SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Exhibit 10.5
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of January 24, 2014 (the “Effective Date”) between SILICON VALLEY BANK, a California corporation (“Bank”), and ULTHERA, INC., a Delaware corporation (“Borrower”) amends and restates, in its entirety, that certain Amended and Restated Loan and Security Agreement between Bank and Borrower dated as of July 27, 2012 (as amended from time to time, including by and between that certain First Amendment to Amended and Restated Loan and Security Agreement December 11, 2013, the “Original Loan Agreement”) and 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; provided that if at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either Borrower or Bank shall so request, Borrower and Bank shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP; provided, further, that, until so amended, (a) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) Borrower shall provide Bank financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13 of this Agreement. 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 and to deduction of Reserves, Bank shall make Advances not exceeding the Availability Amount. Amounts borrowed hereunder 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. Notwithstanding the foregoing, at any time when Co-Borrowers are not Streamline Facility Eligible, all collections through the lockbox in accordance with Section 6.3(c) hereof shall be applied to reduce the outstanding Obligations under the Revolving Line.
2.1.2 Existing Term Loans.
(a) Availability. Subject to the terms and conditions of the Original Loan Agreement, Bank made four (4) term loans to Borrower. (such term loans are hereinafter referred to singly as an “Existing Term Loan” and collectively as the “Existing Term Loans”). As of the Effective Date, the outstanding principal amount of the Existing Term Loans is One Million Six Hundred Thirty-Four Thousand Seven Hundred Seventy-Nine Dollars and Fifty-Seven Cents ($1,634,779.57).
(b) Repayment. Borrower shall continue to repay the Existing Term Loans in equal installments of principal and interest (each an “Existing Term Loan Payment”) on the first day of each month. Borrower’s final Existing Term Loan Payment, due on the Existing Term Loan Maturity Date, shall include (i) all
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outstanding principal and accrued and unpaid interest under the Existing Term Loans, and (ii) unless paid earlier, the Existing Term Loan Final Payment. Once repaid, the Existing Term Loans may not be reborrowed. The Existing Term Loans may only be prepaid in accordance with Sections 2.1.2(c) and 2.1.2(d).
(c) Mandatory Prepayments. If the Existing Term Loans are accelerated following the occurrence and continuance of an Event of Default, Borrower shall immediately pay to Bank amount equal to the sum of: (i) all outstanding and unpaid principal of the Existing Term Loans plus accrued and unpaid interest thereon through the prepayment date, (ii) the Existing Term Loan Final Payment, (iii) the Existing Term Loan Prepayment Fee, plus (iv) all other sums, that shall have become due and payable hereunder but have not been paid, including Bank Expenses and interest at the Default Rate with respect to any past due amounts.
(d) Permitted Prepayment of Existing Term Loans. Borrower shall have the option to prepay the Existing Term Loans advanced by Bank under this Agreement, in whole or in part, provided Borrower (i) provides written notice to Bank of its election to prepay the Existing Term Loans at least three (3) Business Days prior to such prepayment (provided that for a prepayment made with the funding of Acquisition Term Loan in connection with the Cabochon Acquisition such notice period shall be waived), (ii) each prepayment shall be in an amount equal to at least Two Hundred and Fifty Thousand Dollars ($250,000), and (iii) with respect to the amounts being prepaid, pays to Bank on the date of such prepayment, an amount equal to the sum of (A) all outstanding and unpaid principal of the Existing Term Loans plus accrued and unpaid interest thereon through the prepayment date, (B) the portion of the Existing Term Loan Final Payment relating to the amount of the Existing Term Loan or Existing Term Loans prepaid, (C) the Existing Term Loan Prepayment Fee (provided that for a prepayment made with the funding of Acquisition Term Loan in connection with the Cabochon Acquisition such fee shall be waived), plus (D) all other sums, that shall have become due and payable, including Bank Expenses, if any, and interest at the Default Rate with respect to any past due amounts, at Bank’s election. Notwithstanding the foregoing, if funded, the Acquisition Term Loan shall first be used to prepay the Existing Term Loan in accordance with this Section 2.1.2(d) and then to fund the Cabochon Acquisition, and no Existing Term Loan Prepayment shall be payable if the Existing Term Loan is prepaid with the proceeds of the Acquisition Term Loan.
2.1.3 Acquisition Term Loan.
(a) Availability. Subject to the terms and conditions of this Agreement, Bank agrees to make a term loan to Borrower simultaneously with the financial closing of the Cabochon Acquisition in an amount equal to Twenty Million Dollars ($20,000,000) (the “Acquisition Term Loan”). After repayment, the Acquisition Term Loan may not be re-borrowed.
(b) Repayment. Borrower shall make monthly payments of interest only commencing on the first (1st) day of each month following the Funding Date of the Acquisition Term Loan, and continuing on the first (1st) day of each successive month thereafter until the Interest Only End Date. Borrower shall repay the Acquisition Term Loan in thirty (30) equal installments of principal and interest (each a “Acquisition Term Loan Payment”) beginning on the first day of the month after the Interest Only End Date. Borrower’s final Acquisition Term Loan Payment, due on the Acquisition Term Loan Maturity Date, shall include all outstanding principal and accrued and unpaid interest under Acquisition Term Loan. Once repaid, the Acquisition Term Loan may not be reborrowed. The Acquisition Term Loan may only be prepaid in accordance with Sections 2.1.3(c) and 2.1.3(d).
(c) Mandatory Prepayments. If the Acquisition Term Loan is accelerated following the occurrence and continuance of an Event of Default, Borrower shall immediately pay to Bank amount equal to the sum of: (i) all outstanding and unpaid principal of the Acquisition Term Loan plus accrued and unpaid interest thereon through the prepayment date, (ii) the Acquisition Term Loan Prepayment Fee, plus (iii) all other sums, that shall have become due and payable hereunder but have not been paid, including Bank Expenses and interest at the Default Rate with respect to any past due amounts.
(d) Permitted Prepayment of Acquisition Term Loan. Borrower shall have the option to prepay the Acquisition Term Loan, in whole or in part, provided Borrower (i) provides written notice to Bank of its election to prepay the Acquisition Term Loan at least three (3) Business Days prior to such prepayment, (ii) each prepayment shall be in an amount equal to at least Five Million Dollars ($5,000,000), and (iii) with respect to the amounts being prepaid, pays to Bank on the date of such prepayment, an amount equal to the sum of (A) all
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outstanding and unpaid principal of the Acquisition Term Loan plus accrued and unpaid interest thereon through the prepayment date, (B) the Acquisition Term Loan Prepayment Fee, plus (C) all other sums, that shall have become due and payable, including Bank Expenses, if any, and interest at the Default Rate with respect to any past due amounts, at Bank’s election.
2.2 Overadvances. If, at any time, the sum of the outstanding principal amount of any Advances exceeds the lesser of either (a) the Revolving Line or (b) the Domestic Borrowing Base, Borrower shall immediately pay to Bank in cash such excess. Such excess shall be deemed to be an “Overadvance”. Without limiting Borrower’s obligation to repay Bank any amount of the Overadvance, Borrower agrees to pay Bank interest on the outstanding amount of any Overadvance, on demand, at the Default Rate.
2.3 Payment of Interest on the Credit Extensions.
(a) Interest Rates.
(i) Advances. 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 the greater of (A) the Prime Rate plus the Applicable Margin or (B) four and one quarter percent (4.25%) which interest shall be payable monthly in accordance with Section 2.3(f) below.
(ii) Existing Term Loans. Subject to Section 2.3(b), the principal amount outstanding with respect to each Existing Term Loan shall continue to accrue interest at a per annum rate equal to one and three quarters percentage points (1.75%) above the Prime Rate, fixed on the Funding Date of each Existing Term Loan, which interest shall be payable monthly in accordance with Section 2.3(f) below.
(iii) Acquisition Term Loan. Subject to Section 2.3(b), the principal amount outstanding with respect to the Acquisition Term Loan shall accrue interest at a fixed per annum rate equal to seven and one half percent (7.50%), which interest shall be payable monthly in accordance with Section 2.3(f) below.
(b) Default Rate. At the election of Bank, upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is three percentage points (3.00%) above the rate that is otherwise applicable thereto (the “Default Rate”) unless Bank otherwise elects from time to time to impose a smaller increase. Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without limitation, Bank Expenses) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable to the Obligations. 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) Debit of Accounts. Bank shall debit, first, the Designated Deposit Account, and if insufficient funds are in the Designated Deposit Accounts, then any of Borrower’s deposit accounts, for principal and interest payments or any other amounts Borrower owes Bank when due. These debits shall not constitute a set-off.
(e) Intentionally Omitted.
(f) Payment; Interest Computation. Interest is payable monthly on the last calendar day of each month and shall be computed on the basis of a 360-day year for the actual number of days elapsed. In computing interest, (i) all Payments received after 12:00 p.m. Pacific time on any day shall be deemed received at the opening of business on the next Business Day, and (ii) the date of the making of any Credit Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension. Bank
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shall not, however, be required to credit Borrower’s account for the amount of any item of payment which is unsatisfactory to Bank in its good faith business judgment, and Bank may charge Borrower’s Designated Deposit Account for the amount of any item of payment which is returned to Bank unpaid.
2.4 Fees. Borrower shall pay to Bank:
(a) Revolving Line Commitment Fee. A fully earned, non-refundable commitment fee of One Hundred Thousand Dollars ($100,000) on the Effective Date (which amount shall be reduced by an amount equal to the unaccrued portion of the Revolving Line Final Payment Fee due pursuant to the Original Agreement)
(b) Acquisition Term Loan Commitment Fees. Fully earned, non-refundable commitment fees of (i) One Hundred Thousand Dollars ($100,000) on the Effective Date and (i) One Hundred Thousand Dollars ($100,000) on the Funding Date of the Acquisition Term Loan (which amount shall be reduced by an amount equal to the unaccrued portion of the Term Loan Final Payment Fee due pursuant to the Original Agreement); if and only if such term loan is funded.
(c) 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 one half of one percent (0.50%) per annum of the average unused portion of the Revolving Line; provided, however, such percentage shall be reduced to one quarter of one percent (0.25%) upon consummation of the IPO. The unused portion of the Revolving Line, for purposes of this calculation, shall equal the difference between (x) the Revolving Line amount (as it may be reduced from time to time) and (y) the average for the period of the daily closing balance of the Revolving Line outstanding. 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;
(d) Revolving Line Termination Fee. Upon termination of the Revolving Line for any reason prior to the first anniversary of the Effective Date, in addition to the payment of any other amounts then-owing, a termination fee in an amount equal to one percent (1.00%) of the Revolving Line, provided that no termination fee shall be charged if the credit facility hereunder is replaced with a new facility from Bank;
(e) Existing Term Loan Final Payment. The Existing Term Loan Final Payment, when due hereunder;
(f) Prepayment Fees. The Existing Term Loan Prepayment Fee and the Acquisition Term Loan Prepayment Fee, when due hereunder;
(g) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due; and
(h) Good Faith Deposit. A deposit (the “Good Faith Deposit”) of Thirty Thousand Dollars ($30,000) which Borrower has previously paid to Bank. Any portion of the Good Faith Deposit not utilized to pay for Bank’s due diligence and reasonable legal expenses shall be credited towards the Revolving Line Commitment Fee.
