LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") dated as of the
Effective Date between SILICON VALLEY BANK, a California corporation ("Bank"),
and SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC., a Delaware corporation,
SPECIALIZED HEALTH PRODUCTS, INC., a Utah corporation, and SAFETY SYRINGE
CORPORATION, a Utah corporation (collectively, "Borrower"), provides the terms
on which Bank shall lend to Borrower and Borrower shall repay Bank. The parties
agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed
following GAAP. Calculations and determinations must be made following GAAP.
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in Section 13. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meaning provided by the Code to the
extent such terms are defined therein.
2 LOAN AND TERMS OF PAYMENT
2.1 Promise to Pay. Borrower hereby unconditionally promises to pay
Bank the outstanding principal amount of all Credit Extensions and accrued and
unpaid interest thereon as and when due in accordance with this Agreement.
2.1.1 Revolving Advances.
(a) Availability. Subject to the terms and conditions of this
Agreement, Bank shall make Advances not exceeding the Availability Amount.
Amounts borrowed under the Revolving Line may be repaid and, prior to the
Revolving Line Maturity Date, reborrowed, subject to the applicable terms and
conditions precedent herein.
(b) Termination; Repayment. The Revolving Line terminates on
the Revolving Line Maturity Date, when the principal amount of all Advances, the
unpaid interest thereon, and all other Obligations relating to the Revolving
Line shall be immediately due and payable. The Revolving Line may be terminated
at any time without penalty by Borrower, so long as all Advances, the unpaid
interest thereon, and all other Obligations relating to the Revolving Line have
been paid in full.
2.2 Overadvances. If, at any time, the Credit Extensions under Section
2.1.1 exceed the lesser of either (a) the Revolving Line or (b) the Borrowing
Base, Borrower shall immediately pay to Bank in cash such excess.
2.3 Payment of Interest on the Credit Extensions.
(a) Interest Rate. Subject to Section 2.3(b), the principal
amount outstanding under the Revolving Line shall accrue interest at a floating
per annum rate equal to 1.00 percentage points above the Prime Rate, which
interest shall be payable monthly in accordance with Section 2.3(f) below.
(b) Default Rate. Immediately upon the occurrence and during
the continuance of an Event of Default, Obligations shall bear interest at a
rate per annum which is five percentage points above the rate effective
immediately before the Event of Default (the "Default Rate"). Payment or
acceptance of the increased interest rate provided in this Section 2.3(b) is not
a permitted alternative to timely payment and shall not constitute a waiver of
any Event of Default or otherwise prejudice or limit any rights or remedies of
Bank.
(c) Adjustment to Interest Rate. Changes to the interest rate
of any Credit Extension based on changes to the Prime Rate shall be effective on
the effective date of any change to the Prime Rate and to the extent of any such
change.
(d) 360-Day Year. Interest shall be computed on the basis of a
360-day year for the actual number of days elapsed.
(e) Debit of Accounts. Bank may debit any of Borrower's
deposit accounts, including the Designated Deposit Account, for principal and
interest payments or any other amounts Borrower owes Bank when due. These debits
shall not constitute a set-off.
(f) Payments. Unless otherwise provided, interest is payable
monthly on the tenth calendar day of each month. Payments of principal and/or
interest received after 12:00 p.m. Pacific time are considered received at the
opening of business on the next Business Day. When a payment is due on a day
that is not a Business Day, the payment is due the next Business Day and
additional fees or interest, as applicable, shall continue to accrue.
2.4 Fees. Borrower shall pay to Bank:
(a) Commitment Fee. A fully earned, non-refundable commitment
fee of $5,625.00, on the Effective Date; and
(b) Unused Revolving Line Facility Fee. A fee (the "Unused
Revolving Line Facility Fee"), payable quarterly, in arrears, on a calendar year
basis, in an amount equal to three-eighths of one percent (0.3 75%) per annum of
the average unused portion of the Revolving Line, as determined by Bank.
Borrower shall not be entitled to any credit, rebate or repayment of any Unused
Revolving Line Facility Fee previously earned by Bank pursuant to this Section
notwithstanding any termination of the Agreement or the suspension or
termination of Bank's obligation to make loans and advances hereunder; and
(c) Late Payment Fee. A late payment fee equal to five percent
(5.00%) of any payment not paid when due; and
(d) Bank Expenses. All Bank Expenses (including reasonable
attorneys' fees and expenses, plus expenses, for documentation and negotiation
of this Agreement) incurred through and after the Effective Date, when due.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Advance. Bank's obligation to make
the initial Advance is subject to the condition precedent that Bank shall have
received, in form and substance satisfactory to Bank, such documents, and
completion of such other matters, as Bank may reasonably deem necessary or
appropriate, including, without limitation:
(a) Borrower shall have delivered duly executed original
signatures to the Loan Documents to which it is a party;
(b) Borrower shall have delivered duly executed original
signatures to the Control Agreements;
(c) Borrower shall have delivered its Operating Documents and
a good standing certificate of Borrower certified by the Secretary of State of
the States of Delaware and Utah as of a date no earlier than thirty (30) days
prior to the Effective Date;
(d) Borrower shall have delivered duly executed original
signatures to the completed Borrowing Resolutions for Borrower;
(e) Borrower shall have delivered the Subordination Agreement
duly executed by Xxxxx Partners III, LP, Xxxxx Partners International III, LP
and Xxxxx Employee Fund III, LP in favor of Bank;
(f) Bank shall have received certified copies, dated as of a
recent date, of financing statement searches, as Bank shall request, accompanied
by written evidence (including any UCC termination statements) that the Liens
indicated in any such financing statements either constitute Permitted Liens or
have been or, in connection with the initial Advance, will be terminated or
released;
(g) Borrower shall have delivered the Perfection
Certificate(s) executed by Borrower;
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(h) Borrower shall have delivered evidence satisfactory to
Bank that the insurance policies required by Section 6.5 hereof are in full
force and effect, together with appropriate evidence showing loss payable and/or
additional insured clauses or endorsements in favor of Bank; and
(i) Borrower shall have paid the fees and Bank Expenses then
due as specified in Section 2.4 hereof.
3.2 Conditions Precedent to all Credit Extensions. Bank's obligations
to make each Credit Extension, including the initial Credit Extension, is
subject to the following:
(a) except as otherwise provided in Section 3.4(a), timely
receipt of an executed Payment/Advance Form;
(b) the representations and warranties in Section 5 shall be
true in all material respects on the date of the Payment/Advance Form and on the
Funding Date of each Credit Extension; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, and no Default or Event of Default shall have occurred and be
continuing or result from the Credit Extension. Each Credit Extension is
Borrower's representation and warranty on that date that the representations and
warranties in Section 5 remain true in all material respects; provided, however,
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date;
(c) Borrower shall have delivered a landlord's consent
executed within thirty (30) days after the Effective Date in favor of Bank; and
(d) in Bank's sole discretion, there has not been a Material
Adverse Change.
3.3 Covenant to Deliver.
Borrower agrees to deliver to Bank each item required to be delivered
to Bank under this Agreement as a condition to any Credit Extension. Borrower
expressly agrees that the extension of a Credit Extension prior to the receipt
by Bank of any such item shall not constitute a waiver by Bank of Borrower's
obligation to deliver such item, and any such extension in the absence of a
required item shall be in Bank's sole discretion.
3.4 Procedures for Borrowing. Subject to the prior satisfaction of all
other applicable conditions to the making of an Advance set forth in this
Agreement, to obtain an Advance, Borrower shall notify Bank (which notice shall
be irrevocable) by electronic mail, facsimile, or telephone by 12:00 p.m.
