Loan and Security Agreement - 3dfx Interactive Inc. and Silicon Valley Bank
3DFX INTERACTIVE, INC.
LOAN AND SECURITY AGREEMENT
DATED AS OF AUGUST 19, 1996
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AGREEMENT
This Loan and Security Agreement ("Agreement") is made and entered into
as of August 19, 1996, by and between Silicon Valley Bank ("Bank") and 3DFX
INTERACTIVE, INC. ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
SECTION 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 Committed Revolving
Line or the Committed Equipment Line.
"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.
"CASH OR CASH EQUIVALENTS" means cash on hand or cash held in a
certificate of deposit, money market account, or checking account with Bank.
"CLOSING DATE" means the date of this Agreement.
"CODE" means the California Uniform Commercial Code.
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"COLLATERAL" means the property described on EXHIBIT A attached hereto.
"COMMITTED REVOLVING LINE" means Four Million Dollars ($4,000,000).
"COMMITTED EQUIPMENT LINE" means Two Million Dollars ($2,000,000).
"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 ASSETS" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"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 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 (other than by virtue of being directly or indirectly under common
ownership or control with Borrower) of Borrower;
2.
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(F) Accounts with respect to which the account debtor does not
have its principal place of business in the United States, except for Eligible
Foreign Accounts, and Accounts arising from products shipped to or services
provided to branches or offices located in the United States of any account
debtor that does not have its principal place of business in the United States;
(G) Accounts with respect to which the account debtor is a
federal, state, or local governmental entity or any department, agency, or
instrumentality thereof.
(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, provided however, (i) a thirty-five
percent (35%) concentration limit is allowed for any single account debtor
during any one month, or (ii) as otherwise 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 sole 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 to be doubtful.
"ELIGIBLE FOREIGN ACCOUNTS" means Accounts with respect to which the
account debtor does not have its principal place of business in the United
States and that are: (1) covered by credit insurance in form and amount, and by
an insurer satisfactory to Bank less the amount of any deductible(s) which may
be or become owing thereon: or (2) supported by one or more letters of credit in
favor of Bank as beneficiary, in an amount and of a tenor, and issued by a
financial institution, acceptable to Bank; or (3) that Bank approves on a
case-by-case basis.
"EQUIPMENT" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"EQUIPMENT MATURITY DATE" means August 18, 1998.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"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
3.
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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, charge, pledge,
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, 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 otherwise perform its obligations under the Loan Documents.
"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.
"OBLIGATIONS" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, 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.
"OUTSTANDING BALANCE" means any outstandings under the Committed
Equipment Line or the Committed Revolving Line; provided however, that any
issued letters of credit which do not exceed 25% of gross Accounts Receivable
are not considered outstanding under the Committed Revolving Line.
"PAYMENT DATE" means the eighteenth (18th) calendar day of each month.
"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) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(C) Subordinated Debt;
(D) Indebtedness to trade creditors incurred in the ordinary
course of business; and
(E) Indebtedness with respect to capital lease obligations and
Indebtedness secured by Permitted Liens.
4.
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"PERMITTED INVESTMENT" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(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 Investors Service, Inc., and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank.
"PERMITTED LIENS" means the following:
(a) Any Liens existing on the Closing Date 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 or held 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 the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens securing capital lease obligations on assets subject
to such capital leases; and
(e) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (d) 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.
"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 determined in
accordance with GAAP.
"RESPONSIBLE OFFICER" means each of the Chief Executive Officer, the Chief
Financial Officer and the Controller of Borrower.
"REVOLVING MATURITY DATE" means August 18, 1997.
"SCHEDULE" means the schedule of exceptions attached hereto.
"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).
5.
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"SUBSIDIARY" means any corporation or partnership in which (i) any
general partnership interest or (ii) more than 50% of the stock of which by the
terms thereof ordinary voting power to elect the Board of Directors, managers or
trustees of the entity shall, at the time as of which any determination is being
made, be owned by Borrower, either directly or through an Affiliate.
"TANGIBLE NET NORTH" 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, but specifically excluding Subordinated
Debt.