2.5 Payments; Application of Payments.
(a) All payments (including prepayments) to be made by Borrower under any Loan Document shall be made in immediately available funds in U.S. Dollars, without setoff or counterclaim, before 12:00 p.m. Pacific time on the date when due. 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 shall be due the next Business Day, and additional fees or interest, as applicable, shall continue to accrue until paid.
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(b) All payments with respect to the Obligations may be applied in such order and manner as Bank shall determine in its sole discretion. Borrower shall have no right to specify the order or the accounts to which Bank shall allocate or apply any payments required to be made by Borrower to Bank or otherwise received by Bank under this Agreement when any such allocation or application is not specified elsewhere in this Agreement.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Closing. The effectiveness of this Agreement 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) duly executed original signatures to the Loan Documents;
(b) Borrower’s Operating Documents and a good standing certificate of Borrower certified by the Secretary of State of the State of Delaware as of a date no earlier than thirty (30) days prior to the Effective Date;
(c) duly executed original signatures to the completed Borrowing Resolutions for Borrower;
(d) duly executed copies of the Cabochon Acquisition Documents;
(e) 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 constitute Permitted Liens;
(f) the Perfection Certificate of Borrower and Cabochon, together with the duly executed original signatures thereto;
(g) evidence satisfactory to Bank that the insurance policies required by Section 6.7 hereof are in full force and effect, together with appropriate evidence showing lender loss payable and/or additional insured clauses and cancellation notice to Bank (or endorsements reflecting the same) in favor of Bank; and
(h) payment of the fees and Bank Expenses then due as specified in Section 2.4 hereof
3.2 Conditions Precedent to Funding of the Acquisition Term Loan. Bank’s obligation to make the Acquisition Term Loan is subject to (i) all conditions precedent to closing listed in Section 3.1 above have been satisfied as of the Effective Date and (ii) between the Effective Date and the Funding Date of the Acquisition Term Loan:
(a) Bank determines to its reasonable satisfaction that there has not been a Material Adverse Effect (as defined in the Cabochon Acquisition Documents) on Cabochon since the date of the Cabochon Acquisition Documents;
(b) Bank has received evidence that the transactions contemplated by the Cabochon Acquisition Documents will be consummated contemporaneously with the funding of the Acquisition Term Loan; and
(c) The Funding Date of the Acquisition Term Loan is a date not later than sixty (60) days after the Effective Date.
3.3 Conditions Precedent to all Credit Extensions. Bank’s obligations to make each Credit Extension (other than the Acquisition Term Loan) are subject to the following conditions precedent:
(a) timely receipt of an executed Transaction Report; and
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(b) the representations and warranties in this Agreement shall be true, accurate, and complete in all material respects on the date of the Transaction Report 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 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 this Agreement remain true, accurate, and complete 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.
3.4 Post-Closing Condition. Borrower shall deliver to Bank, no later than sixty (60) days after the Effective Date, in form and substance reasonably satisfactory to Bank,
(a) duly executed Control Agreements for each Collateral Account Borrower maintains outside Bank, other than with respect to Collateral Accounts with aggregate balances not exceeding Two Hundred Fifty Thousand Dollars ($250,000); and
(b) Landlord Waivers or Bailee Agreements for each third party location where Eligible Inventory is maintained.
3.5 Covenant to Deliver. Borrower agrees to deliver to Bank each item required to be delivered to Bank under this Agreement as a condition precedent to any Credit Extension. Borrower expressly agrees that a Credit Extension made 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 the making of any Credit Extension in the absence of a required item shall be in Bank’s sole discretion.
3.6 Procedures for Borrowing.
(a) Advances. 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 such notification, Borrower must promptly deliver to Bank by electronic mail or facsimile a completed Transaction Report executed by a Responsible Officer or his or her 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. Bank may rely on any telephone notice given by a person whom Bank believes is a Responsible Officer or designee.
(b) Term Loans. Subject to the prior satisfaction of all other applicable conditions to the making of an Term Loan set forth in this Agreement, to obtain a Term Loan, Borrower must notify Bank (which notice shall be irrevocable) by electronic mail or facsimile no later than 12:00 p.m. Pacific time one (1) Business Day before the proposed Funding Date. The notice shall be a Payment/Advance Form, in the form attached as Exhibit B. On the Funding Date, Bank shall credit to Borrower’s deposit account, as designated on the Payment/Advance Form, an amount equal to the amount of the Term Loan. Bank may make Term Loans under this Agreement based on instructions from 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.
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.
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Borrower acknowledges that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank. Regardless of the terms of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority perfected security interest in the Collateral granted herein (subject only to Permitted Liens that may have superior priority to Bank’s Lien in this Agreement).
If this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are satisfied in full, and at such time, Bank shall, at Borrower’s sole cost and expense, terminate its security interest in the Collateral and all rights therein shall revert to Borrower. In the event (x) all Obligations (other than inchoate indemnity obligations), except for Bank Services, are satisfied in full, and (y) this Agreement is terminated, Bank shall terminate the security interest granted herein upon Borrower providing cash collateral acceptable to Bank in its good faith business judgment for Bank Services, if any. In the event such Bank Services consist of outstanding Letters of Credit, Borrower shall provide to Bank cash collateral in an amount equal to (i) One Hundred Five percent (105%) if the Letter of Credit is denominated in U.S. Dollars or (ii) One Hundred Ten percent (110%) if the Letter of Credit is denominated in a currency other than U.S. Dollars, in either case, of the Dollar Equivalent of the face amount of all such Letters of Credit plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to such Letters of Credit.
4.2 Priority of Security Interest. 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 over Fifty Thousand Dollars ($50,000), 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; provided, however, such amount shall be increased to Two Hundred Fifty Thousand Dollars ($250,000) upon consummation of the IPO. Subject to the terms contained herein, Bank agrees that Permitted Liens which, by the operation of law, are senior to the Bank’s lien are permitted to have superior priority to the Bank’s Lien.
4.3 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.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization, Authorization; Power and Authority. Borrower and each of its Subsidiaries are duly existing and in good standing as Registered Organizations 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 respective business or 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 a completed certificate signed by Borrower (the “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) other than as shown on the Perfection Certificate, Borrower (and each of its predecessors) has not, in the past five (5) years, changed its jurisdiction 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 (it being understood and agreed that Borrower may from time to time update certain information in the Perfection Certificate after the Effective Date to the extent permitted by one or more specific
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provisions in this Agreement). 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 number.
The execution, delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) materially contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or any its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect or which could not reasonably be expected to have a material adverse effect on Borrower’s business), or (v) 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 reasonably be expected to 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 or as permitted under Section 7.2. None of the components of the Collateral are currently being maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2.
Borrower is the sole owner of the Intellectual Property which it owns or purports to own except for (a) licenses permitted hereunder, (b) over-the-counter software that is commercially available to the public, and (c) material Intellectual Property licensed to Borrower and noted on the Perfection Certificate or with respect to which written notice is provided to Bank. Each Patent which it owns or purports to own and which is material to Borrower’s business is valid and enforceable, and no part of the Intellectual Property which Borrower owns or purports to own and which is material to Borrower’s business has been judged invalid or unenforceable, in whole or in part. 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 would 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 it bound by, any Restricted License as of the Effective Date.
5.3 Accounts Receivable; Inventory.
(a) For each Account with respect to which Advances are requested, on the date each Advance is requested and made, such Account shall be an Eligible Account.
(b) All statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing the Eligible Accounts are and shall be true and correct in all material respects, and all such invoices, instruments and other documents, and all of Borrower’s Books are genuine and in all material respects what they purport to be. Whether or not an Event of Default has occurred and is continuing, Bank may notify any Account Debtor owing Borrower money of Bank’s security interest in such funds and verify the amount of such Eligible Account. All sales and other transactions underlying or giving rise to each Eligible 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 Eligible Accounts in any Transaction Report. To the best of Borrower’s knowledge, all signatures and endorsements on all documents, instruments, and agreements relating to all Eligible Accounts are genuine, and all such documents, instruments and agreements are legally enforceable in accordance with their terms.
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(c) For any item of Inventory consisting of Eligible Inventory in any Transaction Report, such Inventory (i) consists of finished goods, in good, new, and salable condition, which is not perishable, returned, consigned, obsolete, not sellable, damaged, or defective, and is not comprised of demonstrative or custom inventory, works in progress, packaging or shipping materials, or supplies; (ii) meets all applicable governmental standards; (iii) has been manufactured in compliance with the Fair Labor Standards Act; (iv) is not subject to any Liens, except the first priority Liens granted or in favor of Bank under this Agreement or any of the other Loan Documents; and (v) is located at the locations identified by Borrower in the Perfection Certificate where it maintains Inventory (or at any location permitted under Section 7.2) and is subject to a landlord waiver or bailee agreement in favor of Bank.
5.4 Litigation. There are no actions or proceedings pending or, to the knowledge of Borrower’s Responsible Officers, threatened in writing by or against Borrower or any Subsidiary in which an adverse decision could reasonably be expected to cause a Material Adverse Change.
5.5 Financial Statements. All consolidated financial statements for Borrower and any Subsidiaries delivered to Bank fairly present in all material respects Borrower’s consolidated financial condition and Borrower’s consolidated results of operations.
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 of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change. 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 in material compliance with applicable law. 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 their respective businesses as currently conducted except to the extent the failure to do so could not reasonably be expected to cause a Material Adverse Change.
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 federal and material foreign, 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 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
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purposes; provided, that, the Acquisition Term Loan may be specifically used to consummate the Cabochon Acquisition and to prepay the Existing Term Loan.
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 representation, warranty, or other statement was 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 materially 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).
5.12 Definition of “Knowledge.” For purposes of the Loan Documents, whenever a representation or warranty is made to Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of the Responsible Officers.
6 AFFIRMATIVE COVENANTS
Borrower shall do all of the following:
6.1 Government Compliance.
(a) 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.
(b) Obtain all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents to which it is a party and the grant of a security interest to Bank in all of its property. Borrower shall promptly provide copies of any such obtained Governmental Approvals to Bank.
