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EXHIBIT 10.11
SILICON VALLEY BANK
AMENDMENT TO LOAN AGREEMENT
BORROWER: I-FLOW CORPORATION
ADDRESS: 00000 XXXXXXX XXXXX
XXXX XXXXXX, XXXXXXXXXX 00000
DATED: MARCH 2, 1998
THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON VALLEY
BANK ("Silicon") and the borrower named above (the "Borrower"). The Parties
agree to amend the Loan and Security Agreement between Silicon and I-Flow
Corporation, dated September 28, 1995, as amended by that Amendment to Loan
Agreement dated July __, 1996 (pursuant to which I-Flow Acquisition Subsidiary
was acquired and made a Borrower under the Loan Agreement), as amended by that
Amendment to Loan Agreement dated April 4, 1997 and as amended by that Amendment
to Loan Agreement dated August 19, 1997 (as so amended and as otherwise amended
from time to time, the "Loan Agreement"), as follows, effective as of the date
hereof. (Capitalized terms used but not defined in this Amendment, shall have
the meanings set forth in the Loan Agreement.)
I-Flow Acquisition Subsidiary was previously an additional Borrower
under the Loan Agreement. I-Flow Acquisition Subsidiary changed its name to
Block Medical, Inc. and recently merged with and into I-Flow Corporation, with
I-Flow Corporation as the surviving entity. Therefore I-Flow Corporation is the
sole Borrower under the Loan Agreement.
1. MODIFIED CREDIT LIMIT. Section 1.1 (Credit Limit) of the Schedule to
Loan Agreement is hereby amended to read as follows:
"(I) Revolving Loans. An amount (the "Revolving
Loans") not to exceed the lesser of: (i)
$4,000,000 at any one time outstanding; or (ii)
75% (the "Advance Percentage") of the Net
Amount of Borrower's accounts, which Silicon in
its discretion deems eligible for borrowing,
provided that with respect to Approved Foreign
Accounts the Advance Percentage is "35%". "Net
Amount" of an account means the gross amount of
the account, minus all applicable sales, use,
excise and other similar taxes and minus all
discounts, credits and allowances of any nature
granted or claimed.
Without limiting the fact that the
determination of which accounts are eligible
for borrowing is a matter of Silicon's
discretion, the following will not be deemed
eligible for borrowing: accounts outstanding
for more than 90 days from the invoice date,
accounts subject to any contingencies, accounts
owing from the United States or any department,
agency or instrumentality of the United States
or any state, city or municipality, accounts
owing from an account debtor
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outside the United States (unless pre-approved
by Silicon in its discretion, or backed by a
letter of credit satisfactory to Silicon, or
FCIA insured satisfactory to Silicon*),
accounts owing from one account debtor to the
extent they exceed 25% of the total eligible
accounts outstanding, accounts owing from an
affiliate of Borrower, and accounts owing from
an account debtor to whom Borrower is or may be
liable for goods purchased from such account
debtor or otherwise. In addition, if more than
50% of the accounts owing from an account
debtor are outstanding more than 90 days from
the invoice date or are otherwise not eligible
accounts, then all accounts owing from that
account debtor will be deemed ineligible for
borrowing.
* , WITH FRESENIUS MEDICAL CARE A.G. AND
INPHARDIAL ZAMBON BIOMEDICA (AND THE ACCOUNTS
RELATING TO SUCH ACCOUNT DEBTORS ARE REFERRED
TO HEREIN AS THE "APPROVED FOREIGN ACCOUNTS")
AS SUCH PREAPPROVED ACCOUNT DEBTORS PROVIDED
THAT THE RELATED ACCOUNTS ARE OTHERWISE DEEMED
ELIGIBLE HEREUNDER
PLUS
II. Term Loan A.
The amount of $4,000,000 (such Loan is "Term
Loan A" and the loan facility relating thereto
is the "Term Loan A Facility") which was
utilized by the Borrower for the purpose of
financing a portion of the purchase of the
assets of Block Medical, Inc. Such acquisition
and related transactions contemplated thereby
are collectively referred to as the
"Acquisition".
Once amounts under the Term Loan A Facility are
repaid, such amounts may not be reborrowed.
