Exhibit 10.38
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INNERDYNE, INC.
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
Page
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1. DEFINITIONS AND CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . 8
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Revolving and Equipment Facilities . . . . . . . . . . . . . . . 8
2.1.2 Equipment Facility . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Overadvances . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Interest Rates, Payments, and Calculations . . . . . . . . . . . 10
2.4 Crediting Payments . . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . 11
3. CONDITIONS OF LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1 Conditions Precedent to Initial Advance. . . . . . . . . . . . . 11
3.2 Conditions Precedent to all Advances . . . . . . . . . . . . . . 12
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . 12
4.1 Grant of Security Interest . . . . . . . . . . . . . . . . . . . 12
4.2 Delivery of Additional Documentation Required. . . . . . . . . . 12
4.3 Right to Inspect . . . . . . . . . . . . . . . . . . . . . . . . 12
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . 13
5.1 Due Organization and Qualification . . . . . . . . . . . . . . . 13
5.2 Due Authorization; No Conflict . . . . . . . . . . . . . . . . . 13
5.3 No Prior Encumbrances. . . . . . . . . . . . . . . . . . . . . . 13
5.4 Bona Fide Eligible Accounts. . . . . . . . . . . . . . . . . . . 13
5.5 Merchantable Inventory . . . . . . . . . . . . . . . . . . . . . 13
5.6 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . 13
5.7 Name; Location of Chief Executive Office . . . . . . . . . . . . 14
5.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.9 No Material Adverse Change in Financial Statements . . . . . . . 14
5.10 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.11 Regulatory Compliance. . . . . . . . . . . . . . . . . . . . . . 14
5.12 Environmental Condition. . . . . . . . . . . . . . . . . . . . . 14
5.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.15 Government Consents. . . . . . . . . . . . . . . . . . . . . . . 15
5.16 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 15
6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Good Standing. . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Government Compliance. . . . . . . . . . . . . . . . . . . . . . 15
6.3 Financial Statements, Reports, Certificates. . . . . . . . . . . 16
6.4 Inventory; Returns . . . . . . . . . . . . . . . . . . . . . . . 16
6.5 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.6 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.7 Principal Depository . . . . . . . . . . . . . . . . . . . . . . 17
6.8 Quick Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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6.9 Debt-Net Worth Ratio . . . . . . . . . . . . . . . . . . . . . . 17
6.10 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . 17
6.11 Minimum Liquidity. . . . . . . . . . . . . . . . . . . . . . . . 17
6.12 Minimum Debt Service . . . . . . . . . . . . . . . . . . . . . . 17
6.13 Profitability. . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.14 Registration of Intellectual Property Rights . . . . . . . . . . 18
6.15 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 18
7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.1 Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.2 Change in Business . . . . . . . . . . . . . . . . . . . . . . . 19
7.3 Mergers or Acquisitions. . . . . . . . . . . . . . . . . . . . . 19
7.4 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.5 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.6 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.7 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.8 Transactions with Affiliates . . . . . . . . . . . . . . . . . . 19
7.9 Intellectual Property Agreements . . . . . . . . . . . . . . . . 20
7.10 Subordinated Debt. . . . . . . . . . . . . . . . . . . . . . . . 20
7.11 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.12 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.1 Payment Default. . . . . . . . . . . . . . . . . . . . . . . . . 20
8.2 Covenant Default . . . . . . . . . . . . . . . . . . . . . . . . 20
8.3 Material Adverse Change. . . . . . . . . . . . . . . . . . . . . 21
8.4 Attachment . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.5 Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.6 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . 21
8.7 Subordinated Debt. . . . . . . . . . . . . . . . . . . . . . . . 21
8.8 Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.9 Misrepresentations . . . . . . . . . . . . . . . . . . . . . . . 22
9. BANK'S RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . . 22
9.1 Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . 22
9.2 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . 23
9.3 Accounts Collection. . . . . . . . . . . . . . . . . . . . . . . 23
9.4 Bank Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.5 Bank's Liability for Collateral. . . . . . . . . . . . . . . . . 24
9.6 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . 24
9.7 Demand; Protest. . . . . . . . . . . . . . . . . . . . . . . . . 24
10. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. . . . . . . . . . . . . . . 25
12. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 25
12.2 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 25
12.3 Time of Essence. . . . . . . . . . . . . . . . . . . . . . . . . 25
12.4 Severability of Provisions . . . . . . . . . . . . . . . . . . . 26
12.5 Amendments in Writing, Integration . . . . . . . . . . . . . . . 26
12.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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12.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12.8 Effect of Amendment and Restatement. . . . . . . . . . . . . . . 26
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This LOAN AND SECURITY AGREEMENT is entered into as of June 19, 1997, by
and between SILICON VALLEY BANK ("Bank") and INNERDYNE, INC. ("Borrower").
RECITALS
A. Borrower and Bank are parties to that certain Loan and Security
Agreement dated as of February 23, 1995, as amended by that certain Amendment
to Loan and Security Agreement dated as of February 29, 1996, and as may have
been further amended (the "Original Loan Agreement", the Original Loan
Agreement and all other documents or instruments executed in connection
therewith are collectively referred to herein as the "Original Loan
Documents").
B. Borrower and Bank wish to amend and restate the terms of the
Original Loan Agreement as stated herein. This Agreement sets forth the
terms on which Bank will loan money to Borrower and Borrower will repay the
amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS.
