EXHIBIT 10.5
This LOAN AND SECURITY AGREEMENT is entered into as of October 9, 2000,
by and between SILICON VALLEY BANK ("Bank") and MAXIM PHARMACEUTICALS, INC.
("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. As used in this Agreement, the following
terms shall have the following definitions:
"Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books relating
to any of the foregoing.
"Advance" or "Advances" means a Term Loan advance or
advances, respectively.
"Affiliate" means, with respect to any Person, any
Person that owns or controls directly or indirectly such Person, any Person that
controls or is controlled by or is under common control with such Person, and
each of such Person's senior executive officers, directors, partners and, for
any Person that is a limited liability company, such Persons, managers and
members.
"Bank Expenses" means all reasonable costs or
expenses (including reasonable attorneys' fees and expenses) incurred in
connection with the preparation, negotiation, administration, and enforcement of
the Loan Documents; and Bank's reasonable attorneys' fees and expenses incurred
in amending, enforcing or defending the Loan Documents, (including fees and
expenses of appeal or review, or those incurred in any Insolvency Proceeding)
whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and
records including, without limitation: ledgers; records concerning Borrower's
assets or liabilities, the Collateral, business operations or financial
condition; and all computer programs, or tape files, and the equipment,
containing such information.
"Business Day" means any day that is not a Saturday,
Sunday, or other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
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"Collateral" means the property described on EXHIBIT
A attached hereto.
"Committed Term Line" means a credit extension of up
to Four Million Dollars ($4,000,000) made pursuant to Section 2.1.2 hereof, and
as further limited pursuant to the terms and conditions of Section 2.1.2 hereof.
"Contingent Obligation" means, as applied to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to (i) any indebtedness, lease, dividend, letter of credit
or other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed, co-made or discounted or
sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable; (ii) any obligations with respect to
undrawn letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"Copyrights" means any and all copyright rights,
copyright applications, copyright registrations and like protections in each
work or authorship and derivative work thereof, whether published or unpublished
and whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Credit Extension" means each Advance, Term Loan, or
any other extension of credit by Bank for the benefit of Borrower hereunder.
"Current Assets" means, as of any applicable date,
all amounts that should, in accordance with GAAP, be included as current assets
on the consolidated balance sheet of Borrower and its Subsidiaries as at such
date.
"Current Liabilities" means, as of any applicable
date, all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its Subsidiaries,
as at such date, plus, to the extent not already included therein, all
outstanding Credit Extensions made under this Agreement, including all
Indebtedness that is payable upon demand or within one year from the date of
determination thereof unless such Indebtedness is renewable or extendable at the
option of Borrower or any Subsidiary to a date more than one year from the date
of determination, but excluding Subordinated Debt.
"Equipment" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"ERISA" means the Employment Retirement Income
Security Act of 1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles
as in effect in the United States from time to time.
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"Indebtedness" means (a) all indebtedness for
borrowed money or the deferred purchase price of property or services, including
without limitation reimbursement and other obligations with respect to surety
bonds and letters of credit, (b) all obligations evidenced by notes, bonds,
debentures or similar instruments, (c) all capital lease obligations and (d) all
Contingent Obligations.
"Insolvency Proceeding" means any proceeding
commenced by or against any person or entity under any provision of the United
States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency
law, including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
"Intellectual Property Collateral" means
(a) Copyrights, Trademarks, Patents, and Mask
Works;
(b) Any and all trade secrets, and any and all
intellectual property rights in computer software and computer software products
now or hereafter existing, created, acquired or held;
(c) Any and all design rights which may be
available to Borrower now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of
past, present and future infringement of any of the rights included above, with
the right, but not the obligation, to xxx for and collect such damages for said
use or infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of
the Copyrights, Patents, Trademarks, or Mask Works, and all license fees and
royalties arising from such use to the extent permitted by such license or
rights;
(f) All amendments, renewals and extensions of
any of the Copyrights, Trademarks, Patents, or Mask Works; and
(g) All proceeds and products of the foregoing,
including without limitation all payments under insurance or any indemnity or
warranty payable in respect of any of the foregoing.
"Inventory" means all present and future inventory in
which Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above.
"Investment" means any beneficial ownership of
(including stock, partnership interest or other securities) any Person, or any
loan, advance or capital contribution to any Person.
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"IRC" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust,
charge, pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement,
any note or notes executed by Borrower, any other present or future agreement
entered into between Borrower and/or for the benefit of Bank in connection with
this Agreement, and any other guaranty, pledge agreement or other document
entered into by a guarantor or any other third party in connection with this
Agreement, all as amended, extended or restated from time to time.
"Mask Works" means all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired.
"Material Adverse Effect" means a material adverse
effect on (i) the business operations or condition (financial or otherwise) of
Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan
Documents.
"Maturity Date" means January 1, 2005.
"Negotiable Collateral" means all of Borrower's
present and future letters of credit of which it is a beneficiary, notes,
drafts, instruments, securities, documents of title, and chattel paper.
"Obligations" means all debt, principal, interest,
Bank Expenses and other amounts owed to Bank by Borrower pursuant to this
Agreement or any or any other agreement, whether absolute or contingent, due or
to become due, now existing or hereafter arising, including any interest that
accrues after the commencement of an Insolvency Proceeding and including any
debt, liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise.
"Patents means all patents, patent applications and
like protections including without limitation improvements, divisions,
continuations, renewals, reissues, extensions and continuations-in-part of the
same.
"Payment Date" means each of the dates for payment as
set forth in Section 2.1.2(d) hereof.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank
arising under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date
and disclosed in the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in
the ordinary course of business; and
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(e) Indebtedness secured by Permitted Liens.
