EXHIBIT 10.44
EXECUTION
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SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
BORROWER: PHARMCHEM, INC.
ADDRESS: 0000 X. XXXXX XXXXXX
XXXXXX XXXX, XXXXX 00000
DATE: June 26, 2003
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK ("Silicon"), whose address is 0000 Xxxxxx Xxxxx, Xxxxx
Xxxxx, Xxxxxxxxxx 00000 and the borrower(s) named above (jointly and severally,
the "Borrower"), whose chief executive office is located at the above address
("Borrower's Address"). The Schedule to this Agreement (the "Schedule") shall
for all purposes be deemed to be a part of this Agreement, and the same is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 LOANS. Silicon will make to Borrower revolving loans (the
"Revolving Loans"), in amounts determined by Silicon in its good faith business
judgment, up to the amounts (the "Revolving Credit Limit") shown on the Schedule
and a term loan (the "Term Loan") up to the amount set forth on the Schedule
(the "Term Credit Limit"), provided no Default or Event of Default has occurred
and is continuing, and subject to deduction of Reserves for accrued interest and
such other Reserves as Silicon deems proper from time to time in its good faith
business judgment.
1.2 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Silicon's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans. Silicon may, in its discretion, charge interest to
Borrower's Deposit Accounts maintained with Silicon. Regardless of the amount of
Obligations that may be outstanding from time to time, Borrower shall pay
Silicon minimum monthly interest during the term of this Agreement in the amount
set forth on the Schedule (the "Minimum Monthly Interest"). Notwithstanding the
foregoing, if at any time the rate at which interest is payable on any Loan or
other Obligation created pursuant to this Agreement hereunder exceeds the
maximum amount of interest permitted to be contracted for, charged, or received
by applicable law from time to time in effect (the "Maximum Rate"), such Loan or
other Obligation shall bear interest at the Maximum Rate only, but shall
continue to bear interest at the Maximum Rate until such times as the total
amount of interest accrued thereon equals (but does not exceed) the total amount
of interest that would have accrued thereon had there been no higher than the
Maximum Rate applicable thereto.
1.3 OVERADVANCES. If at any time or for any reason the total of all
outstanding Revolving Loans and all other monetary Obligations exceeds the
Revolving Credit Limit (an "Overadvance"), Borrower shall immediately pay the
amount of the excess to Silicon, without notice or demand. Without limiting
Borrower's obligation to repay to Silicon the amount of any Overadvance,
Borrower agrees to pay Silicon interest on the outstanding amount of any
Overadvance, on demand, at the Default Rate.
1.4 FEES. Borrower shall pay Silicon the fees shown on the Schedule,
which are in addition to all interest and other sums payable to Silicon and are
not refundable.
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
1.5 LOAN REQUESTS. To obtain a Loan, Borrower shall make a request to
Silicon by facsimile or telephone. Loan requests received after 12:00 Noon
Pacific Standard Time will not be considered by Silicon until the next Business
Day. Silicon may rely on any telephone request for a Loan given by a person whom
Silicon believes is an authorized representative of Borrower, and Borrower will
indemnify Silicon for any loss Silicon suffers as a result of that reliance.
1.6 LETTERS OF CREDIT. At the request of Borrower, Silicon may, in its
good faith business judgment, issue or arrange for the issuance of letters of
credit for the account of Borrower, in each case in form and substance
satisfactory to Silicon in its sole discretion (collectively, "Letters of
Credit"). The aggregate face amount of all Letters of Credit from time to time
outstanding shall not exceed the amount shown on the Schedule (the "Letter of
Credit Sublimit"), and shall be reserved against Loans which would otherwise be
available hereunder, and in the event at any time there are insufficient Loans
available to Borrower for such reserve, Borrower shall deposit and maintain with
Silicon cash collateral in an amount at all times equal to such deficiency,
which shall be held as Collateral for all purposes of this Agreement. Borrower
shall pay all bank charges (including charges of Silicon) for the issuance of
Letters of Credit, together with such additional fee as Silicon's letter of
credit department shall charge in connection with the issuance of the Letters of
Credit. Any payment by Silicon under or in connection with a Letter of Credit
shall constitute a Loan hereunder on the date such payment is made. Each Letter
of Credit shall have an expiry date no later than thirty days prior to the
Maturity Date. Borrower hereby agrees to indemnify and hold Silicon harmless
from any loss, cost, expense, or liability, including payments made by Silicon,
expenses, and reasonable attorneys" fees incurred by Silicon arising out of or
in connection with any Letters of Credit. Borrower agrees to be bound by the
regulations and interpretations of the issuer of any Letters of Credit
guarantied by Silicon and opened for Borrower's account or by Silicon's
interpretations of any Letter of Credit issued by Silicon for Borrower's
account, and Borrower understands and agrees that Silicon shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower's instructions or those contained in the Letters of Credit or
any modifications, amendments, or supplements thereto. Borrower understands that
Letters of Credit may require Silicon to indemnify the issuing bank for certain
costs or liabilities arising out of claims by Borrower against such issuing
bank. Borrower hereby agrees to indemnify and hold Silicon harmless with respect
to any loss, cost, expense, or liability incurred by Silicon under any Letter of
Credit as a result of Silicon's indemnification of any such issuing bank. The
provisions of this Loan Agreement, as it pertains to Letters of Credit, and any
other Loan Documents relating to Letters of Credit are cumulative.
2. SECURITY INTEREST. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Silicon a security interest in
all of the following (collectively, the "Collateral"): all right, title and
interest of Borrower in and to all of the following, whether now owned or
hereafter arising or acquired and wherever located: all Accounts; all Inventory;
all Equipment; all Deposit Accounts; all General Intangibles (including without
limitation all Intellectual Property); all Investment Property; all Other
Property; and any and all claims, rights and interests in any of the above, and
all guaranties and security for any of the above, and all substitutions and
replacements for, additions, accessions, attachments, accessories, and
improvements to, and proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties) of, any and all of the
above, and all Borrower's books relating to any and all of the above.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.
In order to induce Silicon to enter into this Agreement and to make
Loans, Borrower represents and warrants to Silicon as follows, and Borrower
covenants that the following representations will continue to be true, and that
Borrower will at all times comply with all of the following covenants,
throughout the term of this Agreement and until all Obligations have been paid
and performed in full:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower is and will continue to
be, duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Borrower is and will continue to be qualified
and licensed to do business in all jurisdictions in which any failure to do so
would result in a Material Adverse Change. The execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby (i) have been duly and validly authorized, (ii) are enforceable against
Borrower in accordance with their terms (except as enforcement may be limited by
equitable principles and by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to creditors" rights generally), and (iii) do not
violate Borrower's articles or certificate of incorporation, or Borrower's
by-laws, or any law or any material agreement or instrument which is binding
upon Borrower or its property, and (iv) do not constitute grounds for
acceleration of any material indebtedness or obligation under any agreement or
instrument which is binding upon Borrower or its property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed in the Representations are
all prior names of Borrower and all of Borrower's present and prior trade names.
Borrower
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shall give Silicon 30 days" prior written notice before changing its name or
doing business under any other name. Borrower has complied, and will in the
future comply, in all material respects, with all laws relating to the conduct
of business under a fictitious business name, except where the failure to so
comply would not reasonably be expected to result in a Material Adverse Change.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth in the Representations. Borrower will give Silicon at least 30 days
prior written notice before opening any additional place of business, changing
its chief executive office, or moving any of the Collateral to a location other
than Borrower's Address or one of the locations set forth in the
Representations, except that Borrower may maintain sales offices in the ordinary
course of business at which not more than a total of $10,000 fair market value
of Equipment is located.
3.4 TITLE TO COLLATERAL; PERFECTION; PERMITTED LIENS.
(a) Borrower is now, and will at all times in the future be, the sole
owner of all the Collateral, except for items of Equipment which are leased to
Borrower. The Collateral now is and will remain free and clear of any and all
liens, charges, security interests, encumbrances and adverse claims, except for
Permitted Liens. Silicon now has, and will continue to have, a first-priority
perfected and enforceable security interest in all of the Collateral, subject
only to the Permitted Liens, and Borrower will at all times defend Silicon and
the Collateral against all claims of others.
