutes
non-financial trade secrets, or (ii) in respect to which disclosure to the Banks
(or designated representative) is then prohibited by (a) law, or (b) an
agreement binding upon Borrower or any Subsidiary that was not entered into by
Borrower or such Subsidiary for the primary purpose of concealing information
from Banks.
IN WITNESS WHEREOF, the parties hereto have caused this Exim Agreement to
be executed as of the date first above written.
CASTELLE
By: /s/ Randall I. Bambrough
Randall I. Bambrough
Title: Vice President of Finance
SILICON VALLEY BANK
By: /s/ Peter A. Kidder
Peter Kidder
Title: Vice President
EXHIBIT A
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, service marks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities (other than
securities of foreign Subsidiaries), letters of credit, certificates of deposit,
instruments and chattel paper now owned or hereafter acquired and Borrower's
Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
EXHIBIT B
Revolving Promissory Note
(Export-Import Line)
$3,000,000 Palo Alto, California
June 20, 1996
FOR VALUE RECEIVED, the undersigned, Castelle (the "Borrower"), promises to
pay to the order of Silicon Valley Bank ("Bank"), at such place as the holder
hereof may designate, in lawful money of the United States of America, the
aggregate unpaid principal amount of all advances ("Advances") made by Bank to
Borrower under the terms of this Note, up to a maximum principal amount of Three
Million Dollars ($3,000,000). Borrower shall also pay interest on the aggregate
unpaid principal amount of such Advances at the rates and in accordance with the
terms of the Export-Import Bank Loan and Security Agreement between Borrower and
Bank of even date herewith, as amended from time to time (the "Loan Agreement")
on the last Business Day of each month after an Advance has been made. The
entire principal amount and all accrued interest shall be due and payable on
June 16, 1997, or on such earlier date, as provided for in the Loan Agreement.
Borrower irrevocably waives the right to direct the application of any and
all payments at any time hereafter received by Bank from or on behalf of
Borrower, and Borrower irrevocably agrees that Bank shall have the continuing
exclusive right to apply any and all such payments against the then due and
owing obligations of Borrower as Bank may deem advisable. In the absence of a
specific determination by Bank with respect thereto, all payments shall be
applied in the following order: (a) then due and payable fees and expenses; (b)
then due and payable interest payments and mandatory prepayments; and (c) then
due and payable principal payments and optional prepayments.
Bank is hereby authorized by Borrower to endorse on Bank's books and
records each Advance made by Bank under this Note and the amount of each payment
or prepayment of principal of each such Advance received by Bank; it being
understood, however, that failure to make any such endorsement (or any errors in
notation) shall not affect the obligations of Borrower with respect to Advances
made hereunder, and payments of principal by Borrower shall be credited to
Borrower notwithstanding the failure to make a notation (or any errors in
notation) thereof on such books and records.
Borrower promises to pay Bank all reasonable costs and reasonable expenses
of collection of this Note and to pay all reasonable attorneys' fees incurred in
such collection or in any suit or action to collect this Note or in any appeal
thereof. Borrower waives presentment, demand, protest, notice of protest, notice
of dishonor, notice of nonpayment, and any and all other notices and demands in
connection with the delivery, acceptance, performance, default or enforcement of
this Note, as well as any applicable statute of limitations. No delay by Bank in
exercising any power or right hereunder shall operate as a waiver of any power
or right. Time is of the essence as to all obligations hereunder.
This Note is issued pursuant to the Loan Agreement, which shall govern the
rights and obligations of Borrower with respect to all obligations hereunder.
This Note shall be deemed to be made under, and shall be construed in
accordance with and governed by, the laws of the State of California, excluding
conflicts of laws principles.