As used in this Agreement, the following terms shall have the
following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering
of services by Borrower, whether or not earned by performance, and any and
all credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing.
"Advance" or "Advances" means a cash advance or cash advances
under the Revolving Facility or a cash advance or cash advances under the
Equipment Facility.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls
or is controlled by or is under common control with such Person, and each of
such Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection
with the preparation, negotiation, administration, and enforcement of the
Loan Documents; and Bank's reasonable attorneys' fees and expenses incurred
in amending, enforcing or defending the Loan Documents (including fees and
expenses of appeal), 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 2.1.1
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.
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"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on EXHIBIT A attached
hereto.
"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.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"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.
"Debt Service Coverage" means, as measured quarterly as of the
last day of each fiscal quarter of Borrower, on a consolidated basis
determined in accordance with GAAP, the ratio of (a) an amount equal to the
sum of (i) net income, PLUS (ii) depreciation and amortization of intangible
assets and other non-cash charges to income to (b) an amount equal to the sum
of (i) all scheduled repayments and mandatory prepayments of principal on
account of long-term Debt for such quarter PLUS (ii) quarterly interest
expense.
"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;
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(c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower unless pre-approved by Bank;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, xxxx 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;
(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 the
United States or any department, agency, or instrumentality of the United
States;
(h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed
twenty-five percent (25%) of all Accounts, to the extent such obligations
exceed the aforementioned percentage, except as approved in writing by Bank;
(j) Accounts with respect to which the account debtor
disputes liability or makes any claim with respect thereto as to which Bank
believes, in its 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 after reasonable consultation with Borrower to be doubtful.
"Eligible Equipment" means scientific, laboratory,
manufacturing and test equipment, computer equipment, office equipment and
furnishings and other machines and office equipment as approved by Bank in
its sole discretion (i) in which the Bank has a valid perfected security
interest, and (ii) delivered to Borrower by the manufacturer or vendor after,
upon or not more than one hundred twenty (120) days prior to the date of the
Closing Date, which equipment is new and has not previously been used by any
Person. Notwithstanding subsection (ii) of the previous sentence, Eligible
Equipment shall include Equipment delivered to Borrower more than 120 days
prior to the Closing Date to the extent the value of such Equipment does not
exceed Fifty Thousand Dollars ($50,000).
"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.
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"Equipment Advance" or "Equipment Advances" means a cash
advance or cash advances under the Equipment Facility.
"Equipment Availability Date" means June 18, 1998.
"Equipment Committed Line" means Five Hundred Thousand Dollars
($500,000).
"Equipment Facility" means the facility under which Borrower
may request Bank to issue cash advances, as specified in Section 2.1.2.
"Equipment Maturity Date" means June 18, 2002.
"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.
"Intellectual Property Collateral" means all of Borrower's
right, title and interest in and to the following:
(a) Copyrights, Trademarks and Patents;
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to
Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present
and future infringement of any of the rights included above, with the right,
but not the obligation, to xxx for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the
Copyrights, Patents or Trademarks, and all license fees and royalties arising
from such use to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(g) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"Inventory" means all present and future inventory in which
Borrower has any interest,
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including merchandise, raw materials, parts, supplies, packing and shipping
materials, work in process and finished products intended for sale or lease
or to be furnished under a contract of service, of every kind and description
now or at any time hereafter owned by or in the custody or possession, actual
or constructive, of Borrower, including such inventory as is temporarily out
of its custody or possession or in transit and including any returns upon any
accounts or other proceeds, including insurance proceeds, resulting from the
sale or disposition of any of the foregoing and any documents of title
representing any of the above, and Borrower's Books relating to any of the
foregoing.
"Investment" means any beneficial ownership of (including
stock, partnership interest or other securities) any Person, or any loan,
advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
"Liquidity" means the sum of (i) cash, cash-equivalents and
marketable securities on hand PLUS (ii) an amount equal to (a) the lesser of
the Borrowing Base or the Revolving Committed Line LESS (b) the principal
amount of Revolving Advances outstanding at the measurement date.
"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.
"Original Loan Agreement" has the meaning set forth in the
Recitals, above.
"Patents" means all patents, patent applications and like
protections including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of
the same.
"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.
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"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 secured by Liens described in clause (c) of
the defined term "Permitted Liens", provided the principal amount of such
Indebtedness does not exceed the lesser of the cost or fair market value of
the Equipment financed with the proceeds of such Indebtedness; and
(e) Indebtedness to trade creditors incurred in the ordinary
course of business.
"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 Xxxxx'x 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, other than Equipment
financed hereunder, 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, other than Equipment financed hereunder, 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) Leases or subleases and licenses or sublicenses granted
to others in the ordinary course of Borrower's business not interfering in
any material respect with the business of Borrower and its Subsidiaries taken
as a whole, and any interest or title of a lessor, licensor or under any
lease or license provided that such leases, subleases, licenses and
sublicenses do not prohibit the grant of the security interest granted
hereunder; 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 (c) 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
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company, joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, firm, joint stock
company, estate, entity or governmental agency.