6.2 Financial Statements, Reports, Certificates. Provide Bank with the following:
(a) a Transaction Report (and any schedules related thereto) (i) within thirty (30) days after the end of each month if Borrower is Streamline Facility Eligible or (ii) weekly and with each request for an Advance if Borrower is not Streamline Facility Eligible;
(b) within thirty (30) days after the end of each month when either (i) Advances are outstanding or (ii) Borrower is not Streamline Facility Eligible, (A) monthly accounts receivable agings, aged by invoice date, (B) monthly accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, (C) monthly reconciliations of accounts receivable agings (aged by invoice date), transaction reports and general ledger, and (D) monthly perpetual inventory reports (including details of the various components or raw materials, work-in-process, and finished goods) for Inventory valued on a first-in, first-out basis at the lower of cost or market (in accordance with GAAP) or such other inventory reports as are reasonably requested by Bank in its good faith business judgment.
(c) within thirty (30) days after the end of each month, monthly foreign accounts receivable agings, aged by invoice date.
(d) within thirty (30) days after the end of each month, a Deferred Revenue report.
(e) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated balance sheet, income statement and cash flow statement covering Borrower’s
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consolidated operations for such month certified by a Responsible Officer and in a form acceptable to Bank (the “Monthly Financial Statements”);
(f) within thirty (30) days after the last day of each month and together with the Monthly Financial Statements, a duly completed Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Bank shall reasonably request, including, without limitation, a statement that at the end of such month there were no held checks;
(g) within the earlier of (i) fifteen (15) days of board approval or (ii) February 15 of each year, annual financial projections for the following fiscal year (on a quarterly basis) as approved by Borrower’s board of directors, together with any related business forecasts used in the preparation of such annual financial projections; and
(h) as soon as available, and in any event within one hundred eighty (180) days following the end of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to Bank in its reasonable discretion.
(i) Annually, within thirty (30) days of completion, Borrower’s 409A valuation report; provided, however, such reports shall not be required upon consummation of an initial public offering as long as Borrower’s equity securities continue to be traded on a nationally recognized securities exchange.
(j) in the event that Borrower becomes subject to the reporting requirements under the Exchange Act within five (5) Business Days of filing, copies of all periodic and other reports, proxy statements and other materials filed by Borrower with the SEC, any Governmental Authority succeeding to any or all of the functions of the SEC or with any national securities exchange, or distributed to its shareholders, as the case may be. Documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrower’s website on the Internet at Borrower’s website address;
(k) within five (5) Business Days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders or to any holders of Subordinated Debt (other than in their capacities as members of Borrower’s board of directors, consultants or advisors to Borrower);
(l) prompt report of any legal actions pending or threatened in writing against Borrower or any of its Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, Five Hundred Thousand Dollars ($500,000) or more; and
(m) other financial information reasonably requested by Bank.
Notwithstanding the foregoing, upon consummation of the IPO and so long as no Advances are outstanding, all monthly reporting requirements shall be due quarterly within forty five (45) days of the end of each calendar quarter.
6.3 Accounts Receivable.
(a) Schedules and Documents Relating to Accounts. Borrower shall deliver to Bank transaction reports and schedules of collections, as provided in Section 6.2, on Bank’s standard forms; provided, however, that Borrower’s failure to execute and deliver the same shall not affect or limit Bank’s Lien and other rights in all of Borrower’s Accounts, nor shall Bank’s failure to advance or lend against a specific Account affect or limit Bank’s Lien and other rights therein. If reasonably requested by Bank, Borrower shall furnish Bank with copies (or, at Bank’s request, originals) of all contracts, orders, invoices, and other similar documents, and all
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shipping instructions, delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or disposition of which gave rise to such Accounts. In addition, Borrower shall deliver to Bank, on its reasonable request, the originals of all instruments, chattel paper, security agreements, guarantees and other documents and property evidencing or securing any Accounts, in the same form as received, with all necessary indorsements, and copies of all credit memos.
(b) Disputes. Borrower shall promptly notify Bank of all disputes or claims relating to Accounts. Borrower may forgive (completely or partially), compromise, or settle any Account for less than payment in full, or agree to do any of the foregoing so long as (i) Borrower does so in good faith, in a commercially reasonable manner, in the ordinary course of business, in arm’s-length transactions, and reports the same to Bank in the regular reports provided to Bank; (ii) no Event of Default has occurred and is continuing; and (iii) after taking into account all such discounts, settlements and forgiveness, the total outstanding Advances will not exceed the lesser of the Revolving Line or the Borrowing Base.
(c) Collection of Accounts. Borrower shall have the right to collect all Accounts, unless and until an Event of Default has occurred and is continuing. Bank shall require that all proceeds of Accounts be deposited by Borrower into a lockbox account, or such other “blocked account” as specified by Bank, pursuant to a blocked account agreement in such form as Bank may specify in its good faith business judgment. Whether or not an Event of Default has occurred and is continuing, Borrower shall immediately deliver all payments on and proceeds of Accounts to an account maintained with Bank (i) to be applied to immediately reduce the Obligations when a Streamline Period is not effect, or (ii) to be transferred on a daily basis to Borrower’s operating account with Bank when a Streamline Period is in effect.
(d) Returns. Provided no Event of Default has occurred and is continuing, if any Account Debtor returns any Inventory over Two Hundred Fifty Thousand Dollars ($250,000) to Borrower (provided, however, such amount shall be increased to Seven Hundred Fifty Thousand Dollars ($750,000) upon consummation of the IPO), Borrower shall promptly (i) determine the reason for such return, (ii) issue a credit memorandum to the Account Debtor in the appropriate amount, and (iii) provide a copy of such credit memorandum to Bank, upon reasonable request from Bank. In the event any attempted return occurs after the occurrence and during the continuance of any Event of Default, Borrower shall immediately notify Bank of the return of the Inventory.
(e) Verification. Bank may, from time to time, verify directly with the respective Account Debtors the validity, amount and other matters relating to the Accounts.
(f) No Liability. Bank shall not be responsible or liable for any shortage or discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of which gives rise to an Account, or for any error, act, omission, or delay of any kind occurring in the settlement, failure to settle, collection or failure to collect any Account, or for settling any Account in good faith for less than the full amount thereof, nor shall Bank be deemed to be responsible for any of Borrower’s obligations under any contract or agreement giving rise to an Account. Nothing herein shall, however, relieve Bank from liability for its own gross negligence or willful misconduct.
6.4 Remittance of Proceeds. Except as otherwise provided in Section 6.3(c), deliver, in kind, all proceeds arising from the disposition of any Collateral to Bank in the original form in which received by Borrower not later than the following Business Day after receipt by Borrower, to be applied to the Obligations (a) prior to an Event of Default, pursuant to the terms of Section 2.5(b) hereof, and (b) after the occurrence and during the continuance of an Event of Default, pursuant to the terms of Section 9.4 hereof; provided that, if no Event of Default has occurred and is continuing, Borrower shall not be obligated to remit to Bank the proceeds from Transfers permitted by Section 7.1 hereof. Borrower agrees that it will maintain all proceeds of Collateral in an account maintained with Bank. Nothing in this Section limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.
6.5 Taxes; Pensions; Withholding. Timely file, and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely pay, all federal and material foreign, state and local taxes, assessments, deposits and contributions owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.9 hereof, and
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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.
6.6 Access to Collateral; Books and Records. At reasonable times, on two (2) Business Days’ notice (provided no notice is required if an Event of Default has occurred and is continuing), Bank, or its agents, shall have the right to inspect the Collateral and the right to audit and copy Borrower’s Books. The foregoing inspections and audits shall be at Borrower’s expense, and the charge therefor shall be Eight Hundred Fifty Dollars ($850) per person per day (or such higher amount as shall represent Bank’s then-current standard charge for the same), plus reasonable out-of-pocket expenses. In the event Borrower and Bank schedule an audit more than ten (10) days in advance, and Borrower cancels or seeks to reschedules the audit with less than ten (10) days written notice to Bank, then (without limiting any of Bank’s rights or remedies), Borrower shall pay Bank a fee of One Thousand Dollars ($1,000) plus any out-of-pocket expenses incurred by Bank to compensate Bank for the anticipated costs and expenses of the cancellation or rescheduling.
6.7 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 all liability policies shall show, or have endorsements showing, Bank as an additional insured. All policies (or their respective endorsements) shall provide that the insurer must give Bank at least twenty (20) days notice before canceling, amending, or declining to renew its policy except ten (10) days for non-payment of premium. At Bank’s request, Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any property policy shall, at Bank’s option, be payable to Bank on account of the Obligations. Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any property policy up to Three Hundred Thousand Dollars ($300,000) with respect to any loss, but not exceeding Three Hundred Thousand Dollars ($300,000) in the aggregate for all losses under all property policies in any one year, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Bank has been granted a first priority security interest, and (b) after the occurrence and during the continuance of an Event of Default, all proceeds payable under such property policy shall, at the option of Bank, be payable to Bank on account of the Obligations. If Borrower fails to obtain insurance as required under this Section 6.7 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 6.7, and take any action under the policies Bank deems prudent.
6.8 Operating Accounts.
(a) To permit Bank to monitor Borrower’s financial performance and condition, Borrower, and all Borrower’s Subsidiaries, shall maintain Borrower’s and such Subsidiaries’ (i) primary depository and operating accounts with Bank, and (ii) primary securities and investment accounts with Bank and Bank’s Affiliates, which accounts shall represent at least eighty five percent (85%) of the dollar value of Borrower’s and such Subsidiaries’ accounts at all financial institutions.
(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 Bank’s Affiliates. For each Collateral Account that Borrower at any time maintains (other than accounts held outside Bank with aggregate balances not to exceed Two Hundred Fifty Thousand Dollars ($250,000) at any time), 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 which Control Agreement may not be terminated without the prior written consent of Bank. 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 or (ii) Collateral Accounts maintained by Foreign Subsidiaries held outside Bank with aggregate balances not to exceed Two Hundred Fifty Thousand Dollars ($250,000) at any time (provided, however, that such amount shall be increased to One Million Five Hundred Thousand Dollars ($1,500,000) upon consummation of the IPO).
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6.9 Financial Covenants. Maintain, on a consolidated basis with respect to Borrower:
(a) Net Revenue. Net Revenue (as determined in accordance with GAAP), measured quarterly on a trailing twelve (12) month basis, of not less than the following amounts as set forth in the table immediately below.
| Quarterly Measuring Period Ending |
Minimum Net Revenue | |||
| March 31, 2014 |
$ | 72,701,000 | ||
| June 30, 2014 |
$ | 76,140,000 | ||
| September 30, 2014 |
$ | 79,204,000 | ||
| December 31, 2014 |
$ | 85,488,000 | ||
| March 31, 2015 |
$ | 92,717,000 | ||
| June 30, 2015 |
$ | 98,275,000 | ||
| September 30, 2015 |
$ | 106,699,000 | ||
| December 31, 2015 |
$ | 116,542,000 | ||
| March 31, 2016 |
$ | 122,835,000 | ||
| June 30, 2016 |
$ | 130,157,000 | ||
| September 30, 2016 |
$ | 137,080,000 | ||
| December 31, 2016 |
$ | 146,306,000 | ||
| March 31, 2017 |
$ | 149,399,000 | ||
| June 30, 2017 |
$ | 152,998,000 | ||
| September 30, 2017 |
$ | 156,401,000 | ||
| December 31, 2017 |
$ | 160,936,000 | ||
6.10 Protection of Intellectual Property Rights. (i) Protect, defend and maintain the validity and enforceability of its material Intellectual Property; (ii) promptly advise Bank in writing of material infringements of its material Intellectual Property; and (iii) not allow any Intellectual Property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Bank’s written consent.