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.
SECTION 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 (i) the Committed Revolving Line or the Borrowing Base, whichever is
less, minus (ii) the face amount of all outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit). For purposes of this Agreement,
"BORROWING BASE" shall mean an amount equal to (i) seventy-five percent (75%) of
Eligible Accounts plus (ii) one hundred percent (100%) of Cash or Cash
Equivalents. 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. Pacific 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.
Borrower promises to pay to the order of Bank, in lawful money of the
United States of America, the aggregate unpaid principal amount of all Advances
made by Bank to Borrower hereunder. Borrower shall also pay interest on the
aggregate unpaid principal amount of such Advances at the rates and in
accordance with the terms hereof.
The Committed Revolving Line shall terminate on the Revolving Maturity
Date, at which time all Advances under this SECTION 2.1 and other amounts due
under this Agreement (except as otherwise expressly specified herein) shall be
immediately due and payable.
6.
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2.1.1 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this
Agreement, Bank agrees to issue or cause to be issued letters of credit for the
account of Borrower in an aggregate face amount not to exceed (i) the lesser of
the Committed Revolving Line or the Borrowing Base minus (ii) the then
outstanding principal balance of the Advances provided that the face amount of
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit) shall not in any case exceed Four Million Dollars ($4,000,000). Each
such letter of credit shall have an expiry date no later than ninety (90) days
after the Revolving Maturity Date provided that Borrower's letter of credit
reimbursement obligation shall be secured by cash on terms acceptable to Bank at
any time after the Revolving Maturity Date if the term of this Agreement is not
extended by Bank. All such letters of credit shall be, in form and substance,
acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions of Bank's form of application and letter of credit agreement.
(b) The Obligation of Borrower to immediately
reimburse Bank for drawings made under Letters of Credit shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement and such Letters of Credit, under all
circumstances whatsoever. Borrower shall indemnify, defend and hold Bank
harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys' fees, arising out of or in connection with any
letters of credit.
2.1.2 LETTER OF CREDIT REIMBURSEMENT; RESERVE.
(a) Borrower may request that Bank issue a letter of
credit payable in a currency other than United States Dollars. If a demand for
payment is made under any such letter of credit, Bank shall treat such demand as
an advance to Borrower of the equivalent of the amount thereof (plus cable
charges) in United States currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other currency for cable transfer
to the country of which it is the currency.
(b) Upon the issuance of any letter of credit payable
in a currency other than United States Dollars, Bank shall create a reserve
under the Committed Revolving Line for letters of credit against fluctuations in
currency exchange rates, in an amount equal to twenty percent (20%) of the face
amount of such letter of credit. The amount of such reserve may be amended by
Bank from time to time to account for fluctuations in the exchange rate. The
availability of funds under the Committed Revolving Line shall be reduced by the
amount of such reserve for so long as such letter of credit remains outstanding.
2.1.3 EQUIPMENT ADVANCES.
(a) At any time from the date hereof through February
19, 1997 (the "EQUIPMENT AVAILABILITY END DATE"), Borrower may from time to time
request advances (each an "Equipment Advance" and collectively, the "Equipment
Advances") from Bank in an aggregate amount not to exceed the Committed
Equipment Line. To evidence the Equipment Advance or Equipment Advances,
Borrower shall deliver to Bank, at the time of each Equipment Advance request,
an invoice for the equipment to be purchased. The Equipment Advances shall be
used only to purchase equipment, software, and leaseholds and shall not exceed
One Hundred Percent (100%) of the invoice amount of such equipment approved from
time to time by Bank, excluding taxes, shipping, warranty charges, freight
discounts and installation expense.
(b) Interest shall accrue from the date of each
Equipment Advance at the rate specified in Section in SECTION 2.3.1(b), and
shall be payable monthly for each month through the month in which the Equipment
Availability End Date falls.
(c) When Borrower desires to obtain an Equipment
Advance, Borrower shall notify Bank (which notice shall be irrevocable) by
facsimile transmission to be received no later than 3:00 p.m. Pacific time one
(1) Business Day before the day on which the Equipment Advance is to be made.