"Permitted Investment" means:
(a) Investments existing on the Closing Date
disclosed in the Schedule;
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within two (2) years from the date of acquisition
thereof, (ii) commercial paper maturing no more than two (2) years from the date
of creation thereof and currently having the highest rating obtainable from
either Standard & Poor's Corporation or Xxxxx'x Investors Service, Inc., and
(iii) certificates of deposit maturing no more than two (2) years from the date
of investment therein issued by Bank; and
(c) if no Event of Default has occurred and is
continuing or would exist after giving effect to such loans, and no event with
which notice or passage of time would constitute an Event of Default has
occurred and is continuing or would exist after giving effect to such loans,
Borrower may make employee loans in an aggregate amount outstanding of $500,000
at any one time for the purpose of, and only for the purpose of, employee
relocation.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and
disclosed in the Schedule or arising under this Agreement or the other Loan
Documents;
(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and as to which adequate reserves are
maintained on Borrower's Books in accordance with GAAP, PROVIDED the same have
no priority over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired
or held by Borrower or any of its Subsidiaries to secure the purchase price or
lease of such Equipment or indebtedness incurred solely for the purpose of
financing the acquisition of such Equipment, provided that the aggregate amount
of such indebtedness outstanding shall not exceed $500,000 at any time
outstanding, or (ii) existing on such equipment at the time of its acquisition,
PROVIDED that the Lien is confined solely to the property so acquired and
improvements thereon, and the proceeds of such equipment;
(d) Licenses only with respect to the Borrower's
Intellectual Property Collateral in the ordinary course of Borrower's business
relating to research development, manufacturing and distribution; and
(e) Liens incurred in connection with the
extension, renewal or refinancing of the indebtedness secured by Liens of the
type described in clauses (a) through (d) above, PROVIDED that any extension,
renewal or replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase.
"Permitted Venture Transactions" means that if no
Event of Default has occurred and is continuing or would exist after giving
effect to such actions, and no event with which notice or passage of time would
constitute an Event of Default has occurred and is continuing or would exist
after giving effect to such actions, Borrower may enter into joint
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venture transactions with other Persons with respect to the development of
products, PROVIDED that such transactions do not materially adversely affect the
Borrower, PROVIDED, FURTHER, the Borrower does not merge, consolidate or
otherwise effect a combination with such Person unless the shareholders of
Borrower as currently constituted retain a controlling interest of at least 51%
of the resulting entity thereafter, and PROVIDED, FURTHER, the Borrower shall
provide Bank with such information and documentation relating to any of the
proposed foregoing transactions as Bank may reasonably request from time to
time.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per
annum, most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Quick Assets" means, as of any applicable date, the
consolidated cash, cash equivalents, accounts receivable and investments with
maturities of fewer than 90 days of Borrower determined in accordance with GAAP.
"Responsible Officer" means each of the Chief
Executive Officer, the President, the Chief Financial Officer and the Controller
of Borrower.
"Schedule" means the schedule of exceptions attached
hereto, if any.
"Subordinated Debt" means any debt incurred by
Borrower that is subordinated to the debt owing by Borrower to Bank on terms
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means with respect to any Person,
corporation, partnership, company association, joint venture, or any other
business entity of which more than fifty percent (50%) of the voting stock or
other equity interests is owned or controlled, directly or indirectly, by such
Person or one or more Affiliates of such Person.
"Tangible Net Worth" means as of any applicable date,
the consolidated total assets of Borrower and its Subsidiaries MINUS, without
duplication, (i) the sum of any amounts attributable to (a) goodwill, (b)
intangible items such as unamortized debt discount and expense, patents, trade
and service marks and names, copyrights and research and development expenses
except prepaid expenses, and (c) all reserves not already deducted from assets,
AND (ii) Total Liabilities.
"Term Loan" and "Term Loans" shall have the meanings
set forth in Section 2.1.2 hereof.
"Term Loan Evidence" has the meaning set forth in
Section 2.1.2.
"Term Loan Payment" has the meaning set forth in
Section 2.1.5.
"Total Liabilities" means as of any applicable date,
any date as of which the amount thereof shall be determined, all obligations
that should, in accordance with GAAP be classified as liabilities on the
consolidated balance sheet of Borrower, including in any event all Indebtedness,
but specifically excluding Subordinated Debt.
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"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 the
assignor connected with and symbolized by such trademarks.
"Treasury Xxxx Rate" means the interest rate per
annum equal to the most recent weekly average yield on actively traded U.S.
Treasury obligations having a final maturity approximate to June 30, 2005, as
determined by reference to the week ending figures published in the most recent
Federal Reserve Statistical Release which shall become available at least two
Business Days prior to the date as of which such yield is to be determined, or
if a Statistical Release is not then published, the arithmetic average (rounded
to the nearest .01%) of the per annum yields to maturity for each business day
during the week ending at least two business days prior to the date such
determination is made, of all issues of actively traded marketable United States
Treasury fixed interest rate securities with a constant maturity equal to, or
not more than 30 days longer or 30 days shorter than the Maturity Date
(excluding all such securities which can be surrendered at the option of the
holder at the face value of payment of any Federal estate tax, or which provide
for tax benefits to the holder).
1.2 ACCOUNTING AND OTHER TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP and all
calculations and determinations made hereunder shall be made in accordance with
GAAP. When used herein, the term "financial statements" shall include the notes
and schedules thereto. The terms "including"/ "includes" shall always be read as
meaning "including (or includes) without limitation", when used herein or in any
other Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1 CREDIT EXTENSIONS. Borrower promises to pay to the
order of Bank, in lawful money of the United States of America, the aggregate
unpaid principal amount of all Credit Extensions made by Bank to Borrower
hereunder. Borrower shall also pay interest on the unpaid principal amount of
such Credit Extensions at rates in accordance with the terms hereof.
2.1.1 [Reserved]
2.1.2 TERM LOANS; ETC.
(a) Subject to and upon the terms and
conditions of this Agreement, at any time from the date hereof through June 30,
2001 (the "Term Availability End Date"), Bank agrees to make advances (each a
"Term Loan" and collectively the "Term Loans") to Borrower in an aggregate,
initial outstanding amount thereof not to exceed the Committed Term Line,
PROVIDED in no event shall the amount of each Term Loan exceed 100% of the net
purchase price of new equipment being purchased by Borrower or equipment
purchased by the Borrower on and after 90 days prior to the date hereof,
comprised of general purpose, scientific, laboratory, manufacturing and test
equipment, associated software, computer equipment, office equipment, furnishing
and leasehold improvements and which is otherwise acceptable to Bank in its sole
discretion (the "Equipment Borrowing Base"), PROVIDED, HOWEVER, that the first
Term Loan hereunder shall be made substantially concurrently herewith, PROVIDED,
FURTHER, that the aggregate, original principal amount of Term Loans relating to
leasehold improvements and/or software licenses shall not exceed $1,500,000. The
"net purchase price" of equipment means the purchase price thereof, as shown on
the applicable invoice, net of all charges for taxes, freight, delivery,
insurance, set-up, training, manuals, fees, service charges and other similar
items. To evidence each Term Loan, Borrower shall deliver to Bank, at the time
of each Term Loan
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request, evidence, in form and substance satisfactory to Bank (the "Term Loan
Evidence"), of the equipment purchases that are the subject of the Equipment
Borrowing Base.