6.11 Litigation Cooperation. From the Effective 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.
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6.12 Formation or Acquisition of Subsidiaries. At the time that Borrower forms any direct or indirect Domestic Subsidiary or acquires any direct or indirect Domestic Subsidiary after the Effective Date, Borrower shall (a) cause such new Subsidiary to provide to Bank either a joinder to the Loan Agreement to cause such Subsidiary to become a co-borrower hereunder or a Guaranty, together with such appropriate financing statements and/or Control Agreements, all in form and substance reasonably satisfactory to Bank (including being sufficient to grant Bank a first priority Lien (subject to Permitted Liens) in and to the assets of such newly formed or acquired Subsidiary (provided, however, that any such new Subsidiary that is a Foreign Subsidiary shall not be required to become a co-borrower or a guarantor hereunder), (b) provide to Bank appropriate certificates and powers and financing statements, pledging all of the direct or beneficial ownership interest in such new Subsidiary, in form and substance reasonably satisfactory to Bank (provided, however, that Borrower shall not be required to grant or pledge a security interest to Bank in more than 65% of the stock, units or other evidence of ownership held by Borrower of any Foreign Subsidiary), and (c) provide to Bank all other documentation in form and substance reasonably satisfactory to Bank. Any document, agreement, or instrument executed or issued pursuant to this Section 6.12 shall be a Loan Document. Notwithstanding the foregoing, so long as (i) Gemstone is merged into Cabochon upon the funding of the Acquisition Term Loan and (ii) Cabochon is merged into Borrower no later than one (1) Business Day after the funding of the Acquisition Term Loan, the foregoing provisions shall not apply to such entities.
6.13 Further Assurances. 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. Deliver to Bank, within five (5) days after the same are sent or received, copies of all correspondence, reports, documents and other filings with any Governmental Authority regarding compliance with or maintenance of Governmental Approvals or Requirements of Law or that could reasonably be expected to have a material effect on any of the Governmental Approvals or otherwise on the operations of Borrower or any of its Subsidiaries.
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without Bank’s prior written consent:
7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively a “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; (c) in connection with Permitted Liens and Permitted Investments; (d) consisting of 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; or (e) as otherwise explicitly permitted in Section 7.3; or (f) of cash or cash equivalents pursuant to transactions not prohibited hereunder.
7.2 Changes in Business, Ownership, Management 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 or such Subsidiary or reasonably related thereto, or enter into any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediately prior to the first such transaction own more than forty nine percent (49%) of the voting stock of Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrower’s equity securities in a public offering or to venture capital investors so long as Borrower identifies to Bank the venture capital investors prior to the closing of the investment).
(b) Without at least thirty (30) days’ prior written notice to Bank: (i) relocate its chief executive office, or add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than Two Hundred Fifty Thousand Dollars ($250,000) in Borrower’s assets or property); provided, however, such amount shall be increased to One Million Two Hundred Fifty Thousand Dollars ($1,250,000), upon consummation of the IPO, (ii) change its jurisdiction of organization, (iii) change its organizational structure or type, (iv) change its legal name, or (v) change any organizational number (if any) assigned by its jurisdiction of organization.
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(c) Replace its CEO or CFO unless a replacement, suitable to Borrower’s board of directors, is appointed within one hundred twenty (120) days of such officer no longer serving in such position with Borrower.
(d) If Borrower intends to deliver (i) any Eligible Inventory or (ii) any portion of the Collateral valued, individually or in the aggregate, in excess of One Hundred Thousand Dollars ($100,000) (provided, however, such amount shall be increased to Five Hundred Thousand Dollars ($500,000) upon consummation of the IPO) to a bailee, and Bank and such bailee are not already parties to a bailee agreement governing both the Collateral and the location to which Borrower intends to deliver the Collateral, then Borrower will (i) with respect to any locations where Eligible Inventory is held, deliver a bailee agreement in form and substance satisfactory to Bank in its reasonable discretion and (ii) with respect to all other locations, use commercially reasonable efforts to obtain and deliver a bailee agreement in form and substance satisfactory to Bank in its reasonable discretion.
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 for (i) the transactions contemplated by the Cabochon Acquisition Documents or (ii) where (a) total consideration including cash and the value of any non-cash consideration, for all such transactions does not in the aggregate exceed Five Hundred Thousand Dollars ($500,000) in any fiscal year of Borrower; provided, however, such amount shall be increased to Two Million Five Hundred Thousand Dollars ($2,500,000) upon consummation of the IPO; (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.
7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its 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, or permit any Collateral not to be subject to the first priority security interest granted herein (other than with respect to Permitted Liens that are permitted to have superior priority to Bank’s Lien), or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s or any Subsidiary’s intellectual property, except as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted Liens” herein.
7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.8(b) hereof.
7.7 Distributions; Investments. (a) 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 Borrower may: (i) convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange thereof; (ii) pay dividends or distributions solely in common stock; (iii) repurchase the stock of employees, directors, officers or consultants pursuant to stock repurchase agreements, existing as of the Effective Date, so long as no Event of Default exists at the time of such repurchase or would exist after giving effect to such repurchase, and provided further such repurchase does not exceed in the aggregate Two Hundred Fifty Thousand Dollars ($250,000) per fiscal year, provided, however, such amount shall be increased to Seven Hundred Fifty Thousand Dollars ($750,000) upon consummation of the IPO; (iv) purchase capital stock or options to acquire such capital stock with the proceeds (provided the amount of such proceeds exceeds the sum of such purchases) received from a substantially concurrent issuance of capital stock or convertible securities provided that such purchases do not in the aggregate exceed Two Hundred Fifty Thousand ($250,000) per fiscal year, provided, however, such amount shall be increased to One Seven Hundred Fifty Thousand Dollars ($750,000) upon consummation of the IPO; (v) make purchases of capital stock in connection with the exercise of stock options or stock appreciation by way of a cashless exercise; (vi) make purchases of fractional shares of capital stock arising out of stock dividends, splits or combinations or business
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combinations; and (vii) upon or after consummation of the IPO, pay a dividend to Borrower’s stockholders in an amount not to exceed Fifteen Million Dollars ($15,000,000).
7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower, except for (a) 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, (b) equity investments in Borrower or Subordinated Debt and (c) compensation related arrangements.
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 owed by Borrower 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, as amended, 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, each 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 material 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 (which three (3) Business Day cure period shall not apply to payments due on the Revolving Line Maturity Date). During the cure period, the failure to make or pay any payment specified under clause (a) or (b) hereunder 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, 6.5, 6.7, 6.8, 6.9 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 or any Loan Documents, and as to any default (other than those specified in this Section 8) 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 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). Cure periods provided under this section shall not apply, among other things, to financial covenants or any other covenants set forth in clause (a) above;
8.3 Material Adverse Change. A Material Adverse Change occurs;
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8.4 Attachment; Levy; Restraint on Business.
(a) (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under the control of Borrower (including a Subsidiary) on deposit or otherwise maintained with Bank or any Bank Affiliate, or (ii) a notice of lien or levy is filed against any of Borrower’s assets by any government agency, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; or
(b) (i) any material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower from conducting any material part of its business;
8.5 Insolvency. (a) 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 forty-five (45) 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. If there is a default in any agreement to which Borrower is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of Two Hundred Fifty Thousand Dollars ($250,000) or that could result in a Material Adverse Change; provided, however, such amount shall be increased to One Million Two Hundred Fifty Thousand Dollars ($1,250,000) upon consummation of the IPO;
8.7 Judgments. One or more judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least Two Hundred Fifty Thousand Dollars ($250,000) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower and shall remain unsatisfied, unvacated, or unstayed for a period of ten (10) days after the entry thereof (provided that no Credit Extensions will be made prior to the satisfaction, vacation, or stay of such judgment, order, or decree); provided, however, such amount shall be increased to Seven Hundred Fifty Thousand Dollars ($750,000) upon consummation of the IPO;
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 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 agreement, intercreditor agreement, or other similar agreement with Bank (other than a breach of such agreement that is caused by Bank), or any creditor that has signed such an agreement with Bank breaches any terms of the agreement; or
8.10 Governmental Approvals. Any Governmental Approval shall have been (a) revoked, rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a full term or (b) subject to any decision by a Governmental Authority that designates a hearing with respect to any applications for renewal of any of such Governmental Approval or that could result in the Governmental Authority taking any of the actions described in clause (a) above, and such decision or such revocation, rescission, suspension, modification or non-renewal (i) has, or could reasonably be expected to have, a Material Adverse Change, or (ii) adversely affects the legal qualifications of Borrower or any of its Subsidiaries to hold such Governmental Approval in any applicable jurisdiction and such revocation, rescission, suspension, modification or non-renewal could reasonably be expected to affect the status of or legal qualifications of Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction.
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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) for any Letters of Credit, demand that Borrower (i) deposit cash with Bank in an amount equal to one hundred five percent (105%) of the Dollar Equivalent of the aggregate face amount of all Letters of Credit remaining undrawn (plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment)), to secure all of the Obligations relating to such Letters of Credit, 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;
(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 in a location as Bank reasonably 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, 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
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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 Bank’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations (other than inchoate indemnity 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 (other than inchoate indemnity obligations) have been fully repaid and performed and Bank’s obligation to provide Credit Extensions terminates.
9.3 Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.7 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 rate applicable to the Obligations, and secured by the Collateral. Bank will make reasonable efforts to provide Borrower with notice of Bank 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.
9.4 Application of Payments and Proceeds. 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 by credit to the Designated Deposit Account or to 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.
9.5 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.
9.6 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 the party granting the waiver 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 shall not preclude Bank from exercising any other remedy under this Agreement or other remedy available at law or in equity, 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.
9.7 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.