CASTELLE
By: /s/ Randall I. Bambrough
------------------------
Randall I. Bambrough
Title: Vice President of Finance
-------------------------
EXHIBIT C
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
------------------------
FAX#: (408) 432-3249 TIME:
-------------------------
FROM: Castelle
CLIENT NAME (BORROWER)
REQUESTED BY:
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
PHONE NUMBER:
FROM ACCOUNT # TO ACCOUNT #
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE)
PRINCIPAL PAYMENT (ONLY)
INTEREST PAYMENT (ONLY)
PRINCIPAL AND INTEREST (PAYMENT)
OTHER INSTRUCTIONS:
All representations and warranties of Borrower stated in the Loan Agreement
are true, correct and complete in all material respects as of the date of the
telephone request for and Advance confirmed by this Borrowing Certificate;
provided, however, that those representations and warranties expressly referring
to another date shall be true, correct and complete in all material respects as
of such date.
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
Authorized Requester Phone #
Received By (Bank) Phone #
__________________________
Authorized Signature (Bank)
Exhibit D
BORROWING BASE CERTIFICATE
COLLATERAL SCHEDULE
(FOREIGN A/R LINE OF CREDIT)
- --------------------------------------------------------------------------------
Borrower: Castelle Lender: Silicon Valley Bank
3255-3 Scott Boulevard 3003 Tasman Drive
Santa Clara, CA 95054 Santa Clara, CA 95054
Commitment Amount: $3,000,000
- --------------------------------------------------------------------------------
FOREIGN ACCOUNTS RECEIVABLE FROM EXPORT ACTIVITIES
1. Foreign Accounts Receivable Book Value as of
2. Additions (please explain on reverse)
3. TOTAL FOREIGN ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE DEDUCTIONS
4. Term in excess of 90 days
5. Amounts over 90 days (unless insured, then 90 days)
6. Balance of 50% over 90 day accounts
7. Excess 25% concentration
8. Credit Balances over 120 days
9. Accounts not payable in the U.S. Dollars or
payable in other than U.S. Dollars
10. Government and Military Accounts
11. Contra Accounts
12. Promotion, Demo or Consignment Accounts
13. Intercompany/Employee and Affiliate Accounts
14. Accounts in the form of L/Cs, if subject items
have not yet been shipped by Borrower
15. Accounts arising from Inventory not originally
located in and shipped from the U.S.
16. Accounts arising from the sale of defense articles or items
17. Accounts of buyers located in or from countries
in which shipment is prohibited or no coverage available
18. Amounts due and collectable outside U.S.
19. Other exclusions
20. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS
21. Eligible Accounts (No. 3 - No. 20)
22. Loan Value of Accounts (90%-Advance)
FOREIGN INVENTORY
23. Foreign Inventory Value as of _________
24. Additions (please explain on reverse)
25. TOTAL FOREIGN INVENTORY
FOREIGN INVENTORY DEDUCTIONS
26. Outside U.S.
27. Consignment
28. Proprietary Software
29. Damaged/Defective
30. Previously Exported
31. Defense Articles/Services
32. Prohibited County
33. No Coverage County
34. Ineligible A/R
35. TOTAL DEDUCTIONS
36. Eligible Inventory (No. 23 - No. 35)
37. Loan Value of Inventory (40% - No. 35)
BALANCES
38. Maximum Loan Amount
39. Total Available (Lesser of (No. 22 plus No. 37)
40. Present balance owing on Line of Credit
41. Outstanding under Sublimits
42. RESERVE POSITION (No. 39 - (No. 40 + No. 41))
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Collateral Schedule complies
with the representations and warranties set forth in the Borrower Agreement,
executed by Borrower and acknowledged by Lender, and the Export-Import Bank
Amended and Restated Loan and Security Agreement, executed by Borrower and
acknowledged by Lender dated June 20, 1996, as may be amended from time to time,
as if all representations and warranties were made as of the date hereof, and
that Borrower is, and shall remain, in full compliance with its agreements,
covenants, and obligations under such agreement. Such representations and
warranties include, without limitation, the following: Borrower is using
disbursements only for the purpose of enabling Borrower to finance the cost of
manufacturing, producing, purchasing or selling items intended for export.