Such notice shall be substantially in the form of EXHIBIT B. The notice shall be
signed by a Responsible Officer and include a copy of the invoice for the
Equipment to be financed.
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2.2 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower exceeds the lesser of (i) the Committed Revolving
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.
2.3.1 INTEREST RATE. The interest rate on all Advances shall
be applied as follows:
(a) Any Advances under the Committed Revolving Line shall bear
interest, on the average Daily Balance, at a rate equal to one-half of one
(0.50) percentage point above the Prime Rate.
(b) Any Advances under the Committed Equipment Line shall bear
interest, on the average Daily Balance, at a rate equal to one and one-half
(1.50) percentage points above the Prime Rate.
2.3.2 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.
2.3.3 PAYMENTS. Interest hereunder shall be due and payable on
the Payment Date of each month during the term hereof. Borrower hereby
authorizes Bank to debit any accounts with Bank, including, without limitation,
Account Number __________ for payments of principal and interest due on the
Obligations and any other amounts owing by Borrower to Bank. Bank will notify
Borrower of all debits which Bank makes against Borrower's accounts. Any such
debits against Borrower's accounts in no way shall be deemed a set-off. 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.
2.3.4 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 wire transfer or payment received
by Bank after 12:00 noon Pacific 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:
2.5.1 FACILITY FEE. A Facility Fee equal to Twenty Thousand
Dollars ($20,000) for the Committed Revolving Line and a Facility Fee equal to
Ten Thousand Dollars ($10,000) for the Committed Equipment Line, for a total
Facility Fee of Thirty Thousand Dollars ($30,000) which fee shall be due on the
Closing Date and shall be fully earned and non-refundable;
2.5.2 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;
8.
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2.5.3 BANK EXPENSES. Upon the date hereof, all Bank Expenses
incurred through the Closing Date, including reasonable attorneys' fees and
expenses.
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):
2.6.1 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);
2.6.2 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
2.6.3 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.
2.7 TERM. Except as otherwise set forth herein, this Agreement shall
become effective on the Closing Date and, subject to SECTION 12.7, shall
continue in full force and effect for a term ending on the later of the
Revolving Maturity Date or the Equipment 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. Notwithstanding termination,
Bank's Lien on the Collateral shall remain in effect for so long as any
Obligations are outstanding.
SECTION 3 CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of Bank to
make the initial Advances under the Committed Revolving Line and the Committed
Equipment Line is subject to the condition precedent that Bank shall have
received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) financing statements (Forms UCC-1);
(d) insurance certificate;
(e) payment of the fees and Bank Expenses then due specified
in SECTION 2.5 hereof;
(f) an audit of Borrower,s accounts receivable with results
satisfactory to the Bank is required for initial Advances under the Committed
Revolving Line only;
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(g) an equity infusion in the amount of at least Eight Million
Dollars ($8,000,000) is required for initial Advances under the Committed
Equipment Line only; and
(h) 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, and no 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).
SECTION 4 CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower grants and pledges 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.
Borrower acknowledges that Bank may place a "hold" on any Deposit Account
pledged as Collateral to secure the Obligations.
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.
4.4 SINGLE LOAN. All of the Obligations of Borrower to Bank arising
under or in connection with this Agreement or any of the Loan Documents, shall
constitute one general obligation of Borrower and shall be secured by all of the
Collateral.
SECTION 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.
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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 could 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 that is 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 by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect or a material adverse effect on Borrower's interest or
Bank's security interest in the Collateral. Borrower does not have knowledge of
any such pending or threatened actions or proceedings.
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 could 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
11.
<PAGE> 13
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 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.
5.15 FULL DISCLOSURE. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
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.
SECTION 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 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 could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could 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 thirty (30) days
after the end of each month when there is an Outstanding Balance, a company
prepared consolidated balance sheet and income statement 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
thirty (30) days after the end of each quarter when there is NOT an Outstanding
Balance, a company prepared consolidated balance sheet and income statement
covering Borrower's consolidated operations during such period, certified by an
officer of Borrower reasonably acceptable to Bank, (c) as soon as available, but
in any event within ninety (90) 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; (d) within five (5) days of filing, 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 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission; (e)
promptly upon receipt of notice thereof; a report of any legal actions pending
or threatened against Borrower or any Subsidiary that could
12.