(b) Borrower has set forth in the Representations all of Borrower's
Deposit Accounts, and Borrower will give Silicon five Business Days advance
written notice before establishing any new Deposit Accounts and will cause the
institution where any such new Deposit Account is maintained to execute and
deliver to Silicon a control agreement in form sufficient to perfect Silicon's
security interest in the Deposit Account and otherwise satisfactory to Silicon
in its good faith business judgment. Nothing herein limits any requirements
which may be set forth in the Schedule as to where Deposit Accounts will be
maintained.
(c) In the event that Borrower shall at any time after the date hereof
have any commercial tort claims against others, which it is asserting or intends
to assert, and in which the potential recovery exceeds $100,000, Borrower shall
promptly notify Silicon thereof in writing and provide Silicon with such
information regarding the same as Silicon shall request (unless providing such
information would waive the Borrower's attorney-client privilege). Such
notification to Silicon shall constitute a grant of a security interest in the
commercial tort claim and all proceeds thereof to Silicon, and Borrower shall
execute and deliver all such documents and take all such actions as Silicon
shall request in connection therewith.
(d) None of the Collateral now is or will be affixed to any real
property in such a manner, or with such intent, as to become a fixture. Borrower
is not and will not become a lessee under any real property lease pursuant to
which the lessor may obtain any rights in any of the Collateral and no such
lease now prohibits, restrains, impairs or will prohibit, restrain or impair
Borrower's right to remove any Collateral from the leased premises, except the
Lease for Borrower's premises located in Haltom City Texas as to which Borrower
will use its best efforts to obtain a landlord lien waiver satisfactory to
Silicon. Whenever any Collateral is located upon premises in which any third
party has an interest, Borrower shall, whenever requested by Silicon, use its
best efforts to cause such third party to execute and deliver to Silicon, in
form acceptable to Silicon, such waivers and subordinations as Silicon shall
specify in its good faith business judgment. Borrower will keep in full force
and effect, and will comply with all material terms of, any lease of real
property where any of the Collateral now or in the future may be located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in
good working condition (ordinary wear and tear excepted), and Borrower will not
use the Collateral for any unlawful purpose. Borrower will immediately advise
Silicon in writing of any material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered to Silicon have been, and will be,
prepared in conformity with GAAP and now and in the future will fairly present
the results of operations and financial condition of Borrower, in accordance
with GAAP, at the times and for the periods therein stated. Between the last
date covered by any such statement provided to Silicon and the date hereof,
there has been no Material Adverse Change.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
timely filed, and will timely file, all required tax returns and reports, and
Borrower has timely paid, and will timely pay, all foreign, federal, state and
local taxes, assessments, deposits and contributions now or in the future owed
by Borrower. Borrower may, however, defer payment of any contested
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
taxes, provided that Borrower (i) in good faith contests Borrower's obligation
to pay the taxes by appropriate proceedings promptly and diligently instituted
and conducted, (ii) notifies Silicon in writing of the commencement of, and any
material development in, the proceedings, and (iii) posts bonds or takes any
other steps required to keep the contested taxes from becoming a lien upon any
of the Collateral. Borrower is unaware of any claims or adjustments proposed for
any of Borrower's prior tax years which could result in additional taxes
becoming due and payable by Borrower. Borrower has paid, and shall continue to
pay all amounts necessary to fund all present and future pension, profit sharing
and deferred compensation plans in accordance with their terms, and Borrower has
not and will not withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
such plan which could reasonably be expected to result in any liability of
Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.
3.9 COMPLIANCE WITH LAW. Borrower has, to the best of its knowledge,
complied, and will comply, in all material respects, with all provisions of all
foreign, federal, state and local laws and regulations applicable to Borrower,
including, but not limited to, those relating to Borrower's ownership of real or
personal property, the conduct and licensing of Borrower's business, and all
environmental matters.
3.10 LITIGATION. There is no claim, suit, litigation, proceeding or
investigation pending or (to best of Borrower's knowledge) threatened against or
affecting Borrower in any court or before any governmental agency (or any basis
therefor known to Borrower) which could reasonably be expected to result, either
separately or in the aggregate, in any Material Adverse Change except as set
forth on the Disclosure Schedule attached hereto and made a part hereof.
Borrower will promptly inform Silicon in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted against
Borrower involving any single claim of $50,000 or more, or involving $100,000 or
more in the aggregate.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely
for lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
4. ACCOUNTS.
4.1 REPRESENTATIONS RELATING TO ACCOUNTS. Borrower represents and
warrants to Silicon as follows: Each Account with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made, (i)
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services, or the non-exclusive licensing of Intellectual Property,
in the ordinary course of Borrower's business, and (ii) meet the Minimum
Eligibility Requirements set forth in Section 8 below.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE.
Borrower represents and warrants to Silicon as follows: All statements made and
all unpaid balances appearing in all invoices, instruments and other documents
evidencing the Accounts are and shall be true and correct, in all material
respects, and all such invoices, instruments and other documents and all of
Borrower's books and records are and shall be genuine in all material respects,
and in all respects what they purport to be. All sales and other transactions
underlying or giving rise to each Account shall comply in all material respects
with all applicable laws and governmental rules and regulations. To the best of
Borrower's knowledge, all signatures and endorsements on all documents,
instruments, and agreements relating to all Accounts are and shall be genuine,
and all such documents, instruments and agreements are and shall be legally
enforceable in accordance with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO ACCOUNTS. Borrower shall
deliver to Silicon transaction reports and schedules of collections, as provided
in the Schedule, on Silicon's standard forms; provided, however, that Borrower's
failure to execute and deliver the same shall not affect or limit Silicon's
security interest and other rights in all of Borrower's Accounts, nor shall
Silicon's failure to advance or lend against a specific Account affect or limit
Silicon's security interest and other rights therein. If requested by Silicon,
Borrower shall furnish Silicon with copies (or, at Silicon's request, originals)
of all contracts, orders, invoices, and other similar documents, and all
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Accounts, and Borrower warrants that all of the foregoing are genuine in all
material respects. Borrower shall also furnish to Silicon an aged accounts
receivable trial balance as provided in the Schedule. In addition, Borrower
shall deliver to Silicon, on its request, the originals of all instruments,
chattel paper, security agreements, guarantees and other documents and property
evidencing or securing any Accounts, in the same form as received, with all
necessary indorsements, and copies of all credit memos.
4.4 COLLECTION OF ACCOUNTS. Borrower shall have the right to collect
all Accounts, unless and until a Default or an Event of Default has occurred and
is continuing. Whether or not an Event of Default has occurred and is
continuing, Borrower shall
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hold all payments on, and proceeds of, Accounts in trust for Silicon, and
Borrower shall immediately deliver all such payments and proceeds to Silicon in
their original form, duly endorsed, to be applied to the Obligations in such
order as Silicon shall determine. Silicon may, in its good faith business
judgment, require that all proceeds of Collateral be deposited by Borrower into
a lockbox account, or such other "blocked account" as Silicon may specify,
pursuant to a blocked account agreement in such form as Silicon may specify in
its good faith business judgment.
4.5. REMITTANCE OF PROCEEDS. All proceeds arising from the disposition
of any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than two Business Days
after receipt by Borrower, to be applied to the Obligations in such order as
Silicon shall determine; provided that, if no Default or Event of Default has
occurred and is continuing, Borrower shall not be obligated to remit to Silicon
the proceeds of the sale of worn out or obsolete Equipment disposed of by
Borrower in good faith in an arm's length transaction for an aggregate purchase
price of $25,000 or less (for all such transactions in any fiscal year).
Borrower agrees that it will not commingle proceeds of Collateral with any of
Borrower's other funds or property, but will hold such proceeds separate and
apart from such other funds and property and in an express trust for Silicon.
Nothing in this Section limits the restrictions on disposition of Collateral set
forth elsewhere in this Agreement.
4.6 DISPUTES. Borrower shall notify Silicon promptly of all material
disputes or claims relating to Accounts. Borrower shall not forgive (completely
or partially), compromise or settle any Account for less than payment in full,
or agree to do any of the foregoing, except that Borrower may do so, provided
that: (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm's length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account all such discounts, settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit.