Borrower is not using disbursements for the purpose of: (a) servicing any of
Borrower's unrelated pre-existing or future indebtedness; (b) acquiring fixed
assets or capital goods for the use of Borrower's business; (c) acquiring,
equipping, equipping or renting commercial space outside the United States; (d)
supporting research and development, (e) paying salaries of non-U.S. citizens or
non-U.S. permanent residents who are located in the offices of the United
States, or (f) serving as a retainage or warranty bond. Additionally,
disbursements are not being 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 the Export Import Bank of the United States is legally prohibited from
doing business; (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 items directly or indirectly destined for use by
military organizations designed primarily for military use (regardless of the
nature or actual use of the items); or (d) any items to be used in the
construction, alteration, operation or maintenance of nuclear power, enrichment,
reprocessing, research or heavy water production facilities.
Sincerely,
Castelle
By:
Name:
Chief Financial Officer
Date:
BANK USE ONLY
Received by:
Date:
Verified By:
Revolving Promissory Note
$3,000,000 Palo Alto, California
June 20, 1996
FOR VALUE RECEIVED, the undersigned, Castelle (the "Borrower"), promises to
pay to the order of Silicon Valley Bank ("Bank"), at such place as the holder
hereof may designate, in lawful money of the United States of America, the
aggregate unpaid principal amount of all advances ("Advances") made by Bank to
Borrower under the terms of this Note, up to a maximum principal amount of Three
Million Dollars ($3,000,000). Borrower shall also pay interest on the aggregate
unpaid principal amount of such Advances at the rates and in accordance with the
terms of the Export-Import Bank Loan and Security Agreement between Borrower and
Bank of even date herewith, as amended from time to time (the "Loan Agreement")
on the last Business Day of each month after an Advance has been made. The
entire principal amount and all accrued interest shall be due and payable on
June 16, 1997, or on such earlier date, as provided for in the Loan Agreement.
Borrower irrevocably waives the right to direct the application of any and
all payments at any time hereafter received by Bank from or on behalf of
Borrower, and Borrower irrevocably agrees that Bank shall have the continuing
exclusive right to apply any and all such payments against the then due and
owing obligations of Borrower as Bank may deem advisable. In the absence of a
specific determination by Bank with respect thereto, all payments shall be
applied in the following order: (a) then due and payable fees and expenses; (b)
then due and payable interest payments and mandatory prepayments; and (c) then
due and payable principal payments and optional prepayments.
Bank is hereby authorized by Borrower to endorse on Bank's books and
records each Advance made by Bank under this Note and the amount of each payment
or prepayment of principal of each such Advance received by Bank; it being
understood, however, that failure to make any such endorsement (or any errors in
notation) shall not affect the obligations of Borrower with respect to Advances
made hereunder, and payments of principal by Borrower shall be credited to
Borrower notwithstanding the failure to make a notation (or any errors in
notation) thereof on such books and records.
Borrower promises to pay Bank all reasonable costs and reasonable expenses
of collection of this Note and to pay all reasonable attorneys' fees incurred in
such collection or in any suit or action to collect this Note or in any appeal
thereof. Borrower waives presentment, demand, protest, notice of protest, notice
of dishonor, notice of nonpayment, and any and all other notices and demands in
connection with the delivery, acceptance, performance, default or enforcement of
this Note, as well as any applicable statute of limitations. No delay by Bank in
exercising any power or right hereunder shall operate as a waiver of any power
or right. Time is of the essence as to all obligations hereunder.
This Note is issued pursuant to the Loan Agreement, which shall govern the
rights and obligations of Borrower with respect to all obligations hereunder.
This Note shall be deemed to be made under, and shall be construed in
accordance with and governed by, the laws of the State of California, excluding
conflicts of laws principles.