(b) Interest shall accrue from the date
of each Term Loan at the per annum rate equal to three-quarters of one percent
(0.75%) above the Prime Rate (the "Prime Option Rate") and shall be payable
monthly for each month through the Term Availability End Date. On and after the
Term Availability End Date, interest shall accrue at either the Prime Option
Rate or the Fixed Option Rate (as defined below), at the Borrower's election
made by the Borrower on the Term Availability End Date by notifying Bank in
writing of the Borrower's election; if Borrower fails to notify the Bank on or
before the Term Availability End Date of such interest rate election, then the
interest rate shall be deemed to be the Prime Option Rate. Such interest shall
be payable monthly for each month while the Term Loans are outstanding. As used
herein the term "Fixed Option Rate" shall mean the Treasury Xxxx Rate in effect
as of the Term Availability End Date on a per annum basis plus Three and One
Half Percent (3.50%).
(c) In the event the Prime Rate is
changed from time to time hereafter, the applicable rate of interest hereunder
shall be increased or decreased effective as of 12:01 a.m. on the day the Prime
Rate is changed, by an amount equal to such change in the Prime Rate. All
interest chargeable under the Loan Documents shall be computed on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed.
(d) Any Term Loans that are outstanding
on the Term Availability End Date will be payable in forty-two (42) equal
monthly installments of principal, plus all accrued interest, with the first of
such payments due on August 1, 2001, and continuing on the first day of each
month thereafter for the following forty (40) consecutive months, with all Term
Loans and all Obligations relating thereto to be fully due and payable in a
final payment no later than January 1, 2005. If the Prime Option Rate is elected
by Borrower, the principal portion of each monthly payment shall be equal in
amount, and the interest portion of each monthly payment may vary based upon the
Prime Option Rate. If the Fixed Option Rate is elected by Borrower, each monthly
payment, consisting of principal and interest, shall be equal in amount. Term
Loans, once repaid, may not be reborrowed.
(e) When Borrower desires to obtain a
Term Loan, Borrower shall notify Bank (which notice shall be irrevocable) by
facsimile transmission to be received no later than 3:00 p.m. Pacific time one
(1) Business Day before the day on which the Term Loan is to be made. Such
notice shall be substantially in the form of Exhibit B. The notice shall be
signed by a Responsible Officer or its designee and include the Investor
Evidence.
(f) In the event any principal of the
Term Loan is prepaid prior to the dates due under the schedule of principal
payments set forth above and Borrower has elected the Fixed Option Rate only,
Borrower shall also pay Bank a prepayment fee in an amount equal to the
following percentage of the amount prepaid or required to be prepaid, based on
the date the prepayment occurs or the date prepayment is due as a result of an
Event of Default or termination of this Agreement:
From July 1, 2001 through June 30, 2002:
3%
From July 1, 2002 through June 30, 2003:
2%
From July 1, 2003 through June 30, 2004:
1%
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From July 1, 2004 through December 31, 2004:
0%
2.2 [RESERVED]
2.3 INTEREST RATES, PAYMENTS, AND CALCULATIONS; ETC.
(a) INTEREST RATE. The Term Loans shall have the
interest rate as set forth in Section 2.1 above.
(b) DEFAULT RATE. All Obligations shall bear
interest, from and after the occurrence of an Event of Default, at a rate equal
to five (5) percentage points above the interest rate applicable immediately
prior to the occurrence of the Event of Default.
(c) PAYMENTS. Interest hereunder shall be due
and payable on each Payment Date. Borrower hereby authorizes Bank to debit any
accounts with Bank, including, without limitation, Account Number 3300145846 for
payments of principal and interest due on the Obligations and any other amounts
owing by Borrower to Bank. Bank will notify Borrower of all debits which Bank
has made against Borrower's accounts. Any such debits against Borrower's
accounts in no way shall be deemed a set-off. Any interest not paid when due
shall be compounded by becoming a part of the Obligations, and such interest
shall thereafter accrue interest at the rate then applicable hereunder.
(d) COMPUTATION. In the event the Prime Rate is
changed from time to time hereafter, the applicable rate of interest hereunder
shall be increased or decreased effective as of 12:01 a.m. on the day the Prime
Rate is changed, by an amount equal to such change in the Prime Rate. All
interest chargeable under the Loan Documents shall be computed on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed.
2.4 CREDITING PAYMENTS. Prior to the occurrence of an
Event of Default, Bank shall credit a wire transfer of funds, check or other
item of payment to such deposit account or Obligation as Borrower specifies.
After the occurrence of an Event of Default, the receipt by Bank of any wire
transfer of funds, check, or other item of payment, whether directed to
Borrower's deposit account with Bank or to the Obligations or otherwise, shall
be immediately applied to conditionally reduce Obligations, but shall not be
considered a payment in respect of the Obligations unless such payment is of
immediately available federal funds or unless and until such check or other item
of payment is honored when presented for payment. Notwithstanding anything to
the contrary contained herein, any wire transfer or payment received by Bank
after 12:00 noon Pacific time shall be deemed to have been received by Bank as
of the opening of business on the immediately following Business Day. Whenever
any payment to Bank under the Loan Documents would otherwise be due (except by
reason of acceleration) on a date that is not a Business Day, such payment shall
instead be due on the next Business Day, and additional fees or interest, as the
case may be, shall accrue and be payable for the period of such extension.
2.5 FEES. Borrower shall pay to Bank the following:
(a) FACILITY FEE. A Facility Fee equal to Twenty
Five Thousand Dollars ($25,000), which fee shall be due on the Closing Date and
shall be fully earned and non-refundable;
(b) FINANCIAL EXAMINATION AND APPRAISAL FEES.
Bank's customary fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of
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Collateral and financial analysis and examination of Borrower performed from
time to time by Bank or its agents;
(c) BANK EXPENSES. Upon demand from Bank,
including, without limitation, upon the date hereof, all Bank Expenses incurred
through the date hereof, including reasonable attorneys' fees and expenses, and,
after the date hereof, all Bank Expenses, including reasonable attorneys' fees
and expenses, as and when they become due.