Borrower hereby further promises to pay
interest to Silicon on the unpaid principal
balance of Term Loan A at the interest rate as
set forth below. Such interest shall be paid
each month in accordance with the terms of the
Loan Agreement.
Borrower shall repay to Silicon the outstanding
aggregate principal amount of Term Loan A in 48
consecutive equal monthly installments on the
first day of each month, commencing August 1,
1996. The first 47 installments shall be in the
amount of $83,333.34, and the final installment
shall be in remaining principal amount of the
Term Loan.
PLUS
III. Term Loan B.
The amount of $2,500,000 (such Loan is "Term
Loan B" and the loan facility relating thereto
is the "Term Loan B Facility")
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to be utilized by the Borrower in a single
utilization on or about March ___, 1998.
Once amounts under the Term Loan B Facility are
repaid, such amounts may not be reborrowed.
Borrower hereby further promises to pay
interest to Silicon on the unpaid principal
balance of Term Loan B at the interest rate as
set forth below. Such interest shall be paid
each month in accordance with the terms of the
Loan Agreement. Borrower shall repay to Silicon
the outstanding aggregate principal amount of
Term Loan B in 54 consecutive equal monthly
installments on the first day of each month,
commencing October 1, 1998. The first 53
installments shall be in the amount of
$46,296.30, and the final installment shall be
in remaining principal amount of the Term Loan
B.
LETTER OF CREDIT SUBLIMIT Silicon, in its reasonable discretion, will
from time to time during the term of this
Agreement issue letters of credit for the
account of the Borrower ("Letters of Credit"),
in an aggregate amount at any one time
outstanding not to exceed $500,000, upon the
request of the Borrower, provided that, on the
date the Letters of Credit are to be issued,
Borrower has available to it Revolving Loans in
an amount equal to or greater than the face
amount of the Letters of Credit to be issued.
Prior to the issuance of any Letters of Credit,
Borrower shall execute and deliver to Silicon
Applications for Letters of Credit and such
other documentation as Silicon shall specify
(the "Letter of Credit Documentation"). Fees
for the Letters of Credit shall be as provided
in the Letter of Credit Documentation. Letters
of Credit may have a maturity date up to twelve
months beyond the Maturity Date in effect from
time to time, provided that 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 the face amount of all such
letters of credit plus all interest, fees and
costs due or to become due in connection
therewith, to secure all of the Obligations
relating to said letters of credit, pursuant to
Silicon's then standard form cash pledge
agreement.
The Credit Limit set forth above regarding
Revolving Loans and the Revolving Loans
available under this Agreement at any time
shall be reduced by the face amount of Letters
of Credit from time to time outstanding.
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2. MODIFIED INTEREST RATE. Section 1.2 of the Schedule to Loan Agreement
regarding the Interest Rate is hereby amended to read as follows:
INTEREST RATE (Section 1.2): Revolving Loans: With respect to Revolving
Loans and all related Obligations the interest
rate shall be a rate equal to the "Prime Rate"
in effect from time to time, plus .75% per
annum. 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:
With respect to Term Loan A and all related
Obligations, the interest rate shall be a rate
equal to the "Prime Rate" in effect from time
to time, plus 1.00% per annum. 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 B:
With respect to Term Loan B and all related
Obligations, the interest rate shall be a rate
equal to the "Prime Rate" in effect from time
to time, plus 1.00% per annum. 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."
3. MODIFIED MATURITY DATE. Section 5.1 of the Schedule to Loan Agreement
regarding the Maturity Date is hereby amended to read as follows:
"MATURITY DATE
(Section 5.1): FEBRUARY 15, 1999, provided that the Maturity
Date with respect to each of Term Loan A and
Term Loan B shall be as is set forth in Section
1.1 above."
4. MODIFIED FEE. Section 1.3 of the Schedule to Loan Agreement regarding
the Loan Origination Fee is hereby amended to read as follows:
"LOAN ORIGINATION FEE
(Section 1.3): $12,500 to be paid in full concurrently
herewith; and $20,000 to be paid on an annual
basis in connection herewith, which latter fee
shall be payable by the Borrower in
installments of
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$5,000 on each of March 31, 1998, June 30,
1998, September 30, 1998, and December 31,
1998. Failure to pay such amount on each of
such dates shall constitute an Event of Default
hereunder. Such fees shall be in addition to
interest and to all other amounts payable
hereunder and shall not be refundable."