Castelle
By: /s/ Randall I. Bambrough
Randall I. Bambrough
Title: Vice President of Finance
CORPORATE RESOLUTIONS TO BORROW
- --------------------------------------------------------------------------------
Borrower: Castelle
- --------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of Castelle, Inc. (the
"Corporation"), HEREBY CERTIFY that the Corporation is organized and existing
under and by virtue of the laws of the State of California.
I FURTHER CERTIFY that the Articles of Incorporation and Bylaws of the
Corporation previously delivered to Silicon Valley Bank remain in full force and
effect and have not been amended or modified.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation (or
by other duly authorized corporate action in lieu of a meeting), duly called and
held, at which a quorum was present and voting, the following resolutions were
adopted.
BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITION ACTUAL SIGNATURES
Randall I. Bambrough Vice President of Finance /s/ Randall I. Bambrough
- -------------------- ------------------------- ------------------------
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
Borrow Money. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Export-Import Bank Amended and Restated Loan and Security Agreement
dated as of June 20, 1996 (the "Loan Agreement").
Execute Notes. To execute and deliver to Bank the promissory note or notes
of the Corporation, on Lender's forms, at such rates of interest and on such
terms as may be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of the Corporation to Bank, and also to execute and deliver to
Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion of
the notes.
Grant Security. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
Negotiate Items. To draw, endorse, and discount with Bank all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the account of the Corporation with Bank, or to cause such other disposition
of the proceeds derived therefrom as they may deem advisable.
Letters of Credit. To execute letter of credit applications and other
related documents pertaining to Bank's issuance of letters of credit.
Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.
I FURTHER CERTIFY that the Articles of Incorporation and Bylaws of the
Corporation are in full force and effect in the form attached hereto.
IN WITNESS WHEREOF, I have hereunto set my hand on June 20, 1996 and attest
that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
/s/ Randall I Bambrough
-----------------------
Randall I. Bambrough
Chief Financial Officer
COLLATERAL ASSIGNMENT, PATENT MORTGAGE
AND SECURITY AGREEMENT
This Collateral Assignment, Patent Mortgage and Security Agreement is made
as of June 20, 1996, by and between CASTELLE, a California corporation
("Assignor"), and SILICON VALLEY BANK, a California banking corporation
("Assignee").
RECITALS
A. Assignee has agreed to lend to Assignor certain funds (the "Loan"), and
Assignor desires to borrow such funds from Assignee pursuant to the terms of an
Amended and Restated Loan and Security Agreement and Export-Import Amended and
Restated Loan and Security Agreement, both of even date herewith (collectively
referred to as the "Loan Agreement").
B. In order to induce Assignee to make the Loan, Assignor has agreed to
assign certain intangible property to Assignee for purposes of securing the
obligations of Assignor to Assignee.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. Assignment, Patent Mortgage and Grant of Security Interest. As
collateral security for the prompt and complete payment and performance of all
of Assignor's present or future indebtedness, obligations and liabilities to
Assignee, Assignor hereby assigns, transfers, conveys and grants a security
interest and mortgage to Assignee, as security, in and to Assignor's entire
right, title and interest in, to and under the following (all of which shall
collectively be called the "Collateral"):
(a) Any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or
not the same also constitutes a trade secret, now or hereafter existing,
created, acquired or held, including without limitation those set forth on
Exhibit A attached hereto (collectively, the "Copyrights");
(b) Any and all trade secrets, and any and all intellectual property rights
in computer software and computer software products now or hereafter
existing, created, acquired or held;
(c) Any and all design rights which may be available to Assignor now or
hereafter existing, created, acquired or held;
(d) All patents, patent applications and like protections including without
limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same, including without
limitation the patents and patent applications set forth on Exhibit B
attached hereto (collectively, the "Patents");
(e) Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Assignor connected
with and symbolized by such trademarks, including without limitation those
set forth on Exhibit C attached hereto (collectively, the "Trademarks");
(f) Any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not
the obligation, to sue for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(g) All licenses or other rights to use any of the Copyrights, Patents or
Trademarks, and all license fees and royalties arising from such use to the
extent permitted by such license or rights; and
(h) All amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents; and
(i) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
THE INTEREST IN THE COLLATERAL BEING ASSIGNED HEREUNDER SHALL NOT BE
CONSTRUED AS A CURRENT ASSIGNMENT, BUT AS A CONTINGENT ASSIGNMENT TO SECURE
ASSIGNOR'S OBLIGATIONS TO ASSIGNEE UNDER THE LOAN AGREEMENT.
