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LOAN AND SECURITY AGREEMENT
BETWEEN
SILICON VALLEY BANK
AND
TRIPATH IMAGING, INC.
DATED AS OF JANUARY 31, 2000
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TABLE OF CONTENTS
Page
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1. DEFINITIONS AND CONSTRUCTION......................................... 1
1.1. DEFINITIONS...................................................... 1
1.2. ACCOUNTING AND OTHER TERMS....................................... 9
2. LOAN AND TERMS OF PAYMENT............................................ 9
2.1. ADVANCES......................................................... 9
2.2. OVERADVANCES..................................................... 10
2.3. INTEREST RATES, PAYMENTS, AND CALCULATIONS....................... 10
2.4. CREDITING PAYMENTS............................................... 10
2.5. FEES............................................................. 11
2.6. ADDITIONAL COSTS................................................. 11
2.7. TERM............................................................. 12
3. CONDITIONS OF LOANS.................................................. 12
3.1. CONDITIONS PRECEDENT TO INITIAL ADVANCE.......................... 12
3.2. CONDITIONS PRECEDENT TO ALL ADVANCES............................. 13
4. CREATION OF SECURITY INTEREST........................................ 13
4.1. GRANT OF SECURITY INTEREST....................................... 13
4.2. DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED.................... 13
4.3. RIGHT TO INSPECT................................................. 13
5. REPRESENTATIONS AND WARRANTIES....................................... 14
5.1. DUE ORGANIZATION AND QUALIFICATION............................... 14
5.2. DUE AUTHORIZATION; NO CONFLICT................................... 14
5.3. NO PRIOR ENCUMBRANCES............................................ 14
5.4. BONA FIDE ELIGIBLE ACCOUNTS...................................... 14
5.5. MERCHANTABLE INVENTORY........................................... 14
5.6. INTELLECTUAL PROPERTY............................................ 14
5.7. NAME; LOCATION OF CHIEF EXECUTIVE OFFICE......................... 15
5.8. LITIGATION....................................................... 15
5.9. NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS............... 15
5.10. SOLVENCY......................................................... 15
5.11. REGULATORY COMPLIANCE............................................ 15
5.12. ENVIRONMENTAL CONDITION.......................................... 15
5.13. TAXES............................................................ 16
5.14. SUBSIDIARIES..................................................... 16
5.15. GOVERNMENT CONSENTS.............................................. 16
5.16. FULL DISCLOSURE.................................................. 16
6. AFFIRMATIVE COVENANTS................................................ 16
6.1. GOOD STANDING.................................................... 16
6.2. GOVERNMENT COMPLIANCE............................................ 16
6.3. FINANCIAL STATEMENTS, REPORTS, CERTIFICATES...................... 17
6.4. INVENTORY; RETURNS............................................... 17
6.5. TAXES............................................................ 17
6.6. INSURANCE........................................................ 18
6.7. PRINCIPAL DEPOSITORY............................................. 18
6.8. QUICK RATIO...................................................... 18
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6.9. QUARTERLY NET LOSSES............................................. 18
6.10. FURTHER ASSURANCES............................................... 19
7. NEGATIVE COVENANTS................................................... 19
7.1. DISPOSITIONS..................................................... 19
7.2. CHANGES IN BUSINESS, OWNERSHIP, OR MANAGEMENT, BUSINESS LOCATIONS 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..................................... 20
7.9. INTELLECTUAL PROPERTY AGREEMENTS................................. 20
7.9. SUBORDINATED DEBT................................................ 20
7.10. INVENTORY........................................................ 20
7.11. 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................................................ 22
8.8. JUDGMENTS........................................................ 22
8.9. MISREPRESENTATIONS............................................... 22
8.10. GUARANTY......................................................... 22
9. BANK'S RIGHTS AND REMEDIES........................................... 22
9.1. RIGHTS AND REMEDIES.............................................. 22
9.2. POWER OF ATTORNEY................................................ 23
9.3. ACCOUNTS COLLECTION.............................................. 24
9.4. BANK EXPENSES.................................................... 24
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............................................ 25
12. GENERAL PROVISIONS................................................. 26
12.1. SUCCESSORS AND ASSIGNS........................................... 26
12.2. INDEMNIFICATION.................................................. 26
12.3. TIME OF ESSENCE.................................................. 26
12.4. SEVERABILITY OF PROVISIONS....................................... 26
12.5. AMENDMENTS IN WRITING, INTEGRATION............................... 26
12.6. COUNTERPARTS..................................................... 26
12.7. SURVIVAL......................................................... 27
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This LOAN AND SECURITY AGREEMENT is entered into as of January 31, 2000,
by and between SILICON VALLEY BANK ("Bank"); and TRIPATH IMAGING, INC., a
Delaware corporation having its principal place of business at 000 Xxxxxxxxxx
Xxxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000 ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
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 loan advance under the Committed
Revolving Line.