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10 NOTICES
All notices, consents, requests, approvals, demands, or other 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 their mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10.
| If to Borrower: |
ULTHERA, INC. 0000 X. Xxxxxxx Xxxx Xxxxx, Xx 00 Xxxx, Xxxxxxx 00000 Attn: Xxxxxxx Xxxxxx, CFO Fax: (000) 000-0000 Email: x.xxxxxx@xxxxxxx.xxx | |
| with a copy (which shall not constitute notice) to: |
Xxxxxx & Xxxxxxx LLP 000 Xxxxx Xxxxx Xxxxx Xxxx, XX 00000 Attn: Xxxx Xxxxxxxxx Fax: (000) 000-0000 Email: xxxx.xxxxxxxxx@xx.xxx
Xxxxxx & Xxxxxxx LLP 000 Xxxxxxxxxx Xx. Xxx. 0000 Xxx Xxxxxxxxx, XX 00000 Attn: Xxxx Xxxxxxxx Fax: (000) 000-0000 Email: xxxx.xxxxxxxx@xx.xxx | |
| If to Bank: |
Silicon Valley Bank 000 Xxxxxxxxxxx Xxxxxxxx Xxxxx 000 Xxxxxxxxxx, XX 00000 Attn: Xxxx Xxxxxxxx Fax: (000) 000-0000 Email: xxxxxxxxx@xxx.xxx | |
11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE
California 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 Santa Xxxxx County, California; 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
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certified mail addressed to Borrower at the address set forth in, or subsequently provided by Borrower in accordance with, 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) Business Days after deposit in the U.S. mails, proper postage prepaid.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, 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.
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Xxxxx County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Xxxxx County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Xxxxx County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.
12 GENERAL PROVISIONS
12.1 Termination Prior to Revolving Line Maturity Date. This Agreement may be terminated prior to the Revolving Line Maturity Date by Borrower, effective three (3) Business Days after written notice of termination is given to Bank and indefeasible repayment in full of all Obligations. Notwithstanding any such termination, Bank’s lien and security interest in the Collateral shall continue until Borrower fully satisfies its Obligations. Borrower may, by written notice to Bank executed by a Person authorized under Borrower’s Borrowing Resolutions, terminate Bank’s obligations to make any further Advances hereunder.
12.2 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 to sell, transfer, assign, negotiate, or grant participation (each, an “assignment”) in all or any part of, or any interest in, Bank’s obligations, rights, and benefits under this Agreement and the other Loan Documents (other than the Warrant, as to which assignment, transfer and other such actions are governed by the terms of the Warrant) if an Event of Default has occurred and is continuing at the time such assignment is to be made or at any time to an Eligible Assignee. No assignment shall be made except in accordance with this Section 12.2, or as otherwise approved in advance in writing by Borrower.
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12.3 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 (each, an “Indemnified Person”) harmless against: (a) all obligations, demands, claims, and liabilities (collectively, “Claims”) claimed or asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or expenses (including Bank Expenses) in any way suffered, incurred, or paid by such Indemnified Person as a result of, following from, consequential to, or arising from transactions between Bank and Borrower (including reasonable attorneys’ fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct.
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 Correction of Loan Documents. Bank may correct patent errors and fill in any blanks in the Loan Documents consistent with the agreement of the parties so long as Bank provides Borrower with written notice of such correction and allows Borrower at least ten (10) days to object to such correction. In the event of such objection, such correction shall not be made except by an amendment signed by both Bank and Borrower.
12.7 Amendments in Writing; Waiver; Integration. No purported amendment or modification of any Loan Document, or waiver, discharge or termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought. Without limiting the generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document. Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver. 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 the Loan Documents merge into the Loan Documents.
12.8 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, is an original, and all taken together, constitute one Agreement.
12.9 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 paid in full and satisfied. Without limiting the foregoing, except as otherwise provided in Section 4.1, the grant of security interest by Borrower in Section 4.1 shall survive until the termination of all Bank Services Agreements. 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.
12.10 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 obtain any prospective transferee’s or purchaser’s agreement to the terms of this provision or an agreement containing provisions substantially the same as those in this Section); (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; (e) as Bank reasonably considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party service providers of Bank so long as such service providers have executed a confidentiality agreement with Bank with terms no less restrictive than those contained herein. Confidential information does not include information that is either: (i) 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) disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information.
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Bank may use confidential information for the development of databases, reporting purposes, and market analysis so long as such confidential information is aggregated and anonymized prior to distribution unless otherwise expressly permitted by Borrower. The provisions of the immediately preceding sentence shall survive the termination of this Agreement.
12.11 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.
12.12 Electronic Execution of Documents. The words “execution,” “signed,” “signature” and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.
12.13 Captions. The headings used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.
12.14 Construction of Agreement. The parties mutually acknowledge that they and their attorneys have participated in the preparation and negotiation of this Agreement. In cases of uncertainty this Agreement shall be construed without regard to which of the parties caused the uncertainty to exist.
12.15 Relationship. The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement. The parties do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties or incidents different from those of parties to an arm’s-length contract.
12.16 Third Parties. Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights or remedies under or by reason of this Agreement on any persons other than the express parties to it and their respective permitted successors and assigns; (b) relieve or discharge the obligation or liability of any person not an express party to this Agreement; or (c) give any person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.
12.17 Effect of Amendment and Restatement. This Agreement amends and restates in its entirety the Original Loan Agreement. Except for the Original Loan Agreement (which is being amended and restated in its entirety by this Agreement), all other Loan Documents (other than the EX-IM LSA and the documents entered into in connection thereto) shall continue in full force and effect and constitute Loan Documents, all security agreements (which shall continue to secure all present and future Obligations), all lockbox agreements and blocked account agreements, all control agreements relating to deposit accounts, securities accounts or other accounts, all warrants to purchase stock or other securities or interests, all investor rights and other agreements relating to stock or securities, and all UCC-1 financing statements and other documents filed with governmental offices which perfect liens or security interests in favor of Bank. References in any such surviving Loan Documents to “Loan Agreement” shall be deemed to refer to this Agreement instead of the Original Loan Agreement. Except as otherwise set forth herein, this Agreement is intended to and does completely amend and restate, without novation, the Original Loan Agreement. All security interests granted under the Original Loan Agreement are hereby confirmed and ratified and shall continue to secure all Obligations under this Agreement. Bank and Borrower hereby agree that upon execution hereof the EX-IM LSA and the documents entered into in connection therewith shall be deemed to be terminated and no longer of any force and effect
12.18 Termination. Upon (a) the payment in full in cash of the Obligations (other than inchoate indemnity obligations or obligations which by their terms specifically survive terminations) and (b) Bank having no further obligations to make any Advances or the Term Loans (including by reason of Borrower cancelling Bank’s obligation to make Advances or the Term Loans pursuant to the following sentence), this Agreement shall terminate except for any of Borrower’s obligations that specifically survive termination pursuant to the terms hereof. Borrower may, by written notice to Bank executed by a Person authorized under Borrower’s Borrowing Resolutions, terminate Bank’s obligations to make any further Advances or the Term Loans hereunder.
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13 DEFINITIONS
13.1 Definitions. As used in the Loan Documents, the word “shall” is mandatory, the word “may” is permissive, the word “or” is not exclusive, the words “includes” and “including” are not limiting, the singular includes the plural, and numbers denoting amounts that are set off in brackets are negative. As used in this Agreement, the following capitalized 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.
“Acquisition Term Loan” is defined in Section 2.1.3(a).
“Acquisition Term Loan Maturity Date” is the date that is the first (1st) day of the month that is forty-two (42) months from the Funding Date of the Acquisition Term Loan.
“Acquisition Term Loan Prepayment Fee” means an additional fee payable to Bank in amount equal to (i) three percent (3.00%) of the principal amount of Acquisition Term Loan prepaid if the prepayment occurs on or prior to the first anniversary of the Funding Date of Acquisition Term Loan, (ii) two percent (2.00%) of the principal amount of Acquisition Term Loan prepaid if the prepayment occurs after the first anniversary of the Funding Date of Acquisition Term Loan but on or prior to the second anniversary of the Funding Date of Acquisition Term Loan, or (iii) one percent (1.00%) of the principal amount of Acquisition Term Loan prepaid if the prepayment occurs after the second anniversary of the Funding Date of Acquisition Term Loan but prior to the Acquisition Term Loan Maturity Date.
“Advance” or “Advances” means an advance (or advances) under the Revolving Line.
“Affiliate” is, with respect to any Person, each other 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.
“Applicable Margin” is (i) one percent (1.00%) at all times when Borrower is Streamline Facility Eligible or (ii) one and one half percent (1.50%) at all times when Borrower is not Streamline Facility Eligible.
“Availability Amount” is the lesser of (i) the Revolving Line or (ii) the amount available under the Borrowing Base minus the outstanding principal balance of, without duplication, any Advances.
“Bank” is defined in the preamble hereof.
“Bank Expenses” are all reasonable audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses) for preparing, amending, 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.
“Bank Services” are any products, credit services, and/or financial accommodations previously, now, or hereafter provided to Borrower or any of its Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash management services (including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check cashing services), interest rate swap arrangements, and foreign exchange services as any such products or services may be identified in Bank’s various agreements related thereto (each, a “Bank Services Agreement”).
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“Borrower’s Books” are all of 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 (i) eighty percent (80%) of Eligible Accounts (other than Eligible Foreign Accounts), plus (ii) the lesser of (X) seventy percent (70%) of Eligible Foreign Accounts or (Y) Five Million Dollars ($5,000,000), plus (iii) the lesser of (X) thirty percent (30%) of the value of Borrower’s Eligible Inventory (valued at the lower of cost or wholesale fair market value) or (Y) One Million Five Hundred Thousand Dollars ($1,500,000), each as determined by Bank from Borrower’s most recent Transaction Report; 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 the Collateral.
“Borrowing Resolutions” are, with respect to any Person, those resolutions substantially in the form attached hereto as Exhibit E.
“Business Day” is any day that is not a Saturday, Sunday or a day on which Bank is closed.
“Cabochon” means Cabochon Aesthetics, Inc., a Delaware corporation.
“Cabochon Acquisition’ means the acquisition by Borrower of one hundred percent (100%) of the issued and outstanding equity securities of Cabochon pursuant to the Cabochon Acquisition Documents.
“Cabochon Acquisition Documents” means that certain Agreement and Plan of Merger entered into as of January 24, 2014 by and among Borrower, Cabochon Aesthetics, Inc., Gemstone Merger Corporation and Xxx Xxxxx, as Stockholders’ Representatives, and any other documents, instruments, certificates and/or agreements necessary or related to, and/or executed in connection therewith.
“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; (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; and (e) Investments pursuant to an investment policy, if any, adopted by Borrower’s board of directors, provided that such investment policy (and any such amendment thereto) has been provided by Borrower to Bank and approved in writing by Bank.
“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; 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 of 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.
“Compliance Certificate” is that certain certificate in the form attached hereto as Exhibit C.
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“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, in each case, 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.
“Copyrights” are any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.
“Credit Extension” is any Advance, Existing Term Loan, Acquisition Term Loan or any other extension of credit by Bank for Borrower’s benefit under this Agreement.
“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, in accordance with GAAP.
“Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.
“Designated Deposit Account” is Borrower’s deposit account at Bank, which has an account number with the last four digits 6841, maintained with Bank.
“Dollars,” “dollars” or use of the sign “$” means only lawful money of the United States and not any other currency, regardless of whether that currency uses the “$” sign to denote its currency or may be readily converted into lawful money of the United States.
“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the country issuing such Foreign Currency.
“Domestic Subsidiary” means a Subsidiary organized under the laws of the United States or any state or territory thereof or the District of Columbia.
“Effective Date” is defined in the preamble hereof.
“Eligible Assignee” is (A) any commercial bank, insurance company, investment or mutual fund or other entity that is an “accredited investor” (as defined in Regulation D under the Securities Act) and which extends credit or buys loans as one of its businesses and (i) has at least $500,000,000 of Tier 1 Capital and a Credit Rating of at least A1/P1 or equivalent or single A or equivalent, (ii) is not a vulture fund or distressed debt fund as reasonably determined by Bank and (iii) is not a competitor of Borrower as reasonably determined by Borrower or (B) a Federal Reserve Bank; provided that neither Borrower nor any Subsidiary of Borrower shall be an Eligible Assignee.
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“Eligible Accounts” means 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 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 otherwise agrees in writing, Eligible Accounts shall not include:
(a) Accounts that the Account Debtor has not paid within one hundred twenty (120) days of invoice date regardless of invoice payment period terms;
(b) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose Accounts have not been paid within one hundred twenty (120) days of invoice date;
(c) Accounts owing from an Account Debtor which does not have its principal place of business in the United States or Canada, except for Eligible Foreign Accounts;
(d) Accounts billed and/or payable outside of the United States or Canada;
(e) 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, and to the extent of such indebtedness;
(f) Accounts for which the Account Debtor is Borrower’s Affiliate, officer, employee, or agent;
(g) Accounts with credit balances over one hundred twenty (120) days from invoice date;
(h) Accounts owing from an Account Debtor which is a United States government entity or any department, agency, or instrumentality thereof unless Borrower has assigned its payment rights to Bank and the assignment has been acknowledged under the Federal Assignment of Claims Act of 1940, as amended;
(i) Accounts for demonstration or promotional equipment, or in which goods are consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on approval”, or other terms if Account Debtor’s payment may be conditional;
(j) Accounts owing from an Account Debtor where goods or services have not yet been rendered to the Account Debtor (sometimes called memo xxxxxxxx or pre-xxxxxxxx);
(k) Accounts subject to contractual arrangements between Borrower and an Account Debtor where payments shall be scheduled or due according to completion or fulfillment requirements where the Account Debtor has a right of offset for damages suffered as a result of Borrower’s failure to perform in accordance with the contract (sometimes called contracts accounts receivable, progress xxxxxxxx, milestone xxxxxxxx, or fulfillment contracts, but only to the extent of such offset);
(l) Accounts owing from an Account Debtor the amount of which may be subject to withholding based on the Account Debtor’s satisfaction of Borrower’s complete performance (but only to the extent of the amount withheld; sometimes called retainage xxxxxxxx);
(m) Accounts subject to trust provisions, subrogation rights of a bonding company, or a statutory trust;
(n) Accounts owing from an Account Debtor that has been invoiced for goods that have not been shipped to the Account Debtor unless Bank, Borrower, and the Account Debtor have entered into an agreement acceptable to Bank in its sole discretion wherein the Account Debtor acknowledges that (i) it has title to and has
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ownership of the goods wherever located, (ii) a bona fide sale of the goods has occurred, and (iii) it owes payment for such goods in accordance with invoices from Borrower (sometimes called “xxxx and hold” accounts);
(o) Accounts for which the Account Debtor has not been invoiced;
(p) Accounts that represent non-trade receivables or that are derived by means other than in the ordinary course of Borrower’s business;
(q) Accounts for which Borrower has permitted Account Debtor’s payment to extend beyond one hundred twenty (120) days;
(r) Accounts subject to chargebacks or others payment deductions taken by an Account Debtor, but only to the extent of such chargeback or deduction;
(s) 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, except as approved by Bank in writing;
(t) Accounts owing from an Account Debtor with respect to which Borrower has received Deferred Revenue other than warranties sold to customers in the ordinary course of business (but only to the extent of such Deferred Revenue) unless Bank approves in writing, such approval not to be unreasonably withheld or delayed;
(u) Accounts owing from an Account Debtor, whose total obligations to Borrower exceed twenty-five percent (25%) of all Accounts, for the amounts that exceed that percentage, unless Bank approves in writing, such approval not to be unreasonably withheld or delayed; and
(v) Accounts for which Bank in its good faith business judgment determines collection to be doubtful.
“Eligible Foreign Accounts” means Accounts arising in the ordinary course of Borrower’s business from Account Debtors located outside of the United States or Canada and that meet all Borrower’s representations and warranties in Section 5.3 and either (a) are supported by letter(s) of credit acceptable to Bank or (b) that Bank approves in writing, such approval not to be unreasonably withheld or delayed. Eligible Foreign Accounts shall not include any Account:
(a) that does not arise from the sale of Items (as defined in the EX-IM Borrower Agreement) in the ordinary course of Borrower’s business;
(b) that is not subject to a valid, perfected, and enforceable first priority security interest in favor of Bank;
(c) as to which any covenant, representation or warranty contained in the Loan Documents relating to such Account has been breached;
(d) that is not owned by Borrower or is subject to any right, claim, or interest of another party other than the Lien in favor of Bank;
(e) with respect to which an invoice has not been sent;
(f) generated by the sale or provision of defense articles or services, subject to exceptions approved in writing by Bank, such approval not to be unreasonably withheld or delayed;
(g) that is due and payable from a military Buyer (as defined in the EX-IM Borrower Agreement), subject to exceptions approved in writing by Bank, such approval not to be unreasonably withheld or delayed;
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(h) that is due and payable from a foreign Buyer (as defined in the EX-IM Borrower Agreement) located in a country with which the Export-Import Bank of the United States is legally prohibited from doing business as set forth in the current Country Limitation Schedule (as defined in the EX-IM Borrower Agreement) . (Note: If Borrower has knowledge that an export to a country in which the Export-Import Bank of the United States Bank may do business, as set forth in the current Country Limitation Schedule, will be re-exported to a country with which the Export-Import Bank of the United States is legally prohibited from doing business, the corresponding receivables (or a pro-rata portion thereof equal to the value of Items (as defined in the EX-IM Borrower Agreement) re-exported to such prohibit country are not Eligible Foreign Accounts);
(i) that does not comply with the requirements of the Country Limitation Schedule (as defined in the EX-IM Borrower Agreement);
(j) that by its original terms is due and payable more than one hundred twenty (120) days from the date of invoice;
(k) that is not paid within ninety (90) calendar days from its original due date;
(l) that arises from a sale of goods to or performance of services for an employee, stockholder, or subsidiary of Borrower, intra-company receivables or any receivable from a stockholder, any person or entity with a controlling interest in Borrower or which shares common controlling ownership with Borrower;
(m) that is backed by a letter of credit where all of the Items (as defined in the EX-IM Borrower Agreement) covered by the subject letter of credit have not yet been shipped, or where all of the covered services have not yet provided;
(n) that Bank, in its reasonable judgment, deems uncollectible or unacceptable; this category includes, but is not limited to, finance charges or late charges imposed on the foreign buyer by Borrower as a result of the foreign buyer’s past due status;
(o) that is denominated in non-U.S. currency (unless converted into Dollars), unless pre-approved in writing by Bank;
(p) that does not comply with the terms of sale as set forth by the Export-Import Bank of the United States;
(q) that is due and payable from a Buyer (as defined in the EX-IM Borrower Agreement) who becomes unable to pay its debts or whose ability to pay its debts becomes questionable;
(r) that arises from a xxxx-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment, or any other repurchase or return basis or is evidenced by chattel paper;
(s) for which the Items (as defined in the EX-IM Borrower Agreement) giving rise to such Accounts Receivable have not been shipped to the Buyer or when the Items are services, such services have not been performed or when the Export Order (as defined in the EX-IM Borrower Agreement) specifies a timing for invoicing the Items other than shipment or performance and the Items have not been invoiced in accordance with such terms of the Export Order (as defined in the EX-IM Borrower Agreement) , or the Accounts Receivable do not otherwise represent a final sale;
(t) that is subject to any offset, deduction, defense, dispute, or counterclaim, or the Buyer is also a creditor or supplier of Borrower, or the Account Receivable is contingent in any respect or for any reason;
(u) for which Borrower has made any agreement with the Buyer (as defined in the EX-IM Borrower Agreement) for any deduction therefrom, except for discounts or allowances made in the ordinary course of business for prompt payment;
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(v) for which any of the Items (as defined in the EX-IM Borrower Agreement) giving rise to such Account Receivable have been returned, rejected, or repossessed;
(w) that arises from the sale of Items (as defined in the EX-IM Borrower Agreement) that do not meet 50% U.S. Content requirements;
(x) that Bank determines would be deemed ineligible by the Export-Import Bank of the United States.
Bank reserves the right at any time after the Effective Date to adjust the foregoing in its good faith business judgment and establish new criteria to determine the foregoing.
“Eligible Inventory” means Inventory that meets all of Borrower’s representations and warranties in Section 5.3 and is otherwise reasonably acceptable to Bank in all respects.
“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 Employee Retirement Income Security Act of 1974, and its regulations.
“Event of Default” is defined in Section 8.
“Exchange Act” is the Securities Exchange Act of 1934, as amended.
“EX-IM Borrower Agreement” means that certain Borrower Agreement executed by Borrower as of July 27, 2012 in favor of Bank and the EX-IM Bank in connection with the Ex-IM LSA.
“EX-IM LSA” means that certain Amended and Restated Loan and Security Agreement (EX-IM Loan Facility) executed by Borrower and Bank as of July 27, 2012.
“Existing Term Loans” is defined in Section 2.1.2(a) hereof.
“Existing Term Loan Final Payment” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) due on the earliest to occur of (a) the Existing Term Loan Maturity Date (as applicable), or (b) the acceleration of the Existing Term Loans, or (c) the prepayment of the Existing Term Loans, equal to Twenty Thousand Dollars ($20,000).
“Existing Term Loan Maturity Date” is June 1, 2016.
“Existing Term Loan Prepayment Fee” means (i) with respect to any Existing Term Loan subject to prepayment prior to the Existing Term Loan Maturity Date, whether by mandatory or voluntary prepayment, acceleration or otherwise, an additional fee payable to Bank in amount equal to (i) two percent (2.00%) of the principal amount of the Existing Term Loans prepaid if the prepayment occurs on or prior to July 27, 2013 or (ii) one percent (1.00%) of the principal amount of the Existing Term Loans prepaid if the prepayment occurs after July 27, 2013 but prior to the Existing Term Loan Maturity Date.