2. Authorization and Request. Assignor authorizes and requests that the
Register of Copyrights and the Commissioner of Patents and Trademarks record
this conditional assignment.
3. Covenants and Warranties. Assignor represents, warrants, covenants and
agrees as follows:
(a) Assignor is now the sole owner of the Collateral, except for
non-exclusive licenses granted by Assignor to its customers in the ordinary
course of business;
(b) Performance of this Assignment does not conflict with or result in a
breach of any agreement to which Assignor is party or by which Assignor is
bound, except to the extent that certain intellectual property agreements
prohibit the assignment of the rights thereunder to a third party without
the licensor's or other party's consent and this Assignment constitutes an
assignment;
(c) During the term of this Assignment, Assignor will not transfer or
otherwise encumber any interest in the Collateral, except for non-exclusive
licenses granted by Assignor in the ordinary course of business or as set
forth in this Assignment;
(d) To its knowledge, each of the Patents is valid and enforceable, and no
part of the Collateral has been judged invalid or unenforceable, in whole
or in part, and no claim has been made that any part of the Collateral
violates the rights of any third party;
(e) Assignor shall promptly advise Assignee of any material change in the
composition of the Collateral, including but not limited to any subsequent
ownership right of the Assignor in or to any Trademark, Patent or Copyright
not specified in this Assignment;
(f) Assignor shall (i) protect, defend and maintain the validity and
enforceability of the Trademarks, Patents and Copyrights, (ii) use its best
efforts to detect infringements of the Trademarks, Patents and Copyrights
and promptly advise Assignee in writing of material infringements detected
and (iii) not allow any Trademarks, Patents or Copyrights to be abandoned,
forfeited or dedicated to the public without the written consent of
Assignee, which shall not be unreasonably withheld, unless Assignor
determines that reasonable business practices suggest that abandonment is
appropriate.
(g) Assignor shall promptly register the most recent version of any of
Assignor's Copyrights, if not so already registered, and shall, from time
to time, execute and file such other instruments, and take such further
actions as Assignee may reasonably request from time to time to perfect or
continue the perfection of Assignee's interest in the Collateral;
(h) This Assignment creates, and in the case of after acquired Collateral,
this Assignment will create at the time Assignor first has rights in such
after acquired Collateral, in favor of Assignee a valid and perfected first
priority security interest in the Collateral in the United States securing
the payment and performance of the obligations evidenced by the Note upon
making the filings referred to in clause (i) below;
(i) To its knowledge, except for, and upon, the filing with the United
States Patent and Trademark office with respect to the Patents and
Trademarks and the Register of Copyrights with respect to the Copyrights
necessary to perfect the security interests and assignment created
hereunder, and except as has been already made or obtained, no
authorization, approval or other action by, and no notice to or filing
with, any U.S. governmental authority or U.S. regulatory body is required
either (i) for the grant by Assignor of the security interest granted
hereby or for the execution, delivery or performance of this Assignment by
Assignor in the U.S. or (ii) for the perfection in the United States or the
exercise by Assignee of its rights and remedies hereunder;
(j) All information heretofore, herein or hereafter supplied to Assignee by
or on behalf of Assignor with respect to the Collateral is accurate and
complete in all material respects.
(k) Assignor shall not enter into any agreement that would materially
impair or conflict with Assignor's obligations hereunder without Assignee's
prior written consent, which consent shall not be unreasonably withheld.