4.7 RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower, Borrower
shall promptly determine the reason for such return and promptly issue a credit
memorandum to the Account Debtor in the appropriate amount. In the event any
attempted return occurs after the occurrence and during the continuance of any
Event of Default, Borrower shall hold the returned Inventory in trust for
Silicon, and immediately notify Silicon of the return of the Inventory.
4.8 VERIFICATION. Silicon may, from time to time, verify directly with
the respective Account Debtors the validity, amount and other matters relating
to the Accounts, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.
4.9 NO LIABILITY. Silicon shall not be responsible or liable for any
shortage or discrepancy in, damage to, or loss or destruction of, any goods, the
sale or other disposition of which gives rise to an Account, or for any error,
act, omission, or delay of any kind occurring in the settlement, failure to
settle, collection or failure to collect any Account, or for settling any
Account in good faith for less than the full amount thereof, nor shall Silicon
be deemed to be responsible for any of Borrower's obligations under any contract
or agreement giving rise to an Account. Nothing herein shall, however, relieve
Silicon from liability for its own gross negligence or willful misconduct.
5. ADDITIONAL DUTIES OF BORROWER.
5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply
with the financial and other covenants set forth in the Schedule.
5.2 INSURANCE. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require and that are customary and in accordance with standard
practices for Borrower's industry and locations, and Borrower shall provide
evidence of such insurance to Silicon. All such insurance policies shall name
Silicon as an additional loss payee, and shall contain a lenders loss payee
endorsement in form reasonably acceptable to Silicon. Upon receipt of the
proceeds of any such insurance, Silicon shall apply such proceeds in reduction
of the Obligations as Silicon shall determine in its good faith business
judgment, except that, provided no Default or Event of Default has occurred and
is continuing, Silicon shall release to Borrower insurance proceeds with respect
to Equipment totaling less than $100,000, which shall be utilized by Borrower
for the replacement of the Equipment with respect to which the insurance
proceeds were paid. Silicon may require reasonable assurance that the insurance
proceeds so released will be so used. If Borrower fails to provide or pay for
any
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insurance, Silicon may, but is not obligated to, obtain the same at Borrower's
expense. Borrower shall promptly deliver to Silicon copies of all material
reports made to insurance companies.
5.3 REPORTS. Borrower, at its expense, shall provide Silicon with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as Silicon shall from time to time specify in
its good faith business judgment.
5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and
on not less than one Business Day's notice, Silicon, or its agents, shall have
the right to inspect the Collateral, and the right to audit and copy Borrower's
books and records, provided, however, that Silicon shall give Borrower not
less than five (5) business days' notice of routine audits and inspections of
the Collateral. Notwithstanding the foregoing, no notice shall be required if a
Default or Event of Default has occurred and is continuing or a Material Adverse
Change has occurred. Silicon shall take reasonable steps to keep confidential
all information obtained in any such inspection or audit, but Silicon shall have
the right to disclose any such information to its auditors, regulatory agencies,
and attorneys, and pursuant to any subpoena or other legal process. The
foregoing inspections and audits shall be at Borrower's expense and the charge
therefor shall be $700 per person per day (or such higher amount as shall
represent Silicon's then current standard charge for the same), plus reasonable
out of pocket expenses.
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule,
Borrower shall not, without Silicon's prior written consent (which shall be a
matter of its good faith business judgment), do any of the following: (i) merge
or consolidate with another corporation or entity; (ii) acquire any assets,
except in the ordinary course of business; (iii) enter into any other
transaction outside the ordinary course of business; (iv) sell or transfer any
Collateral, except for the sale of finished Inventory in the ordinary course of
Borrower's business, and except for the sale of obsolete or unneeded Equipment
in the ordinary course of business; (v) store any Inventory or other Collateral
with any warehouseman or other third party; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii)
make any loans of any money or other assets (other than loans to any employees
which shall not exceed $5000 outstanding at any time per employee); (viii) incur
any debts, outside the ordinary course of business, which would result in a
Material Adverse Change; (ix) guarantee or otherwise become liable with respect
to the obligations of another party or entity; (x) pay or declare any dividends
on Borrower's stock (except for dividends payable solely in stock of Borrower);
(xi) redeem, retire, purchase or otherwise acquire, directly or indirectly, any
of Borrower's stock, except that Borrower may redeem or repurchase its stock so
long as (x) no Default or Event of Default has occurred and is continuing or
will occur as a result there and (y) the aggregate price for all such
redemptions and repurchases shall never exceed $1,500,000; (xii) make any change
in Borrower's capital structure which would result in a Material Adverse Change;
or (xiii) engage, directly or indirectly, in any business other than the
businesses currently engaged in by Borrower or reasonably related thereto; or
(xiv) dissolve or elect to dissolve. Transactions permitted by the foregoing
provisions of this Section are only permitted if no Default or Event of Default
would occur as a result of such transaction.
5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding
be instituted by or against Silicon with respect to any Collateral or relating
to Borrower, Borrower shall, without expense to Silicon, make available Borrower
and its officers, employees and agents and Borrower's books and records, to the
extent that Silicon may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.
5.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take all actions, as Silicon, may, in its
good faith business judgment, deem necessary or useful in order to perfect and
maintain Silicon's perfected first-priority security interest in the Collateral
(subject to Permitted Liens), and in order to fully consummate the transactions
contemplated by this Agreement.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"), subject to
Section 6.3 below.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three Business Days after
written notice of termination is given to Silicon; or (ii) by Silicon at any
time after the occurrence and during the continuance of an Event of Default,
without notice, effective immediately. If this Agreement is terminated by
Borrower or by Silicon under this Section 6.2, Borrower shall pay to Silicon a
termination fee in an amount equal to one percent (1.0%) of the Revolving Credit
Limit, provided that no termination fee shall be charged if the credit facility
hereunder is replaced with a new facility from another division of Silicon
Valley Bank. The termination fee shall be
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due and payable on the effective date of termination and thereafter shall bear
interest at a rate equal to the highest rate applicable to any of the
Obligations.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or on
any earlier effective date of termination, there are any outstanding Letters of
Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to 105% of the face amount of all such Letters of Credit plus all
interest, fees and cost due or to become due in connection therewith (as
estimated by Silicon in its good faith business judgment), to secure all of the
Obligations relating to said Letters of Credit, pursuant to Silicon's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Silicon's security interests in all of the Collateral and all
of the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided that
Silicon may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of Silicon, nor shall any such termination relieve Borrower of any
Obligation to Silicon, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, Silicon shall promptly terminate its financing
statements with respect to the Borrower and deliver to Borrower such other
documents as may be required to fully terminate Silicon's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and Borrower shall
give Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect when made or deemed to be made; or
(b) Borrower shall fail to pay when due any Loan or any interest thereon or any
other monetary Obligation; or (c) the total Loans and other Obligations
outstanding at any time shall exceed the Credit Limit; or (d) Borrower shall
fail to comply with any of the financial covenants set forth in the Schedule, or
shall fail to perform any other non-monetary Obligation which by its nature
cannot be cured, or shall fail to permit Silicon to conduct an inspection or
audit as specified in Section 5.4 hereof; or (e) Borrower shall fail to perform
any other non-monetary Obligation, which failure is not cured within five
Business Days after the date due; or (f) any levy, assessment, attachment,
seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any
part of the Collateral which is not cured within 10 days after the occurrence of
the same; or (g) any default or event of default occurs under any obligation
having a balance in excess of $50,000 which is secured by a Permitted Lien,
which is not cured within any applicable cure period or waived in writing by the
holder of the Permitted Lien; or (h) Borrower breaches any material contract or
obligation, which has resulted or may reasonably be expected to result in a
Material Adverse Change; or (i) Dissolution, termination of existence,
insolvency or business failure of Borrower; or appointment of a receiver,
trustee or custodian, for all or any part of the property of, assignment for the
benefit of creditors by, or the commencement of any proceeding by Borrower under
any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower or
any guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, which is not cured
by the dismissal thereof within 30 days after the date commenced; or (k)
revocation or termination of, or limitation or denial of liability upon, any
guaranty of the Obligations or any attempt to do any of the foregoing, or
commencement of proceedings by any guarantor of any of the Obligations under any
bankruptcy or insolvency law; or (l) revocation or termination of, or limitation
or denial of liability upon, any pledge of any certificate of deposit,
securities or other property or asset of any kind pledged by any third party to
secure any or all of the Obligations, or any attempt to do any of the foregoing,
or commencement of proceedings by or against any such third party under any
bankruptcy or insolvency law; or (m) Borrower makes any payment on account of
any indebtedness or obligation which has been subordinated to the Obligations
other than as permitted in the applicable subordination agreement, or if any
Person who has subordinated such indebtedness or obligations terminates or in
any way limits his subordination agreement; or (n) any "person" or "group"
(within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of a sufficient number
of shares of all classes of stock then outstanding of Borrower ordinarily
entitled to vote in the election of directors, empowering such "person" or
"group" to elect a majority of the Board
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
of Directors of Borrower, who did not have such power before such transaction;
or (o) Borrower shall generally not pay its debts as they become due, or
Borrower shall conceal, remove or transfer any part of its property, with intent
to hinder, delay or defraud its creditors, or make or suffer any transfer of any
of its property which may be fraudulent under any bankruptcy, fraudulent
conveyance or similar law; or (p) a Material Adverse Change shall occur; or (q)
Silicon, acting in good faith and in a commercially reasonable manner, deems
itself insecure because of the occurrence of an event prior to the effective
date hereof of which Silicon had no knowledge on the effective date or because
of the occurrence of an event on or subsequent to the effective date. Silicon
may cease making any Loans hereunder during any of the above cure periods, and
thereafter if an Event of Default has occurred and is continuing. (For purposes
of this Article VII, any reference to the Borrower shall be deemed to include
the Borrower's Subsidiaries.)