Pacific time on the Funding Date of the Advance. Together with any such
electronic or facsimile notification, Borrower shall deliver to Bank by
electronic mail or facsimile a completed Payment/Advance Form executed by a
Responsible Officer or his or her designee. Bank may rely on any telephone
notice given by a person whom Bank believes is a Responsible Officer or
designee. Bank shall credit Advances to the Designated Deposit Account. Bank may
make Advances under this Agreement based on instructions from a Responsible
Officer or his or her designee or without instructions if the Advances are
necessary to meet Obligations which have become due.
4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure
the payment and performance in full of all of the Obligations, a continuing
security interest in, and pledges to Bank, the Collateral, wherever located,
whether now owned or hereafter acquired or arising, and all proceeds and
products thereof. Borrower represents, warrants, and covenants that the security
interest granted herein is and shall at all times continue to be a first
priority perfected security interest in the Collateral (subject only to
Permitted Liens that may have superior priority to Bank's Lien under this
Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall
promptly notify Bank in a writing signed by Borrower of the general details
thereof and grant to Bank in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance reasonably satisfactory to Bank.
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If this Agreement is terminated, Bank's Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations) are
repaid in full in cash. Upon payment in full in cash of the Obligations and at
such time as Bank's obligation to make Credit Extensions has terminated, Bank
shall, at Borrower's sole cost and expense, release its Liens in the Collateral
and all rights therein shall revert to Borrower.
4.2 Authorization to File Financing Statements. Borrower hereby
authorizes Bank to file financing statements, without notice to Borrower, with
all appropriate jurisdictions to perfect or protect Bank's interest or rights
hereunder, including a notice that any disposition of the Collateral, by either
Borrower or any other Person, shall be deemed to violate the rights of Bank
under the Code.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Authorization. Borrower and each of its
Subsidiaries are duly existing and in good standing in their respective
jurisdictions of formation and are qualified and licensed to do business and are
in good standing in any jurisdiction in which the conduct of their business or
their ownership of property requires that they be qualified except where the
failure to do so could not reasonably be expected to have a material adverse
effect on Borrower's business. In connection with this Agreement, Borrower has
delivered to Bank completed certificates substantially in the form attached
hereto as Exhibit F signed by each Borrower, entitled "Perfection Certificate"
Borrower represents and warrants to Bank that (a) Borrower's exact legal name is
that indicated on the Perfection Certificate and on the signature page hereof;
(b) Borrower is an organization of the type and is organized in the jurisdiction
set forth in the Perfection Certificate; (c) the Perfection Certificate
accurately sets forth Borrower's organizational identification number or
accurately states that Borrower has none; (d) the Perfection Certificate
accurately sets forth Borrower's place of business, or, if more than one, its
chief executive office as well as Borrower's mailing address (if different than
its chief executive office); (e) Borrower (and each of its predecessors) has
not, in the past five (5) years, changed its state of formation, organizational
structure or type, or any organizational number assigned by its jurisdiction;
and (f) all other information set forth on the Perfection Certificate pertaining
to Borrower and each of its Subsidiaries is accurate and complete. If Borrower
is not now a Registered Organization but later becomes one, Borrower shall
promptly notify Bank of such occurrence and provide Bank with Borrower's
organizational identification number.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's organizational documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which it is
a party or by which it is bound in which the default could have a material
adverse effect on Borrower's business.
5.2 Collateral. Borrower has good title to, has rights in, and the
power to transfer each item of the Collateral upon which it purports to xxxxx x
Xxxx hereunder, free and clear of any and all Liens except Permitted Liens.
Borrower has no deposit accounts other than the deposit accounts with Bank, the
deposit accounts, if any, described in the Perfection Certificate delivered to
Bank in connection herewith, or of which Borrower has given Bank notice and
taken such actions as are necessary to give Bank a perfected security interest
therein. The Accounts are bona fide, existing obligations of the Account
Debtors.
The Collateral is not in the possession of any third party bailee (such
as a warehouse) except as otherwise provided in the Perfection Certificate. None
of the components of the Collateral shall be maintained at locations other than
as provided in the Perfection Certificate or as Borrower has given Bank notice
pursuant to Section 7.2. In the event that Borrower, after the date hereof,
intends to store or otherwise deliver any portion of the Collateral to a bailee,
then Borrower will first receive the written consent of Bank and such bailee
must execute and deliver a bailee agreement in form and substance satisfactory
to Bank in its sole discretion.
All Inventory is in all material respects of good and marketable
quality, free from material defects. Except for certain intellectual property
assigned to Tyco Healthcare Group L.P., Borrower is the sole owner of its
intellectual property, except for non-exclusive licenses granted to its
customers in the ordinary course of business. Each patent is valid and
enforceable to the best of Borrower's knowledge, and no part of the intellectual
property has been judged invalid or unenforceable, in whole or in part, and to
the best of Borrower's knowledge, no claim has been made that any part of the
intellectual property violates the rights of any third party except to the
extent such claim could not reasonably be expected to have a material adverse
effect on Borrower's business. Except as noted on the Perfection Certificate,
Borrower is not a party to, nor is bound by, any license or other agreement with
respect
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to which Borrower is the licensee that prohibits or otherwise restricts Borrower
from granting a security interest in Borrower's interest in such license or
agreement or any other property. Borrower shall provide written notice to Bank
within ten (10) days of entering or becoming bound by any such license or
agreement which is reasonably likely to have an adverse material impact on
Borrower's business or financial condition (other than over-the-counter software
that is commercially available to the public). Borrower shall take such steps as
Bank requests to obtain the consent of, or waiver by, any person whose consent
or waiver is necessary for all such licenses or contract rights to be deemed
"Collateral" and for Bank to have a security interest in it that might otherwise
be restricted or prohibited by law or by the terms of any such license or
agreement (such consent or authorization may include a licensor's agreement to a
contingent assignment of the license to Bank if Bank determines that is
necessary in its good faith judgment), whether now existing or entered into in
the future.
5.3 Accounts Receivable. For any Eligible Domestic Account and Eligible
Foreign Account in any Borrowing Base Certificate, all statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing such Eligible Domestic Accounts and Eligible Foreign Accounts are and
shall be true and correct and all such invoices, instruments and other
documents, and all of Borrower's Books are genuine and in all respects what they
purport to be. All sales and other transactions underlying or giving rise to
each Eligible Domestic Account and Eligible Foreign Account shall comply in all
material respects with all applicable laws and governmental rules and
regulations. Borrower has no knowledge of any actual or imminent Insolvency
Proceeding of any Account Debtor whose accounts are an Eligible Domestic Account
and Eligible Foreign Account in any Borrowing Base Certificate. To the best of
Borrower's knowledge, all signatures and endorsements on all documents,
instruments, and agreements relating to all Eligible Domestic Accounts and
Eligible Foreign Accounts are genuine, and all such documents, instruments and
agreements are legally enforceable in accordance with their terms.
5.4 Litigation. There are no actions or proceedings pending or, to the
knowledge of the Responsible Officers, threatened in writing by or against
Borrower or any of its Subsidiaries involving more than $100,000.
5.5 No Material Deviation in Financial Statements. All consolidated
financial statements for Borrower and any of its Subsidiaries delivered to Bank
fairly present in all material respects Borrower's consolidated financial
condition and Borrower's consolidated results of operations. There has not been
any material deterioration in Borrower's consolidated financial condition since
the date of the most recent financial statements submitted to Bank.
5.6 Solvency. The fair salable value of Borrower's assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities;
Borrower is not left with unreasonably small capital after the transactions in
this Agreement; and Borrower is able to pay its debts (including trade debts) as
they mature.