Assignor shall not permit the inclusion in any material contract to which
it becomes a party of any provisions that could or might in any way prevent
the creation of a security interest in Assignor's rights and interests in
any property included within the definition of the Collateral acquired
under such contracts, except that certain contracts may contain
anti-assignment provisions that could in effect prohibit the creation of a
security interest in such contracts.
(l) Upon any executive officer of Assignor obtaining actual knowledge
thereof, Assignor will promptly notify Assignee in writing of any event
that materially adversely affects the value of any Collateral, the ability
of Assignor to dispose of any Collateral or the rights and remedies of
Assignee in relation thereto, including the levy of any legal process
against any of the Collateral.
4. Assignee's Rights. Assignee shall have the right, but not the
obligation, to take, at Assignor's sole expense, any actions that Assignor is
required under this Assignment to take but which Assignor fails to take, after
fifteen (15) days' notice to Assignor. Assignor shall reimburse and indemnify
Assignee for all reasonable costs and reasonable expenses incurred in the
reasonable exercise of its rights under this section 4.
5. Inspection Rights. Assignor hereby grants to Assignee and its employees,
representatives and agents the right to visit, during reasonable hours upon
prior reasonable written notice to Assignor, any of Assignor's plants and
facilities that manufacture, install or store products (or that have done so
during the prior six-month period) that are sold utilizing any of the
Collateral, and to inspect the products and quality control records relating
thereto upon reasonable written notice to Assignor and as often as may be
reasonably requested.
6. Further Assurances; Attorney in Fact.
(a) On a continuing basis, Assignor will make, execute, acknowledge and
deliver, and file and record in the proper filing and recording places in
the United States, all such instruments, including appropriate financing
and continuation statements and collateral agreements and filings with the
United States Patent and Trademark Office and the Register of Copyrights,
and take all such action as may reasonably be deemed necessary or
advisable, or as requested by Assignee, to perfect Assignee's security
interest in all Copyrights, Patents and Trademarks and otherwise to carry
out the intent and purposes of this Collateral Assignment, or for assuring
and confirming to Assignee the grant or perfection of a security interest
in all Collateral.
(b) Assignor hereby irrevocably appoints Assignee as Assignor's
attorney-in-fact, with full authority in the place and stead of Assignor
and in the name of Assignor, from time to time in Assignee's discretion, to
take any action and to execute any instrument which Assignee may deem
necessary or advisable to accomplish the purposes of this Collateral
Assignment, including (i) to modify, in its sole discretion, this
Collateral Assignment without first obtaining Assignor's approval of or
signature to such modification by amending Exhibit A, Exhibit B and Exhibit
C, thereof, as appropriate, to include reference to any right, title or
interest in any Copyrights, Patents or Trademarks acquired by Assignor
after the execution hereof or to delete any reference to any right, title
or interest in any Copyrights, Patents or Trademarks in which Assignor no
longer has or claims any right, title or interest, (ii) to file, in its
sole discretion, one or more financing or continuation statements and
amendments thereto, relative to any of the Collateral without the signature
of Assignor where permitted by law and (iii) after the occurrence of an
Event of Default, to transfer the Collateral into the name of Bank or a
third party to the extent permitted under the California Uniform Commercial
Code.
7. Events of Default. The occurrence of any of the following shall
constitute an Event of Default under the Assignment:
(a) An Event of Default occurs under the Loan Agreement; or
(b) Assignor breaches any warranty or agreement made by Assignor in this
Assignment and, as to any breach that is capable of cure, Assignor fails to
cure such breach within five (5) days of the occurrence of such breach.