"Prepayment Fee" means a fee on any portion of the Obligations
with a fixed interest rate (the "Fixed Obligations") that is paid before the
payment due date. The Prepayment Fee is calculated as follows: First, Bank
determines a "Current Market Rate" based on what the Bank would receive if it
loaned the amount on the on the prepayment date in a wholesale funding market
matching maturity, principal amount and principal and interest payment dates,
such rate to be equivalent to what Bank would charge its other customers
(such aggregate payments received being deemed the "Current Market Rate
Amount"). Bank, in its sole discretion, xxx select any wholesale funding
market rate as the Current Market Rate. Second, Bank will take the
prepayment amount and calculate the present value of each principal and
interest payment which, without prepayment, the Bank would have received
during the term of the Fixed Obligations using the applicable interest rate
set forth in this Agreement. The sum of the present value calculations is
the "Xxxx to Market Amount". Third, the Bank will subtract the Xxxx to
Market Amount from the Current Market Rate Amount. Any amount greater than
zero is the Prepayment Fee.
"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 unrestricted cash and cash-equivalents; net,
billed accounts receivable; and investments, with maturities not to exceed
one year, 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 Advance" or Revolving Advances means a cash advance
or cash advances under the Revolving Facility.
"Revolving Committed Line" means Two Million Dollars
($2,000,000).
"Revolving Facility" means the facility under which Borrower
may request Bank to issue cash advances, as specified in Section 2.1.1 hereof.
"Revolving Maturity Date" means June 18, 1998.
"Schedule" means the schedule of exceptions attached hereto,
if any.
"Subordinated Debt" means any debt incurred by Borrower that
is subordinated to the debt owing by Borrower to Bank on terms reasonably
acceptable to Bank (and identified as being such by Borrower and Bank).
"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 Worth" means at any date as of which the amount
thereof shall be determined, the consolidated total assets of Borrower and
its Subsidiaries MINUS, without duplication, (i) the sum of any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, patents, trade and service marks and names, copyrights
and research and development expenses except prepaid expenses, and (c) all
reserves not already deducted from assets, AND (ii) Total Liabilities.
"Total Liabilities" means at any date as of which the amount
thereof shall be determined,
7
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.
"Trademarks" means any trademark and servicemark rights,
whether registered or not, applications to register and registrations of the
same and like protections, and the entire goodwill of the business of
Borrower connected with and symbolized by such trademarks.
1.2 ACCOUNTING TERMS.
All accounting terms not specifically defined herein shall be
construed in accordance with GAAP and all calculations made hereunder shall
be made in accordance with GAAP. When used herein, the terms "financial
statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
2.1 REVOLVING AND EQUIPMENT FACILITIES.
2.1.1 REVOLVING FACILITY.
(a) ADVANCES. Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Revolving Advances to
Borrower in an aggregate amount not to exceed the lesser of the Revolving
Committed Line or the Borrowing Base. For purposes of this Agreement,
"Borrowing Base" shall mean an amount equal to seventy-five percent (75%) of
Eligible Accounts. Subject to the terms and conditions of this Agreement,
amounts borrowed pursuant to this Section 2.1.1 may be repaid and reborrowed
at any time prior to the Revolving Maturity Date.
(b) PROCEDURES. Whenever Borrower desires a Revolving
Advance, Borrower will notify Bank by facsimile transmission or telephone no
later than 3:00 p.m. California time, on the Business Day that the Revolving
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 Revolving Advances under this Agreement, based upon
instructions received from a Responsible Officer, or without instructions if
in Bank's discretion such Revolving 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 Revolving Advances made under this
Section 2.1.1 to Borrower's deposit account.
(c) PAYMENTS. Interest hereunder shall be due and
payable on the eighteenth (18th) calendar day of each month during the term
hereof. Bank shall, at its option, charge such interest, all Bank Expenses,
and all Periodic Payments against any of Borrower's deposit accounts or
against the Revolving Committed Line, in which case those amounts shall
thereafter accrue interest at the rate then applicable hereunder. Any
interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate
then applicable hereunder.
(d) MATURITY. The Revolving Facility shall terminate on
the Revolving Maturity Date, at which time all Revolving Advances under this
Section 2.1.1 shall be immediately due and payable.
2.1.2 EQUIPMENT FACILITY.
(a) ADVANCES. Subject to and upon the terms and conditions
of this Agreement, Bank agrees, at any time from the Closing Date through the
Equipment Availability Date, to make Equipment Advances to Borrower in an
aggregate principal amount of up to the Equipment Committed Line. On the
date of
8
each Equipment Advance, Borrower shall provide invoices and other documents
as reasonably requested by Bank, in form and content reasonably satisfactory
to Bank, demonstrating that the Equipment Advances then outstanding (A) shall
be used to finance or refinance, as the case may be, Eligible Equipment and
(B) shall not exceed one hundred percent (100%) of the cost of such Eligible
Equipment, excluding any and all installation, freight or warranty expenses
or sales taxes. Amounts borrowed pursuant to this Section 2.1.2 may not be
reborrowed once repaid.
(b) PROCEDURES. Whenever Borrower desires an Equipment
Advance, Borrower shall notify Bank by facsimile transmission or telephone no
later than 3:00 p.m. California time, one (1) Business Day before the day on
which the Equipment Advance is requested to be made. Each such notification
shall be promptly confirmed by a Payment/Advance Form in substantially the
form of EXHIBIT B hereto. The notice shall be signed by a Responsible
Officer and include a copy of the invoice for the Eligible Equipment to be
financed. Bank is authorized to make Equipment Advances under this
Agreement, based upon instructions received from a Responsible Officer, or
without instructions if in Bank's discretion such Equipment 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 Equipment Advances made
under this Section 2.1.2 to Borrower's deposit account.