“Federal Reserve Bank” is any bank organized under the Federal Reserve System of the United States.
“Foreign Currency” means lawful money of a country other than the United States.
“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.
“Funding Date” is any date on which a Credit Extension is made to or for the account of Borrower which shall be a Business Day.
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“FX Contract” is any foreign exchange contract by and between Borrower and Bank under which Borrower commits to purchase from or sell to Bank a specific amount of Foreign Currency on a specified date.
“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.
“Gemstone” means Gemstone Merger Corporation, a Delaware corporation
“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 Intellectual Property, claims, income and other tax refunds, security and other deposits, payment intangibles, contract rights, 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.
“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
“Governmental Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
“Guarantor” is any present or future guarantor of the Obligations.
“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.
“Indemnified Person” is defined in Section 12.3.
“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.
“Intellectual Property” means all of Borrower’s right, title, and interest in and to the following:
(a) its Copyrights, Trademarks and Patents;
(b) any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how, operating manuals;
(c) any and all source code;
(d) any and all design rights which may be available to Borrower;
(e) any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to xxx for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and
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(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.
“Interest Only End Date” means the date that is twelve (12) months after the Funding Date of the Acquisition Term Loan.
“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.
“IPO” means the initial public offering of Borrower’s equity securities on a nationally recognized exchange with net proceeds to Borrower of not less than Sixty Million Dollars ($60,000,000).
“Letter of Credit” is a standby or commercial letter of credit issued by Bank upon request of Borrower based upon an application, guarantee, indemnity, or similar agreement.
“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.
“Liquidity Ratio” is a ratio of (i) the sum of (a) the aggregate amount of unrestricted cash and Cash Equivalents held at such time by Borrower and its Subsidiaries at Bank or Bank’s Affiliates (and subject to a Control Agreement) and (b) Eligible Accounts to (ii) all of Borrower’s Indebtedness to Bank under the Revolving Line.
“Loan Documents” are, collectively, this Agreement, the Perfection Certificate, any Bank Services Agreement, any subordination agreement, any note, or notes or guaranties executed by Borrower or any Guarantor, and any other present or future agreement between Borrower and any Guarantor and/or for the benefit of Bank, all as amended, restated, or otherwise modified; provided, however, “Loan Documents” does not include any warrants or other equity securities issued by Borrower to Bank or Bank’s Affiliates.
“Material Adverse Change” (a) a material impairment in the perfection or priority of Bank’s security interest in the Collateral or in the value of such Collateral; (b) a material change in the nature of the line of business of the Borrower; or (c) a material impairment of the prospect of repayment of any portion of the Obligations. In determining whether a “Material Adverse Change” has occurred under clause (b) or (c) above, Bank’s primary, though not sole, consideration will be whether Borrower has or will have sufficient cash resources to repay the Obligations as and when due. Bank recognizes that, as a pre-profit company, Borrower’s cash resources will decline over time, and Borrower will periodically require additional infusions of equity capital. The clear intention of Borrower’s investors to continue to fund Borrower in the amounts and timeframe necessary, in Bank’s good faith judgment, to enable Borrower to satisfy the Obligations as they become due and payable is the most significant criterion Bank shall consider in making any such determination.
“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 other Loan Documents, or otherwise, including, without limitation, any 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; provided, however, “Obligations” does not include any obligations relating to warrants or other equity securities issued by Borrower to Bank or Bank’s Affiliates.
“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
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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.
“Overadvance” is defined in Section 2.2.
“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
“Payment” means all checks, wire transfers and other items of payment received by Bank (including proceeds of Accounts and payment of the Obligations in full) for credit to Borrower’s outstanding Credit Extensions or, if the balance of the Credit Extensions has been reduced to zero, for credit to its deposit accounts.
“Perfection Certificate” is defined in Section 5.1.
“Permitted Indebtedness” is:
(a) Borrower’s indebtedness to Bank under this Agreement or the Loan Documents;
(b) Subordinated Debt;
(c) Indebtedness to trade creditors incurred in the ordinary course of business;
(d) Indebtedness secured by Permitted Liens;
(e) Indebtedness existing on the Effective Date and shown on the Perfection Certificate;
(f) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;
(g) Unsecured Indebtedness not otherwise permitted by Section 7.4, not exceeding Two Hundred Fifty Thousand Dollars ($250,000) in any fiscal year of Borrower (provided, however, such amount shall be increased to One Million Two Hundred Fifty Thousand Dollars ($1,250,000) upon consummation of the IPO);
(h) (i) Indebtedness of Borrower to any Subsidiary incurred in the ordinary course of business in an aggregate amount not to exceed Fifty Thousand Dollars ($50,000) (provided, however, such amount shall be increased to Two Hundred Fifty Thousand Dollars ($250,000) upon consummation of the IPO); (ii) Contingent Obligations of any Subsidiary with respect to obligations of Borrower (provided that the primary obligations are not prohibited hereby); (iii) Indebtedness of any Subsidiary to Borrower in an aggregate principal amount not to exceed Fifty Thousand Dollars ($50,000) or any other Subsidiary (provided, however, such amount shall be increased to Two Hundred Fifty Thousand Dollars ($250,000) upon consummation of the IPO); and (iv) Contingent Obligations of any Subsidiary with respect to obligations of any other Subsidiary (provided that the primary obligations are not prohibited hereby); and
(i) Extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (h) of this Section, 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) marketable direct obligations issued or unconditionally guaranteed by the United States or its agency or any state maturing within one (1) year from its acquisition, (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Corporation or
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Xxxxx’x Investors Service, Inc., (c) Bank’s certificates of deposit issued maturing no more than one (1) year after issue, and (d) any other investments administered through Bank.
(b) Investments (including, without limitation, Subsidiaries) existing on the Effective Date and shown on the Perfection Certificate;
(c) (i) Investments consisting of Cash Equivalents, and (ii) any Investments permitted by Borrower’s investment policy, if any, as amended from time to time, provided that such investment policy (and any such amendment thereto) has been approved by Bank;
(d) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;
(e) Investments consisting of deposit accounts or securities accounts in which Bank has a perfected security interest;
(f) Investments consisting of the creation of Gemstone provided that such entity shall be merged into Cabochon upon funding of the Acquisition Term Loan;
(g) Investments accepted in connection with Transfers permitted by Section 7.1;
(h) Investments (i) by Borrower in Subsidiaries not to exceed Five Hundred Thousand Dollars ($500,000) in the aggregate in any fiscal year (provided, however, such amount shall be increased to Two Million Five Hundred Thousand Dollars ($2,500,000) upon consummation of the IPO), and (ii) by Subsidiaries in other Subsidiaries or in Borrower;
(i) 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;
(j) 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;
(k) 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 (i) shall not apply to Investments of Borrower in any Subsidiary;
(l) Investments in an aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate in any fiscal year (provided, however, such amount shall be increased to One Million Two Hundred Fifty Thousand Dollars ($1,250,000) upon consummation of the IPO), consisting of cash investments by Borrower in connection with joint ventures or strategic alliances or collaboration of Borrower or a Subsidiary in the ordinary course of Borrower’s or such Subsidiary’s business, consisting of the licensing of technology pursuant to license agreements permitted under this Agreement, the development of technology or the providing of technical support;
(m) Investments of any Subsidiary in Borrower; and
(n) Investments in Cabochon in an aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000).
35
“Permitted Liens” are:
(a) Liens existing on the Effective Date and shown on the Perfection Certificate or arising under this Agreement or 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 security interests;
(c) Purchase money Liens securing no more than Two Hundred Fifty Thousand Dollars ($250,000) (provided, however, such amount shall be increased to One Million Two Hundred Fifty Thousand Dollars ($1,250,000) upon consummation of the IPO) in the aggregate amount outstanding (i) on equipment acquired or held by Borrower incurred for financing the acquisition of the equipment, or (ii) existing on equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the equipment;
(d) Leases or subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), and leases or subleases and licenses or sublicenses of personal property granted in the ordinary course of Borrower’s business, if (i) the leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest, and (ii) any exclusive license or sublicense could not result in a legal transfer of title of the licensed property; and
(e) Licenses permitted under Section 7.1;
(f) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (d), 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;
(g) Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory, and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;
(h) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);
(i) Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections 8.4 and 8.7;
(j) Liens in favor of other financial institutions arising in connection with Borrower’s deposit and/or securities accounts held at such institutions, provided that Bank has a perfected security interest in the amounts held in such deposit and/or securities accounts to the extent required by Section 6.8; and
(k) Liens securing Subordinated Debt.
“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 the Prime Rate published in the Money Rates section of the Western Edition of The Wall Street Journal, provided however, if such rate becomes unavailable, there after the “Prime Rate” is Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest rate.
“Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made
36
“Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Reserves” means, as of any date of determination, such amounts as Bank may from time to time establish and revise in its good faith business judgment, reducing the amount of Advances and other financial accommodations which would otherwise be available to Borrower (a) to reflect events, conditions, contingencies or risks which, as determined by Bank in its good faith business judgment, do or may adversely affect (i) the Collateral or any other property which is security for the Obligations or its value (including without limitation any increase in delinquencies of Accounts), (ii) the assets, business or prospects of Borrower or any Guarantor, or (iii) the security interests and other rights of Bank in the Collateral (including the enforceability, perfection and priority thereof); or (b) to reflect Bank’s good faith belief that any collateral report or financial information furnished by or on behalf of Borrower or any Guarantor to Bank is or may have been incomplete, inaccurate or misleading in any material respect; or (c) in respect of any state of facts which Bank determines in good faith constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default.
“Responsible Officer” is any of the Chief Executive Officer, President, Chief Financial Officer and Controller of Borrower.
“Restricted License” is any material license or other agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with the Bank’s right to sell any Collateral.
“Revolving Line” is an Advance or Advances in an amount equal to Ten Million Dollars ($10,000,000)
“Revolving Line Maturity Date” is January 24, 2017.
“SEC” shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority.
“Securities Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made.
“Streamline Facility Eligible” means, as of any day during any Subject Month, Borrower has provided evidence to Bank at the end of the Subject Month that it (a) had a Liquidity Ratio of at least 1.50 to 1.00 at all times during the prior two (2) applicable Testing Months, and (b) has a Liquidity Ratio of at least 1.50 to 1.00 on such day. In addition, upon the occurrence of an Event of Default that is continuing, Borrower shall immediately cease to be Streamline Facility Eligible.
“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 reasonably satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank.
“Subsidiary” is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of Borrower.
37
“Subject Month” is the month on which the Liquidity Ratio is being measured (i.e. March is the “Subject Month” for the March 31st Liquidity Ratio measurement).
“Testing Month” is any Subject Month and the month immediately prior to the Subject Month.
“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.