"AFFILIATE" means, with respect to any Person, any Person that owns
or controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, partners and, for any Person that
is a limited liability company, such Persons, managers and members.
"ASSET PURCHASE PLAN" shall mean the factoring arrangement pursuant
to the Non-Recourse Receivables Purchase Agreement between Borrower and Bank.
"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
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and expenses of appeal or review, or those incurred in any Insolvency
Proceeding) whether or not suit is brought.
"BORROWER'S BOOKS" means all of Borrower's books and records
including, without limitation: 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" means an amount equal to eighty percent (80%) of
Eligible Accounts as determined by Bank with reference to the most recent
Borrowing Base Certificate delivered by Borrower.
"BUSINESS DAY" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or required
to close.
"CLOSING DATE" means the date of this Agreement.
"CODE" means the Delaware, North Carolina, Washington or other
applicable states' Uniform Commercial Code.
"COLLATERAL" means all Intellectual Property Collateral and the
property described on Exhibit A attached hereto.
"COMMITTED REVOLVING LINE" means a credit extension of up to Five
Million and No/100ths Dollars ($5,000,000).
"CONTINGENT OBLIGATION" means, as applied to any Person, any direct
or indirect liability, contingent or otherwise, of that Person with respect to
(i) any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
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"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.
"CREDIT EXTENSION" means each Advance of or any other extension of
credit by Bank for the benefit of Borrower hereunder.
"CURRENT ASSETS" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"CURRENT LIABILITIES" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding Credit
Extensions 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.
"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 in writing, 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, including
Affiliates, whose total obligations to Borrower exceed twenty-five percent (25%)
of all Accounts, except for Quest Diagnostics, f/k/a SmithKline Xxxxxxx and
Laboratory Corporation, for which the percentage may be thirty-five percent
(35%);
(c) Accounts collected by deposit to a lockbox at any financial
institution other than Bank, unless Bank has entered into an intercreditor
agreement with such other financial institution in form acceptable to Bank
allowing Bank access to such Accounts;
(d) Accounts with respect to which the account debtor does not have
its principal place of business in the United States, unless Borrower has
obtained foreign credit insurance or letters of credit acceptable to Bank;
(e) Accounts with respect to which the account debtor is a federal,
state, or local governmental entity or any department, agency, or
instrumentality thereof;
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(f) 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 (sometimes
referred to as "contra" accounts, e.g. accounts payable, customer deposits,
credit accounts, contract xxxxxxxx, advance xxxxxxxx, etc.) against amounts owed
to Borrower, provided, however this exclusion shall not include Accounts which
have customer deposits, which Account shall only be eligible to the extent of
all amounts in excess of the deposit;
(g) Accounts generated by demonstration or promotional equipment, or
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;
(h) Accounts with respect to which the account debtor is an
Affiliate, officer, employee, or agent of Borrower, other than HoffmanLaRoche,
provided its ownership percentage of Borrower does not exceed 15% of the issued
and outstanding capital stock of Borrower;
(i) 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
(j) Accounts the collection of which Bank reasonably determines to
be doubtful by reason of the account debtor's financial condition; and
(k) Accounts sold or transferred by Borrower pursuant to the Asset
Purchase Plan.
"EQUIPMENT" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in effect
in the United States from time to time.
"GUARANTOR" means any present or future guarantor of the
Obligations, including, without limitation, AutoCyte North Carolina LLC and Cell
Analysis Systems, Inc.
