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HEARTPORT, INC.
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION...................................... 1
1.1 Definitions............................................... 1
1.2 Accounting Terms.......................................... 8
2. LOANS AND TERMS OF PAYMENT........................................ 8
2.1 Advances.................................................. 8
2.2 Interest Rates, Payments, and Calculations................ 10
2.3 Crediting Payments........................................ 11
2.4 Fees...................................................... 11
2.5 Additional Costs.......................................... 11
2.6 Term...................................................... 12
2.7 Conversion/Continuation of Advances....................... 12
2.8 Additional Requirements/Provisions Regarding
LIBOR Rate Advances..................................... 13
3. CONDITIONS OF LOANS............................................... 14
3.1 Conditions Precedent to Initial Advance................... 14
3.2 Conditions Precedent to all Advances...................... 14
4. CREATION OF SECURITY INTEREST..................................... 15
4.1 Grant of Security Interest................................ 15
4.2 Delivery of Additional Documentation Required............. 15
4.3 Right to Inspect.......................................... 15
5. REPRESENTATIONS AND WARRANTIES.................................... 15
5.1 Due Organization and Qualification........................ 15
5.2 Due Authorization; No Conflict............................ 15
5.3 No Prior Encumbrances..................................... 16
5.4 Name; Location of Chief Executive Office.................. 16
5.5 Litigation................................................ 16
5.6 No Material Adverse Change in Financial Statements........ 16
5.7 Solvency.................................................. 16
5.8 Regulatory Compliance..................................... 16
5.9 Environmental Condition................................... 16
5.10 Taxes..................................................... 17
5.11 Subsidiaries.............................................. 17
5.12 Government Consents....................................... 17
5.13 Full Disclosure........................................... 17
6. AFFIRMATIVE COVENANTS............................................. 17
6.1 Good Standing............................................. 17
6.2 Government Compliance..................................... 17
6.3 Financial Statements, Reports, Certificates............... 17
6.4 Taxes..................................................... 18
6.5 Insurance................................................. 18
6.6 Principal Depository...................................... 18
6.7 Debt-Net Worth Ratio...................................... 19
6.8 Tangible Net Worth........................................ 19
6.9 Minimum Liquidity......................................... 19
6.10 Co-Borrowers; Further Assurances.......................... 19
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7. NEGATIVE COVENANTS................................................ 19
7.1 Dispositions.............................................. 19
7.2 Change in Business........................................ 19
7.3 Mergers or Acquisitions................................... 19
7.4 Indebtedness.............................................. 20
7.5 Encumbrances.............................................. 20
7.6 Distributions............................................. 20
7.7 Investments............................................... 20
7.8 Transactions with Affiliates.............................. 20
7.9 Subordinated Debt......................................... 20
7.10 Compliance................................................ 20
8. EVENTS OF DEFAULT................................................. 20
8.1 Payment Default........................................... 20
8.2 Covenant Default.......................................... 20
8.3 Material Adverse Change................................... 21
8.4 Attachment................................................ 21
8.5 Insolvency................................................ 21
8.6 Other Agreements.......................................... 21
8.7 Subordinated Debt......................................... 21
8.8 Judgments................................................. 21
8.9 Misrepresentations........................................ 21
9. BANKS' RIGHTS AND REMEDIES........................................ 22
9.1 Rights and Remedies....................................... 22
9.2 Power of Attorney......................................... 23
9.3 Accounts Collection....................................... 23
9.4 Bank Expenses............................................. 23
9.5 Servicing Agent's Liability for Collateral................ 23
9.6 Remedies Cumulative....................................... 23
9.7 Demand; Protest........................................... 24
10. NOTICES........................................................... 24
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER........................ 24
12. INTERCREDITOR PROVISIONS.......................................... 25
12.1 Proportionate Interests.................................. 25
12.2 Designation of Service Agent............................. 25
12.3 Resignation.............................................. 25
12.4 Servicing Agent as Bank.................................. 25
12.5 No Agency................................................ 25
12.6 No Reliance.............................................. 25
13. GENERAL PROVISIONS................................................ 25
13.1 Successors and Assigns................................... 25
13.2 Indemnification.......................................... 26
13.3 Time of Essence.......................................... 26
13.4 Severability of Provisions............................... 26
13.5 Amendments in Writing, Integration....................... 26
13.6 Counterparts............................................. 26
13.7 Survival................................................. 26
13.8 Confidentiality.......................................... 26
13.9 Amended and Restated Agreement........................... 26
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This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into as
of March 20, 1998, by and between SILICON VALLEY BANK ("SVB") as Servicing
Agent and a Bank and BANQUE NATIONALE DE PARIS ("BNP"); SVB and BNP are
sometimes referred to herein individually as a "Bank" and, collectively, as
the "Banks") and HEARTPORT, INC. ("Borrower").