5.7 Regulatory Compliance. Borrower is not an "investment company" or a
company "controlled" by an "investment company" under the Investment Company
Act. Borrower is not engaged as one of its important activities in extending
credit for margin stock (under Regulations T and U of the Federal Reserve Board
of Governors). Borrower has complied in all material respects with the Federal
Fair Labor Standards Act. Borrower has not violated any laws, ordinances or
rules, the violation of which could reasonably be expected to have a material
adverse effect on its business. None of Borrower's or any of its Subsidiaries'
properties or assets has been used by Borrower or any Subsidiary or, to the best
of Borrower's knowledge, by previous Persons, in disposing, producing, storing,
treating, or transporting any hazardous substance other than legally. Borrower
and each of its Subsidiaries have obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted.
5.8 Subsidiaries; Investments. Borrower does not own any stock,
partnership interest or other equity securities except for Permitted
Investments.
5.9 Tax Returns and Payments; Pension Contributions. Borrower has
timely filed all required tax returns and reports, and Borrower has timely paid
all foreign, federal, state and local taxes, assessments, deposits and
contributions owed by Borrower. Borrower may defer payment of any contested
taxes, provided that Borrower (a) in good faith contests its obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (b) notifies Bank in writing of the commencement of, and any material
development in, the proceedings, (c) posts bonds or takes any other steps
required to prevent the governmental authority levying such contested taxes from
obtaining a Lien upon any of the Collateral that is other than a "Permitted
Lien". Borrower is unaware of any claims or adjustments proposed for any of
Borrower's prior tax years which could result in
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additional taxes becoming due and payable by Borrower. Borrower has paid all
amounts necessary to fund all present pension, profit sharing and deferred
compensation plans in accordance with their terms, and Borrower has not
withdrawn from participation in, and has not permitted partial or complete
termination of, or permitted 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.
5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit
Extensions solely as working capital and to fund its general business
requirements and not for personal, family, household or agricultural purposes.
5.11 Full Disclosure. No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank, as
of the date such representations, warranties, or other statements were made,
taken together with all such written certificates and written statements given
to Bank, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results).
6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 Government Compliance. Maintain its and all its Subsidiaries' legal
existence and good standing in their respective jurisdictions of formation and
maintain qualification in each jurisdiction in which the failure to so qualify
would reasonably be expected to have a material adverse effect on Borrower's
business or operations. Borrower shall comply, and have each Subsidiary comply,
with all laws, ordinances and regulations to which it is subject, noncompliance
with which could have a material adverse effect on Borrower's business.
6.2 Financial Statements, Reports, Certificates.
(a) Deliver to Bank: (i) as soon as available, but no later
than thirty (30) days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during the period certified by a Responsible Officer and in a form
acceptable to Bank; (ii) within five (5) days of delivery, copies of all
statements, reports and notices made available to Borrower's security holders or
to any holders of Subordinated Debt; (iii) within five (5) days of filing, all
reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission or a link thereto on Borrower's or another website on the Internet;
(iv) within five (5) days of filing all reports on Form 10-K or 10-Q with the
Securities and Exchange Commission, a company prepared consolidating balance
sheet and income statement covering Borrower's operations during the period
certified by a Responsible Officer and in a form acceptable to Bank; (v) a
prompt report of any legal actions pending or threatened against Borrower or any
of its Subsidiaries that could result in damages or costs to Borrower or any of
its Subsidiaries of One Hundred Thousand Dollars ($100,000) or more; (vi) prompt
notice of an event that materially and adversely affects the value of the
intellectual property; and (vii) budgets, sales projections, operating plans and
other financial information reasonably requested by Bank.
(b) Within twenty (20) days after the last day of each month,
deliver to Bank a duly completed Borrowing Base Certificate signed by a
Responsible Officer, with aged listings of accounts receivable and accounts
payable (by invoice date); provided however, that a Borrowing Base Certificate
will be required only if the total outstanding balance due under the Revolving
Line, including any Advance being requested by Borrower, exceeds $250,000.00,
and Borrowing Base Certificates shall be provided within twenty (20) days after
each month thereafter.
(c) Within thirty (30) days after the last day of each month,
deliver to Bank with the monthly financial statements, a duly completed
Compliance Certificate signed by a Responsible Officer setting forth
calculations showing compliance with the financial covenants set forth in this
Agreement.
(d) Allow Bank to audit Borrower's Collateral at Borrower's
expense; provided however, that the initial Collateral audit will be required
only if (i) the total outstanding balance due under the Revolving Line,
including any Advance being requested by Borrower, exceeds $500,000.00 or (ii)
Borrower fails to comply
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with any term or condition of this Agreement. Such audits shall be conducted no
more often than once every twelve (12) months unless a Default or an Event of
Default has occurred and is continuing.
6.3 Inventory; Returns. Keep all Inventory in good and marketable
condition, free from material defects. Returns and allowances between Borrower
and its Account Debtors shall follow Borrower's customary practices as they
exist at the Effective Date. Borrower must promptly notify Bank of all returns,
recoveries, disputes and claims that involve more than One Hundred Thousand
Dollars ($100,000).
6.4 Taxes; Pensions. Make, and cause each of its Subsidiaries to make,
timely payment of all foreign, federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting pursuant to the
terms of Section 5.9 hereof) and shall deliver to Bank, on demand, appropriate
certificates attesting to such payments, and pay all amounts necessary to fund
all present pension, profit sharing and deferred compensation plans in
accordance with their terms.
6.5 Insurance. Keep its business and the Collateral insured for risks
and in amounts standard for companies in Borrower's industry and location and as
Bank may reasonably request. Insurance policies shall be in a form, with
companies, and in amounts that are satisfactory to Bank. All property policies
shall have a lender's loss payable endorsement showing Bank as the lender loss
payee and waive subrogation against Bank, and all liability policies shall show,
or have endorsements showing, Bank as an additional insured. All policies (or
the loss payable and additional insured endorsements) shall provide that the
insurer must give Bank at least twenty (20) days notice before canceling,
amending, or declining to renew its policy. At Bank's request, Borrower shall
deliver certified copies of policies and evidence of all premium payments.
Proceeds payable under any policy shall, at Bank's option, be payable to Bank on
account of the Obligations. If Borrower fails to obtain insurance as required
under this Section 6.5 or to pay any amount or furnish any required proof of
payment to third persons and Bank, Bank may make all or part of such payment or
obtain such insurance policies required in this Section 6.5, and take any action
under the policies Bank deems prudent.
WARNING
Unless you provide us with evidence of the insurance coverage
as required by our contract or loan agreement, we may purchase insurance at your
expense to protect our interest. This insurance may, but need not, also protect
your interest. If the collateral becomes damaged, the coverage we purchase may
not pay any claim you make or any claim made against you. You may later cancel
this coverage by providing evidence that you have obtained property coverage
elsewhere.
You are responsible for the cost of any insurance purchased by
us. The cost of this insurance may be added to your contract or loan balance. If
the cost is added to your contract or loan balance, the interest rate on the
underlying contract or loan will apply to this added amount. The effective date
of coverage may be the date your prior coverage lapsed or the date you failed to
provide proof of coverage.
This coverage we purchased may be considerably more expensive
than insurance you can obtain on your own and may not satisfy any need for
property damage coverage or any mandatory liability insurance requirements
imposed by applicable law.
6.6 Operating Accounts.
(a) Maintain its primary depository and operating accounts and
securities accounts with Bank and Bank's affiliates.