(c) PAYMENTS. Interest shall accrue from the date of each
Equipment Advance at the rate specified in Section 2.3(a), and shall be
payable monthly on the eighteenth (18th) calendar day of the month for each
month through the month in which the Equipment Availability Date falls. All
Equipment Advances that are outstanding on the Equipment Availability Date
will be payable in forty-eight (48) equal monthly installments of principal,
plus accrued interest, on the eighteenth (18th) calendar day of the month for
each month through the Equipment Maturity Date.
(d) MATURITY. The Equipment Facility shall terminate on the
Equipment Maturity Date, at which time all Equipment Advances under this
Section 2.1.2, and all other amounts due under this Agreement, shall be
immediately due and payable.
2.2 OVERADVANCES.
If, at any time or for any reason, the amount of Obligations
owed by Borrower to Bank pursuant to Section 2.1.1 of this Agreement is
greater than the lesser of (i) the Revolving Committed Line or (ii) the
Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount
of such excess. If at any time, or for any reason, the amount of Obligations
owed by Borrower to Bank pursuant to Section 2.1.2 of this Agreement is
greater than the Equipment Committed Line, Borrower shall immediately pay to
Bank, in cash, the amount of such excess.
2.3 INTEREST RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATE. Except as set forth in Section 2.3(b),
any Revolving Advances shall bear interest, on the average Daily Balance, at
a rate equal to one percentage point (1.0%) above the Prime Rate. Except as
set forth in Section 2.3(b) and subject to the following sentence, all
outstanding Equipment Advances shall bear interest at a floating rate equal
to one percentage point (1.0%) above the Prime Rate. Except as set forth in
Section 2.3(b), Borrower shall have a one-time option on the Equipment
Availability Date, exercisable by written notice to Bank, to elect that all
outstanding Equipment Advances shall bear interest at a rate equal to three
and one-half (3.5) percentage points above the forty-eight (48) month
Treasury Note Yield to maturity for four (4) year treasury bills, as such
rate is quoted by Bank. Such fixed rate option, once elected, shall continue
for the term of the Equipment Facility. If Borrower elects such fixed rate
option, any amounts prepaid by Borrower shall be accompanied by a Prepayment
Fee on the date of prepayment.
(b) DEFAULT RATE. All Obligations shall bear interest, from
and after the occurrence
9
of an Event of Default, at a rate equal to five (5) percentage points above
the interest rate applicable immediately prior to the occurrence of the Event
of Default.
(c) 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 California time shall be deemed
to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the
Loan Documents would otherwise be due (except by reason of acceleration) on a
date that is not a Business Day, such payment shall instead be due on the
next Business Day, and additional fees or interest, as the case may be, shall
accrue and be payable for the period of such extension.
2.5 FEES.
Borrower shall pay to Bank the following:
(a) FACILITY FEES. A revolving facility fee equal to Five
Thousand Dollars ($5,000), which fee shall be due on the Closing Date and
shall be fully earned and nonrefundable and an equipment facility fee equal
to Five Thousand Dollars ($5,000) which fee shall be due on the Closing Date
and shall be fully earned and nonrefundable;
(b) 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;
(c) BANK EXPENSES. Upon the date hereof, all Bank Expenses
incurred through the Closing Date, including reasonable attorneys' fees and
expenses, and, after the date hereof, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.
2.6 ADDITIONAL COSTS.
In case any change in 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), in each case
after the date of this Agreement:
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for
taxes on the overall net income of Bank imposed by the United States of
America or any political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special
10
deposit or similar requirement against assets held by, or deposits in or for
the account of, or loans by, Bank in connection with this Agreement; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank,
reduce the income receivable by Bank or impose any expense upon Bank with
respect to any loans made under this Agreement, 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.
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 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.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE.
The obligation of Bank to make the initial Advance is subject
to the condition precedent that Bank shall have received, in form and
substance satisfactory to Bank, the following:
(a) this 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; and
(f) 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 Sections 2.1.1 and 2.1.2;
(b) timely receipt by Bank of the invoices and other documents
required by Section
11
2.1.2; and
(c) 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(c).
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.
4.2 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED.
Borrower shall from time to time execute and deliver to Bank,
at the request of Bank, all Negotiable Collateral, all financing statements
and other documents that Bank may reasonably request, in form satisfactory to
Bank, to perfect and continue perfected Bank's security interests in the
Collateral and in order to fully consummate all of the transactions
contemplated under the Loan Documents.
4.3 RIGHT TO INSPECT.
Bank (through any of its officers, employees, or agents) shall
have the right, upon reasonable prior notice, from time to time during
Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any
other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION.
Borrower and each Subsidiary is a corporation duly existing
and in good standing under the laws of its state of incorporation and
qualified and licensed to do business in, and is in good standing in, any
state in which the conduct of its business or its ownership of property
requires that it be so qualified except where the failure to qualify would
not have a Material Adverse Effect.
12
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 Certificate 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 except to the extent that certain intellectual
property agreements prohibit the assignment of the rights thereunder to a
third party without the Borrower's or other party's consent and the Loan
Documents constitute an assignment. 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 INTELLECTUAL PROPERTY.