"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
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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
(a) Copyrights, Trademarks, Patents, and Mask Works;
(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, Trademarks, or Mask Works, 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, Patents, or Mask Works; 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, 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.
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"INVESTMENT" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"LIEN" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"LOAN DOCUMENTS" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other present or future agreement entered
into between Borrower and/or for the benefit of Bank in connection with this
Agreement, all as amended, extended or restated from time to time.
"MASK WORKS" means all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired.
"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.
"MATURITY DATE" means January 31, 2001.
"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.
"NET INCOME (LOSS)" shall mean, for any fiscal period of Borrower,
the net income (or loss) of Borrower and its Subsidiaries on a consolidated
basis for such period (taken as a single accounting period) determined in
conformity with GAAP, after the payment or accrual of all Federal, state or
local taxes, but excluding therefrom (to the extent otherwise included therein
and without duplication): (i) any gains or losses, together with any related
provisions for taxes, realized by Borrower upon any sale of its assets other
than in the ordinary course of business, (ii) any other non-recurring gains or
losses, and (iii) any income or loss of any other Person acquired prior to the
date such other Person becomes a Subsidiary of Borrower or is merged into or
consolidated with Borrower or all or substantially all of such other Person's
assets are acquired by Borrower.
"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
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debt, liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise.
"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.
"PAYMENT DATE" means the first calendar day of each month commencing
on the first such date after the Closing Date and ending on the Maturity Date.
"PERMITTED INDEBTEDNESS" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course
of business; and
(e) Indebtedness secured by Permitted Liens.
"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 and as to which adequate reserves are maintained on Borrower's Books
in accordance with GAAP, provided the same have no priority over any of Bank's
security interests;
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(c) Liens (i) upon or in any Equipment acquired or held by Borrower
or any of its Subsidiaries to secure the purchase price of such Equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such Equipment, or (ii) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) Leases or subleases and licenses or sublicenses granted to
others in the ordinary course of either 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;
(e) Sales and leasebacks relating to equipment and other assets
listed on the Schedules;
(f) 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; and
(g) Any liens securing Subordinated Debt.
"PERSON" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"PRIME RATE" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"RESPONSIBLE OFFICER" means each of the Chief Executive Officer,
the President, the Chief Financial Officer and the Controller of Borrower.
"SCHEDULE" means the schedule of exceptions attached hereto, if
any.
"SUBORDINATED DEBT" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"SUBSIDIARY" means with respect to any Person, corporation,
partnership, company association, limited liability company, joint venture, or
any other business entity of which more than fifty percent (50%) of the voting
stock or other equity interests is owned or controlled, directly or indirectly,
by such Person or one or more Affiliates of such Person, including, but not
limited to the Subsidiary.
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"TOTAL LIABILITIES" means as of any applicable date, any date as of
which the amount thereof shall be determined, all obligations that should, in
accordance with GAAP be classified as liabilities on the consolidated balance
sheet of Borrower, including in any event all Indebtedness, but specifically
excluding Subordinated Debt.
"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 Assignor connected
with and symbolized by such trademarks.
1.2. Accounting and Other Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
and determinations made hereunder shall be made in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. The terms "including"/ "includes" shall always be read as
meaning "including (or includes) without limitation", when used herein or in any
other Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1. Advances. Borrower promises to pay to the order of Bank, in lawful
money of the United States of America, the aggregate unpaid principal amount of
all Advances made by Bank to Borrower hereunder. Borrower shall also pay
interest on the unpaid principal amount of such Advances at rates in accordance
with the terms hereof.
2.1.1. Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower in an aggregate outstanding
amount not to exceed the Committed Revolving Line or the Borrowing Base,
whichever is less, less any unpaid accounts receivables purchased or transferred
pursuant to the Asset Purchase Plan between Borrower and Bank. Subject to the
terms and conditions of this Agreement, amounts borrowed pursuant to this
Section 2.1 may be repaid and reborrowed at any time during the term of this
Agreement.
Whenever Borrower desires an Advance, Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. Eastern time, on the
Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank's discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1 to such Borrower's deposit account.