8. Remedies. Upon the occurrence and continuance of an Event of Default,
Assignee shall have the right to exercise all the remedies of a secured party
under the California Uniform Commercial Code, including without limitation the
right to require Assignor to assemble the Collateral and any tangible property
in which Assignee has a security interest and to make it available to Assignee
at a place designated by Assignee. Assignee shall have a nonexclusive, royalty
free license to use the Copyrights, Patents and Trademarks to the extent
reasonably necessary to permit Assignee to exercise its rights and remedies upon
the occurrence of an Event of Default. Assignor will pay any expenses (including
reasonable attorneys' fees) incurred by Assignee in connection with the exercise
of any of Assignee's rights hereunder, including without limitation any expense
incurred in disposing of the Collateral. All of Assignee's rights and remedies
with respect to the Collateral shall be cumulative.
9. Indemnity. Assignor agrees to defend, indemnify and hold harmless
Assignee and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by this Agreement, and (b) all
losses or expenses in any way suffered, incurred, or paid by Assignee as a
result of or in any way arising out of, following or consequential to
transactions between Assignee and Assignor, whether under this Assignment or
otherwise (including without limitation reasonable attorneys' fees and
reasonable expenses), except for losses arising from or out of Assignee's gross
negligence or willful misconduct.
10. Reassignment. At such time as Assignor shall completely satisfy all of
the obligations secured hereunder, Assignee shall execute and deliver to
Assignor all deeds, assignments and other instruments as may be necessary or
proper to revest in Assignor full title to the property assigned hereunder,
subject to any disposition thereof which may have been made by Assignee pursuant
hereto.
11. Course of Dealing. No course of dealing, nor any failure to exercise,
nor any delay in exercising any right, power or privilege hereunder shall
operate as a waiver thereof.
12. Attorneys' Fees. If any action relating to this Assignment is brought
by either party hereto against the other party, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements.
13. Amendments. This Assignment may be amended only by a written instrument
signed by both parties hereto.
14. Counterparts. This Assignment may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute the same instrument.
15. California Law and Jurisdiction; Jury Waiver. This Assignment shall be
governed by the laws of the State of California, without regard for choice of
law provisions. Assignor and Assignee consent to the exclusive jurisdiction of
any state or federal court located in Santa Clara County, California. ASSIGNOR
AND ASSIGNEE EACH WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE LOAN AGREEMENT, THIS
ASSIGNMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS.
16. Confidentiality. In handling any confidential information, Assignee
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Assignment
except that disclosure of such information may be made (i) to the affiliates of
Assignee, (ii) to prospective transferees or purchasers of an interest in the
obligations secured hereby, provided that they have entered into a comparable
confidentiality agreement in favor of Assignor and have delivered a copy to
Assignor, (iii) as required by law, regulation, rule or order, subpoena,
judicial order or similar order, (iv) as may be required in connection with the
examination, audit or similar investigation of Assignee and (v) as Bank may
determine in connection with the enforcement of any remedies hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment on the
day and year first above written.
Address of Assignor: ASSIGNOR:
3255-3 Scott Boulevard CASTELLE
Santa Clara, CA 95054
Attn: By: /s/ Randall I. Bambrough
Mr. Randall Bambrough
Randall I. Bambrough
Title: Vice President of Finance
Address of Assignee: ASSIGNEE:
3003 Tasman Drive SILICON VALLEY BANK
Santa Clara, CA 95054
Attn: By: /s/ Peter A. Kidder
Mr. Peter Kidder
Peter A. Kidder
Title: Vice President
EXHIBIT A
Copyrights
Registration/ Registration/
Application Application
Description Number Date
UNREGISTERED COPYRIGHTS
SOFTWARE OPTIONS (VERSIONS 3.5.3 AND/OR 3.7)
FaxPress Multi-protocol Software Option
FaxPress CC:Mail Gateway for NetWare
FaxPress MHS Gateway for NetWare
FaxPress Groupwise Gateway for NetWare
FaxPress OCR Software
FaxPress Billing and Analysis Software
FaxPress Embedded Codes Gateway
FaxPress Print Server Options
FaxWare 4 - Evaluation Copy