2.6 ADDITIONAL COSTS. In case any law, regulation, treaty
or official directive or the interpretation or application thereof by any court
or any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to
payments of principal or interest or any other amounts payable hereunder by
Borrower or otherwise with respect to the transactions contemplated hereby
(except for taxes on the overall net income of Bank imposed by the United States
of America or any political subdivision thereof);
(b) imposes, modifies or deems applicable any
deposit insurance, reserve, special deposit or similar requirement against
assets held by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with
respect to its performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 TERM. Except as otherwise set forth herein, this
Agreement shall become effective on the Closing Date and, subject to Section
12.7, shall continue in full force and effect for a term ending on the Maturity
Date. Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination of this Agreement, Bank's lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The
obligation of Bank to make the initial Credit Extension is subject to the
condition precedent that Bank shall have received, in form and substance
satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower
with respect to articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of this Agreement;
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(c) financing statements (Forms UCC-1) executed
by Borrower, in form and substance satisfactory to Borrower ;
(d) insurance certificate;
(e) payment of the fees and Bank Expenses then
due specified in Section 2.5 hereof;
(f) Certificate of Foreign Qualification (if
applicable); and
(g) such other documents, and completion of such
other matters, as Bank may reasonably deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. The
obligation of Bank to make each Credit Extension, including the initial Credit
Extension, is further subject to the following conditions:
(a) timely receipt by Bank of the
Payment/Advance Form as provided in Section 2.1;
(b) the representations and warranties contained
in Section 5 shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each Credit
Extension as though made at and as of each such date, and no Event of Default
shall have occurred and be continuing, or would result from such Credit
Extension. The making of each Credit Extension shall be deemed to be a
representation and warranty by Borrower on the date of such Credit Extension as
to the accuracy of the facts referred to in this Section 3.2(b); and
(c) with respect to each Term Loan, the Term
Loan Evidence.
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower grants and
pledges to Bank a continuing security interest in all presently existing and
hereafter acquired or arising Collateral in order to secure prompt payment of
any and all Obligations and in order to secure prompt performance by Borrower of
each of its covenants and duties under the Loan Documents. Except as set forth
in the Schedule, such security interest constitutes a valid, first priority
security interest in the presently existing Collateral, and will constitute a
valid, first priority security interest in Collateral acquired after the date
hereof. Borrower acknowledges that Bank may place a "hold" on any Deposit
Account pledged as Collateral to secure the Obligations. Notwithstanding
termination of this Agreement, Bank's Lien on the Collateral shall remain in
effect for so long as any Obligations are outstanding.
4.2 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED.
Borrower shall from time to time execute and deliver to Bank, at the request of
Bank, all Negotiable Collateral, all financing statements and other documents
that Bank may reasonably request, in form satisfactory to Bank, to perfect and
continue perfected Bank's security interests in the Collateral and in order to
fully consummate all of the transactions contemplated under the Loan Documents.
4.3 RIGHT TO INSPECT. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's Books
and to make copies thereof and to check, test, and
11
appraise the Collateral in order to verify Borrower's financial condition or the
amount, condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws of
its state of incorporation and qualified and licensed to do business in, and is
in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified.
5.2 DUE AUTHORIZATION; NO CONFLICT. The execution,
delivery, and performance of the Loan Documents are within Borrower's powers,
have been duly authorized, and are not in conflict with nor constitute a breach
of any provision contained in Borrower's Articles of Incorporation or Bylaws,
nor will they constitute an event of default under any material agreement to
which Borrower is a party or by which Borrower is bound. Borrower is not in
default under any agreement to which it is a party or by which it is bound,
which default could have a Material Adverse Effect.
5.3 NO PRIOR ENCUMBRANCES. Borrower has good and
indefeasible title to the Collateral, free and clear of Liens, except for
Permitted Liens.
5.4 [RESERVED]
5.5 MERCHANTABLE INVENTORY. All Inventory is in all
material respects of good and marketable quality, free from all material
defects.
5.6 INTELLECTUAL PROPERTY. Borrower is the sole owner of
the Intellectual Property Collateral, except for non-exclusive licenses granted
by Borrower to its customers in the ordinary course of business and except for
the Permitted Liens. Each of the Patents is valid and enforceable, and no part
of the Intellectual Property Collateral has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
the Intellectual Property Collateral violates the rights of any third party.
Except for and upon the filing with the United States Patent and Trademark
Office with respect to the Patents and Trademarks and the Register of Copyrights
with respect to the Copyrights and Mask Works necessary to perfect the security
interests created hereunder, and except as has been already made or obtained, no
authorization, approval or other action by, and no notice to or filing with, any
United States governmental authority or United States regulatory body is
required either (i) for the grant by Borrower of the security interest granted
hereby or for the execution, delivery or performance of Loan Documents by
Borrower in the United States or (ii) for the perfection in the United States or
the exercise by Bank of its rights and remedies hereunder.
5.7 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE. Except as
disclosed in the Schedule, Borrower has not done business and will not without
at least thirty (30) days prior written notice to Bank do business under any
name other than that specified on the signature page hereof. The chief executive
office of Borrower is located at the address indicated in Section 10 hereof.
5.8 LITIGATION. Except as set forth in the Schedule,
there are no actions or proceedings pending, or, to Borrower's knowledge,
threatened by or against Borrower or any Subsidiary before any court or
administrative agency in which an adverse decision could have a
12
Material Adverse Effect or a material adverse effect on Borrower's interest or
Bank's security interest in the Collateral.
5.9 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements related to Borrower and any Subsidiary
that have been delivered by Borrower to Bank fairly present in all material
respects Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank on or about the Closing Date.
5.10 SOLVENCY. The fair saleable value of Borrower's
assets (including goodwill minus disposition costs) exceeds the fair value of
its liabilities; the Borrower is not left with unreasonably small capital after
the transactions contemplated by this Agreement; and Borrower is able to pay its
debts (including trade debts) as they mature.
5.11 REGULATORY COMPLIANCE. Borrower and each Subsidiary
has met the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. No event has occurred resulting from Borrower's
failure to comply with ERISA that is reasonably likely to result in Borrower's
incurring any liability that could have a Material Adverse Effect. Borrower is
not an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.12 ENVIRONMENTAL CONDITION. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the release, or other disposition of hazardous waste or
hazardous substances into the environment.