7.2 REMEDIES. Upon the occurrence and during the continuance of any
Event of Default, and at any time thereafter, Silicon, at its option, and
without notice or demand of any kind (all of which are hereby expressly waived
by Borrower), may do any one or more of the following: (a) Cease making Loans or
otherwise extending credit to Borrower under this Agreement or any other Loan
Document; (b) Accelerate and declare all or any part of the Obligations to be
immediately due, payable, and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation; (c) Take possession of any or all of the Collateral wherever it may
be found, and for that purpose Borrower hereby authorizes Silicon without
judicial process to enter onto any of Borrower's premises without interference
to search for, take possession of, keep, store, or remove any of the Collateral,
and remain on the premises or cause a custodian to remain on the premises in
exclusive control thereof, without charge for so long as Silicon deems it
necessary, in its good faith business judgment, in order to complete the
enforcement of its rights under this Agreement or any other agreement; provided,
however, that should Silicon seek to take possession of any of the Collateral by
court process, Borrower hereby irrevocably waives: (i) any bond and any surety
or security relating thereto required by any statute, court rule or otherwise as
an incident to such possession; (ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (iii) any
requirement that Silicon retain possession of, and not dispose of, any such
Collateral until after trial or final judgment; (d) Require Borrower to assemble
any or all of the Collateral and make it available to Silicon at places
designated by Silicon which are reasonably convenient to Silicon and Borrower,
and to remove the Collateral to such locations as Silicon may deem advisable;
(e) Complete the processing, manufacturing or repair of any Collateral prior to
a disposition thereof and, for such purpose and for the purpose of removal,
Silicon shall have the right to use Borrower's premises, vehicles, hoists,
lifts, cranes, and other Equipment and all other property without charge; (f)
Sell, lease or otherwise dispose of any of the Collateral, in its condition at
the time Silicon obtains possession of it or after further manufacturing,
processing or repair, at one or more public and/or private sales, in lots or in
bulk, for cash, exchange or other property, or on credit, and to adjourn any
such sale from time to time without notice other than oral announcement at the
time scheduled for sale. Silicon shall have the right to conduct such
disposition on Borrower's premises without charge, for such time or times as
Silicon deems reasonable, or on Silicon's premises, or elsewhere and the
Collateral need not be located at the place of disposition. Silicon may directly
or through any affiliated company purchase or lease any Collateral at any such
public disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale; (g) Demand payment
of, and collect any Accounts and General Intangibles comprising Collateral and,
in connection therewith, Borrower irrevocably authorizes Silicon to endorse or
sign Borrower's name on all collections, receipts, instruments and other
documents, to take possession of and open mail addressed to Borrower and remove
therefrom payments made with respect to any item of the Collateral or proceeds
thereof, and, in Silicon's good faith business judgment, to grant extensions of
time to pay, compromise claims and settle Accounts and the like for less than
face value; (h) Offset against any sums in any of Borrower's general, special or
other Deposit Accounts with Silicon against any or all of the Obligations; and
(i) Demand and receive possession of any of Borrower's federal and state income
tax returns and the books and records utilized in the preparation thereof or
referring thereto. All reasonable attorneys" fees, expenses, costs, liabilities
and obligations incurred by Silicon with respect to the foregoing shall be added
to and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. Without limiting any of Silicon's rights and remedies, from and
after the occurrence and during the continuance of any Event of Default, the
interest rate applicable to the Obligations shall be increased by an additional
three percent per annum (the "Default Rate").
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least ten days prior to the sale, and, in the case of a public sale,
notice of the sale is published at least five days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
between 8:00 a.m. and 6:00 p.m.; (v) Payment of the purchase price in cash or by
cashier's check or wire transfer is required; (vi) With respect to any sale of
any of the Collateral, Silicon may (but is not obligated to) direct any
prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. Silicon shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
7.4 POWER OF ATTORNEY. Upon the occurrence and during the continuance
of any Event of Default, without limiting Silicon's other rights and remedies,
Borrower grants to Silicon an irrevocable power of attorney coupled with an
interest, authorizing and permitting Silicon (acting through any of its
employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise, but Silicon agrees
that if it exercises any right hereunder, it will do so in good faith and in a
commercially reasonable manner: (a) Execute on behalf of Borrower any documents
that Silicon may, in its good faith business judgment, deem advisable in order
to perfect and maintain Silicon's security interest in the Collateral, or in
order to exercise a right of Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
Loan Documents; (b) Execute on behalf of Borrower, any invoices relating to any
Account, any draft against any Account Debtor and any notice to any Account
Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien; (c) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name of
Borrower upon any instruments, or documents, evidence of payment or Collateral
that may come into Silicon's possession; (d) Endorse all checks and other forms
of remittances received by Silicon; (e) Pay, contest or settle any lien, charge,
encumbrance, security interest and adverse claim in or to any of the Collateral,
or any judgment based thereon, or otherwise take any action to terminate or
discharge the same; (f) Grant extensions of time to pay, compromise claims and
settle Accounts and General Intangibles for less than face value and execute all
releases and other documents in connection therewith; (g) Pay any sums required
on account of Borrower's taxes or to secure the release of any liens therefor,
or both; (h) Settle and adjust, and give releases of, any insurance claim that
relates to any of the Collateral and obtain payment therefor; (i) Instruct any
third party having custody or control of any books or records belonging to, or
relating to, Borrower to give Silicon the same rights of access and other rights
with respect thereto as Silicon has under this Agreement; and (j) Take any
action or pay any sum required of Borrower pursuant to this Agreement and any
other Loan Documents. Any and all reasonable sums paid and any and all
reasonable costs, expenses, liabilities, obligations and attorneys" fees
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be payable on demand, and shall bear interest at
a rate equal to the highest interest rate applicable to any of the Obligations.
In no event shall Silicon's rights under the foregoing power of attorney or any
of Silicon's other rights under this Agreement be deemed to indicate that
Silicon is in control of the business, management or properties of Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale of the Collateral shall be applied by Silicon first to the reasonable
costs, expenses, liabilities, obligations and attorneys" fees incurred by
Silicon in the exercise of its rights under this Agreement, second to the
interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Silicon shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in its
good faith business judgment, directly or indirectly enters into a deferred
payment or other credit transaction with any purchaser at any sale of
Collateral, Silicon shall have the option, exercisable at any time, in its good
faith business judgment, of either reducing the Obligations by the principal
amount of purchase price or deferring the reduction of the Obligations until the
actual receipt by Silicon of the cash therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, Silicon shall have all the other rights and remedies
accorded a secured party under the California Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or in
the future entered into between Silicon and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on an Account.