Borrower is the sole owner of the Intellectual Property
Collateral, except for non-exclusive licenses granted by Borrower to its
customers in the ordinary course of business. To Borrower's knowledge, each
of the Patents is valid and enforceable, and no part of the Intellectual
Property Collateral has been judged invalid or unenforceable, in whole or in
part, and no claim has been made that any part of the Intellectual Property
Collateral violates the rights of any third party. Except for and upon the
filing with the United States Patent and Trademark Office with respect to the
Patents and Trademarks and the Register of Copyrights with respect to the
Copyrights necessary to perfect the security interests created hereunder, and
except as has been already made or obtained, no authorization, approval or
other action by, and no notice to or filing with, any United States
governmental authority or United States regulatory body is required either
(i) for the grant by Borrower of the security interest granted hereby or for
the execution, delivery or performance of the Loan Documents by Borrower in
the United States or (ii) for the perfection in the United States or the
exercise by Bank of its rights and remedies hereunder.
5.7 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.
13
5.8 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. Borrower does not have knowledge of any such pending or
threatened actions or proceedings.
5.9 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.
5.10 SOLVENCY.
Borrower is solvent and able to pay its debts (including trade
debts) as they mature.
5.11 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 its 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.
5.12 ENVIRONMENTAL CONDITION.
None of Borrower's or any Subsidiary's properties or assets
has ever been used by Borrower or any Subsidiary or, to the best of
Borrower's knowledge, by previous owners or operators, in the disposal of, or
to produce, store, handle, treat, release, or transport, any hazardous waste
or hazardous substance other than in accordance with applicable law; to the
best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any
environmental protection statute as a hazardous waste or hazardous substance
disposal site, or a candidate for closure pursuant to any environmental
protection statute; no lien arising under any environmental protection
statute has attached to any revenues or to any real or personal property
owned by Borrower or any Subsidiary; and neither Borrower nor any Subsidiary
has received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal, state or other governmental agency
concerning any action or omission by Borrower or any Subsidiary resulting in
the releasing, or otherwise disposing of hazardous waste or hazardous
substances into the environment.
5.13 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.
14
5.14 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other
equity securities of any Person, except for Permitted Investments.
5.15 GOVERNMENT CONSENTS.
Borrower and each Subsidiary has obtained all consents,
approvals and authorizations of, made all declarations or filings with, and
given all notices to, all governmental authorities that are necessary for the
continued operation of Borrower's business as currently conducted except
where failure to do so would not have a Material Adverse Effect.
5.16 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.
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.
15
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, a company
prepared consolidated balance sheet and income statement covering Borrower's
consolidated operations during such period, certified by a Responsible
Officer; (b) 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; (c) within ten (10) days upon becoming available, copies of all
statements, reports and notices sent or made available generally by Borrower
to its security holders or to any holders of Subordinated Debt and all
reports on Form 10-K and 10-Q filed with the Securities and Exchange
Commission; (d) promptly upon receipt of notice thereof, a report of any
legal actions pending or threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any Subsidiary of One Hundred
Thousand Dollars ($100,000) or more; (e) prompt notice of any material change
in the composition of the Intellectual Property Collateral, including, but
not limited to, any subsequent ownership right of the Borrower in or to any
Copyright, Patent or Trademark not specified in any intellectual property
security agreement between Borrower and Bank or knowledge of an event that
materially adversely effects the value of the Intellectual Property
Collateral; and (f) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time.
Within twenty (20) days after the last day of each month,
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.
Within thirty (30) days after the last day of each month,
Borrower shall deliver to Bank with the monthly financial statements and 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 unless an Event of Default
has occurred and is continuing.
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 One
Hundred Thousand Dollars ($100,000).
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.
16
6.6 INSURANCE.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against
by other owners in similar businesses conducted in the locations where
Borrower's business is conducted on the date hereof. Borrower shall also
maintain insurance relating to Borrower's ownership and use of the Collateral
in amounts and of a type that are customary to businesses similar to
Borrower's.
(b) All such policies of insurance shall be in such form,
with such companies, and in such amounts as reasonably satisfactory to Bank.
All such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional
loss payee thereof and all liability insurance policies shall show the Bank
as an additional insured, and shall specify that the insurer must give at
least twenty (20) days notice to Bank before canceling its policy for any
reason. Upon Bank's request, Borrower shall deliver to Bank certified copies
of such policies of insurance and evidence of the payments of all premiums
therefor. 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 of not more than
1.0 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 Four Million Dollars
($4,000,000).
6.11 MINIMUM LIQUIDITY. Until such time as Borrower shall have
complied with Section 6.12 for a period of six consecutive months, Borrower
shall maintain as of the last day of each calendar month minimum Liquidity of
2.0 times the outstanding aggregate principal balance of the Equipment
Advances.
6.12 MINIMUM DEBT SERVICE. Borrower shall maintain on a monthly
basis minimum Debt Service of 2.0 to 1.0 provided, however, that this
covenant shall not apply until such time as Borrower shall be in compliance
with such covenant for a period of six consecutive months.