5.13 TAXES. Borrower and each Subsidiary has filed or
caused to be filed all tax returns required to be filed on a timely basis, and
has paid, or has made adequate provision for the payment of, all taxes reflected
therein.
5.14 SUBSIDIARIES. Borrower does not own any stock,
partnership interest or other equity securities of any Person, except for
Permitted Investments.
5.15 GOVERNMENT CONSENTS. Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all
13
notices to, all governmental authorities that are necessary for the continued
operation of Borrower's business as currently conducted.
5.16 FULL DISCLOSURE. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
certificates or statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of
all outstanding Obligations, and for so long as Bank may have any commitment to
make a Credit Extension hereunder, Borrower shall do all of the following:
6.1 GOOD STANDING. Borrower shall maintain its and each
of its Subsidiaries' corporate existence and good standing in its jurisdiction
of incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 GOVERNMENT COMPLIANCE. Borrower shall meet, and shall
cause each Subsidiary to meet, the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA. Borrower shall comply,
and shall cause each Subsidiary to comply, with all statutes, laws, ordinances
and government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower
shall deliver to Bank: (a) as soon as available, but in any event within
forty-five (45) days after the last day of each fiscal quarter of Borrower
ending on December 31, March 31 and June 30, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during such period (in a form and certified by an officer of Borrower reasonably
acceptable to Bank); (b) as soon as available, but in any event within
one-hundred twenty (120) days after the end of the fiscal year of Borrower,
audited consolidated financial statements of Borrower prepared in accordance
with GAAP, consistently applied, together with an unqualified opinion on such
financial statements of an independent certified public accounting firm
reasonably acceptable to Bank; (c) within five (5) days of filing, copies of all
statements, reports and notices sent or made available generally by Borrower to
its security holders or to any holders of Subordinated Debt and all reports on
Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission; (d)
promptly upon receipt of notice thereof, a report of any legal actions pending
or threatened against Borrower or any Subsidiary that could result in damages or
costs to Borrower or any Subsidiary of One Hundred Thousand Dollars ($100,000)
or more; and (e) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time.
Within forty-five (45) days after the last day of each fiscal
quarter of Borrower ending on December 31, March 31 and June 30 and accompanying
the delivery of the audited annual financial statements of the Borrower as set
forth above, Borrower shall deliver to Bank with the financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of EXHIBIT D hereto.
14
Bank shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such audits will be
conducted no more often than every six (6) months unless an Event of Default has
occurred and is continuing.
6.4 INVENTORY; RETURNS. Borrower shall keep all Inventory
in good and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on the
same basis and in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 TAXES. Borrower shall make, and shall cause each
Subsidiary to make, due and timely payment or deposit of all material federal,
state, and local taxes, assessments, or contributions required of it by law, and
will execute and deliver to Bank, on demand, appropriate certificates attesting
to the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is (I) contested in good faith
by appropriate proceedings , (ii) is reserved against (to the extent required by
GAAP) by Borrower and (iii) no lien other than a Permitted Lien results.
6.6 INSURANCE.
(a) Borrower, at its expense, shall keep the
Collateral insured against loss or damage by fire, theft, explosion, sprinklers,
and all other hazards and risks, and in such amounts, as ordinarily insured
against by other owners in similar businesses conducted in the locations where
Borrower's business is conducted on the date hereof. Borrower shall also
maintain insurance relating to Borrower's ownership and use of the Collateral in
amounts and of a type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in
such form, with such companies, and in such amounts as are reasonably
satisfactory to Bank. All such policies of property insurance shall contain a
lender's loss payable endorsement, in a form satisfactory to Bank, showing Bank
as an additional loss payee thereof and all liability insurance policies shall
show the Bank as an additional insured, and shall specify that the insurer must
give at least twenty (20) days notice to Bank before canceling its policy for
any reason. At Bank's request, Borrower shall deliver to Bank certified copies
of such policies of insurance and evidence of the payments of all premiums
therefor. All proceeds payable under any such policy shall, at the option of
Bank, be payable to Bank to be applied on account of the Obligations.
6.7 PRINCIPAL DEPOSITORY. Borrower shall maintain its
principal depository and operating accounts with Bank, including but not limited
to general checking, money market and/or investment accounts maintained with
Bank's Investment Products and Services Department, and shall maintain a minimum
aggregate balance of $5,000,000 in such accounts at all times.
6.8 LITIGATION. The Borrower will promptly inform Bank in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against the Borrower involving amounts in excess
of $100,000.
15
6.9 FINANCIAL COVENANT. Borrower will maintain as of the
last day of each fiscal quarter of Borrower, unless otherwise noted, a Tangible
Net Worth of at least One-Hundred Million Dollars ($100,000,000).
6.10 [Reserved]
6.11 [Reserved]
6.12 [Reserved]
6.13 FURTHER ASSURANCES. At any time and from time to time
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any Credit
Extension hereunder shall be available and until payment in full of the
outstanding Obligations or for so long as Bank may have any commitment to make
any Advances, Borrower will not do any of the following:
7.1 DISPOSITIONS. Convey, sell, lease, transfer or
otherwise dispose of (collectively, a "Transfer"), or permit any of its
Subsidiaries to Transfer, all or any part of its business or property, other
than Transfers: (i) of inventory in the ordinary course of business, (ii) of
non-exclusive licenses and similar arrangements for the use of the property of
Borrower or its Subsidiaries in the ordinary course of business; (iii) that
constitute payment of normal and usual operating expenses in the ordinary course
of business; or (iii) of worn-out or obsolete Equipment.
7.2 CHANGES IN BUSINESS, OWNERSHIP, OR MANAGEMENT,
BUSINESS LOCATIONS. Engage in any business, or permit any of its Subsidiaries to
engage in any business, other than the businesses currently engaged in by
Borrower and any business substantially similar or related thereto (or
incidental thereto), or suffer a change in Borrower's ownership of greater than
20% compared to the date hereof or suffer a material change in Borrower's
management compared to the date hereof, other than Permitted Venture
Transactions. Borrower will not, without at least thirty (30) days prior written
notification to Bank, relocate its chief executive office or add any new offices
or business locations.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or
permit any of its Subsidiaries to merge or consolidate, with or into any other
business organization, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person if
no Event of Default has occurred and is continuing or would exist after giving
effect to such action, result in a change of more than 25% of Net Worth, other
than in connection with Permitted Venture Transactions.