FaxWare 4 - Evaluation Upgrade
FaxWare 4 - Starter Pack
FaxWare 4 - 5 User License
FaxWare 4 - Line License
SOFTWARE & HARDWARE UPGRADES
FaxPress 3.7 Software Upgrade for FP 1000, FP2000, FP3000, FP1500 & Office
Connect Fax Server (both Ethernet & Token Ring)
FaxPress 3.5.3 Software Upgrade for FP1000, FP2000, and FP3000 (both Ethernet
and Token Ring)
FaxPress 1500 1-line Upgrade
FaxPress 2000 2-line Upgrade
FaxPress 3000 2-line Upgrade
FaxPress 1500 Upgrade Kit to Faxpress 1500-N (for NT support)
FaxPress 3000 Upgrade Kit to Faxpress 3500 (for NT support & both Ethernet &
Token Ring)
LANpress U/G for 2+2 (both Ethernet and Token Ring)
LANpress U/G for 1+1
LANpress U/G for 1P
LANpress U/G for 2P
LANpress 2P Extra NDS Upgrade Kit
LANpress 2+2 NDS Upgrade Kit
JetPress U/G for XIO Extra
JetPress U/G for MIO Plus Extra
FaxPress firmware upgrade for FP 2000 (both Ethernet and Token Ring)
FaxPress firmware upgrade for FP 1000
FaxPress 3.5.3 firmware and software upgrade for FP1000
FaxPress 3.5.3 firmware and software upgrade for FP2000 (both Ethernet and Token
Ring)
FaxPress 1500 modem upgrade
FaxPress 1500 4 MB, Memory Upgrade
HARDWARE
OfficeConnect Fax Server
FaxPress 1500-N Ethernet (both 1 and 2 lines)
FaxPress 3500 (both Ethernet & Token Ring and both 1 & 2 lines)
FaxPress 1500 Ethernet (both 1 and 2 lines)
FaxPress 3000 (both Ethernet & Token Ring and both 1 & 2 lines)
FaxPress 2000 (both Ethernet & Token Ring and both 1 & 2 lines)
FaxPress 2000 Ethernet 4 lines
Personal FaxPress 100
LANpress Jr. MP
LANpress 1P MP
LANpress 2+1 MP (both Ethernet and Token Ring)
LANpress 3+1 MP
LANpress 1+1 Extra (both Ethernet and Token Ring)
LANpress 1P
LANpress 2P
LANpress 2+2 (both Ethernet and Token Ring)
LANpress 2P Extra with Flash
JetPress MIO Plus EXTRA
JetPress XIO
JetPress MIO Plus
OfficeConnect Print Server
Qnix Internal Print Server
Qnix LP 2+1 MP
EXHIBIT B
Patents
Registration/ Registration/
Application Application
Description Number Date
EXHIBIT C
Trademarks
Registration/ Registration/
Application Application
Description Number Date
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 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 Al 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:
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 enforceable 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.
"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.
"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
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 office 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.
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 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.
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 a 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;
(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 of 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.
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.
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.
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.
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.
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.
2.9 Insurance. The Borrower shall maintain insurance coverage in the manner
and to the extent customary in businesses of similar character.
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.
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.
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.
2.13 Financial Statements. The Borrower shall provide quarterly financial
statements to the Lender no later than fifty (50) 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.
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.
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.
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 Governmentwide 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).
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
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
4.1 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, United States of America.
4.2 Notification. All notifications required by this Agreement shall be
given in the manner provided in the Loan Agreement.
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.
IN WITNESS WHEREOF, the Borrower has caused this Agreement to be duly
executed as of the 20th day of June, 1996.
CASTELLE
By: /s/ Randall I. Bambrough
Name: Randall I. Bambrough
Title: Vice President of Finance
ACKNOWLEDGED:
SILICON VALLEY BANK
By: /s/ Peter A. Kidder
Name: Peter Kidder
Title: Vice President
Guaranteed Loan No.
ANNEXES:
Al - Loan Authorization Agreement or
A2 - Loan Authorization Notice