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The Committed Revolving Line shall terminate on the Maturity Date, at
which time all Advances under this Section 2.1 and other amounts due under this
Agreement (except as otherwise expressly specified herein) shall be immediately
due and payable.
2.2. Overadvances. If, at any time or for any reason, the amount of
Obligations, less any unpaid accounts receivable purchased or transferred
pursuant to the Asset Purchase Plan between Borrower and Bank, owed by Borrower
to Bank pursuant to Section 2.1.1 of this Agreement is greater than the lesser
of (i) the Committed Revolving Line or (ii) the Borrowing Base, Borrower shall
immediately pay to Bank, in cash, the amount of such excess.
2.3. Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section 2.3(b), any
Advances shall bear interest, on the average daily balance thereof, at a per
annum rate equal to one (1.00) percentage point above the Prime Rate.
(b) Default Rate. All Obligations shall bear interest, from and
after the occurrence of an Event of Default, at a rate equal to five (5.00)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on each
Payment Date. Borrower hereby authorizes Bank to debit any accounts with Bank,
including, without limitation, Account Number ________ for payments of principal
and interest due on the Obligations and any other amounts owing by Borrower to
Bank. Bank will notify Borrower of all debits which Bank has made against
Borrower's accounts. Any such debits against Borrower's accounts in no way shall
be deemed a set-off. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to
time hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.
2.4. Crediting Payments. Prior to the occurrence of an Event of Default,
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment, whether directed to Borrower's deposit account
with Bank or to the Obligations or otherwise, shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment in
respect of the Obligations 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 2:00 p.m. Eastern
time shall be deemed to have been received by Bank as of the opening of
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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 Fee. A Facility Fee equal to Twenty-Five Thousand and
No/100ths ($25,000), $15,000 of which has been paid prior to closing leaving a
balance of $10,000 due at closing, which Facility Fee shall be fully earned and
non-refundable when paid.
(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, up to $10,000 per year; and
(c) Bank Expenses. Upon demand from Bank, including, without
limitation, upon the date hereof, all Bank Expenses incurred through the date
hereof, including reasonable attorneys' fees and expenses (which shall not
exceed $10,000) 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 law, regulation, treaty or official
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of principal
or interest or any other amounts payable hereunder by Borrower or otherwise with
respect to the transactions contemplated hereby (except for taxes on the overall
net income of Bank imposed by the United States of America, any state, territory
thereof or any political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement, and the result of any of the foregoing is to
increase the cost to Bank, reduce the income receivable by Bank or impose any
expense upon Bank with respect to any loans, Bank shall notify Borrower thereof.
Upon such notification from Bank, 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.
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2.7. Term. Except as otherwise set forth herein, this Agreement shall
become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the Maturity Date.
Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination of this Agreement, 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 officer or manager, as applicable, of Borrower
with respect to articles of incorporation, bylaws, articles of organization,
operating agreement, incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(c) completion by Bank of an audit of Borrower's financial
condition, acceptable to Bank;
(d) financing statements (Forms UCC-1);
(e) insurance certificate;
(f) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof;
(g) Certificate of Good Standing and/or Foreign Qualification for
Borrower from the States of Delaware, North Carolina and Washington, and any
other state in which Borrower does business;
(h) Certified Certificate of Incorporation of Borrower; and
(i) a negative pledge security agreement;
(j) an intellectual property security agreement;
(k) guaranties and security agreements by the Guarantor(s);
(l) Subordination Agreement with respect to approximately
$7,000,000 in notes payable to Xxxxx Xxxxxxxx/TransAmerica; and
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(m) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
3.2. Conditions Precedent to all Advances. The obligation of Bank to make
each Advance, including the initial Advance, is further subject to the following
conditions:
(a) timely receipt by Bank of the Payment/Advance Form as provided
in Section 2.1; and
(b) the representations and warranties contained in Section 5 shall
be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Advance as though made at
and as of each such date, and no Event of Default shall have occurred and be
continuing, or would result from such Advance. The making of each Advance shall
be deemed to be a representation and warranty by Borrower on the date of such
Advance as to the accuracy of the facts referred to in this Section 3.2(b).
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 payment of any and all Obligations
and in order to secure prompt performance by Borrower of each of its covenants
and duties under the Loan Documents. Except as set forth in the Schedule, such
security interest constitutes a valid, first priority security interest in the
presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof. Borrower
acknowledges that Bank may place a "hold" on any Deposit Account pledged as
Collateral to secure the Obligations. Notwithstanding termination of this
Agreement, Bank's Lien on the Collateral shall remain in effect for so long as
any Obligations are outstanding.
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.
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5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1. Due Organization and Qualification. Borrower is a corporation, duly
existing and in good standing under the laws of its state of organization 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.
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, bylaws, or other
governing documents, nor will they constitute an event of default under any
material agreement to which Borrower is a party or by which Borrower is bound.
Borrower is not in default under any agreement to which it is a party or by
which it is bound, which default could have a Material Adverse Effect.
5.3. No Prior Encumbrances. Borrower has good and indefeasible title
to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4. Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
existing obligations. The service or property giving rise to such Eligible
Accounts has been performed or 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 whose accounts are included in any
Borrowing Base Certificate as an Eligible Account.
5.5. Merchantable Inventory. All Inventory (less reserves) is in all
material respects of good and marketable quality, free from all material
defects.
5.6. Intellectual Property. Except as set forth in Schedule 5.6, Borrower
is the sole owner of, or has the right to use, the Intellectual Property
Collateral, except for non-exclusive licenses granted by Borrower to its
customers in the ordinary course of business. 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 and Mask Works 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 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.
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5.7. Name; Location of Chief Executive Office. Except as disclosed in the
Schedule, Borrower has not done business and will not without at least thirty
(30) days prior written notice to Bank do business under any name other than
that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.
5.8. Litigation. Except as set forth in the Schedule, there are no actions
or proceedings pending, or, to each Borrower's knowledge, threatened by or
against Borrower or any Subsidiary before any court or administrative agency in
which an adverse decision could have a Material Adverse Effect or a material
adverse effect on Borrower's interest or Bank's security interest in the
Collateral.
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
on or about the Closing Date.
5.10. Solvency. The fair saleable value of Borrower's assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities; the
Borrower is not left with unreasonably small capital after the transactions
contemplated by this Agreement; and Borrower is able to pay its debts (including
trade debts) as they mature.
5.11. Regulatory Compliance. Borrower 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 a Borrower 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 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
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protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and 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
release, or other disposition 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 on a timely basis, and has paid, or has
made adequate provision for the payment of, all taxes reflected therein.
5.14. Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities or interests of any Person, except for
Permitted Investments.
5.15. Government Consents. Borrower and each Subsidiary have obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted.
5.16. 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' existence as a corporation or limited liability company, as the
case may be, and good standing in its jurisdiction of organization 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.
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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,
in a form and certified by an officer or manager of a Borrower reasonably
acceptable to Bank; (b) as soon as available, but in any event within ninety
(90) days after the end of the Borrower's fiscal year, audited consolidated
financial statements of Borrower prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank; (c)
within five (5) days of filing, copies of all statements, reports and notices
sent or made available generally by each Borrower to its security holders or to
any holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K
filed with the Securities and Exchange Commission; (d) promptly upon receipt of
notice thereof, a report of any legal actions pending or threatened against a
Borrower or any Subsidiary that could result in damages or costs to a Borrower
or any Subsidiary of One Hundred Thousand Dollars ($100,000) or more; and (e)
such budgets, sales projections, operating plans or other financial information
as Bank may reasonably request from time to time.
Within twenty (20) days after the last day of each month, 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 (aged by invoice date) and accounts payable.
Borrower shall deliver to Bank with the monthly financial statements
a Compliance Certificate signed by a Responsible Officer in substantially the
form of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit the
business of the Borrower at Borrower's expense, with the first audit to be
performed prior to the initial Advance; provided that such audits will be
conducted no more often than annually, 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 Five
Hundred Thousand Dollars ($500,000).
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
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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 (i) contested in good faith
by appropriate proceedings, (ii) is reserved against (to the extent required by
GAAP) by Borrower and (iii) no lien other than a Permitted Lien results.
6.6. Insurance.
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.