"Accounts" means all present and future "accounts" as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all accounts receivable and other sums owing to Borrower.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Business Day" means a day on which Silicon is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"Collateral" has the meaning set forth in Section 2 above.
"continuing" and "during the continuance of" when used with reference
to a Default or Event of Default means that the Default or Event of Default has
occurred and has not been either waived in writing by Silicon or cured within
any applicable cure period.
"Credit Limit" means the aggregate amount of the Revolving Credit Limit
and the Term Credit Limit.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Default Rate" has the meaning set forth in Section 7.2 above.
"Deposit Accounts" means all present and future "deposit accounts" as
defined in the California Uniform Commercial Code in effect on the date hereof
with such additions to such term as may hereafter be made, and includes without
limitation all general and special bank accounts, demand accounts, checking
accounts, savings accounts and certificates of deposit.
"Eligible Accounts" means Accounts and General Intangibles arising in
the ordinary course of Borrower's business from the sale of goods or the
rendition of services, or the non-exclusive licensing of Intellectual Property,
which Silicon, in its good faith business judgment, shall deem eligible for
borrowing. Without limiting the fact that the determination of which Accounts
are eligible for borrowing is a matter of Silicon's good faith business
judgment, the following (the "Minimum Eligibility Requirements") are the minimum
requirements for a Account to be an Eligible Account: (i) the Account must not
be outstanding for more than 120 days from its invoice date (the "Eligibility
Period"), (ii) the Account must not represent progress xxxxxxxx, or be due under
a fulfillment or requirements contract with the Account Debtor, (iii) the
Account must not be subject to any contingencies (including Accounts arising
from sales on consignment, guaranteed sale or other terms pursuant to which
payment by the Account Debtor may be conditional), (iv) the Account must not be
owing from an Account Debtor with whom Borrower has any dispute involving an
amount in excess of $50,000 (whether or not relating to the particular Account),
(v) the Account must not be owing from an Affiliate of Borrower, (vi) the
Account must not be owing from an Account Debtor which is subject to any
insolvency or bankruptcy proceeding, or whose financial condition is not
acceptable to Silicon, or which, fails or goes out of a material portion of its
business, (vii) the Account must not be owing from the United States or any
department, agency or instrumentality thereof (unless there has been compliance,
to Silicon's satisfaction, with the United States Assignment of Claims Act),
(viii) the Account must not be owing from an Account Debtor located outside the
United States or Canada (unless pre-approved by Silicon in its discretion in
writing, or backed by a letter of credit satisfactory to Silicon, or FCIA
insured satisfactory to Silicon), (ix) the Account must not be owing from an
Account Debtor to whom Borrower is or may be liable for goods purchased from
such Account Debtor or otherwise (but, in such case, the Account will be deemed
not eligible only to the extent of any amounts owed by Borrower to such Account
Debtor). Accounts owing from one Account Debtor will not be deemed Eligible
Accounts to the extent they exceed 25% of the total Accounts outstanding, except
for accounts owing from the Federal Probation Office A/K/A U.S. Administrative
Courts which shall not be deemed Eligible Accounts to the extent they exceed 35%
of the total Accounts outstanding. In addition, if more than 50% of the Accounts
owing from an Account Debtor are outstanding for a period longer than their
Eligibility Period (without regard to unapplied credits) or are otherwise not
eligible Accounts, then all Accounts owing from that Account Debtor will be
deemed ineligible for borrowing. Silicon may, from time to time, in its good
faith business judgment, revise the Minimum Eligibility Requirements, upon
written notice to Borrower.
"Equipment" means all present and future "equipment" as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all machinery, fixtures, goods, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"GAAP" means generally accepted accounting principles consistently
applied.
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
"General Intangibles" means all present and future "general
intangibles" as defined in the California Uniform Commercial Code in effect on
the date hereof with such additions to such term as may hereafter be made, and
includes without limitation all Intellectual Property, payment intangibles,
royalties, contract rights, goodwill, franchise agreements, purchase orders,
customer lists, route lists, telephone numbers, domain names, claims, income tax
refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.
"good faith business judgment" means honesty in fact and good faith (as
defined in Section 1201 of the Code) in the exercise of Silicon's business
judgment.
"including" means including (but not limited to).
"Intellectual Property" means all present and future (a) copyrights,
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, (b) trade secret rights, including all rights to
unpatented inventions and know-how, and confidential information; (c) mask work
or similar rights available for the protection of semiconductor chips; (d)
patents, patent applications and like protections including without limitation
improvements, divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same; (e) trademarks, servicemarks, trade styles,
and trade names, whether or not any of the foregoing are registered, and all
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Borrower connected with and symbolized by
any such trademarks; (f) computer software and computer software products; (g)
designs and design rights; (h) technology; (i) all claims for damages by way of
past, present and future infringement of any of the rights included above; (j)
all licenses or other rights to use any property or rights of a type described
above.
"Inventory" means all present and future "inventory" as defined in the
California Uniform Commercial Code in effect on the date hereof with such
additions to such term as may hereafter be made, and includes without limitation
all merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products, including without limitation such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returned goods and any documents of title representing
any of the above.
"Investment Property" means all present and future investment property,
securities, stocks, bonds, debentures, debt securities, partnership interests,
limited liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts, and all financial assets held
in any securities account or otherwise, and all options and warrants to purchase
any of the foregoing, wherever located, and all other securities of every kind,
whether certificated or uncertificated.
"Loan Documents" means, collectively, this Agreement, the
Representations, and all other present and future documents, instruments and
agreements between Silicon and Borrower, including, but not limited to those
relating to this Agreement, and all amendments and modifications thereto and
replacements therefor.
"Loans" means, collectively, the Revolving Loans and the Term Loan.
"Maximum Rate" has the meaning given it in Section 1.2.
"Material Adverse Change" means any of the following: (i) a material
adverse change in the business, operations, or financial or other condition of
the Borrower, or (ii) a material impairment of the prospect of repayment of any
portion of the Obligations; or (iii) a material impairment of the value or
priority of Silicon's security interests in the Collateral.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, or otherwise, whether arising from an
extension of credit, opening of a letter of credit, banker's acceptance, loan,
guaranty, indemnification or otherwise, whether direct or indirect (including,
without limitation, those acquired by assignment and any participation by
Silicon in Borrower's debts owing to others), absolute or contingent, due or to
become due, including, without limitation, all interest, charges, expenses,
fees, attorney's fees, expert witness fees, audit fees, letter of credit fees,
collateral monitoring fees, closing fees, facility fees, termination fees,
minimum interest charges and any other sums chargeable to Borrower under this
Agreement or under any other Loan Documents.
"Other Property" means the following as defined in the California
Uniform Commercial Code in effect on the date hereof with such additions to such
term as may hereafter be made, and all rights relating thereto: all present and
future "commercial tort claims" (including without limitation any commercial
tort claims identified in the Representations), "documents", "instruments",
"promissory notes", "chattel paper", "letters of credit", "letter-of-credit
rights", "fixtures", "farm products" and
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
"money"; and all other goods and personal property of every kind, tangible and
intangible, whether or not governed by the California Uniform Commercial Code.
"Permitted Liens" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens consented to in writing by Silicon, which consent may be
withheld in its good faith business judgment; (v) security interests being
terminated substantially concurrently with this Agreement; (vi) liens of
materialmen, mechanics, warehousemen, carriers, or other similar liens arising
in the ordinary course of business and securing obligations which are not
delinquent; (vii) liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described above in
clauses (i) or (ii) above, provided that any extension, renewal or replacement
lien is limited to the property encumbered by the existing lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase; (viii) Liens in favor of customs and revenue authorities which
secure payment of customs duties in connection with the importation of goods,
and (ix) liens described in the Disclosure Schedule attached hereto. Silicon
will have the right to require, as a condition to its consent under subparagraph
(iv) above, that the holder of the additional security interest or lien sign an
intercreditor agreement on Silicon's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Representations" means the written Representations and Warranties
provided by Borrower to Silicon referred to in the Schedule.