(b) Provide Bank five (5) days prior written notice before
establishing any Collateral Account at or with any bank or financial institution
other than Bank or its Affiliates. In addition, for each Collateral Account that
Borrower at any time maintains, Borrower shall cause the applicable bank or
financial institution (other than Bank) at or with which any Collateral Account
is maintained to execute and deliver a Control Agreement or other appropriate
instrument with respect to such Collateral Account to perfect Bank's Lien in
such Collateral Account in accordance with the terms hereunder. The provisions
of the previous sentence shall not apply to deposit accounts exclusively used
for payroll, payroll taxes and other employee wage and benefit payments to or
for the benefit of Borrower's employees and identified to Bank by Borrower as
such.
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6.7 Financial Covenants.
Borrower shall maintain as of the last day of each month,
unless otherwise noted, on a consolidated basis with respect to every Borrower:
(a) Quick Ratio. A ratio of Quick Assets to Current
Liabilities of at least 1.25 to 1.0.
(b) Tangible Net Worth. A Tangible Net Worth of at least
$1,750,000.00, plus 50% of all equity or capital contributed to Borrower after
the Effective Date, including Subordinated Debt, and 50% of all positive
quarterly Net Income from and after the Effective Date.
6.8 Protection of Intellectual Property Rights. Borrower shall: (a)
protect, defend and maintain the validity and enforceability of its intellectual
property material to Borrower's business; (b) promptly advise Bank in writing of
material infringements of its intellectual property; and (c) not allow any
intellectual property material to Borrower's business to be abandoned, forfeited
or dedicated to the public without Bank's written consent.
6.9 Litigation Cooperation. From the date hereof and continuing through
the termination of this Agreement, make available to Bank, without expense to
Bank, Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Bank may deem them reasonably necessary to prosecute
or defend any third-party suit or proceeding instituted by or against Bank with
respect to any Collateral or relating to Borrower.
6.10 Further Assurances. Borrower shall execute any further instruments
and take further action as Bank reasonably requests to perfect or continue
Bank's Lien in the Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without Bank's prior written
consent:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively, "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, except for Transfers (a) of Inventory
in the ordinary course of business; (b) of worn-out or obsolete Equipment; and
(c) in connection with Permitted Liens and Permitted Investments; and (d) of
non-exclusive licenses for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business and licenses that could not
result in a legal transfer of title of the licensed property but that may be
exclusive in respects other than territory and that may be exclusive as to
territory only as to discreet geographical areas outside of the United States.
7.2 Changes in Business, Management, Control, or Business Locations.
(a) Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses currently engaged in by Borrower and such Subsidiary, as
applicable, or reasonably related thereto; (b) liquidate or dissolve; or (c) (i)
if any Key Person ceases to hold such offices with Borrower and replacements
satisfactory to Bank are not made within thirty (30) days after their departure
from Borrower or (ii) permit or suffer any Change in Control. Borrower shall
not, without at least thirty (30) days prior written notice to Bank: (1) add any
new offices or business locations, including warehouses (unless such new offices
or business locations contain less than Ten Thousand Dollars ($10,000) in
Borrower's assets or property), (2) change its jurisdiction of organization, (3)
change its organizational structure or type, (4) change its legal name, or (5)
change any organizational number (if any) assigned by its jurisdiction of
organization.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person except where (a) total consideration
including cash and the value of any non-cash consideration, for all such
transactions does not in the aggregate exceed $200,000 in any fiscal year of
Borrower; (b) no Event of Default has occurred and is continuing or would exist
after giving effect to the transactions; and (c) Borrower is the surviving legal
entity. A Subsidiary may merge or consolidate into another Subsidiary or into
Borrower.
7.4 Indebtedness. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.
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7.5 Encumbrance. Create, incur, or allow any Lien on any of the
Collateral or its intellectual property, or assign or convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to
be subject to the first priority security interest granted herein.
7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account
except pursuant to the terms of Section 6.6.(b) hereof.
7.7 Distributions; Investments. (a) Directly or indirectly make any
Investment other than Permitted Investments, or permit any of its Subsidiaries
to do so; or (b) pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock provided that (i) Borrower may
convert any of its convertible securities into other securities pursuant to the
terms of such convertible securities or otherwise in exchange thereof, (ii)
Borrower may pay dividends solely in common stock; and (iii) Borrower may
repurchase the stock of former employees or consultants pursuant to stock
repurchase agreements so long as an Event of Default does not exist at the time
of such repurchase and would not exist after giving effect to such repurchase,
provided such repurchase does not exceed in the aggregate of $50,000 per fiscal
year.
7.8 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower, except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-affiliated Person.
7.9 Subordinated Debt. (a) Make or permit any payment on any
Subordinated Debt, except under the terms of the subordination, intercreditor,
or other similar agreement to which such Subordinated Debt is subject, or (b)
amend any provision in any document relating to the Subordinated Debt which
would increase the amount thereof or adversely affect the subordination thereof
to Obligations owed to Bank.
7.10 Compliance. Become an "investment company" or a company controlled
by an "investment company", under the Investment Company Act of 1940 or
undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a material
adverse effect on Borrower's business, or permit any of its Subsidiaries to do
so; withdraw or permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any present pension, profit sharing and deferred compensation
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.
8 EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an
"Event of Default") under this Agreement:
8.1 Payment Default. Borrower fails to (a) make any payment of
principal or interest on any Credit Extension on its due date, or (b) pay any
other Obligations within three (3) Business Days after such Obligations are due
and payable. During the cure period, the failure to cure the payment default is
not an Event of Default (but no Credit Extension will be made during the cure
period);
8.2 Covenant Default.
(a) Borrower fails or neglects to perform any obligation in
Sections 6.2, 6.6 and 6.7 or violates any covenant in Section 7; or
(b) Borrower fails or neglects to perform, keep, or observe
any other term, provision, condition, covenant or agreement contained in this
Agreement, any Loan Documents, and as to any default (other than those specified
in Section 8 below) under such other term, provision, condition, covenant or
agreement that can be cured, has failed to cure the default within ten (10) days
after the occurrence thereof; provided, however, that if the default cannot by
its nature be cured within the ten (10) day period or cannot after diligent
attempts by Borrower be cured
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within such ten (10) day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional period (which shall not
in any case exceed thirty (30) days) to attempt to cure such default, and within
such reasonable time period the failure to cure the default shall not be deemed
an Event of Default (but no Credit Extensions shall be made during such cure
period). Grace periods provided under this section shall not apply, among other
things, to financial covenants or any other covenants set forth in subsection
(a) above;
8.3 Material Adverse Change. A Material Adverse Change occurs;
8.4 Attachment. (a) Any material portion of Borrower's assets is
attached, seized, levied on, or comes into possession of a trustee or receiver
and the attachment, seizure or levy is not removed in ten (10) days; (b) the
service of process upon Borrower seeking to attach, by trustee or similar
process, any funds of Borrower on deposit with Bank, or any entity under control
of Bank (including a subsidiary); (c) Borrower is enjoined, restrained, or
prevented by court order from conducting a material part of its business; (d) a
judgment or other claim in excess of $50,000 becomes a Lien on any of Borrower's
assets; or (e) a notice of lien, levy, or assessment is filed against any of
Borrower's assets by any government agency and not paid within ten (10) days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Credit Extensions shall be
made during the cure period);
8.5 Insolvency Borrower is unable to pay its debts (including trade
debts) as they become due or otherwise becomes insolvent; (b) Borrower begins an
Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower
and not dismissed or stayed within thirty (30) days (but no Credit Extensions
shall be made while of any of the conditions described in clause (a) exist
and/or until any Insolvency Proceeding is dismissed);
8.6 Other Agreements. There is a default in any agreement to which
Borrower or any Guarantor is a party with a third party or parties resulting in
a right by such third party or parties, whether or not exercised, to accelerate
the maturity of any Indebtedness in an amount in excess of Fifty Thousand
Dollars ($50,000) or that could have a material adverse effect on Borrower's or
any Guarantor's business;
8.7 Judgments. A judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least Fifty Thousand Dollars
($50,000) (not covered by independent third-party insurance) shall be rendered
against Borrower and shall remain unsatisfied and unstayed for a period of ten
(10) days after the entry thereof (provided that no Credit Extensions will be
made prior to the satisfaction or stay of such judgment);
8.8 Misrepresentations. Borrower or any Person acting for Borrower
makes any representation, warranty, or other statement now or later in this
Agreement, any Loan Document or in any writing delivered to Bank or to induce
Bank to enter this Agreement or any Loan Document, and such representation,
warranty, or other statement is incorrect in any material respect when made;
8.9 Subordinated Debt. A default or breach occurs under any agreement
between Borrower and any creditor of Borrower that signed a subordination,
intercreditor, or other similar agreement with Bank, or any creditor that has
signed such an agreement with Bank breaches any terms of such agreement; or
9 BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. While an Event of Default occurs and continues
Bank may, without notice or demand, do any or all of the following:
(a) declare all Obligations immediately due and payable (but
if an Event of Default described in Section 8.5 occurs all Obligations are
immediately due and payable without any action by Bank);
(b) stop advancing money or extending credit for Borrower's
benefit under this Agreement or under any other agreement between Borrower and
Bank;
(c) demand that Borrower (i) deposits cash with Bank in an
amount equal to the aggregate amount of any Letters of Credit remaining undrawn,
as collateral security for the repayment of any future drawings under such
Letters of Credit, and Borrower shall forthwith deposit and pay such amounts,
and (ii) pay in advance all Letter of Credit fees scheduled to be paid or
payable over the remaining term of any Letters of Credit;
(d) terminate any FX Contracts;
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(e) settle or adjust disputes and claims directly with Account
Debtors for amounts on terms and in any order that Bank considers advisable,
notify any Person owing Borrower money of Bank's security interest in such
funds, and verify the amount of such account;
(f) make any payments and do any acts it considers necessary
or reasonable to protect the Collateral and/or its security interest in the
Collateral. Borrower shall assemble the Collateral if Bank requests and make it
available as Bank designates. Bank may enter premises where the Collateral is
located, take and maintain possession of any part of the Collateral, and pay,
purchase, contest, or compromise any Lien which appears to be prior or superior
to its security interest and pay all expenses incurred. Borrower grants Bank a
license to enter and occupy any of its premises, without charge, to exercise any
of Bank's rights or remedies;
(g) apply to the Obligations any (i) balances and deposits of
Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or
the account of Borrower;
(h) ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell the Collateral. Bank is hereby
granted a non-exclusive, royalty-free license or other right to use, without
charge, Borrower's labels, patents, copyrights, mask works, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
(i) place a "hold" on any account maintained with Bank and/or
deliver a notice of exclusive control, any entitlement order, or other
directions or instructions pursuant to any Control Agreement or similar
agreements providing control of any Collateral;
(j) demand and receive possession of Borrower's Books; and
(k) exercise all rights and remedies available to Bank under
the Loan Documents or at law or equity, including all remedies provided under
the Code (including disposal of the Collateral pursuant to the terms thereof).
9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its
lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower's name on any
checks or other forms of payment or security; (b) sign Borrower's name on any
invoice or xxxx of lading for any Account or drafts against Account Debtors; (c)
settle and adjust disputes and claims about the Accounts directly with Account
Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle,
and adjust all claims under Borrower's insurance policies; (e) pay, contest or
settle any Lien, charge, encumbrance, security interest, and adverse claim in or
to the Collateral, or any judgment based thereon, or otherwise take any action
to terminate or discharge the same; and (f) transfer the Collateral into the
name of Bank or a third party as the Code permits. Borrower hereby appoints Bank
as its lawful attorney-in-fact to sign Borrower's name on any documents
necessary to perfect or continue the perfection of any security interest
regardless of whether an Event of Default has occurred until all Obligations
have been satisfied in full and Bank is under no further obligation to make
Credit Extensions hereunder. Bank's foregoing appointment as Borrower's attorney
in fact, and all of Bank's rights and powers, coupled with an interest, are
irrevocable until all Obligations have been fully repaid and performed and
Bank's obligation to provide Credit Extensions terminates.
9.3 Accounts Verification; Collection. Whether or not an Event of
Default has occurred and is continuing, Bank may notify any Person owing
Borrower money of Bank's security interest in such funds and verify the amount
of such account. After the occurrence of an Event of Default, any amounts
received by Borrower shall be held in trust by Borrower for Bank, and, if
requested by Bank, Borrower shall immediately deliver such receipts to Bank in
the form received from the Account Debtor, with proper endorsements for deposit.
9.4 Protective Payments. If Borrower fails to obtain the insurance
called for by Section 6.5 or fails to pay any premium thereon or fails to pay
any other amount which Borrower is obligated to pay under this Agreement or any
other Loan Document, Bank may obtain such insurance or make such payment, and
all amounts so paid by Bank are Bank Expenses and immediately due and payable,
bearing interest at the then highest applicable rate, and secured by the
Collateral. Bank will make reasonable efforts to provide Borrower with notice of
Bank
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obtaining such insurance at the time it is obtained or within a reasonable time
thereafter. No payments by Bank are deemed an agreement to make similar payments
in the future or Bank's waiver of any Event of Default.
9.5 Application of Payments and Proceeds. Unless an Event of Default
has occurred and is continuing, Bank shall apply any funds in its possession,
whether from Borrower account balances, payments, or proceeds realized as the
result of any collection of Accounts or other disposition of the Collateral,
first, to Bank Expenses, including without limitation, the reasonable costs,
expenses, liabilities, obligations and attorneys' fees incurred by Bank 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 and any
applicable fees and other charges, in such order as Bank shall determine in its
sole discretion. Any surplus shall be paid to Borrower or other Persons legally
entitled thereto; Borrower shall remain liable to Bank for any deficiency. If an
Event of Default has occurred and is continuing, Bank may apply any funds in its
possession, whether from Borrower account balances, payments, proceeds realized
as the result of any collection of Accounts or other disposition of the
Collateral, or otherwise, to the Obligations in such order as Bank shall
determine in its sole discretion. Any surplus shall be paid to Borrower or other
Persons legally entitled thereto; Borrower shall remain liable to Bank for any
deficiency. If Bank, 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, Bank shall have the option, exercisable at any time, of
either reducing the Obligations by the principal amount of the purchase price or
deferring the reduction of the Obligations until the actual receipt by Bank of
cash therefor.
9.6 Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices regarding the safekeeping of the Collateral in the
possession or under the control of Bank, Bank shall not be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other Person. Borrower bears
all risk of loss, damage or destruction of the Collateral.
9.7 No Waiver; Remedies Cumulative. Bank's failure, at any time or
times, to require strict performance by Borrower of any provision of this
Agreement or any other Loan Document shall not waive, affect, or diminish any
right of Bank thereafter to demand strict performance and compliance herewith or
therewith. No waiver hereunder shall be effective unless signed by Bank and then
is only effective for the specific instance and purpose for which it is given.
Bank's rights and remedies under this Agreement and the other Loan Documents are
cumulative. Bank has all rights and remedies provided under the Code, by law, or
in equity. Bank's exercise of one right or remedy is not an election, and Bank's
waiver of any Event of Default is not a continuing waiver. Bank's delay in
exercising any remedy is not a waiver, election, or acquiescence.