7.4 INDEBTEDNESS. Create, incur, assume or be or remain
liable with respect to any Indebtedness, or permit any Subsidiary so to do,
other than Permitted Indebtedness.
7.5 ENCUMBRANCES. Create, incur, assume or suffer to
exist any Lien with respect to any of its property, or assign or otherwise
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries so to do, except for Permitted Liens.
7.6 DISTRIBUTIONS. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock, provided
16
that, after giving effect thereto, no Event of Default has occurred and is
continuing and no event has occurred which, with notice or passage of time or
both, would constitute an Event of Default, and provided that the following is
done in compliance with all material applicable laws, rules and regulations,
Borrower may repurchase shares of Borrower's stock pursuant to any employee
stock purchase or benefit plan, provided that the total amount paid by Borrower
for such stock does not exceed $500,000 in any fiscal year.
7.7 INVESTMENTS. Directly or indirectly acquire or own,
or make any Investment in or to any Person, or permit any of its Subsidiaries so
to do, other than Permitted Investments.
7.8 TRANSACTIONS WITH AFFILIATES. Directly or indirectly
enter into or permit to exist any material transaction with any Affiliate of
Borrower except for transactions that are in the ordinary course of Borrower's
business, upon fair and reasonable terms that are no less favorable to Borrower
than would be obtained in an arm's length transaction with a nonaffiliated
Person.
7.9 [Reserved]
7.10 SUBORDINATED DEBT. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.11 INVENTORY. Store the Inventory with a bailee,
warehouseman, or similar party unless Bank has received a pledge of any
warehouse receipt covering such Inventory. Except for Inventory sold in the
ordinary course of business and except for such other locations as Bank may
approve in writing, Borrower shall keep the Inventory only at the location set
forth in Section 10 hereof and such other locations of which Borrower gives Bank
prior written notice and as to which Borrower signs and files a financing
statement where needed to perfect Bank's security interest, if Bank requests
Borrower to so execute any such additional financing statements after Borrower
gives such written notice to the Bank, with the understanding that, unless Bank
reasonably determines otherwise and so notifies Borrower, inventory relating to
clinical trials shall not be subject to the provisions set forth in this
section.
7.12 COMPLIANCE. Become an "investment company" or a
company controlled by an "investment company," within the meaning of the
Investment Company Act of 1940, or become principally engaged in, or undertake
as one of its important activities, the business of extending credit for the
purpose of purchasing or carrying margin stock, or use the proceeds of any
Advance for such purpose; fail to meet the minimum funding requirements of
ERISA; permit a Reportable Event or Prohibited Transaction, as defined in ERISA,
to occur; fail to comply with the Federal Fair Labor Standards Act or violate
any other law or regulation, which violation could have a Material Adverse
Effect or a material adverse effect on the Collateral or the priority of Bank's
Lien on the Collateral; or permit any of its Subsidiaries to do any of the
foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
8.1 PAYMENT DEFAULT. If Borrower fails to pay, when due,
any of the Obligations.
17
8.2 COVENANT DEFAULT.
(a) If Borrower fails to perform any obligation
under Sections 6.3, 6.6, 6.7, 6.9, or 6.13 or violates any of the covenants
contained in Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform,
keep, or observe any other material term, provision, condition, covenant, or
agreement contained in this Agreement, in any of the Loan Documents, or in any
other present or future agreement between Borrower and Bank and as to any
default under such other term, provision, condition, covenant or agreement that
can be cured, has failed to cure such default within ten (10) days after the
occurrence thereof; provided, however, that if the default cannot by its nature
be cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed thirty (30) days) to
attempt to cure such default, and within such reasonable time period the failure
to have cured such default shall not be deemed an Event of Default (provided
that no Advances will be required to be made during such cure period);
8.3 MATERIAL ADVERSE CHANGE. If there (i) occurs,
compared to the date hereof, a material adverse change in the business,
operations, or condition (financial or otherwise) of the Borrower, or (ii) is a
material impairment of the prospect of repayment of any portion of the
Obligations or (iii) is a material impairment of the value or priority of Bank's
security interests in the Collateral (assuming that as of the date hereof the
Bank has a first perfected security interest in the Collateral, subject only to
the Permitted Liens);
8.4 ATTACHMENT. If any material portion of Borrower's
assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any trustee, receiver or person
acting in a similar capacity and such attachment, seizure, writ or distress
warrant or levy has not been removed, discharged or rescinded within ten (10)
days, or if Borrower is enjoined, restrained, or in any way prevented by court
order from continuing to conduct all or any material part of its business
affairs, or if a judgment or other claim becomes a lien or encumbrance upon any
material portion of Borrower's assets, or if a notice of lien, levy, or
assessment is filed of record with respect to any of Borrower's assets by the
United States Government, or any department, agency, or instrumentality thereof,
or by any state, county, municipal, or governmental agency, and the same is not
paid within ten (10) days after Borrower receives notice thereof, provided that
none of the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith contest
by Borrower (provided that no Credit Extensions will be required to be made
during such cure period);
8.5 INSOLVENCY. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
is commenced against Borrower and is not dismissed or stayed within 30 days
(provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 OTHER AGREEMENTS. If there is a default in any
agreement to which Borrower is a party with a third party or parties resulting
in a right by such third party or parties, whether or not exercised, to
accelerate the maturity of any Indebtedness in an amount in excess of One
Hundred Thousand Dollars ($100,000) or that could have a Material Adverse
Effect;
8.7 SUBORDINATED DEBT. If Borrower makes any payment on
account of Subordinated Debt, except to the extent such payment is allowed under
any subordination agreement entered into with Bank;
18
8.8 JUDGMENTS. If a judgment or judgments for the payment
of money in an amount, individually or in the aggregate, of at least Fifty
Thousand Dollars ($50,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no Credit
Extensions will be made prior to the satisfaction or stay of such judgment); or
8.9 MISREPRESENTATIONS. If any material misrepresentation
or material misstatement exists now or hereafter in any warranty or
representation set forth herein or in any certificate or writing delivered to
Bank by Borrower or any Person acting on Borrower's behalf pursuant to this
Agreement or to induce Bank to enter into this Agreement or any other Loan
Document.