<PAGE> 14
result in damages or costs to Borrower or any Subsidiary of One Hundred Thousand
Dollars ($100,000) or more; and (f) such budgets, sales projections, operating
plans or other financial information as Bank may reasonably request from time to
time.
When there is an Outstanding Balance under the Committed Revolving
Line, within fifteen (15) days after the last day of each month, or prior to the
issuance of a Letter of Credit secured by Accounts Receivable, 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 monthly 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 at Borrower's expense, provided that such audits will be conducted no
more often than every six (6) months, if there is an Outstanding Balance under
the Committed Revolving Line, unless an Event of Default has occurred and is
continuing.
Bank shall also have a right to audit Borrower's Accounts at Borrower's
expense within thirty (30) days of the issuance of a letter of credit which is
not secured by Cash or Cash Equivalents.
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 Fifty
Thousand Dollars ($50,000).
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.
6.6.1 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.
6.6.2 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. Borrower
shall deliver to Bank certified copies of such policies of insurance and
evidence of the payments of all premiums therefor.
13.
<PAGE> 15
All proceeds payable under any such policy shall, at the option of Bank, be
payable to Bank to be applied on account of 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
calendar month, a ratio of Quick Assets to Current Liabilities of at least 1.5
to 1.0.
6.9 DEBT-NET WORTH RATIO. Borrower shall maintain, as of the last day
of each calendar month, a ratio of Total Liabilities to Tangible Net Worth plus
Subordinated Debt of not more than 2.0 to 1.0.
6.10 TANGIBLE NET WORTH. Borrower shall maintain, as of the last day of
each calendar month, a Tangible Net Worth of not less than Three Million Seven
Hundred and Fifty Thousand Dollars ($3,750,000).
6.11 PROFITABILITY. Borrower may suffer a loss not to exceed (i) a loss
of Four Million Four Hundred Thousand Dollars ($4,400,000) for the second
quarter of 1996, and (ii) a loss of Two Million Six Hundred Thousand Dollars
($2,600,000) for the third quarter of 1996. Borrower shall be profitable for
each fiscal quarter beginning the fourth quarter of 1996. Borrower shall be
profitable for each fiscal year beginning the fiscal year 1997.
6.12 MINIMUM LIQUIDITY. Through the Equipment Availability End Date,
Borrower shall maintain, as of the last calendar day of each month, a ratio of
Liquid Assets to the Committed Equipment Line of not less than 2.0 to 1.0.
"LIQUID ASSETS" means unrestricted Cash and Cash Equivalents plus either (i)
fifty percent (50%) of net accounts receivable or (ii) net available under the
Committed Revolving Line. Beginning January 23, 1997, Borrower shall maintain,
as of the last calendar day of each month, a ratio of Liquid Assets to the
Outstanding Balance under the Committed Equipment Line of not less than 2.0 to
1.0.
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.
SECTION 7 NEGATIVE COVENANTS
Borrower covenants and agrees that, 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) the
sale or other disposition of that portion of the business of Borrower
encompassing a software development team located in Boston, Massachusetts and
referred to as "Advanced Game Technology."
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,
management or directors. 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.
14.
<PAGE> 16
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.
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
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.
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 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 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.
SECTION 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, when due, any of the
Obligations.
8.2 COVENANT DEFAULT.
8.2.1 If Borrower fails to perform any obligation under
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
8.2.2 If Borrower 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,
15.
<PAGE> 17
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after Borrower receives notice thereof or
any 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 ten (10) 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 ten (10) 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 could have a Material Adverse Effect;
8.7 SUBORDINATED DEBT. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 JUDGMENTS. If a judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least Fifty Thousand Dollars
($50,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of ten (10) days (provided that no Advances will be made
prior to the satisfaction or stay of such judgment); or
8.9 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.