9.8 Demand Waiver. Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees held by Bank on which
Borrower is liable.
10 NOTICES
All notices, consents, requests, approvals, demands, or other
communication (collectively, "Communication") by any party to this Agreement or
any other Loan Document must be in writing and shall be deemed to have been
validly served, given, or delivered: (a) upon the earlier of actual receipt and
three (3) Business Days after deposit in the U.S. mail, first class, registered
or certified mail return receipt requested, with proper postage prepaid; (b)
upon transmission, when sent by electronic mail or facsimile transmission; (c)
one (1) Business Day after deposit with a reputable overnight courier with all
charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of
which shall be addressed to the party to be notified and sent to the address,
facsimile number, or email address indicated below. Bank or Borrower may change
its address or facsimile number by giving the other party written notice thereof
in accordance with the terms of this Section 10.
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If to Borrower: Specialized Health Products International, Inc.,
Specialized Health Products, Inc. and Safety
Syringe Corporation
000 Xxxx 000 Xxxxx
Xxxxxxxxx, Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
Fax: (000) 000-0000
Email: XXxxxxxx@xxxx.xxx
If to Bank:
Silicon Valley Bank
0000 XX Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxx Xxxxxxx
Fax: (000) 000-0000
Email: xxxxxxxx@xxxxxx.xxx
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
Oregon law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Multnomah County, Oregon; provided, however,
that nothing in this Agreement shall be deemed to operate to preclude Bank from
bringing suit or taking other legal action in any other jurisdiction to realize
on the Collateral or any other security for the Obligations, or to enforce a
judgment or other court order in favor of Bank. Borrower expressly submits and
consents in advance to such jurisdiction in any action or suit commenced in any
such court, and Borrower hereby waives any objection that it may have based upon
lack of personal jurisdiction, improper venue, or forum non conveniens and
hereby consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth in
Section 10 of this Agreement and that service so made shall be deemed completed
upon the earlier to occur of Borrower's actual receipt thereof or three (3) days
after deposit in the U.S. mails, proper postage prepaid.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement binds and is for the
benefit of the successors and permitted assigns of each party. Borrower may not
assign this Agreement or any rights or obligations under it without Bank's prior
written consent (which may be granted or withheld in Bank's discretion). Bank
has the right, without the consent of or notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights, and benefits under this Agreement and the other Loan
Documents.
12.2 Indemnification. Borrower agrees to indemnify, defend and hold
Bank and its directors, officers, employees, agents, attorneys, or any other
Person affiliated with or representing Bank harmless against: (a) all
obligations, demands, claims, and liabilities (collectively, "Claims") asserted
by any other party in connection with the transactions contemplated by the Loan
Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from,
following, or arising from transactions between Bank and Borrower (including
reasonable attorneys' fees and expenses), except for Claims and/or losses
directly caused by Bank's gross negligence or willful misconduct.
12.3 Limitation of Actions. Any claim or cause of action by Borrower
against Bank, its directors, officers, employees, agents, accountants,
attorneys, or any other Person affiliated with or representing Bank 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 Bank, its directors, officers, employees, agents,
accountants or
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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 Bank, or on any other person authorized
to accept service on behalf of Bank, 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 Bank in its sole discretion. This provision shall
survive any termination of this Loan Agreement or any other Loan Document.
12.4 Time of Essence. Time is of the essence for the performance of all
Obligations in this Agreement.
12.5 Severability of Provisions. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.
12.6 Amendments in Writing; Integration. All amendments to this
Agreement must be in writing signed by both Bank and Borrower. This Agreement
and the Loan Documents represent the entire agreement about this subject matter
and supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents.
12.7 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, constitute
one Agreement.
12.8 Survival. All covenants, representations and warranties made in
this Agreement continue in full force until this Agreement has terminated
pursuant to its terms and all Obligations (other than inchoate indemnity
obligations and any other obligations which, by their terms, are to survive the
termination of this Agreement) have been satisfied. The obligation of Borrower
in Section 12.2 to indemnify Bank shall survive until the statute of limitations
with respect to such claim or cause of action shall have run.
12.9 Confidentiality. In handling any confidential information, Bank
shall exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank's
Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Bank shall use
commercially reasonable efforts to obtain such prospective transferee's or
purchaser's agreement to the terms of this provision); (c) as required by law,
regulation, subpoena, or other order; (d) to Bank's regulators or as otherwise
required in connection with Bank's examination or audit; and (e) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (i) is in the public
domain or in Bank's possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (ii) is disclosed to Bank by a third
party, if Bank does not know that the third party is prohibited from disclosing
the information.
12.10 Attorneys' Fees, Costs and Expenses. In any action or proceeding
between Borrower and Bank arising out of or relating to the Loan Documents, the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
other costs and expenses incurred, in addition to any other relief to which it
may be entitled.
13 DEFINITIONS
13.1 Definitions. As used in this Agreement, the following terms have
the following meanings:
"Account" is any "account" as defined in the Code with such additions
to such term as may hereafter be made, and includes, without limitation, all
accounts receivable and other sums owing to Borrower.
"Account Debtor" is any "account debtor" as defined in the Code with
such additions to such term as may hereafter be made.
"Advance" or "Advances" means an advance (or advances) under the
Revolving Line.
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"Affiliate" of any Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"Agreement" is defined in the preamble hereof. "Bank" is defined in the
preamble hereof.
"Bank Expenses" are all audit fees and expenses, costs, and expenses
(including reasonable attorneys' fees and expenses) for preparing, negotiating,
administering, defending and enforcing the Loan Documents (including, without
limitation, those incurred in connection with appeals or Insolvency Proceedings)
or otherwise incurred with respect to Borrower.
"Bankruptcy-Related Defaults" is defined in Section 9.1.
"Borrower" is defined in the preamble hereof
"Borrower's Books" are all Borrower's books and records including
ledgers, federal and state tax returns, records regarding Borrower's assets or
liabilities, the Collateral, business operations or financial condition, and all
computer programs or storage or any equipment containing such information.
"Borrowing Base" is 80% of Eligible Accounts, as determined by Bank
from Borrower's most recent Borrowing Base Certificate; provided, however, that
Bank may decrease the foregoing percentages in its good faith business judgment
based on events, conditions, contingencies, or risks which, as determined by
Bank, may adversely affect Collateral.
"Borrowing Base Certificate" is that certain certificate in the form
attached hereto as Exhibit C.
"Borrowing Resolutions" are, with respect to any Person, those
resolutions substantially in the form attached hereto as Exhibit E adopted by
such Person's Board of Directors and delivered by such Person to Bank approving
the Loan Documents to which such Person is a party and the transactions
contemplated thereby, together with a certificate executed by its secretary on
behalf of such Person certifying that (a) such Person has the authority to
execute, deliver, and perform its obligations under each of the Loan Documents
to which it is a party, (b) that attached as Exhibit A to such certificate is a
true, correct, and complete copy of the resolutions then in full force and
effect authorizing and ratifying the execution, delivery, and performance by
such Person of the Loan Documents to which it is a party, (c) the name(s) of the
Person(s) authorized to execute the Loan Documents on behalf of such Person,
together with a sample of the true signature(s) of such Person(s), and (d) that
Bank may conclusively rely on such certificate unless and until such Person
shall have delivered to Bank a further certificate canceling or amending such
prior certificate.
"Business Day" is any day that is not a Saturday, Sunday or a day on
which Bank is closed.
"Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor's Ratings
Group or Xxxxx'x Investors Service, Inc., (c) Bank's certificates of deposit
issued maturing no more than one (1) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this
definition.