RECITALS
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Borrower and Banks are parties to a Loan and Security Agreement dated as
of December 31, 1996, as amended from time to time. Borrower wishes to
continue to obtain credit from time to time from Banks, and Banks desire to
continue to extend credit to Borrower. This Agreement sets forth the terms
on which Banks will advance credit to Borrower, and Borrower will repay the
amounts owing to Banks.
AGREEMENT
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The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
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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 cash advance under the
Revolving Facility.
"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, and partners.
"Agency Agreement" means that certain Agency Agreement dated
as of even date herewith, between the Banks and the Servicing Agent,
concerning the administration of this Agreement by them.
"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), whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: 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.
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"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on EXHIBIT A
attached hereto.
"Committed Line" means Twenty Five Million Dollars
($25,000,000).
"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 net
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.
"Daily Balance" means the principal amount of the Obligations
owed at the end of a given day.
"Effective Date" means the date on which Liquidity is less
than either (i) two (2.0) times the outstanding principal balance hereunder
(including the face amount of outstanding Letters of Credit) or (ii) the
amount equal to nine (9) times the then applicable Remaining Months Liquidity.
"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 from time to time.
"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.
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"Interest Period" means for each LIBOR Rate Advance, a period
of approximately one, two, three or six months as Borrower may elect,
PROVIDED that the last day of an Interest Period for a LIBOR Rate Advance
shall be determined in accordance with the practices, of the LIBOR interbank
market as from time to time in effect, PROVIDED, FURTHER, in all cases such
period shall expire not later than the Maturity Date.
"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,
and Borrower's Books relating to any of the foregoing.
"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.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Issuing Bank" means the Bank issuing a Letter of Credit
pursuant to Section 2.1.1. SVB shall be the issuing bank, except that BNP
shall be the Issuing Bank if (i) SVB is unable to issue a Letter of Credit or
(ii) a Letter of Credit issued by SVB would require confirmation by another
bank under circumstances in which a Letter of Credit issued by BNP would not
require confirmation.
"Letter of Credit" means a Letter of Credit issued pursuant to
Section 2.1.1.
"LIBOR Base Rate" means, for any Interest Period for a LIBOR
Rate Advance, the rate of interest per annum determined by Servicing Agent to
be the per annum rate of interest at which deposits in United States Dollars
are or would be offered to Servicing Agent in the London interbank market at
11:00 A.M. (local time in such interbank market) three (3) Business Days
before the first day of such Interest Period for a period approximately equal
to such Interest Period and in an amount approximately equal to the amount of
such Advance.
"LIBOR Rate" shall mean, for any Interest Period for a LIBOR
Rate Advance, a rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) equal to (i) the LIBOR Base Rate for such Interest Period divided
by (ii) 1 minus the Reserve Requirement for such Interest Period.
"LIBOR Rate Advances" means any Advances made or a portion
thereof on which interest is payable based on the LIBOR Rate in accordance
with the terms hereof.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
"Liquidity" means, at any date of determination, the sum of
Borrower's cash, cash equivalents, and short term investments, less any cash
and cash equivalent balances that are held in a sinking fund for the
retirement of debt or capital stock or that are held in pledge for another
creditor, plus fifty percent (50%) of Borrower's net trade Accounts (not to
exceed $5,000,000).
"Loan Documents" means, collectively, this Agreement, any note
or notes executed by Borrower, and any other agreement entered into between
Borrower and any Bank the
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Servicing Agent or the Issuing Bank in connection with this Agreement, all as
amended or extended from time to time.