SECTION 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:
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9.1.1 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);
9.1.2 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;
9.1.3 Settle or adjust disputes and claims directly with
account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
9.1.4 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;
9.1.5 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;
9.1.6 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;
9.1.7 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;
9.1.8 Bank may credit bid and purchase at any public sale; and
9.1.9 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
17.
<PAGE> 19
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 performed and Bank's obligation to
provide advances hereunder is terminated.
9.3 ACCOUNTS COLLECTION. At any time from the date of this Agreement, Bank
may notify any Person owing funds to Borrower of Bank's security interest in
such funds and verify the amount of such Account. 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 under the
Committed Revolving Line 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
reasonable banking practices, 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.
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 and then
shall be effective only in the specific instance and for the specific purpose
for which it was given.
9.7 DEMAND; PROTEST. Borrower waives demand, protest, notice of protest,
notice of default or 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.
SECTION 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 3Dfx Interactive, Inc.
415 Clyde Avenue, Suite 105
Mountain View, CA 94043
Attn: Gary Martin
Fax: (415) 934-2424
18.
<PAGE> 20
If to Bank Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Attn: Legal Department
Fax: 408/496-2419
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.
SECTION 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 WAIVE THEIR 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.
SECTION 12 GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. 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 participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
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 maw of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
19.
<PAGE> 21
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 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 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. MD 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 Bank by a third party, provided Bank does not have actual
knowledge that such third party is prohibited from disclosing such information.
20.
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
SILICON VALLEY BANK 3DFX INTERACTIVE, INC.
By: [SIG] By: Gary Martin
-------------------------------- -----------------------------------
Title: VICE PRESIDENT Title: VP FINANCE
21.
<PAGE> 23
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, servicemarks,
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, letters of
credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Borrower's Books relating to the foregoing;
(f) Silicon Valley Bank Certificate of Deposit, together with all
renewals and proceeds of the foregoing.
(g) 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
(h) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.
1.
<PAGE> 24
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: 3Dfx Interactive, Inc.
Bank: Silicon Valley Bank
Commitment Amount: $4,000,000
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, including one 35% concen. $
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) $
CASH AND CASH EQUIVALENTS
16. Cash Value as of $
17. LOAN VALUE OF CASH (100% of #16) $
BALANCES
18. Maximum Loan Amount $4,000.000
19. Total Funds Available Lesser of #18 or (#15 plus #17) $
20. Present balance owing on Line of Credit $
21. Outstanding under Sublimits ( ) $
22. RESERVE POSITION (#19 minus #20 and #21) $
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
By: Rec'd By:
-------------------------------- ------------------------
Authorized Signer Auth. Signer
Date:
----------------------------
Verified:
------------------------
Auth. Signer
Date:
----------------------------
1.
<PAGE> 25
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: 3DFX INTERACTIVE, INC.
The undersigned authorized officer of 3Dfx Interactive. Inc. hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (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 COVANENT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements* Monthly within 30 days Yes No
Quarterly financial statements* Quarterly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings** Monthly within 15 days Yes No
A/R Audit Initial and Semi-Annual Yes No
* Due monthly when there is an Outstanding Balance, as defined in the Loan
Agreement, otherwise due quarterly.
** Also due prior to the issuance of a Letter of Credit secured by Accounts
Receivable.
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio 1.5:l.0 __:1.0 Yes No
Minimum Tangible Net Worth $3,750,000 $_____ Yes No
Maximum Debt/Tangible Net Worth 2.0:1.0 __:1.0 Yes No
Profitability: Maximum Loss 2Q96 ($4,400,000) Yes No
Maximum Loss 3Q96 ($2,600,000)
Quarterly, begin 4Q96 Profitable $_____
Annually, begin FY97 Profitable $_____
Liquidity***: 2.0:1.0 __:1.0 Yes No
***2x Commitment until 2/19/97, then 2x Outstanding.
Comments Regarding Exceptions: See Attached.
Sincerely, BANK USE ONLY
------------------------------- Received By:
SIGNATURE ---------------------
AUTHORIZED SIGNER
TITLE Date:
----------------------------
DATE Verified:
------------------------
AUTHORIZED SIGNER
Date:
----------------------------
1.
<PAGE> 26
AGREEMENT TO PROVIDE INSURANCE
Grantor: 3Dfx Interactive, Inc. Bank: Silicon Valley Bank
INSURANCE REQUIREMENTS. 3Dfx Interactive, 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 canceled 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 August 19, 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 AUGUST 19,
1996.
GRANTOR:
/s/ Gary Martin
--------------------------
Authorized Officer
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:
1.
<PAGE> 27
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: 3Dfx Interactive, Inc. Bank: Silicon Valley Bank
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $4,000,000 and an Equipment Line of Credit of a principal amount up
to $2,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of the Revolving Line is: Short Term
Working Capital. The specific purpose of the Revolving Line is: Purchase of
Equipment.
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 $
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Prepaid Finance Charges Paid in Cash: $
$ 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
$ Outside Counsel Fees and Expenses (Estimate)
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 ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF AUGUST 19, 1996.
BORROWER:
/s/ Gary Martin
-----------------------------
Authorized Officer
<PAGE> 28
This STATEMENT is presented for filing pursuant to the California Uniform Commercial Code UCC-2
------------------------------------------------------------------------------------------------------------------------------------
FILE NO. OF ORIG. FINANCING STATEMENT 1A. DATE OF FILING OF ORIG. FINANCING STATEMENT 1B. DATE OF ORIG. FINANCING STATEMENT
------------------------------------------------------------------------------------------------------------------------------------
DEBTOR (LAST NAME FIRST)
3Dfx Interactive, Inc.
------------------------------------------------------------------------------------------------------------------------------------
MAILING ADDRESS 2C. CITY, STATE
415 Clyde Avenue, Suite 105 Mountain View, CA
------------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST)
------------------------------------------------------------------------------------------------------------------------------------
MAILING ADDRESS 3C. CITY, STATE
------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY
NAME SILICON VALLEY BANK
MAILING ADDRESS
3003 TASMAN DRIVE
CITY SANTA CLARA STATE CA ZIP CODE 95054
------------------------------------------------------------------------------------------------------------------------------------
ASSIGNEE OF SECURED PARTY (IF ANY)
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
------------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------
1C. PLACE OF FILING ORIG. FINANCING STATEMENT
Secretary of State
---------------------------------------------
2A. SOCIAL SECURITY NO./FEDERAL TAX NO.
---------------------------------------------
2D. ZIP CODE
94043
---------------------------------------------
3A SOCIAL SECURITY NO. FEDERAL TAX NO.
---------------------------------------------
3D. ZIP CODE
---------------------------------------------
4A. SOCIAL SECURITY NO., FEDERAL TAX NO. OR
BANK TRANSIT AND A.B.A. NO.
---------------------------------------------
5A. SOCIAL SECURITY NO., FEDERAL TAX NO. OR
BANK TRANSIT AND A.B.A. NO.
---------------------------------------------
A [ ] CONTINUATION - The original Financing Statement between the foregoing Debtor and Secured Party bearing the file
number and date shown above is continued. If collateral is crops or timber, check here [ ] and insert description
of real property on which growing or to be grown in Item 7 below.
---------------------------------------------------------------------------------------------------------------------
B [ ] RELEASE - From the collateral described in the Financing Statement bearing the file number shown above, the Secured
Party releases the collateral decribed in Item 7 below.
---------------------------------------------------------------------------------------------------------------------
C [ ] ASSISNGMENT - The Secured Party certifies that the Secured Party has assigned to the Assignee above named, all the
Secured Party's rights under the Financing Statement bearing the file number shown above in the collateral described
in Item 7 below.
---------------------------------------------------------------------------------------------------------------------
D [ ] TERMINATION - The Secured Party certifies that the Secured Party no longer claims a security interest under the
Financing Statement bearing the file number shown above.
---------------------------------------------------------------------------------------------------------------------
E [X] AMENDMENT - The Financing Statement bearing the file number shown above is amended as set forth in Item 7 below.
(Signature of Debtor required on all amendments.)