"Reserves" means, as of any date of determination, such amounts as
Silicon may from time to time establish and revise in its good faith business
judgment, reducing the amount of Loans, Letters of Credit and other financial
accommodations which would otherwise be available to Borrower under the lending
formula(s) provided in the Schedule: (a) to reflect events, conditions,
contingencies or risks which, as determined by Silicon in its good faith
business judgment, do or may adversely affect (i) the Collateral or any other
property which is security for the Obligations or its value (including without
limitation any increase in delinquencies of Accounts), (ii) the assets, business
or prospects of Borrower or any Guarantor, or (iii) the security interests and
other rights of Silicon in the Collateral (including the enforceability,
perfection and priority thereof); or (b) to reflect Silicon's good faith belief
that any collateral report or financial information furnished by or on behalf of
Borrower or any Guarantor to Silicon is or may have been incomplete, inaccurate
or misleading in any material respect; or (c) in respect of any state of facts
which Silicon determines in good faith constitutes an Event of Default or may,
with notice or passage of time or both, constitute an Event of Default.
"Unbilled Receivable" means an Eligible Account for which an invoice
has not been sent to the Account Debtor, but the product or service giving rise
to such Eligible Account has been delivered and Borrower has sufficient
information to prepare the invoice.
Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP, consistently applied. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meanings provided by the Code, to the
extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Silicon (including
proceeds of Accounts and payment of the Obligations in full) shall be deemed
applied by Silicon on account of the Obligations two Business Days after receipt
by Silicon of immediately available funds, and, for purposes of the foregoing,
any such funds received after 12:00 Noon on any day shall be deemed received on
the next Business Day. Silicon shall not, however, be required to credit
Borrower's account for the amount of any item of payment which is unsatisfactory
to Silicon in its good faith business judgment, and Silicon may charge
Borrower's loan account for the amount of any item of payment which is returned
to Silicon unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the
Obligations may be applied, and in Silicon's good faith business judgment
reversed and re-applied, to the Obligations, in such order and manner as Silicon
shall determine in its good faith business judgment.
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
9.3 CHARGES TO ACCOUNTS. Silicon may, in its discretion, require that
Borrower pay monetary Obligations in cash to Silicon, or charge them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable to the Loans. Silicon may also, in its discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.
9.4 MONTHLY ACCOUNTINGS. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within 60 days after such account is
rendered, describing the nature of any alleged errors or omissions.
9.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to Silicon or Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party. Notices to Silicon shall be directed to the Commercial
Finance Division, to the attention of the Division Manager or the Division
Credit Manager, with a copy to Silicon's attorney, Xxxxxxx X. Xxxxxx, Xxxxxxxx &
Xxxxxx L.L.P., 0000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000. Notices to
Borrower shall be directed to the Chief Financial Officer, with a copy to the
Chief Executive Officer. All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered, or at the expiration of
one Business Day following delivery to the private delivery service, or two
Business Days following the deposit thereof in the United States mail, with
postage prepaid.
9.6 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
9.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Silicon and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. There are
no oral understandings, representations or agreements between the parties which
are not set forth in this Agreement or in other written agreements signed by the
parties in connection herewith. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
9.8 WAIVERS; INDEMNITY. The failure of Silicon at any time or times to
require Borrower to strictly comply with any of the provisions of this Agreement
or any other Loan Document shall not waive or diminish any right of Silicon
later to demand and receive strict compliance therewith. Any waiver of any
default shall not waive or affect any other default, whether prior or
subsequent, and whether or not similar. None of the provisions of this Agreement
or any other Loan Document shall be deemed to have been waived by any act or
knowledge of Silicon or its agents or employees, but only by a specific written
waiver signed by an authorized officer of Silicon and delivered to Borrower.
Borrower waives the benefit of all statutes of limitations relating to any of
the Obligations or this Agreement or any other Loan Document, and Borrower
waives demand, protest, notice of protest and notice of default or dishonor,
notice of payment and nonpayment, release, compromise, settlement, extension or
renewal of any commercial paper, instrument, account, General Intangible,
document or guaranty at any time held by Silicon on which Borrower is or may in
any way be liable, and notice of any action taken by Silicon, unless expressly
required by this Agreement. Borrower hereby agrees to indemnify Silicon and its
affiliates, subsidiaries, parent, directors, officers, employees, agents, and
attorneys, and to hold them harmless from and against any and all claims, debts,
liabilities, demands, obligations, actions, causes of action, penalties, costs
and expenses (including reasonable attorneys" fees), of every kind, which they
may sustain or incur based upon or arising out of any of the Obligations, or any
relationship or agreement between Silicon and Borrower, or any other matter,
relating to Borrower or the Obligations; provided that this indemnity shall not
extend to damages proximately caused by the indemnitee's own gross negligence or
willful misconduct. Notwithstanding any provision in this Agreement to the
contrary, the indemnity agreement set forth in this Section shall survive any
termination of this Agreement and shall for all purposes continue in full force
and effect.
9.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Silicon, nor any of
its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Silicon SHALL BE LIABLE FOR ANY CLAIMS, DEMANDS,
LOSSES OR DAMAGES, OF ANY KIND WHATSOEVER, MADE, CLAIMED, INCURRED OR SUFFERED
BY BORROWER OR ANY OTHER PARTY THROUGH THE ORDINARY NEGLIGENCE OF SILICON, OR
ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSON
AFFILIATED WITH
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
OR REPRESENTING SILICON, but nothing herein shall relieve Silicon from liability
for its own gross negligence or willful misconduct.
9.10 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Silicon.
9.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.12 ATTORNEYS FEES AND COSTS. Borrower shall reimburse Silicon for all
reasonable attorneys" fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys" fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and all present and future documents relating to this Agreement;
obtain legal advice in connection with this Agreement or Borrower; enforce, or
seek to enforce, any of its rights; prosecute actions against, or defend actions
by, Account Debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim; examine, audit, copy, and inspect any of the Collateral or any of
Borrower's books and records; protect, obtain possession of, lease, dispose of,
or otherwise enforce Silicon's security interest in, the Collateral; and
otherwise represent Silicon in any litigation relating to Borrower. In
satisfying Borrower's obligation hereunder to reimburse Silicon for attorneys
fees, Borrower may, for convenience, issue checks directly to Silicon's
attorneys, Xxxxxxxx & Xxxxxx L.L.P., but Borrower acknowledges and agrees that
Xxxxxxxx & Knight L.L.P. is representing only Silicon and not Borrower in
connection with this Agreement. If either Silicon or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys"
fees, including (but not limited to) reasonable attorneys" fees and costs
incurred in the enforcement of, execution upon or defense of any order, decree,
award or judgment. All attorneys" fees and costs to which Silicon may be
entitled pursuant to this Paragraph shall immediately become part of Borrower's
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations.
9.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Silicon; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Silicon, and any prohibited
assignment shall be void. No consent by Silicon to any assignment shall release
Borrower from its liability for the Obligations.
9.14 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.15 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower
against Silicon, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other Loan Document, or any other transaction contemplated hereby or thereby or
relating hereto or thereto, or any other matter, cause or thing whatsoever,
occurred, done, omitted or suffered to be done by Silicon, its directors,
officers, employees, agents, accountants or attorneys, shall be barred unless
asserted by Borrower by the commencement of an action or proceeding in a court
of competent jurisdiction by the filing of a complaint within one year after the
first act, occurrence or omission upon which such claim or cause of action, or
any part thereof, is based, and the service of a summons and complaint on an
officer of Silicon, or on any other person authorized to accept service on
behalf of Silicon, within thirty (30) days thereafter. Borrower agrees that such
one-year period is a reasonable and sufficient time for Borrower to investigate
and act upon any such claim or cause of action. The one-year period provided
herein shall not be waived, tolled, or extended except by the written consent of
Silicon in its sole discretion. This provision shall survive any termination of
this Loan Agreement or any other Loan Document.
9.16 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used
in this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. This Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed strictly
against Silicon or Borrower under any rule of construction or otherwise.