“Transaction Report” is that certain report of transactions and schedule of collections in the form attached hereto as Exhibit D.
“Transfer” is defined in Section 7.1.
“Unused Revolving Line Facility Fee” is defined in Section 2.4(c).
[Signature page follows.]
38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.
| BORROWER:
ULTHERA, INC. | ||
| By |
/s/ Xxxx Xxxxxx | |
| Name: |
Xxxx Xxxxxx | |
| Title |
Chief Financial Officer | |
| BANK:
SILICON VALLEY BANK | ||
| By |
/s/ Chase Little | |
| Name: |
Chase Little | |
| Title: |
Vice President | |
[Signature Page to Second Amended and Restated Loan and Security Agreement]
39
EXHIBIT A – COLLATERAL DESCRIPTION
The Collateral consists of all of Borrower’s right, title and interest in and to the following:
All goods, equipment, inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, general intangibles (including payment intangibles) accounts (including health-care receivables), 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), commercial tort claims, securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and any copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, now owned or later acquired; any patents, trademarks, service marks and applications therefor; trade styles, trade names, any trade secret rights, including any rights to unpatented inventions, know-how, operating manuals, license rights and agreements and confidential information, now owned or hereafter acquired; or any claims for damages by way of any past, present and future infringement of any of the foregoing; 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 shall not be deemed to include (i) more than 65% of the presently existing and hereafter arising issued and outstanding shares of capital stock owned by Borrower or any Subsidiary of any Foreign Subsidiary which shares entitle the holder thereof to vote for directors or any other matter, (ii) any copyrights (including computer programs, blueprints and drawings), copyright applications, copyright registration and like protection in each work of authorship and derivative work thereof, whether published or unpublished, now owned or hereafter acquired; any design rights; any patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same, trademarks, servicemarks and applications therefor, whether registered or not, except that 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, or (iii) any interest of Borrower as a lessee or licensee under a lease, license, sublicense or any agreement if Borrower is prohibited by the terms of such lease, license, sublicense or agreement from granting a security interest in such interest (and such prohibition is legally enforceable) or under which such an assignment or Lien would cause a legally enforceable default to occur under such lease, license, sublicense or any agreement.
Borrower and Bank are parties to that certain negative pledge arrangement whereby Borrower, in connection with Bank’s loan(s) to Borrower, has agreed not to sell, transfer, assign, mortgage, pledge, lease grant a security interest in, or encumber any of its intellectual property without Bank’s prior written consent.
1
EXHIBIT B – LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS NOON PACIFIC TIME*
| Fax To: |
Date: |
| LOAN PAYMENT: | ||||||||
| ULTHERA, INC. | ||||||||
| From Account # | To Account | |||||||
| (Deposit Account #) | (Loan Account #) | |||||||
| Principal $ | and/or Interest $ | |||||||
| Authorized Signature: | Phone Number: | |||||||
| Print Name/Title: | ||||||||
| LOAN ADVANCE: | ||||||||
| Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an outgoing wire. | ||||||||
| From Account # | To Account | |||||||
| (Loan Account #) | (Deposit Account #) | |||||||
| Borrower’s representations and warranties in the Second Amended and Restated Loan and Security Agreement are true, correct and complete in all material respects on the date of the request for an advance; 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: | ||||||||
| Authorized Signature: | Phone Number: | |||||||
| Print Name/Title: | ||||||||
| OUTGOING WIRE REQUEST: | ||||||||
| Complete only if all or a portion of funds from the loan advance above is to be wired. | ||||||||
| Deadline for same day processing is noon, Pacific Time | ||||||||
| Beneficiary Name: | Amount of Wire: $ | |||||||
| Beneficiary Bank: | Account Number: | |||||||
| City and State: | ||||||||
| Beneficiary Bank Transit (ABA) #: | Beneficiary Bank Code (Swift, Sort, Chip, etc.): | |||||||
| (For International Wire Only) | ||||||||
| Intermediary Bank: | Transit (ABA) #: | |||||||
| For Further Credit to: | ||||||||
| Special Instruction: | ||||||||
| By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreements(s) covering funds transfer service(s), which agreements(s) were previously received and executed by me (us). | ||||||||
| Authorized Signature: | 2nd Signature (if required): | |||||||
| Print Name/Title: | Print Name/Title: | |||||||
| Telephone #: | Telephone #: | |||||||
| * | Unless otherwise provided for an Advance bearing interest at LIBOR. |
1
EXHIBIT C
COMPLIANCE CERTIFICATE
| TO: SILICON VALLEY BANK FROM: ULTHERA, INC. |
Date: |
The undersigned authorized officer of ULTHERA, INC. (“Borrower”) certifies, on behalf of Borrower (in his or her role as an authorized officer of Borrower and not in his or her individual capacity), that under the terms and conditions of the Second Amended and Restated Loan and Security Agreement between Borrower and Bank (the “Agreement”):
(1) Borrower is in complete compliance for the period ending with all required covenants except as noted below; (2) there are no Events of Default; (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; 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; (4) Borrower, and each of its Subsidiaries, 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 except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement; and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.
Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No under “Complies” column.
| Reporting Covenant |
Required |
Complies | ||
| Monthly financial statements with Compliance Certificate |
Monthly within 30 days |
Yes No | ||
| Annual financial statement (CPA Audited) |
FYE within 180 days |
Yes No | ||
| 10 Q, 10 K and 8-K |
Within 5 days after filing with SEC |
Yes No | ||
| A/R & A/P Agings, Inventory Reports |
Monthly within 30 days if Advances outstanding |
Yes No | ||
| Deferred Revenue Report |
Monthly within 30 days |
Yes No | ||
| Transaction Report |
Monthly within 30 days (on Streamline) or Weekly (off Streamline) and with each request for an Advance |
Yes No | ||
| Annual Projections |
Within 15 days from approval or 2/15 of each year |
Yes No | ||
| 409A Valuation Reports |
Annually, within 30 days of completion* |
Yes No | ||
| * | not required upon IPO and provided that Borrower’s equity securities continue to be traded on a nationally recognized securities exchange |
Notwithstanding the foregoing, upon consummation of the IPO and so long as no Advances are outstanding, all monthly reporting requirements shall be due quarterly within forty five (45) days of the end of each calendar quarter
| Financial Covenant |
Required | Actual | Complies | |||||
| Minimum Revenue to Plan |
See Section 6.9(a) | $ | Yes No | |||||
| Streamline Eligibility |
Applies | |||
| Liquidity Ratio greater than or equal to 1.50 to 1.00 at all times during past 2 consecutive months? |
Streamline Facility Eligible |
Yes No | ||
| Liquidity Ratio less than 1.50 to 1.00 at all times during past 2 consecutive months |
Not Streamline Facility Eligible |
Yes No | ||
The following financial covenant analysis and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.
The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)
| ULTHERA, INC. | BANK USE ONLY | |||||||
| By: |
|
Received by: | ||||||
| Name: |
|
AUTHORIZED SIGNER | ||||||
| Title: | Date: |
| ||||||
|
|
Verified: |
| ||||||
| AUTHORIZED SIGNER | ||||||||
| Date: |
| |||||||
| Compliance Status: | Yes No | |||||||
Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.
Dated:
| I. | Liquidity Ratio (for Streamline Calculation) |
Required: 1.50:1.00
Actual:
| A. | Aggregate amount of unrestricted cash and Cash Equivalents of Borrower at Bank and Bank’s Affiliates | $ | ||||
| B. | Aggregate amount of Eligible Accounts | $ | ||||
| C. | Aggregate value of Obligations to Bank with respect to the Revolving Line | $ | ||||
| D. | Liquidity Ratio (line A plus line B, divided by line C) | __________ | ||||
| Is line D equal to or greater than 1.50:1:00? | __________ | |||||
| No, not Streamline Facility Eligible |
Yes, Streamline Facility Eligible |
4
EXHIBIT D
Transaction Report
[EXCEL spreadsheet to be provided separately from lending officer.]
5
EXHIBIT E
BORROWING RESOLUTIONS
CORPORATE BORROWING CERTIFICATE
| BORROWER: ULTHERA, INC. BANK: Silicon Valley Bank |
DATE: January 24, 2014 |
I hereby certify as follows, as of the date set forth above:
1. I am the Secretary, Assistant Secretary or other officer of the Borrower. My title is as set forth below.
2. Borrower’s exact legal name is set forth above. Borrower is a corporation existing under the laws of the State of Delaware.
3. Attached hereto are true, correct and complete copies of Borrower’s Articles/Certificate of Incorporation (including amendments), as filed with the Secretary of State of the state in which Borrower is incorporated as set forth in paragraph 2 above. Such Articles/Certificate of Incorporation have not been amended, annulled, rescinded, revoked or supplemented, and remain in full force and effect as of the date hereof.
4. The following resolutions were duly and validly adopted by Borrower’s Board of Directors at a duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized corporate action). Such resolutions are in full force and effect as of the date hereof and have not been in any way modified, repealed, rescinded, amended or revoked, and Bank may rely on them until Bank receives written notice of revocation from Borrower.
RESOLVED, that any one of the following officers or employees of Borrower, whose names, titles and signatures are below, may act on behalf of Borrower.
| Name |
Title |
Signature |
Authorized to Add or Remove | |||
|
|
|
|
¨ | |||
|
|
|
|
¨ | |||
|
|
|
|
¨ | |||
|
|
|
|
¨ |
RESOLVED FURTHER, that any one of the persons designated above with a checked box beside his or her name may, from time to time, add or remove any individuals to and from the above list of persons authorized to act on behalf of Borrower.
RESOLVED FURTHER, that such individuals may, on behalf of Borrower:
Borrow Money. Borrow money from Silicon Valley Bank (“Bank”).
Execute Loan Documents. Execute any loan documents Bank requires.
Grant Security. Grant Bank a security interest in any of Borrower’s assets.
6
Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory notes, or other indebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds.
Letters of Credit. Apply for letters of credit from Bank.
Foreign Exchange Contracts. Execute spot or forward foreign exchange contracts.
Further Acts. Designate other individuals to request advances, pay fees and costs and execute other documents or agreements (including documents or agreements that waive Borrower’s right to a jury trial) they believe to be necessary to effectuate such resolutions.
RESOLVED FURTHER, that all acts authorized by the above resolutions and any prior acts relating thereto are ratified.
5. The persons listed above are Borrower’s officers or employees with their titles and signatures shown next to their names.
| ULTHERA, INC. | ||
| By: | ||
| Name: |
| |
| Title: |
| |
*** If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set forth in paragraph 4 as one of the authorized signing officers, this Certificate must also be signed by a second authorized officer or director of Borrower.
I, the of Borrower, hereby certify as to paragraphs 1 through 5 above, as [print title] of the date set forth above.
| By: | ||
| Name: |
| |
| Title: |
|
