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. <PAGE> 2 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; <PAGE> 3 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. <PAGE> 4 3D/fx Interactive, Inc. Commitment Letter Page -4- 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: _______________________________