6.13 PROFITABILITY.
Borrower shall have a minimum net profit of One Dollar ($1.00)
for each fiscal quarter, except Borrower may sustain (a) cumulative losses
not exceeding: One Million Four Hundred Thousand Dollars ($1,400,000) as of
the fiscal quarter ending June 30, 1997; One Million Nine Hundred Thousand
Dollars ($1,900,000) as of the fiscal quarter ending September 30, 1997; and
Two Million Four Hundred Thousand Dollars ($2,400,000) as of the fiscal
quarter ending December 31, 1997; and (b) Borrower may sustain a loss not
exceeding Two Hundred Fifty Thousand Dollars for the fiscal quarter ending
March 31, 1998.
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6.14 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
(a) Borrower shall register or cause to be registered (to the
extent not already registered) with the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, those
intellectual property rights listed on Exhibits A, B and C to the
Intellectual Property Security Agreement delivered to Bank by Borrower in
connection with this Agreement within thirty (30) days of the date of this
Agreement. Borrower shall register or cause to be registered with the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, those additional intellectual property rights developed or
acquired by Borrower from time to time in connection with any product prior
to the sale or licensing of such product to any third party, including
without limitation revisions or additions to the intellectual property rights
listed on such Exhibits A, B and C.
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request
to perfect Bank's security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents and Copyrights, (ii)
use commercially reasonable efforts to detect infringements of the
Trademarks, Patents and Copyrights and promptly advise Bank in writing of
material infringements detected and (iii) not allow any Trademarks, Patents
or Copyrights to be abandoned, forfeited or dedicated to the public without
the written consent of Bank, which shall not be unreasonably withheld, unless
commercially reasonable business practices suggest that abandonment is
appropriate.
(d) Bank shall have the right, but not the obligation, to
take, at Borrower's sole expense, any actions that Borrower is required under
this Section 6.14 to take but which Borrower fails to take, after fifteen
(15) days' notice to Borrower. Borrower shall reimburse and indemnify Bank
for all reasonable costs and reasonable expenses incurred in the reasonable
exercise of its rights under this Section 6.14.
6.15 FURTHER ASSURANCES.
At any time and from time to time Borrower shall execute and
deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, 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; or (iii) Transfers of worn-out or obsolete Equipment.
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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 of
more than thirty percent (30%) acquired or sold by any one (1) Person.
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 unless no Event of
Default has occurred or is continuing or would result from such action.
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 INTELLECTUAL PROPERTY AGREEMENTS.
Borrower shall not permit the inclusion in any material
contract to which it becomes a party of any provisions that could or might in
any way prevent the creation of a security interest in Borrower's rights and
interests in any property included within the definition of the Intellectual
Property Collateral acquired under such contracts.
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7.10 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.
7.11 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 a financing statement where needed to perfect
Bank's security interest.
7.12 COMPLIANCE.
Become an "investment company" or become "controlled" by an
"investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose.
Fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur, fail to
comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect or a
material adverse effect on the Collateral or the priority of Bank's Lien on
the Collateral, or permit any of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event
of Default by Borrower under this Agreement:
8.1 PAYMENT DEFAULT.
If Borrower fails to pay the principal of, or any interest on,
any Advances when due and payable; or fails to pay any portion of any other
Obligations not constituting such principal or interest, including without
limitation Bank Expenses, within thirty (30) days of receipt by Borrower of
an invoice for such other Obligations;
8.2 COVENANT DEFAULT.
If Borrower fails to perform any obligation under Sections
6.7, 6.8, 6.9, 6.10, 6.11, 6.12, 6.13 or 6.14 or violates any of the
covenants contained in Article 7 of this Agreement, or fails or neglects to
perform, keep, or observe any other material term, provision, condition,
covenant, or agreement contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between Borrower and
Bank and as to any default under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure such default
within 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);
20
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 ten (10) 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.
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9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES.
Upon the occurrence and during the continuance of an Event of
Default, Bank may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are
authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due
and payable (provided that upon the occurrence of an Event of Default
described in Section 8.5 all Obligations shall become immediately due and
payable without any action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with
account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(d) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble
the Collateral if Bank so requires, and to make the Collateral available to
Bank as Bank may designate. Borrower authorizes Bank to enter the premises
where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise
any encumbrance, charge, or lien which in Bank's determination appears to be
prior or superior to its security interest and to pay all expenses incurred
in connection therewith. With respect to any of Borrower's owned premises,
Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(e) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank,
or (ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right,
solely pursuant to the provisions of this Section 9.1, to use, without
charge, Borrower's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling
any Collateral and, in connection with Bank's exercise of its rights under
this Section 9.1, Borrower's rights under all licenses and all franchise
agreements shall inure to Bank's benefit;
(g) Sell the Collateral at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as
Bank determines is commercially reasonable, and apply any proceeds to the
Obligations in whatever manner or order Bank deems appropriate;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
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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 xxxx
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; (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; (f) to
modify, in its sole discretion, any intellectual property security agreement
entered into between Borrower and Bank without first obtaining Borrower's
approval of or signature to such modification by amending Exhibit A, Exhibit
B and Exhibit C, thereof, as appropriate, to include reference to any right,
title or interest in any Copyrights, Patents or Trademarks acquired by
Borrower after the execution hereof or to delete any reference to any right,
title or interest in any Copyrights, Patents or Trademarks in which Borrower
no longer has or claims any right, title or interest; (g) to file, in its
sole discretion, one or more financing or continuation statements and
amendments thereto, relative to any of the Collateral without the signature
of Borrower where permitted by law; and (h) to transfer the Intellectual
Property Collateral into the name of Bank or a third party to the extent
permitted under the California Uniform Commercial Code provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default
has occurred. The appointment of Bank as Borrower's attorney in fact, and
each and every one of Bank's rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully repaid
and 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 Revolving Facility as Bank deems necessary to protect Bank from the
exposure created by such failure; or (c) obtain and maintain insurance
policies of the type discussed in Section 6.6 of this Agreement, and take any
action with respect to such policies as Bank deems prudent. Any amounts so
paid or deposited by Bank shall constitute Bank Expenses, shall be
immediately due and payable, and shall bear interest at the then applicable
rate hereinabove provided, and shall be secured by the Collateral. Any
payments made by Bank shall not constitute an agreement by Bank to make
similar payments in the future or a waiver by Bank of any Event of Default
under this Agreement. Bank shall have a non-exclusive, royalty-free license
to use the Intellectual Property Collateral to the extent reasonably
necessary to permit Bank to exercise its rights and remedies upon the
occurrence of an Event of Default.