5. FINANCIAL COVENANTS. Section 4.1 of the Schedule to Loan Agreement
regarding the Financial Covenants is hereby amended to read as follows:
"FINANCIAL COVENANTS
(Section 4.1): Borrower, on a consolidated basis, shall comply
with all of the following covenants. Compliance
shall be determined as of the end of each
quarter, except as otherwise specifically
provided below:
QUICK ASSET RATIO: Borrower shall maintain a ratio of "Quick
Assets" to current liabilities of not less than
1.00 to 1.
STATED NET WORTH: Borrower shall maintain a stated net worth of
not less than $9,000,000.
DEBT TO STATED
NET WORTH RATIO: Borrower shall maintain a ratio of total
liabilities to stated net worth of not more
than 1.00 to 1.
PROFITABILITY: Borrower shall not incur a loss (after taxes)
for any fiscal quarter, except that Borrower
may incur a loss (after taxes) for a single
fiscal quarter during the term hereof not to
exceed $100,000. Notwithstanding the foregoing,
Borrower may incur a loss (after taxes) for the
quarter ending December 31, 1997 not to exceed
$1,600,000.
DEBT SERVICE RATIO: Borrower shall maintain a Debt Service Ratio
(as referred to below) of not less than 1.50 to
1 as of the end of each fiscal quarter.
DEFINITIONS: "Current assets," and "current liabilities"
shall have the meanings ascribed to them in
accordance with generally accepted accounting
principles, consistently applied.
"Quick Assets" means cash on hand or on deposit
in banks, readily marketable securities issued
by the United States, readily marketable
commercial paper rated "A-1" by Standard &
Poor's Corporation (or a similar rating by a
similar rating organization), certificates of
deposit and banker's acceptances, and accounts
receivable (net of allowance for doubtful
accounts).
"Stated net worth" means the excess of total
assets over total liabilities (including but
not limited to indebtedness which is
subordinated to the indebtedness to Silicon),
determined in
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accordance with generally accepted accounting
principles, consistently applied..
"Debt Service Ratio" means the year-to-date and
annualized ratio of (a) earnings before
interest, taxes, depreciation and other
non-cash amortization expenses and other
non-cash expenses of the Borrower, determined
in accordance with generally accepted
accounting principles, consistently applied,
(other than for expenses of Borrower associated
solely with the Acquisition) to (b) Borrower's
obligations relating to payment of interest and
current maturities of principal on Borrower's
outstanding indebtedness, determined in
accordance with generally accepted accounting
principles, consistently applied. For purposes
hereof, the annualized Debt Service Ratio for
the quarter ending March 31, 1998 shall be such
quarter's ratio multiplied by four; the
annualized Debt Service Ratio for the quarter
ending June 30, 1998 shall be the sum of such
quarter's ratio plus the ratio for the prior
quarter, which sum is then multiplied by two;
the annualized Debt Service Ratio for the
quarter ending September 30, 1998 shall be the
sum of such quarter's ratio plus the ratio for
each of the two preceding quarters, which sum
is then multiplied by the fraction of 4/3.
SUBORDINATED DEBT: "Liabilities" for purposes of the foregoing
covenants do not include indebtedness which is
subordinated to the indebtedness to Silicon
under a subordination agreement in form
specified by Silicon or by language in the
instrument evidencing the indebtedness which is
acceptable to Silicon."
6. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct.
7. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and the Borrower, and
the other written documents and agreements between Silicon and the Borrower set
forth in full all of the representations and agreements of the parties with
respect to the subject matter hereof and supersede all prior discussions,
representations, agreements and understandings between the
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parties with respect to the subject hereof. Except as herein expressly amended,
all of the terms and provisions of the Loan Agreement, and all other documents
and agreements between Silicon and the Borrower shall continue in full force and
effect and the same are hereby ratified and confirmed.
BORROWER:
I-FLOW CORPORATION
BY_______________________________
TITLE:
BY_______________________________
TITLE:
SILICON:
SILICON VALLEY BANK
BY_______________________________
TITLE______________________________
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