All such policies of insurance shall be in such form, with such companies,
and in such amounts as are 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 thirty (30) days notice to
Bank before canceling its policy for any reason. At 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 each maintain its principal
depository and operating accounts with Bank.
6.8. Quick Ratio. Borrower on a monthly basis shall maintain, as of the
last day of each calendar month, a ratio of cash, cash equivalents and Eligible
Accounts to Current Liabilities of at least 1.40 to 1.00.
6.9. Quarterly Net Losses. Borrower's Net Losses, each quarter, shall not
exceed the amounts following for each time period:
Time Period Net Loss
-------------------------------------------
01/01/00 - 03/31/00 ($4,500,000)
-------------------------------------------
04/01/00 - 06/30/00 ($3,500,000)
-------------------------------------------
07/01/00 - 09/30/00 ($2,500,000)
-------------------------------------------
10/01/00 - 12/31/00 ($1,500,000)
-------------------------------------------
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6.10. 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 Advance 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 shall not do
any of the following without the Bank's prior written consent:
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 Transfers: (i) of inventory
in the ordinary course of business, (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; (iii) that constitute payment of normal and usual
operating expenses in the ordinary course of business; (iv) of replaced,
worn-out or obsolete Equipment; or (v) pursuant to the Asset Purchase Plan.
7.2. Changes in Business, Ownership, or Management, Business
Locations. 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). Borrower will not, without at least thirty (30) days
prior written notification to Bank, relocate its chief executive office or add
any new offices or business locations.
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.
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; provided, however, Borrower shall be permitted to make Distributions for
Taxes.
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.
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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 non-affiliated 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 acquired under such contracts.
7.9. Subordinated Debt. Make any payment in respect of any Subordinated
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any provision
contained in any documentation relating to the Subordinated Debt without Bank's
prior written consent.
7.10. Inventory. Store the Inventory with a bailee, warehouseman, or
similar party unless Bank has received a pledge of any 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 or
as listed in Schedule 7.10, Borrower shall keep the Inventory only at the
location set forth in Section 10 hereof and such other locations of which
Borrower gives Bank prior written notice and as to which Borrower signs and
files a financing statement where needed to perfect Bank's security interest.
7.11. Compliance. Become an "investment company" or a company controlled
by an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose; fail
to meet the minimum funding requirements of ERISA; permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other 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, when due, any of the
Obligations.
8.2. Covenant Default. (a) If Borrower fails to perform any
obligation under Sections 6.3, 6.6, 6.7, 6.8 and 6.9 or violates any of the
covenants contained in Article 7 of this Agreement, or
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(b) If Borrower fails or neglects to perform, keep, or observe any
other material term, provision, condition, covenant, or agreement contained in
this Agreement, in any of the Loan Documents, or in any other present or future
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after the occurrence thereof; provided,
however, that if the default cannot by its nature be cured within the ten (10)
day period or cannot after diligent attempts by Borrower be cured within such
ten (10) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional reasonable period (which shall not
in any case exceed thirty (30) days) to attempt to cure such default, and within
such reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Advances will be required to be
made during such cure period);
8.3. Material Adverse Change. If there (i) occurs a material adverse
change in the business, operations, or condition (financial or otherwise) of
Borrower, or (ii) is a material impairment of the prospect of repayment of any
portion of the Obligations or (iii) is 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 any 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 45 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 Five Hundred Thousand Dollars
($500,000) or that could have a Material Adverse Effect;
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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 One Hundred Thousand
Dollars ($100,000) shall be rendered against any 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);
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 or writing delivered to Bank by Borrower or any
Person acting on Borrower's behalf pursuant to this Agreement or to induce Bank
to enter into this Agreement or any other Loan Document.
8.10. Guaranty. Any guaranty of all or a portion of the Obligations ceases
for any reason to be in full force and effect, or any Guarantor fails to perform
any obligation under any guaranty of all or a portion of the Obligations, or any
material misrepresentation or material misstatement exists now or hereafter in
any warranty or representation set forth in any guaranty of all or a portion of
the Obligations or in any certificate delivered to Bank in connection with such
guaranty, or any of the circumstances described in Sections 8.4, 8.5 or 8.8
occur with respect to any Guarantor.