"Change in Control" means any event, transaction, or occurrence as a
result of which (a) any "person" (as such term is defined in Sections 3(a)(9)
and 13(d)(3) of the Securities Exchange Act of 1934, as an amended (the
"Exchange Act")), other than a trustee or other fiduciary holding securities
under an employee benefit plan of Borrower, is or becomes a beneficial owner
(within the meaning Rule 1 3d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of Borrower, representing fifteen percent (15%) or
more of the combined voting power of Borrower's then outstanding securities; or
(b) during any period of twelve consecutive calendar months, individuals who at
the beginning of such period constituted the Board of Directors of Borrower
(together with any new directors whose election by the Board of Directors of
Borrower was approved by a vote of at least two-thirds of the directors then
still in office who either were directions at the beginning of such period or
whose election or
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nomination for election was previously so approved) cease for any reason other
than death or disability to constitute a majority of the directors then in
office.
"Code" is the Uniform Commercial Code, as the same may, from time to
time, be enacted and in effect in the State of Oregon; provided, that, to the
extent that the Code is used to define any term herein or in any Loan Document
and such term is defined differently in different Articles or Divisions of the
Code, the definition of such term contained in Article or Division 9 shall
govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection, or priority of, or
remedies with respect to, Bank's Lien on any Collateral is governed by the
Uniform Commercial Code in effect in a jurisdiction other than the State of
California, the term "Code" shall mean the Uniform Commercial Code as enacted
and in effect in such other jurisdiction solely for purposes on the provisions
thereof relating to such attachment, perfection, priority, or remedies and for
purposes of definitions relating to such provisions.
"Collateral" is any and all properties, rights and assets of Borrower
described on Exhibit A.
"Collateral Account" is any Deposit Account, Securities Account, or
Commodity Account. "Commodity Account" is any "commodity account" as defined in
the Code with such additions to such term as may hereafter be made.
"Communication" is defined in Section 10.
"Compliance Certificate" is that certain certificate in the form
attached hereto as Exhibit D.
"Contingent Obligation" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (a) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable;
(b) any obligations for undrawn letters of credit for the account of
that Person; and (c) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.
"Control Agreement" is any control agreement entered into among the
depository institution at which Borrower maintains a Deposit Account or the
securities intermediary or commodity intermediary at which Borrower maintains a
Securities Account or a Commodity account, Borrower, and Bank pursuant to which
Bank obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.
"Credit Extension" is any Advance or any other extension of credit by
Bank for Borrower's benefit.
"Current Liabilities" are all obligations and liabilities of Borrower
to Bank, plus, without duplication, the aggregate amount of Borrower's Total
Liabilities that mature within one (1) year.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"Default Rate" is defined in Section 2.3(b).
"Deferred Revenue" is all amounts received or invoiced in advance of
performance under contracts and not yet recognized as revenue.
"Deposit Account" is any "deposit account" as defined in the Code with
such additions to such term as may hereafter be made.
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"Dollars," "dollars" and "$" each mean lawful money of the United
States.
"Effective Date" is the date Bank executes this Agreement and as
indicated on the signature page hereof.
"Eligible Accounts" are Accounts which arise in the ordinary course of
Borrower's business that meet all Borrower's representations and warranties in
Section 5.3. Bank reserves the right at any time and from time to time after the
Effective Date, to adjust any of the criteria set forth below and to establish
new criteria in its good faith business judgment. Unless Bank agrees otherwise
in writing, Eligible Accounts shall not include:
(a) Accounts that the Account Debtor has not paid within ninety (90)
days of invoice date;
(b) Accounts owing from an Account Debtor, fifty percent (50%) or more
of whose Accounts have not been paid within ninety (90) days of invoice date;
(c) Credit balances over ninety (90) days from invoice date;
(d) Accounts owing from an Account Debtor, including Affiliates, whose
total obligations to Borrower exceed twenty-five (25%) of all Accounts, for the
amounts that exceed that percentage, unless Bank approves in writing in its sole
discretion based on its review on a case-by-case basis at Borrower's request;
(e) Accounts owing from an Account Debtor which does not have its
principal place of business in the United States except for Eligible Foreign
Accounts;
(f) Accounts owing from an Account Debtor which is a federal, state or
local government entity or any department, agency, or instrumentality thereof;
(g) Accounts owing from an Account Debtor to the extent that Borrower
is indebted or obligated in any manner to the Account Debtor (as creditor,
lessor, supplier or otherwise - sometimes called "contra" accounts, accounts
payable, customer deposits or credit accounts), with the exception of customary
credits, adjustments and/or discounts given to an Account Debtor by Borrower in
the ordinary course of its business;
(h) Accounts for demonstration or promotional equipment, or in which
goods are consigned, or sold on a "sale guaranteed", "sale or return", "sale on
approval", "xxxx and hold", or other terms if Account Debtor's payment may be
conditional;
(i) Accounts for which the Account Debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the Account Debtor disputes liability or makes
any claim (but only up to the disputed or claimed amount), or if the Account
Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out
of business;
(k) Accounts owing from an Account Debtor with respect to which
Borrower has received Deferred Revenue (but only to the extent of such Deferred
Revenue);
(l) Accounts for which Bank in its good faith business judgment
determines collection to be doubtful; and
(m) other Accounts Bank deems ineligible in the exercise of its good
faith business judgment.
"Eligible Foreign Accounts" are Accounts for which the Account Debtor
does not have its principal place of business in the United States but are
otherwise Eligible Accounts that are (a) covered by credit insurance
satisfactory to Bank, less any deductible; (b) supported by letter(s) of credit
acceptable to Bank; or (c) that Bank approves in writing.
"Equipment" is all "equipment" as defined in the Code 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.
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
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"Event of Default" is defined in Section 8.
"Funding Date" is any date on which a Credit Extension is made to or on
account of Borrower which shall be a Business Day.
"GAAP" is generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other Person as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"General Intangibles" is all "general intangibles" as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation, all copyright rights,
copyright applications, copyright registrations and like protections in each
work of authorship and derivative work, whether published or unpublished, any
patents, trademarks, service marks and, to the extent permitted under applicable
law, any applications therefor, whether registered or not, any trade secret
rights, including any rights to unpatented inventions, payment intangibles,
royalties, contract rights, goodwill, franchise agreements, purchase orders,
customer lists, route lists, telephone numbers, domain names, claims, income and
other 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.
"Indebtedness" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and (d)
Contingent Obligations.
"Insolvency Proceeding" is any proceeding by or against any Person
under the United States Bankruptcy Code, or any other bankruptcy or insolvency
law, including assignments for the benefit of creditors, compositions,
extensions generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"Inventory" is all "inventory" as defined in the 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" is any beneficial ownership interest in any Person
(including stock, partnership interest or other securities), and any loan,
advance or capital contribution to any Person.
"Key Person" is any of Borrower's Chief Executive Officer, Chief
Operating Officer and Chief Financial Officer.
"Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"Loan Documents" are, collectively, this Agreement, the Warrant, the
Perfection Certificate, any note executed by Borrower, and any other present or
future agreement between Borrower and/or for the benefit of Bank in connection
with this Agreement, all as amended, restated, or otherwise modified.
"Material Adverse Change" is (a) a material impairment in the
perfection or priority of Bank's Lien in the Collateral or in the value of such
Collateral; (b) a material adverse change in the business, operations, or
condition (financial or otherwise) of Borrower; or (c) a material impairment of
the prospect of repayment of any portion of the Obligations.
"Net Income" means, as calculated on a consolidated basis for Borrower
for any period as at any date of determination, the net profit (or loss), after
provision for taxes, of Borrower and its Subsidiaries for such period taken as a
single accounting period.