23
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.
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: InnerDyne, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxx, CFO
FAX: (000) 000-0000
If to Bank: Silicon Valley Bank
0000 Xxxxxxxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx
FAX: (000) 000-0000
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.
24
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 Xxxxx, 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.
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 matter of
this Agreement, if any, are merged into this Agreement and the Loan
Documents, except that any financing statements or other agreements or
instruments filed by Bank with respect to Borrower shall remain in full force
and effect.
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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.
12.8 EFFECT OF AMENDMENT AND RESTATEMENT. This Agreement is
intended to and does completely amend and restate, without novation, the
Original Loan Documents. All security interests granted under the Original
Loan Documents are hereby confirmed and ratified and shall continue to secure
all Obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
INNERDYNE, INC.
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------
Title: Vice President & CFO
------------------------------------
SILICON VALLEY BANK
By: /s/ Xxxx Xxxxxx
---------------------------------------
Title: Vice President
------------------------------------
26
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, financial
assets, securities accounts, securities entitlements, investment property,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter
acquired; all trade secret rights, including all rights to unpatented
inventions, know-how, operating manuals, license rights and agreements and
confidential information, now owned or hereafter acquired; all mask work or
similar rights available for the protection of semiconductor chips, now owned
or hereafter acquired; all claims for damages by way of any past, present and
future infringement of any of the foregoing; and
(g) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.
27
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
-------------------
FAX#: (000) 000-0000 TIME:
-------------------
FROM: INNERDYNE, INC.
-----------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
----------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
--------------------------------------------------------
PHONE NUMBER:
---------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
---------------- -------------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
PRINCIPAL INCREASE (REVOLVING ADVANCE) $
------------------------------------
PRINCIPAL INCREASE (EQUIPMENT ADVANCE) $
------------------------------------
PRINCIPAL PAYMENT (ONLY) $
------------------------------------
INTEREST PAYMENT (ONLY) $
------------------------------------
PRINCIPAL AND INTEREST (PAYMENT) $
------------------------------------
OTHER INSTRUCTIONS: ----------------------------------------------------------
------------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Amended and
Restated Loan and Security Agreement are true, correct and complete in all
material respects as of the date of the telephone request for and Advance
confirmed by this Borrowing Certificate; provided, however, that those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of such date.
-----------------------------------------
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
------------------------------ -----------------------
Authorized Requester Phone #
------------------------------ -----------------------
Received By (Bank) Phone #
---------------------------------------
Authorized Signature (Bank)
28
EXHIBIT C
BORROWING BASE CERTIFICATE
-------------------------------------------------------------------------------
Borrower: InnerDyne, Inc. Lender: Silicon Valley Bank
Commitment Amount: $2,000,000
-------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of $
--- ---------
2. Additions (please explain on reverse) $
---------
3. TOTAL ACCOUNTS RECEIVABLE $
---------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $
--------
5. Balance of 50% over 90 day accounts $
--------
6. Concentration Limits $
--------
7. Foreign Accounts $
--------
8. Governmental Accounts $
--------
9. Contra Accounts $
--------
10. Promotion or Demo Accounts $
--------
11. Intercompany/Employee Accounts $
--------
12. Other (please explain on reverse) $
--------
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
--------
14. Eligible Accounts (#3 minus #13) $
--------
15. LOAN VALUE OF ACCOUNTS (75% of #14) $
--------
BALANCES
16. Maximum Loan Amount $
--------
17. Total Funds Available (Lesser of #15 or 16) $
--------
18. Present balance owing on Line of Credit $
--------
19. RESERVE POSITION (#17 minus #18) $
--------
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE FOREGOING IS TRUE, COMPLETE
AND CORRECT, AND THAT THE INFORMATION REFLECTED IN THIS BORROWING BASE
CERTIFICATE COMPLIES WITH THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT BETWEEN THE UNDERSIGNED AND
SILICON VALLEY BANK.
COMMENTS: BANK USE ONLY
Rec'd By:
By: ------------
-------------------------------- Auth. Signer
Authorized Signer Date:
----------------
Verified:
-------------
Auth. Signer
Date:
----------------
29
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: INNERDYNE, INC.