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 any
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
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26
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 premises, Borrower hereby grants Bank a license to enter 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 any Borrower held by Bank, or (ii)
indebtedness at any time owing to or for the credit or the account of any
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 non-exclusive, royalty-free license or
other right, solely pursuant to the provisions of this Section 9.1, to use,
without charge, any of Borrower's labels, patents, copyrights, mask works,
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, any of 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 the proceeds thereof to the Obligations in
whatever manner or order it deems appropriate;
(h) Bank may credit bid and purchase at any public sale, or at any
private sale as permitted by law; and
(i) Any deficiency that exists after disposition of the Collateral
as provided above will be paid immediately by Borrower.
9.2. Power of Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as each 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; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an
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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. Upon the occurrence and during the continuance
of an Event of Default, Bank may notify any Person owing funds 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 if requested or required by Bank,
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.
9.4. Bank Expenses. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following: (a)
make payment of the same or any part thereof; (b) set up such reserves under the
Committed Revolving Line as Bank deems necessary to protect Bank from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
9.5. Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6. Remedies Cumulative. Bank's rights and remedies under this Agreement,
the Loan Documents, and all other agreements shall be cumulative. Bank shall
have all other rights and remedies not expressly set forth herein 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
any 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
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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, by 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: TriPath Imaging, Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn.: Xx. Xxxx Xxxxxxx
FAX: (000) 000-0000
If to Bank Silicon Valley Bank
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn.: Xx. Xxxxxx Xxxx
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.
11. CHOICE OF LAW AND VENUE
The Loan Documents shall be governed by, and construed in accordance with,
the internal laws of the State of Georgia, without regard to principles of
conflicts of law. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, 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. THE BORROWER AND THE BANK ALSO AGREE THAT ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
OR TO ENFORCE ANY JUDGMENT OBTAINED AGAINST ANY BORROWER IN CONNECTION WITH THIS
AGREEMENT OR SUCH OTHER LOAN DOCUMENT, MAY BE BROUGHT BY THE BANK OR BORROWER IN
ANY STATE OR
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29
FEDERAL COURT SITTING IN THE COUNTY OF THE STATE IN WHICH BANK'S ADDRESS SHOWN
IN SECTION 10 ABOVE IS LOCATED, OR IN ANY OTHER COURT TO THE JURISDICTION OF
WHICH SUCH BORROWER OR ANY OF ITS PROPERTY IS OR MAY BE SUBJECT. EACH OF THE
BORROWER AND THE BANK IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE AFORESAID
STATE AND FEDERAL COURTS, AND IRREVOCABLY WAIVES ANY PRESENT OR FUTURE OBJECTION
TO VENUE IN ANY SUCH COURT, AND ANY PRESENT OR FUTURE CLAIM THAT ANY SUCH COURT
IS AN INCONVENIENT FORUM, IN CONNECTION WITH ANY ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
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, indemnify, defend, protect 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 the Loan Documents;
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 the Loan Documents, 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 except by a writing signed by Borrower and Bank. 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.
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,
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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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, under seal, as of the date first above written.
TRIPATH IMAGING, INC.
By: /s/ Xxxx Xxxxxxx (SEAL)
------------------------------------
Title: CFO
------------------------------
SILICON VALLEY BANK
By: /s/ Xxxxxx X. Xxxx
------------------------------------
Title: Vice President
------------------------------
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EXHIBIT A
The Collateral consists of all of Borrowers' right, title and interest in
and to the following:
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;
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 Borrowers' 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;
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;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrowers
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrowers, 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 Borrowers;
All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrowers' Books relating to the foregoing;
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
All Borrowers' Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
32
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM DEADLINE FOR SAME
DAY PROCESSING IS 3:00 P.M., E.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:___________________
FAX#: (000)000-0000 TIME:___________________
FROM: TRIPATH IMAGING, INC.