"Obligations" are Borrower's obligation to pay when due any debts,
principal, interest, Bank Expenses and other amounts Borrower owes Bank now or
later, whether under this Agreement, the Loan Documents, or otherwise,
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including, without limitation, all obligations relating to letters of credit,
cash management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and the performance of Borrower's
duties under the Loan Documents.
"Operating Documents" are, for any Person, such Person's formation
documents, as certified with the Secretary of State of such Person's state of
formation on a date that is no earlier than 30 days prior to the Effective Date,
and, (a) if such Person is a corporation, its bylaws in current form, (b) if
such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its
partnership agreement (or similar agreement), each of the foregoing with all
current amendments or modifications thereto.
"Payment/Advance Form" is that certain form attached hereto as Exhibit
B.
"Perfection Certificate" is defined in Section 5.1.
"Permitted Indebtedness" is:
(a) Borrower's Indebtedness to Bank under this Agreement and the other
Loan Documents;
(b) Indebtedness existing on the Effective Date and shown on the
Perfection Certificate;
(c) Subordinated Debt;
(d) unsecured Indebtedness to trade creditors incurred in the ordinary
course of business;
(e) Indebtedness incurred as a result of endorsing negotiable
instruments received in the ordinary course of business; and
(f) extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (a) through (e) above,
provided that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon Borrower or its
Subsidiary, as the case may be.
"Permitted Investments" are:
(a) Investments shown on the Perfection Certificate and existing on the
Effective Date;
(b) (i) Cash Equivalents;
(c) Investments consisting of the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
Borrower;
(d) Investments consisting of deposit accounts in which Bank has a
perfected security interest;
(e) Investments accepted in connection with Transfers permitted by
Section 7.1;
(f) Investments consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plans or agreements approved by Borrower's Board of
Directors;
(g) Investments (including debt obligations) received in connection
with the bankruptcy or reorganization of customers or suppliers and in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the ordinary course of business; and
(h) Investments consisting of notes receivable of, or prepaid royalties
and other credit extensions, to customers and suppliers who are not Affiliates,
in the ordinary course of business; provided that this paragraph (h) shall not
apply to Investments of Borrower in any Subsidiary.
"Permitted Liens" are:
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(a) Liens existing on the Effective Date and shown on the Perfection
Certificate or arising under this Agreement and the other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank's Liens;
(c) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase;
(d) leases or subleases of real property granted in the ordinary course
of business, and leases, subleases, non-exclusive licenses or sublicenses of
property (other than real property or intellectual property) granted in the
ordinary course of Borrower's business, if the leases, subleases, licenses and
sublicenses do not prohibit granting Bank a security interest;
(e) non-exclusive license of intellectual property granted to third
parties in the ordinary course of business, and licenses of intellectual
property that could not result in a legal transfer of title of the licensed
property that may be exclusive in respects other than territory and that may be
exclusive as to territory only as to discreet geographical areas outside of the
United States; and
(f) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.4 or 8.7.
"Person" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.
"Prime Rate" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.
"Quick Assets" is, on any date, Borrower's unrestricted cash and Cash
Equivalents maintained with Bank, net billed accounts receivable, and
investments with Bank or its Affiliates with maturities of fewer than 12 months
determined according to GAAP.
"Registered Organization" is any "registered organization" as defined
in the Code with such additions to such term as may hereafter be made
"Responsible Officer" is any of the Chief Executive Officer, President,
Chief Financial Officer, Chief Operating Officer and Controller of Borrower.
"Revolving Line" is an Advance or Advances in an aggregate amount of up
to $1,500,000.00 outstanding at any time.
"Revolving Line Maturity Date" is February 10, 2008.
"Securities Account" is any "securities account" as defined in the Code
with such additions to such term as may hereafter be made.
"Subordinated Debt" is indebtedness incurred by Borrower subordinated
to all of Borrower's now or hereafter indebtedness to Bank (pursuant to a
subordination, intercreditor, or other similar agreement in form and substance
satisfactory to Bank entered into between Bank and the other creditor), on terms
acceptable to Bank.
"Subsidiary" means, with respect to any Person, any Person of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by such Person or one or more Affiliates of
such Person.
"Tangible Net Worth" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus (a) any amounts attributable to (i)
goodwill, (ii) intangible items including unamortized debt discount and expense,
patents, trade and service marks and names, copyrights and research and
development expenses except prepaid
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expenses, (iii) notes, accounts receivable and other obligations owing to
Borrower from its officers or other Affiliates, and (iv) reserves not already
deducted from assets, minus (b) Total Liabilities
"Total Liabilities" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion of Subordinated Debt permitted by Bank to
be paid by Borrower, but excluding all other Subordinated Debt.
"Transfer" is defined in Section 7.1.
"Unused Revolving Line Facility Fee" is defined in Section 2.4(b).
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY
BANK CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL
FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST
BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE ENFORCEABLE.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the Effective Date.
BORROWER:
SPECIALIZED HEALTH PRODUCTS INTERNATIONAL, INC.
By /s/ Xxxxxxx X. Xxxxxxx
------------------------------
Name Xxxxxxx X. Xxxxxxx
----------------------------
Title President and CEO
---------------------------
SPECIALIZED HEALTH PRODUCTS, INC.
By /s/ Xxxxxxx X. Xxxxxxx
------------------------------
Name Xxxxxxx X. Xxxxxxx
----------------------------
Title President
---------------------------
SAFETY SYRINGE CORPORATION
By /s/ Xxxxxxx X. Xxxxxxx
------------------------------
Name Xxxxxxx X. Xxxxxxx
----------------------------
Title President
---------------------------
BANK:
SILICON VALLEY BANK
By /s/ Xxx Xxxxxxx
Name Xxx Xxxxxxx
Title Relationship Manager
Effective Date: February 22, 2006
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest in and to
the following personal property:
All goods, Accounts (including health-care receivables), Equipment,
Inventory, contract rights or rights to payment of money, leases, license
agreements, franchise agreements, General Intangibles (except as provided
below), commercial tort claims, documents, instruments (including any promissory
notes), chattel paper (whether tangible or electronic), cash, deposit accounts,
fixtures, letters of credit rights (whether or not the letter of credit is
evidenced by a writing), securities, and all other investment property,
supporting obligations, and financial assets, whether now owned or hereafter
acquired, wherever located; and
all Borrower's Books relating to the foregoing, and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral does not include any of
the following, whether now owned or hereafter acquired, any copyright rights,
copyright applications, copyright registrations and like protections in each
work of authorship and derivative work, whether published or unpublished, any
patents, patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions, and
continuations-inpart of the same, trademarks, service marks and, to the extent
permitted under applicable law, any applications therefor, whether registered or
not, and the goodwill of the business of Borrower connected with and symbolized
thereby, know-how, operating manuals, trade secret rights, rights to unpatented
inventions, and any claims for damage by way of any past, present, or future
infringement of any of the foregoing; provided, however, the Collateral shall
include all Accounts, license and royalty fees and other revenues, proceeds, or
income arising out of or relating to any of the foregoing.
Pursuant to the terms of a certain negative pledge arrangement with
Bank, Borrower has agreed not to encumber any of its copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
patent applications and like protections, including improvements, divisions,
continuations, renewals, reissues, extensions, and continuations-inpart of the
same, trademarks, service marks and, to the extent permitted under applicable
law, any applications therefor, whether registered or not, and the goodwill of
the business of Borrower connected with and symbolized thereby, know-how,
operating manuals, trade secret rights, rights to unpatented inventions, and any
claims for damage by way of any past, present, or future infringement of any of
the foregoing, without Bank's prior written consent.