8.10 GUARANTY. Any guaranty of all or a portion of the
Obligations ceases for any reason to be in full force and effect, or any
guarantor of the Obligations fails to perform any obligation under any guaranty
of all or a portion of the Obligations, or any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth in any guaranty of all or a portion of the Obligations or in any
certificate delivered to Bank in connection with such guaranty, or any of the
circumstances described in Sections 8.4, 8.5 or 8.8 occur with respect to any
guarantor of the Obligations.
8.11 RECALL OR GOVERNMENTAL DISAPPROVAL OF BORROWER'S
PRODUCT(S). If any product the sale of which, as determined by Bank in its
discretion, constitutes a substantial portion of Borrower's actual or projected
total sales is recalled or, if approval by any governmental body is required for
the sale of any such product, such approval is not obtained by Borrower or, if
obtained, is at any time thereafter terminated.
9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence and during
the continuance of an Event of Default, Bank may, at its election, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced
by this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default
described in Section 8.5 all Obligations shall become immediately due and
payable without any action by Bank);
(b) Cease advancing money or extending credit to
or for the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(c) [Reserved]
(d) [Reserved]
(e) Settle or adjust disputes and claims
directly with account debtors for amounts, upon terms and in whatever order that
Bank reasonably considers advisable;
(f) Without notice to or demand upon Borrower,
make such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which
19
in Bank's determination appears to be prior or superior to its security interest
and to pay all expenses incurred in connection therewith. With respect to any of
Borrower's premises, Borrower hereby grants Bank a license to enter such
premises and to occupy the same, without charge in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower set off and apply
to the Obligations any and all (i) balances and deposits of Borrower held by
Bank, or (ii) indebtedness at any time owing to or for the credit or the account
of Borrower held by Bank;
(h) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Bank is hereby granted a non-exclusive,
royalty-free license or other right, solely pursuant to the provisions of this
Section 9.1, to use, without charge, Borrower's labels, patents, copyrights,
mask works, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any property of a similar nature, as
it pertains to the Collateral, in completing production of, advertising for
sale, and selling any Collateral and, in connection with Bank's exercise of its
rights under this Section 9.1, Borrower's rights under all licenses and all
franchise agreements shall inure to Bank's benefit;
(i) Sell the Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrower's premises)
as Bank determines is commercially reasonable, and apply the proceeds thereof to
the Obligations in whatever manner or order it deems appropriate;
(j) Bank may credit bid and purchase at any
public sale, or at any private sale as permitted by law;
(k) Any deficiency that exists after disposition
of the Collateral as provided above will be paid immediately by Borrower; and
(l) Bank shall have a non-exclusive,
royalty-free license to use the Intellectual Property Collateral to the extent
reasonably necessary to permit Bank to exercise its rights and remedies upon the
occurrence of an Event of Default.
9.2 POWER OF ATTORNEY. Effective only upon the occurrence
and during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
xxxx of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle, and adjust all claims under and decisions
with respect to Borrower's policies of insurance; and (e) settle and adjust
disputes and claims respecting the accounts directly with account debtors, for
amounts and upon terms which Bank determines to be reasonable; (f) [reserved];
(g) to file, in its sole discretion, one or more financing or continuation
statements and amendments thereto, relative to any of the Collateral without the
signature of Borrower where permitted by law; and (h) [reserved], PROVIDED Bank
may exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide advances hereunder is terminated.
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9.3 ACCOUNTS COLLECTION. Upon the occurrence and during
the continuance of an Event of Default, Bank may notify any Person owing funds
to Borrower of Bank's security interest in such funds and verify the amount of
such Account. Borrower shall collect all amounts owing to Borrower for Bank,
receive in trust all payments as Bank's trustee, and if requested or required by
Bank, immediately deliver such payments to Bank in their original form as
received from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES. If Borrower fails to pay any amounts
or furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Committed Term Line as Bank deems necessary to protect Bank
from the exposure created by such failure; or (c) obtain and maintain insurance
policies of the type discussed in Section 6.6 of this Agreement, and take any
action with respect to such policies as Bank deems prudent. Any amounts so paid
or deposited by Bank shall constitute Bank Expenses, shall be immediately due
and payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement.
9.5 BANK'S LIABILITY FOR COLLATERAL. So long as Bank
complies with reasonable banking practices, Bank shall not in any way or manner
be liable or responsible for: (a) the safekeeping of the Collateral; (b) any
loss or damage thereto occurring or arising in any manner or fashion from any
cause; (c) any diminution in the value thereof; or (d) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other person whomsoever.
All risk of loss, damage or destruction of the Collateral shall be borne by
Borrower.
9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Bank shall have all other rights and remedies not expressly set
forth herein as provided under the Code, by law, or in equity. No exercise by
Bank of one right or remedy shall be deemed an election, and no waiver by Bank
of any Event of Default on Borrower's part shall be deemed a continuing waiver.
No delay by Bank shall constitute a waiver, election, or acquiescence by it. No
waiver by Bank shall be effective unless made in a written document signed on
behalf of Bank and then shall be effective only in the specific instance and for
the specific purpose for which it was given.
9.7 DEMAND; PROTEST. Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees at any time held by Bank on which Borrower may in any way
be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
If to Borrower Maxim Pharmaceuticals, Inc.
0000 Xxxxxxxxxx Xxxxxx Xxxx #000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxx, Chief Financial Officer
FAX: 000-000-0000
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If to Bank Silicon Valley Bank
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Manager
FAX: 000-000-0000
With a copy to:
Silicon Valley Bank
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Legal Department
FAX: 000-000-0000
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
the other.
11. CHOICE OF LAW, VENUE, AND WAIVER OF JURY TRIAL.
The Loan Documents shall be governed by, and construed in
accordance with, the internal laws of the State of California, without regard to
principles of conflicts of law. Each of Borrower and Bank hereby submits to the
exclusive jurisdiction of the state and Federal courts located in the County of
San Diego, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of each
of the parties; PROVIDED, HOWEVER, that neither this Agreement nor any rights
hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder.
12.2 INDEMNIFICATION. Borrower shall , indemnify ,defend,
protect and hold harmless Bank and its officers, employees, and agents against:
(a) all obligations, demands, claims, and liabilities claimed or asserted by any
other party in connection with the transactions contemplated by the Loan
Documents; and (b) all losses or Bank Expenses in any way suffered, incurred, or
paid by Bank as a result of or in any way arising out of, following, or
consequential to transactions between Bank and Borrower whether under the Loan
Documents, or otherwise
22
(including without limitation reasonable attorneys fees and expenses), except
for losses caused by Bank's gross negligence or willful misconduct.