The undersigned authorized officer of InnerDyne, Inc. ("Borrower")
hereby certifies that in accordance with the terms and conditions of the
Amended and Restated 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 COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 20 days Yes No
A/R Audit Initial and Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio 1.5:1.0 _____:1.0 Yes No
Minimum Liquidity1 2.0:1.0 _____:1.0 Yes No
Debt Service Coverage2 2.0:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $4,000,000 $________ Yes No
Maximum Debt/Tangible
Net Worth 1.0:1.0 _____:1.0 Yes No
Profitability: Quarterly $1.00(3) $________ Yes No
(1) Maintain until Borrower maintains 6 consecutive months of DSC of 2.0:1.0.
(2) Tested upon release of Minimum Liquidity covenant.
(3) Except (a) cumulative quarterly losses not exceeding: $1,400,000 as of
QE 6/30/97; $1,900,000 as of QE 9/30/97; and $2,400,000 as of QE
12/31/97; and (b) $250,000 for QE 3/31/98.
COMMENTS REGARDING EXCEPTIONS: BANK USE ONLY
See Attached.
Received by:
Sincerely, -------------------
AUTHORIZED SIGNER
----------------------------------
SIGNATURE Date:
---------------------------
---------------------------------- Verified:
TITLE ---------------------
AUTHORIZED SIGNER
----------------------------------
DATE Date:
---------------------------
Compliance Status: Yes No
30
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: Bank: Silicon Valley
Bank
-------------------------------------------------------------------------------
LOAN TYPE. This is a variable rate, revolving line of credit of a principal
amount up to $2,000,000, and an equipment line of credit of a principal
amount of up to $500,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working
Capital and Acquisition 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 Equipment 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: $____
$10,0000 Loan Fee
$ TBD Accounts Receivables Audit
Other Charges Paid in Cash: $____
$ TBD UCC Search Fees
$ TBD UCC Filing Fees
$ TBD Patent Filing Fees
$ TBD Trademark Filing Fees
$ TBD Copyright Filing Fees
$ TBD 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.
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 JUNE 19, 1997.
BORROWER:
INNERDYNE, INC.
_____________________________________
Authorized Officer
-------------------------------------------------------------------------------
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: InnerDyne, Inc. BANK: Silicon Valley Bank
-------------------------------------------------------------------------------
INSURANCE REQUIREMENTS. InnerDyne, Inc. ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or
the providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral
(the "Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be cancelled or diminished without a
minimum of twenty (20) days' prior written notice to
Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of June 19, 1997, 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 Amended and Restated Loan and Security Agreement. The cost of such
insurance, at the option of Bank, shall be payable on demand or shall be
added to the indebtedness as provided in the security document. GRANTOR
ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL
PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO
THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT
BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY
OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY
FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance
agent or company) all information Bank deems appropriate, whether regarding
the Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JUNE 19,
1997.
GRANTOR:
INNERDYNE, INC.
x
Authorized Officer
FOR BANK USE ONLY
______________________________ INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS: ____________ _______________
CORPORATE RESOLUTIONS TO BORROW
-------------------------------------------------------------------------------
BORROWER: InnerDyne, Inc.
-------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of InnerDyne, Inc.
(the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the State of Delaware.
I FURTHER CERTIFY that the Certificate of Incorporation and Bylaws of
the Corporation previously delivered to Bank remain in full force and effect
on the date hereof and have not been amended, restated, modified or otherwise
changed.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation,
duly called and held, at which a quorum was present and voting (or by other
duly authorized corporate action in lieu of a meeting), the following
resolutions were adopted.
BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
-------------------------------------------------------------------
__________________ _____________________ ________________________
__________________ _____________________ ________________________
__________________ _____________________ ________________________
__________________ _____________________ ________________________
__________________ _____________________ ________________________
acting for an on behalf of this Corporation and as its act and deed be, and
they hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers,
employees, or agents and Bank, such sum or sums of money as in their judgment
should be borrowed, without limitation, including such sums as are specified
in that certain Amended and Restated Loan and Security Agreement dated as of
June 19, 1997 (the "Loan Agreement").
EXECUTE NOTES. To execute and deliver to Bank the promissory note or
notes of the Corporation, on Lender's forms, at such rates of interest and on
such terms as may be agreed upon, evidencing the sums of money so borrowed or
any indebtedness of the Corporation to Bank, and also to execute and deliver
to Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion
of the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of
the Corporation's Obligations, as described in the Loan Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness
payable to or belonging to the Corporation or in which the Corporation may
have an interest, and either to receive cash for the same or to cause such
proceeds to be credited to the account of the Corporation with Bank, or to
cause such other disposition of the proceeds derived therefrom as they may
deem advisable.
1
FURTHER ACTS. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances thereunder,
and in all cases, to do and perform such other acts and things, to pay any
and all fees and costs, and to execute and deliver such other documents and
agreements as they may in their discretion deem reasonably necessary or
proper in order to carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full
force and effect and Bank may rely on these Resolutions until written notice
of their revocation shall have been delivered to and received by Bank. Any
such notice shall not affect any of the Corporation's agreements or
commitments in effect at the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the
case may be, and occupy the positions set forth opposite their respective
names; that the foregoing Resolutions now stand of record on the books of the
Corporation; and that the Resolutions are in full force and effect and have
not been modified or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on June 19, 1997 and
attest that the signatures set opposite the names listed above are their
genuine signatures.
CERTIFIED TO AND ATTESTED BY:
X
-------------------------------------------------------------------------------
2