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
9.17 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts
and transactions hereunder and all rights and obligations of Silicon and
Borrower shall be governed by the laws of the State of California. As a material
part of the consideration to Silicon to enter into this Agreement, Borrower (i)
agrees that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Santa Xxxxx County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.18 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND SILICON EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
9.19 SPECIAL PROVISIONS REGARDING INTEREST. Silicon, Borrower, Secured
Guarantors and the other parties to the Loan Documents intend to contract in
strict compliance with applicable usury law from time to time in effect. In
furtherance thereof such persons stipulate and agree that none of the terms and
provisions contained in the Loan Documents shall ever be construed to provide
for interest in excess of the Maximum Rate. Neither Borrower, Secured Guarantors
nor any present or future guarantors, endorsers, or other Persons hereafter
becoming liable for payment of any Obligation shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in excess of
the Maximum Rate, and the provisions of this section shall control over all
other provisions of the Loan Documents which may be in conflict or apparent
conflict herewith. Silicon expressly disavows any intention to charge or collect
excessive unearned interest or finance charges in the event the maturity of any
Obligation is accelerated. If (a) the maturity of any Obligation is accelerated
for any reason, (b) any Obligation is prepaid and as a result any amounts held
to constitute interest are determined to be in excess of the legal maximum, or
(c) Silicon or any other holder of any or all of the Obligations shall otherwise
collect moneys which are determined to constitute interest which would otherwise
increase the interest on any or all of the Obligations to an amount in excess of
that permitted to be charged by applicable law then in effect, then all such
sums determined to constitute interest in excess of such legal limit shall,
without penalty, be promptly applied to reduce the then outstanding principal of
the related Obligations or, at Silicon's or such holder's option, promptly
returned to each Borrower or the other payor thereof upon such determination. In
determining whether or not the interest paid or payable, under any specific
circumstance, exceeds the maximum amount permitted under applicable law, Silicon
and each Borrower (and any other payors thereof) shall to the greatest extent
permitted under applicable law, (i) characterize any non-principal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and
spread the total amount of interest throughout the entire contemplated term of
the instruments evidencing the Obligations in accordance with the amounts
outstanding from time to time thereunder and the maximum legal rate of interest
from time to time in effect under applicable law in order to lawfully charge the
maximum amount of interest permitted under applicable law.
9.20. NON-CONSUMER LOAN. Chapter 346 of the Texas Finance Code (which
regulates certain revolving credit loan accounts and revolving tri-party
accounts) does not apply to the Loan Documents.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
Borrower: Silicon:
PHARMCHEM, INC. SILICON VALLEY BANK
By /s/ Xxx Xxxxxxxx By /s/ Xxxxxx X. Tone
--------------------------------- ---------------------------
President or Vice President Title Portfolio Manager
By /s/ Xxxxx X. Xxxxxxxxx
---------------------------------
Secretary or Ass't Secretary
Form: -3 (3/7/02)
Version -0
SILICON VALLEY BANK
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: PHARMCHEM, INC.
ADDRESS: 0000 X. XXXXX XXXXXX
XXXXXX XXXX, XXXXX 00000
DATE: JUNE 26, 2003
This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.
1. CREDIT LIMIT
Prior to the making of any advance by Silicon with respect to the Revolving Line
of Credit or the Term Loan (or contemporaneously with the making of any such
advance), all outstanding subordinated debt of the Borrower shall be repaid or
the applicable creditor shall have entered into a subordination agreement with
respect thereto on Silicon's standard form, and all liens and security interests
in favor of Comerica Bank shall be released.
(Section 1.1a):
REVOLVING LINE OF CREDIT: An amount not to exceed the lesser of: (i) $3,500,000 at any one time outstanding (the
"Maximum Credit Limit"); or (ii) 80% (the "Advance Rate") of the amount of Borrower's Eligible
Receivables and Borrower's Unbilled Receivables (as such terms are defined in Section 8 above).
Silicon may, from time to time, modify the Advance Rate, in its good faith business judgment,
upon notice to the Borrower, based on changes in collection experience with respect to Accounts
or other issues or factors relating to the Accounts or other Collateral.
Silicon Valley Bank Schedule to Loan and Security Agreement
TERM LOAN: An amount not to exceed $1,500,000 to be funded on or before the 90th day after the date
hereof, which may be made in multiple advances of not less than $500,000 each.
LETTER OF CREDIT SUBLIMIT
(Section 1.6): $100,000
2. INTEREST.
INTEREST RATE (Section 1.2):
(Revolving Line of Credit): During the period from the date hereof until and including October 31, 2003, a rate equal to the
"Prime Rate" in effect from time to time, plus 1.0% per annum, and thereafter, BUT ONLY IF THE
MINIMUM DEBT SERVICE COVERAGE RATIO FOR THE TWO IMMEDIATELY PRECEDING FISCAL QUARTERS HAS BEEN
NOT LESS THAN 1.5 TO 1.0, a rate equal to the "Prime Rate" in effect from time to time plus 0.5%
per annum; provided that after the Term Loan is repaid in full, beginning on the day after the
end of the first fiscal quarter of the Borrower in which the Borrower's consolidated EBITDA (as
defined below under "Financial Covenants") for the two immediately preceding fiscal quarters is
greater than zero, the rate shall be reduced to a rate equal to the "Prime Rate" in effect from
time to time. Interest shall be calculated on the basis of a 360-day year for the actual number
of days elapsed. "Prime Rate" means the rate announced from time to time by Silicon as its
"prime rate;" it is a base rate upon which other rates charged by Silicon are based, and it is
not necessarily the best rate available at Silicon. The interest rate applicable to the
Obligations shall change on each date there is a change in the Prime Rate.
(Term Loan): A rate equal to the Prime Rate in effect from time to time, plus 3.0% per annum.
3. FEES (Section 1.4):
COMMITMENT FEE
(Revolving Line of Credit): $10,000 that is fully earned at closing, $2,500 of which is payable on September 30, 2003 (and
which was paid prior
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Silicon Valley Bank Schedule to Loan and Security Agreement
to closing), $2,500 of which is payable on December 31, 2003, $2,500 of which is payable on
March 31, 2004 and $2,500 of which is payable on June 30, 2004; provided that if the
Revolving Line of Credit is terminated prior to the maturity date set forth below in this
Schedule, the remaining balance of this commitment fee shall be due and payable in full on such
date.
COMMITMENT FEE
(Term Loan): $15,000 payable at closing.
UNUSED LINE FEE: 0.50% per annum multiplied by the difference between the Revolving Credit Limit and the average
daily aggregate principal balance of the Revolving Loans outstanding during each calendar month,
payable in arrears (prorated for any partial month at the beginning and at termination of this
Agreement).
COLLATERAL MONITORING
FEE: $1,000, per month, payable in arrears (prorated for any partial month at the beginning and at
termination of this Agreement).
PAYMENT FEE REVOLVING
LINE OF CREDIT: 1% of the Revolving Credit Limit, $35,000, if the Revolving Line of Credit is terminated
prior to the maturity date set forth below in this schedule.
PREPAYMENT FEE FOR
TERM LOAN: None.
4. MATURITY DATE
(Section 6.1):
REVOLVING LOANS: Three (3) years from the date of this Agreement.
TERM LOAN: Three years from the date of funding the Term Loan with principal installments of $41,667.00
payable on the last day of each month.
5. FINANCIAL COVENANTS
(Section 5.1): Borrower shall comply with each of the following covenants. Compliance shall be determined as of
the end of each month, except as otherwise specifically provided below:
Debt Service Coverage Ratio. Borrower shall maintain a Debt Service Coverage Ratio at all times
prior to the repayment in full of the Term
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Silicon Valley Bank Schedule to Loan and Security Agreement
Loan of not less than 1.5 to 1.0 calculated as of the end of each fiscal quarter of the Borrower
for the two immediately preceding fiscal quarters then ended; provided that for the fiscal
quarter ending June 30, 2003, Borrower shall maintain a Debt Service Coverage Ratio of not less
than 1.25 to 1.0 calculated as of such date for such fiscal quarter only.
Liquidity Ratio. Borrower shall maintain a Liquidity Ratio at all times prior to the repayment
in full of the Term Loan of not less than 1.25 to 1.0, calculated as of the end of each calendar
month.