"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 March 19, 2000.
"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, and
Borrower's Books relating to any of the foregoing.
"Net Cash Losses" means, with respect to any date of
determination, determined on a consolidated basis in accordance with GAAP for
Borrower and its consolidated Subsidiaries, the average reduction in cash
from operations (excluding non-recurring charges) during the fiscal quarter
ending prior to such date of determination or if the date of determination is
the last day of a fiscal quarter, during the fiscal quarter then ending (or,
if monthly reporting is required pursuant to Section 6.3(b), during the three
fiscal months ending prior to such date of determination).
"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to the Servicing Agent or the Banks by
Borrower pursuant to this Agreement 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 any Bank may have obtained by assignment or otherwise.
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay
to any Bank pursuant to the terms and provisions of any Loan Document.
"Percentage Share" means, as to each Bank, the percentage
calculated in accordance with Section 12.1 hereof.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Banks 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;
(e) Indebtedness secured by Permitted Liens;
(f) Indebtedness of any Subsidiary to Borrower and
Contingent Obligations of any Subsidiary with respect to obligations of
Borrower (provided that the primary obligations are not prohibited hereby);
provided that the incurrence of such Indebtedness or
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Contingent Obligations, as the case may be, does not result in a violation of
Section 7.7 as a consequence of the provisos set forth in paragraph (d) of
the definition of "Permitted Investments;"
(g) Indebtedness of Borrower to any Subsidiary and
Contingent Obligations of Borrower with respect to obligations of any
Subsidiary (provided that the primary obligations are not prohibited hereby),
and Indebtedness of any Subsidiary to any other Subsidiary and Contingent
Obligations of any Subsidiary with respect to obligations of any other
Subsidiary (provided that the primary obligations are not prohibited hereby);
(h) Indebtedness in connection with capital leases:
(i) Extensions, renewals and refinancings of the
Indebtedness of the Borrower or any of its Subsidiaries of the type referred
to in clause (b) or (h) above, PROVIDED that the principal amount of such
Indebtedness being extended, renewed or refinanced does not increase; and
(j) Indebtedness consisting of guarantees resulting from
endorsement of negotiable instruments for collection by the Borrower or any
such Subsidiary in the ordinary course of business.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in
the Schedule;
(b) any investments selected by the Borrower in accordance
with its Investment Policy as adopted by the Borrower on December 19, 1996
(as the same may be amended from time to time with the approval of the
Banks); and
(c) Investments consisting of the endorsement of
negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business;
(d) Investments (whether consisting of the purchase of
securities, loans, capital contributions or otherwise) of Borrower in or to
Subsidiaries and Investments by Borrower in or to companies which
simultaneously with such Investments become Subsidiaries, provided that the
sum of (i) all such Investments by Borrower in or to Subsidiaries, plus (ii)
Contingent Obligations by Borrower outstanding at any time with respect to
the obligations of Subsidiaries, minus the sum of (x) Investments by
Subsidiaries in or to Borrower, plus (y) payments to Borrower on account of
Investments of Borrower in or to Subsidiaries, plus (z) distributions or
dividends by Subsidiaries to Borrower, in each case, made, incurred or
arising on or after the date hereof, does not exceed Five Million Dollars
($5,000,000) outstanding at any time, provided an Event of Default does not
exist immediately before or would not exist after giving effect to such
Investments;
(e) Investments (whether consisting of the purchase of
securities, loans, capital contributions, or otherwise) of Subsidiaries in or
to other Subsidiaries or in Borrower;
(f) Investments consisting of receivables owing to
Borrower or its Subsidiaries by Persons and advances to customers or
suppliers, in each case, if created, acquired or made in the ordinary course
of business; provided that this paragraph (f) shall not apply to Investments
owing by Subsidiaries to Borrower;
(g) Investments consisting of (i) compensation of
employees, officers and directors of Borrower or its Subsidiaries so long as
the Board of Directors of Borrower determines that such compensation is in
the best interests of Borrower, (ii) travel advances, employee relocation
loans and other employee loans and advances in the ordinary course of
business; (iii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries;
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(h) