Loan Commitment Agreement - Silicon Valley Bank and 3dfx Interactive Inc.
July 1, 1996
Gary Martin
Chief Financial Officer
3D/fx Interactive, Inc.
415 Clyde Ave., Suite 105
Mountain View, CA 94043
Dear Gary:
Silicon Valley Bank ("Bank") is pleased to commit the following loans ("Loans")
to 3D/fx Interactive, Inc. ("Borrower") under the terms and conditions in this
letter. This letter is not meant to be, nor shall it be construed as, an attempt
to define all of the terms and conditions of the loans. The following is a
summary of the basic points of our proposal:
CREDIT FACILITY: A. $4,000,000 Revolving Accounts Receivable
Line of Credit, with the full amount of the
facility available for the issuance of
letters of credit.
B. $2,000,000 Term Loan.
MATURITY: A. 12 months from execution of loan documents.
B. Draw-Down Period: 6 months from execution of
loan documents. Repayment Period: 18 months
following Draw-Down Period.
COLLATERAL: First priority security interest in all corporate
assets. Facilities will be cross defaulted and
cross-collateralized.
INTEREST RATE: A. Prime Rate plus 0.50%, floating.
B. OPTION 1: Prime Rate plus 1.50%,
floating. This option carries
no prepayment penalty.
OPTION 2: Draw period - Prime Rate
plus 1.50%, floating.
Repayment - Fixed rate of 400
basis points above the current
yield given on US Treasury
securities of equal maturity.
The rate will be set at the
conclusion of the draw period.
This option carries a
prepayment penalty.
LOAN FEE: A. $20,000 (0.5%), due upon acceptance of
commitment.
B. $10,000 (0.5%), due upon acceptance of
commitment.
WARRANTS: A. None.
B. None.
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3D/fx Interactive, Inc.
Commitment Letter
Page -2-
BORROWING FORMULA: A. Lesser of Facility amount or 75% of standard
eligible* accounts receivable Borrower may
increase borrowing base availability by
pledging cash & equivalents in the amount of
100% of any request exceeding eligible A/R
base.
*Standard ineligibles will be modified to
allow up to a 35% concentration for any one
A/R debtor in any one month during the term
of the Facility.
B. 100% of the invoice cost of equipment,
software and leaseholds.
Expenses related to sales tax, installation
and/or delivery will be excluded.
WARRANTIES &
COVENANTS: Borrower shall make customary representations,
warranties, and covenants, together with such other
representations, warranties, and covenants as the
Bank or its counsel may deem reasonably necessary or
desirable, including the following:
FINANCIAL COVENANTS:
Borrower will agree to maintain the following
financial covenants monthly when there is an
outstanding balance under Facility A or B (quarterly
otherwise):
1. Minimum Quick Ratio of 1.50 to 1;
2. Minimum Tangible Net Worth of $3,750,000;
3. Maximum Debt to Tangible Net Worth of 2.00
to 1;
4. Quarterly profitability required starting
Q496. Q296 and Q396 losses not to exceed
($4,250,000) and ($1,700,000), respectively;
annual profitability required beginning
FY97;
5. *MINIMUM LIQUIDITY coverage of 2x Facility B
commitment required until expiration of
drawdown; 2x loan outstanding under Facility
B required thereafter.
*MINIMUM LIQUIDITY applies to Facility B
only and is defined as unrestricted cash
(and equivalents) plus 50% of net accounts
receivable or net available under A/R line
of credit.
REPORTING
REQUIREMENTS: 1. Within 90 days of fiscal year-end,
CPA-audited annual financial statements;
2. Monthly company-prepared financial
statements, prepared in accordance with GMP,
and Covenant Compliance Certificate received
within fifteen (15) days of month end when
there is an outstanding balance* under
Facility A or B; quarterly, within 30 days
otherwise;
3. Monthly Borrowing Base Certificate, accounts
receivable agings and accounts payable
agings received within fifteen days (15) of
month end immediately prior to and while
there is an outstanding balance* under
Facility A;
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3D/fx Interactive, Inc.
Commitment Letter
Page -3-
4. Collateral audit required prior to initial
cash advance under Facility A and within 30
days following a non-cash secured L/C
issuance; audits performed semi-annually
thereafter so long as there is an
outstanding balance* under Facility A. Cost
of the examinations are at Borrower's
expense.
*Bank will permit letters of credit to be
issued in an amount not to exceed 25% of
gross A/R without considering such issuances
as outstandings under Facility A. Borrower
will be required to submit a Borrowing Base
Certificate and A/R aging prior to initial
letter of credit issuance secured by A/R.
OTHER REQUIREMENTS: 1. Primary banking relationship to be
maintained with Bank.
2. Copies of invoices prior to each advance on
the Term Loan.
4. Proof of insurance on all corporate assets
with Lenders' Loss Payable F Clause naming
Bank Loss Payee.
EXPENSES: Borrower shall pay all of the Bank's fees and charges
in connection with the Loans, including all
reasonable fees of Bank's counsel. Such costs payable
by Borrower are in addition to the Loan Fees
described above. In the event the Loan does not
close, the Loan Fees to Borrower shall be reduced by
the aggregate of all expenses and charges.
CONDITIONS
OF CLOSING: The following shall be satisfied prior to closing and
shall be conditions precedent to the Bank's
obligation to fund the Loans:
1. Compliance with all warranties and
covenants, including financial and reporting
requirements.
2. After due-diligence inquiry conducted by the
Bank there shall be no discovery of any
facts or circumstances which would
negatively affect, in the Bank's sole
discretion, collectability of the Loans
against Borrower.
If these basic terms and conditions are acceptable, please so indicate by
signing the enclosed copy of this letter and returning it with the Loan Fees to
the attention of the undersigned by Wednesday, July 10, 1996 or such later date
agreed upon by Bank in writing. The proposal will constitute your instruction to
the Bank to commence, at your expense, documentation which shall supersede this
letter. This letter is intended to set forth the proposed terms of the Loans
currently under discussion between us. Except for your obligation to pay the
Bank's expenses and charges described above, this letter and our other
communications and negotiations regarding the proposed Loans do not constitute
an agreement or an offer and do not create any legal rights benefiting, or
obligations binding on, either of us. It is intended that all legal rights and
obligations of the Bank and Borrower will be set forth in definitive loan
documents.
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3D/fx Interactive, Inc.
Commitment Letter
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Gary, we are pleased to provide you with this commitment. We hope these loans
provide the foundation for a long and mutually beneficial relationship.
Sincerely,
SILICON VALLEY BANK
________________________________
Michael J. Rose, Vice President
________________________________
Sean Lynden, Vice President & Group Manager
AGREED TO AND ACCEPTED THIS _________ DAY OF ________, 1996
3DFX INTERACTIVE, INC.
By: ________________________________
Vice President, Administration & CFO
Its: _______________________________