Minimum Tangible Net Worth Borrower shall maintain a Tangible Net Worth as of the end of each
month of not less than the amount set forth below opposite such amount:
MONTH END AMOUNT
5/03 $7,000,000
6/03 7,400,000
7/03 7,500,000
8/03 7,500,000
9/03 7,500,000
10/03 7,800,000
11/03 7,800,000
12/03 7,800,000
The minimum Tangible Net Worth amounts for each calendar year, beginning with 2004, shall be
established by Silicon, in its sole and absolute discretion, based upon Borrower's annual
operating budget and projections for such year delivered to Silicon pursuant to subsection 8 of
Section 6 of this Schedule. Silicon shall notify Borrower in writing of such amounts once they
are determined.
DEFINITIONS. For purposes of the foregoing financial covenants, the following term shall have the following
meaning:
"Cash Equivalents" means (i) securities issued or directly and fully guaranteed or insured by
the United States Government or any agency or instrumentality thereof which mature within ninety
(90) days from the date of acquisition, and (ii) time deposits and certificates of deposit,
which mature within ninety (90) days from the date of acquisition, of Silicon or any other
domestic commercial bank having capital and surplus in excess of $200,000,000, which has, or the
holding company of which has, a commercial paper rating of at least
-4-
Silicon Valley Bank Schedule to Loan and Security Agreement
A-1 or the equivalent thereof by Standard & Poors Corporation or P-1 or the equivalent thereof
by Xxxxx'x Investors Service, Inc.
"Cash Flow" of any Person shall mean, for any applicable period of determination, (a) the sum of
(i) the Net Income (or loss) of such Person for such period (after deduction for income taxes
and other taxes of such Person determined by reference to income or profits of such Person),
plus (ii), to the extent deducted in the computation of such Net Income, the amount of
depreciation and amortization expense for such period.
"Current Maturities of Long Term Indebtedness" shall mean, in respect of a Person and as of any
applicable date of determination thereof, that portion of Long Term Indebtedness that should be
classified as current in accordance with GAAP.
"Debt Service Coverage Ratio" shall mean, in respect of the Borrower and for any period of
determination, the ratio of (a) Cash Flow of the Borrower and its Subsidiaries for such period,
to (b) the sum of all principal payments made by Borrower and its Subsidiaries on all
indebtedness, including but not limited to the Term Loan, during such period.
"EBITDA" shall mean, with respect to any Person, and as to any applicable period of
determination, the Net Income of such Person for such period before deduction for interest
expense (determined in accordance with GAAP), income taxes (and other taxes of such Person
determined by reference to the income or profits of such Person) and the amount of depreciation
and amortization expense of such Person.
"Liquidity Ratio" shall mean, as of any date (a) the sum of the cash and Cash Equivalents of the
Borrower and its Subsidiaries plus the amount then available to be drawn under the Revolving
Line of Credit, to (b) the sum of Current Maturities of Long term Debt plus the outstanding
principal amount of the Revolving Loans outstanding under the Revolving Line of Credit.
"Long Term Indebtedness" shall mean, in respect of a Person and as of any applicable date of
determination thereof, all indebtedness (other than the aggregate outstanding principal balance
of all Revolving Loans) which should be classified as "funded indebtedness" or "long term
indebtedness" on a balance sheet of such Person as of such date in accordance with GAAP.
"Net Income" shall mean the net income (or loss) of a Person for any applicable period of
determination, determined in accordance with GAAP, but excluding, in any event:
-5-
Silicon Valley Bank Schedule to Loan and Security Agreement
(A) any gains or losses on the sale or other disposition, not in the ordinary course of
business, of investments or fixed or capital assets, and any taxes on the excluded gains and any
tax deductions or credits on account of any excluded losses; and
(B) in the case of the Borrower and its Subsidiaries, net earnings of any Person in
which Borrower has an ownership interest, unless such net earnings shall have actually been
received by Borrower in the form of cash distributions.
"Tangible Net Worth" shall mean the excess of total assets over total liabilities, determined in
accordance with GAAP, with the following adjustments:
(A) there shall be excluded from assets: (i) notes, accounts receivable and other
obligations owing to Borrower from its officers or other Affiliates, and (ii) all assets which
would be classified as intangible assets under GAAP, including without limitation goodwill,
licenses, patents, trademarks, trade names, copyrights, organizational costs, licenses and
franchises.
(B) there shall be excluded from liabilities: all indebtedness which is subordinated to
the Obligations under a subordination agreement in form specified by Silicon or by language in
the instrument evidencing the indebtedness which Silicon agrees in writing is acceptable to
Silicon in its good faith business judgment.
6. REPORTING.
Section 5.3):
Borrower shall provide Silicon with the following:
1. Weekly transaction reports and schedules of collections, on Silicon's standard form.
2. Weekly reports on the balance of unbilled receivables.
3. Monthly accounts receivable agings, aged by invoice date, within twenty days after the
end of each month.
4. Monthly accounts payable agings, aged by invoice date, and outstanding or held check
registers, if any, within twenty days after the end of each month.
-6-
Silicon Valley Bank Schedule to Loan and Security Agreement
5. Monthly reconciliations of accounts receivable agings (aged by invoice date),
transaction reports, and general ledger, within twenty days after the end of
each month.
6. Monthly unaudited financial statements, as soon as available, and in any event within
thirty days after the end of each month.
7. Monthly Compliance Certificates, within thirty days after the end of each month, in
such form as Silicon shall reasonably specify, signed by the Chief Financial Officer of
Borrower, certifying that as of the end of such month Borrower was in full compliance
with all of the terms and conditions of this Agreement, and setting forth calculations
showing compliance with the financial covenants set forth in this Agreement and such
other information as Silicon shall reasonably request, including, without limitation, a
statement that at the end of such month there were no held checks.
8. Annual operating budgets (including income statements, balance sheets and cash flow
statements, by month) for the upcoming fiscal year of Borrower within thirty days prior
to the end of each fiscal year of Borrower.
9. Annual financial statements, as soon as available, and in any event within 90 days
following the end of Borrower's fiscal year, certified by, and with an unqualified
opinion of, independent certified public accountants acceptable to Silicon.
10. Copies of all filings with the Securities Exchange Commission including, but not
limited to, filings on Form 10K and Form 10Q, when each filing is made.
7. BORROWER INFORMATION:
Borrower represents and warrants that the information set forth in the Representations and
Warranties of the Borrower dated April 8, 0000,
-0-
Xxxxxxx Xxxxxx Xxxx Schedule to Loan and Security Agreement
previously submitted to Silicon (the "Representations") is true and correct as of the date
hereof.
8. ADDITIONAL PROVISIONS
(1) BANKING RELATIONSHIP. Borrower shall at all times maintain its primary banking
relationship with Silicon. Without limiting the generality of the foregoing, Borrower
shall, at all times, maintain a majority of its total cash and investments on deposit
with Silicon. As to any Deposit Accounts and investment accounts maintained with
another institution, Borrower shall cause such institution, within 30 days after the
date of this Agreement, to enter into a control agreement in form acceptable to
Silicon in its good faith business judgment in order to perfect Silicon's
first-priority security interest in said Deposit Accounts and investment accounts.
(2) SUBORDINATION OF INSIDE DEBT. All present and future indebtedness of Borrower to its
officers, directors and shareholders ("Inside Debt") shall, at all times, be
subordinated to the Obligations pursuant to a subordination agreement on Silicon's
standard form. Borrower represents and warrants that there is no Inside Debt
presently outstanding, except for the Unsecured Subordinated Notes payable to the
Xxxxx Family Limited Partnership, Xxxxxxx X. Xxxxx/Micro Cap Partners, LP in the
amounts of $375,000, $375,000 and $750,000, respectively, which may be repaid prior
to or contemporaneously with the making of the first advance by Silicon. Prior to
incurring any Inside Debt in the future, Borrower shall cause the person to whom such
Inside Debt will be owed to execute and deliver to Silicon a subordination agreement
on Silicon's standard form.
-8-
Borrower: Silicon:
PHARMCHEM, INC. SILICON VALLEY BANK
By /s/ Xxx Xxxxxxxx By /s/ Xxxxxx X. Tone
------------------------------ ----------------------------
President or Vice President Title Portfolio Manager
By /s/ Xxxxx X. Xxxxxxxxx
------------------------------
Secretary or Ass't Secretary
Form: -3 (3/7/02)
Version -0