---------------------------------------------------------------------------------------------------------------------
F [ ] OTHER
------------------------------------------------------------------------------------------------------------------------------------
This serves to amend the address of Debtor shown in line 2B. The new address is 4435 Fortran Drive, San Jose, CA 95134.
------------------------------------------------------------------------------------------------------------------------------------
(Date) 9-6 19 96 9. This Space for Use of Filing
3Dfx Interactive, Inc. Officer
By: /s/ Gary Martin VP Finance (Date, Time, Filing Office)
----------------------------------
SIGNATURE(S) OF DEBTOR(S) TITLE
----------------------------------
Silicon Valley Bank
By:
---------------------------------------------------------------------------
SIGNATURE(S) OF SECURED PARTY(IES) (TITLE)
---------------------------------------------------------------------------------------------
Return Copy to
NAME Silicon Valley Bank
ADDRESS Attn: Loan Services
30003 Tasman Drive
CITY AND STATE Santa Clara, CA 95054
CODE
1
2
3
4
5
6
7
8
9
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<PAGE> 29
CORPORATE BORROWING RESOLUTION
BORROWER: 3Dfx Interactive, Inc. BANK: Silicon Valley Bank
415 Clyde Avenue, Suite 105
Mountain View, CA 94043
I THE UNDERSIGNED, hereby certify that 3Dfx Interactive, Inc. ("Borrower"), is
duly organized, validly existing and in good standing as a corporation under
and by virtue of the laws of the State of California, and that I am its duly
appointed and acting Secretary/Assistant Secretary and the Borrower's name
shown above is the complete and correct name of Borrower.
I FURTHER CERTIFY that at a meeting of the Board of Directors of Borrower (or
by other duly authorized company action in lieu of a meeting), duly called and
held, at which a quorum were present and voting, the following resolutions were
adopted:
BE IT RESOLVED, that ANY ONE (1) of the following officers, employees or agents
of Borrower, whose actual signatures are shown below:
NAME TITLE SIGNATURE
Gordon Campbell Chief Executive Officer /s/ Gordon Campbell
Gary Martin Chief Financial Officer /s/ Gary Martin
may enter into any agreements of any nature with Bank, and those agreements
will bind Borrower, and acting for and on behalf of Borrower and as its act and
deed be, and he or she hereby is, authorized and empowered in the name of
Borrower:
BORROW MONEY. To borrow from time to time from Silicon Valley 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.
EXECUTE LOAN DOCUMENTS. To execute and deliver to Bank the loan documents
of Borrower, on Bank'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 Borrower to Bank, and also to execute and deliver to Bank
one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the loan documents, or
any portion of the loan documents.
GRANT SECURITY. To grant a security interest to Bank in any of Borrower's
assets, which security interest shall secure all of Borrower's obligations
to Bank.
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 Borrower or in which Borrower may have an interest, and
either to receive cash for the same or to cause such proceeds to be
credited to the account of Borrower 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.
1.
<PAGE> 30
FOREIGN EXCHANGE CONTRACTS. To execute and deliver foreign exchange
contracts, either spot or forward, from time to time, in such amount as
in the judgment of the undersigned party or parties is authorized.
FURTHER ACTS. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances
thereunder, and in ail 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, including agreements waiving the
right to a trial by jury, 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. Any such notice shall not affect
any of Borrower's agreements or commitments in effect at the time notice is
given.
I FURTHER CERTIFY that the persons named above and the undersigned are duly
elected, appointed, or employed by or for Borrower, as the case may be, and
occupy the positions set opposite their names and the signatures set forth
opposite their names are their genuine signatures; that the foregoing
resolutions now stand of record on the books of Borrower, and that the
resolutions are in full force and effect and have not been modified or revoked
in any manner whatsoever; and that the copies of Borrower's Restated Certificate
of Incorporation and Bylaws previously delivered to Bank are true and correct
and in full force and effect as of the date hereof without modification or
amendment.
IN WITNESS WHEREOF, I have hereunto set my hand on August 19, 1996.
/s/ Gary Martin
-----------------------------
Secretary/Assistant Secretary
2.