12.3 TIME OF ESSENCE. Time is of the essence for the
performance of all obligations set forth in this Agreement.
12.4 SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION. This Agreement
cannot be amended or terminated except by a writing signed by Borrower and Bank.
All prior agreements, understandings, representations, warranties, and
negotiations between the parties hereto with respect to the subject matter of
this Agreement, if any, are merged into this Agreement and the Loan Documents.
12.6 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.
12.7 SURVIVAL. All covenants, representations and
warranties made in this Agreement shall continue in full force and effect so
long as any Obligations remain outstanding. The obligations of Borrower to
indemnify Bank with respect to the expenses, damages, losses, costs and
liabilities described in Section 12.2 shall survive until all applicable statute
of limitations periods with respect to actions that may be brought against Bank
have run.
12.8 CONFIDENTIALITY. In handling any confidential
information Bank shall exercise the same degree of care that it exercises with
respect to its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower, (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order, (iv) as may be required in
connection with the examination, audit or similar investigation of Bank, and (v)
as Bank may deem appropriate in connection with the exercise of any remedies
hereunder. Confidential information hereunder shall not include information that
either: (a) is in the public domain or in the knowledge or possession of Bank
when disclosed to Bank, or becomes part of the public domain after disclosure to
Bank through no fault of Bank; or (b) is disclosed to Bank by a third party,
provided Bank does not have actual knowledge that such third party is prohibited
from disclosing such information.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
MAXIM PHARMACEUTICALS, INC.
By: /s/ XXXX X. XXXXXX
Title: CFO
By: /s/ XXXXX X. XXXXXXXXX
Title: CEO
SILICON VALLEY BANK
By: /s/ XXXXXX XXXXXXXXXX
Title: VP
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EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following, now existing or hereafter arising:
(a) All goods, farm products and equipment now owned or hereafter
acquired, including, without limitation, all machinery, fixtures, trade
fixtures, vehicles (including motor vehicles and trailers), furniture,
materials, tools, office equipment, computers and peripheral devices,
appliances, apparatus, parts, dies and jigs, and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing, wherever
located;
(b) All inventory, now owned or hereafter acquired, including,
without limitation, all merchandise, raw materials, parts, supplies,
advertising, packing and shipping materials, work in process and finished
products including such inventory as is temporarily out of Borrower's custody or
possession or in transit and including any returns upon any accounts or other
proceeds, including insurance proceeds, resulting from the sale or disposition
of any of the foregoing and any documents of title representing any of the
above, and all other tangible personal property which is held for sale or lease
or furnished under contracts of service or consumed in Borrower's business, and
all warehouse receipts and other documents;
(c) All contract rights and general intangibles now owned or
hereafter acquired, including, without limitation, goodwill, trademarks,
servicemarks, trade styles, trade names, patents, patent applications, leases,
license agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, federal,
state and local tax refunds, security deposits, loan commitment fees, all rights
in all litigation presently or hereafter pending for any cause or claim (whether
in contract, tort or otherwise) and all judgments now or hereafter arising
therefrom, all claims of Borrower against Bank, all rights to purchase or sell
real or personal property, all royalties, payments of insurance and rights to
payment of any kind, all processes, telephone numbers, proprietary information,
purchase orders, all insurance policies and claims (including, without
limitation, credit, liability, property and other insurance), and all other
rights , privileges and franchises of every kind;
(d) All now existing and hereafter arising accounts, contract
rights, royalties, license rights and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods, the licensing of technology
or the rendering of services by Borrower, whether or not earned by performance,
and any and all credit insurance, guaranties, and other security therefor, as
well as all merchandise returned to or reclaimed by Borrower;
(e) All documents, cash, deposit accounts, securities, investment
property, letters of credit, certificates of deposit, instruments and chattel
paper now owned or hereafter acquired and Borrower's Books relating to the
foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and
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(g) all of Borrower's books and records including, without
limitation: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information, in each
case relating to the foregoing and any and all claims, rights and interests in
any of the above and all substitutions for, additions and accessions to and
proceeds thereof.
2
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE: ________________
FAX#: (408) __________ TIME: ________________
FROM:_______________________________________________________________________
BORROWER'S NAME
FROM:_______________________________________________________________________
AUTHORIZED SIGNER'S NAME
____________________________________________________________________________
AUTHORIZED SIGNATURE
PHONE:______________________________________________________________________
FROM ACCOUNT #_____________________ TO ACCOUNT#________________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $___________________
PRINCIPAL PAYMENT (ONLY) $___________________
INTEREST PAYMENT (ONLY) $___________________
PRINCIPAL AND INTEREST (PAYMENT) $___________________
OTHER INSTRUCTIONS: ___________________________________________________
All representations and warranties of Borrower stated in the Loan and
Security Agreement are true, correct and complete in all material respects as of
the date of the telephone request for and Advance confirmed by this Advance
Request; provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such date.
BANK USE ONLY:
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
______________________________________________________________________________
Authorized Requester
___________________________________________
Authorized Signature (Bank)
Phone #____________________________________
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EXHIBIT C
[Reserved]
1
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM:
The undersigned authorized officer of MAXIM PHARMACEUTICALS, INC.
hereby certifies that in accordance with the terms and conditions of the Loan
and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower
is in complete compliance for the period ending with all required covenants
except as noted below and (ii) all representations and warranties of Borrower
stated in the Agreement are true and correct in all material respects as of the
date hereof. Attached herewith are the required documents supporting the above
certification. The Officer further certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that no
borrowings may be requested by the Borrower at any time or date of determination
that Borrower is not in compliance with any of the terms of the Agreement, and
that such compliance is determined not just at the date this certificate is
delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Quarterly financial statements Within 45 days of 12/31, 3/31 and 6/30 only Yes No
Annual (CPA Audited) FYE within 120 days Yes No
[10Q and 10K Within 5 days after filing with the SEC] Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Min TNW $100MM _____________ Yes No
======================================================
BANK USE ONLY
RECEIVED BY:____________________
DATE:________________
REVIEWED BY:____________________
COMPLIANCE STATUS: YES / NO
======================================================
COMMENTS REGARDING EXCEPTIONS:
Sincerely,
_______________________ Date:_______________
SIGNATURE
_______________________
TITLE
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