FROM:_________________________________________________________________________
AUTHORIZED SIGNER'S NAME
_________________________________________________________________________
AUTHORIZED SIGNATURE
PHONE:______________________________________________________________________
FROM ACCOUNT #____________________________________
TO ACCOUNT#___________________________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
__________________________ _____________________
PRINCIPAL INCREASE (ADVANCE) $_____________________________
PRINCIPAL PAYMENT (ONLY) $____________________________
INTEREST PAYMENT (ONLY) $_____________________________
PRINCIPAL AND INTEREST (PAYMENT) $____________________________
OTHER INSTRUCTIONS:__________________________________________________________
All representations and warranties of Borrower stated in the Loan 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 Advance
Request; 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
___________________________________
Authorized Signature (Bank)
Phone #____________________________
33
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: TRIPATH IMAGING, INC. Bank: Silicon Valley Bank
Commitment Amount: $5,000,000
--------------------------------------------------------------------------------
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 (35% for Quest and Laboratory Corporation) $
----------------
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 (80% of #14) $
----------------
BALANCES
16. Maximum Loan Amount $
----------------
17. Total Funds Available [Lesser of #16 or #15] $
----------------
18. Present balance owing on Line of Credit $
----------------
19. Outstanding under Sublimits ( ) $
----------------
20. RESERVE POSITION (#17 minus #18 and #19) $
----------------
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS:
===============================
BANK USE ONLY
RECEIVED BY:
--------------------
DATE:
----------------
REVIEWED BY:
-------------------
COMPLIANCE STATUS: YES / NO
===============================
TRIPATH IMAGING, INC.
By:
-----------------------------
Authorized Signer
34
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: TRIPATH IMAGING, INC.
The undersigned authorized member of TRIPATH IMAGING, INC. hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between each of the Borrower and Bank (the "Agreement"), (i)
the Borrower is in complete compliance for the period ending with all
required covenants except as noted below and (ii) all representations and
warranties of the 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 Member 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. The Member expressly
acknowledges that h no borrowings may be requested by the Borrower at any time
or date of determination that Borrower is not in compliance with any of the
terms of the Agreement, and that such compliance is determined not just at the
date this certificate is delivered.
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
10Q and 10K Within 5 days after filing with the SEC Yes No
A/R and Borrowing Base Monthly within 20 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio 1.40:1.0 :1.0 Yes No
-------
Maintain on a Quarterly Basis:
Quarterly Net Losses not to exceed:
1Q ($4,500,000) Yes No
----------
2Q ($3,500,000) Yes No
----------
3Q ($2,250,000) Yes No
----------
4Q ($1,500,000) Yes No
----------
=====================================
BANK USE ONLY
RECEIVED BY:
---------------------
DATE:
----------------
REVIEWED BY:
---------------------
COMPLIANCE STATUS: YES / NO
=====================================
COMMENTS REGARDING EXCEPTIONS:
Sincerely,
----------------------- Date:--------------
SIGNATURE
-----------------------
TITLE
35
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: TRIPATH IMAGING, INC. Bank: Silicon Valley Bank
--------------------------------------------------------------------------------
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $5,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: working capital
DISBURSEMENT INSTRUCTIONS. Borrower understand that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line
--------------
Amount paid to Borrower directly: $
-------
Undisbursed Funds $
-------
Principal $
-------
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Prepaid Finance Charges Paid in Cash: $10,000.00
$25,000.00 Initial Loan Fee ($15,000 previously paid)
$ Accounts Receivables Audit
Other Charges Paid in Cash: $10,632.25
$ 426.00 UCC Search Fees
$10,206.25 Outside Counsel Fees and Expenses
Total Charges Paid in Cash $20,632.25
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 JANUARY 25, 2000.
BORROWER:
------------------------------------
Authorized Signature
36
AGREEMENT TO PROVIDE INSURANCE
GRANTOR: TRIPATH IMAGING, INC. BANK: Silicon Valley Bank
--------------------------------------------------------------------------------
INSURANCE REQUIREMENTS. TRIPATH IMAGING, 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 January 25, 2000, or earlier. Grantor acknowledges and agrees
that if Grantor fails to provide any required insurance or fails to continue
such insurance in force, Bank may do so at Grantor's expense as provided in the
Loan and Security Agreement. The cost of such insurance, at the option of Bank,
shall be payable on demand or shall be added to the indebtedness as provided in
the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
JANUARY 25, 2000.
GRANTOR:
x
--------------------------------
Authorized Member
================================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:
================================================================================
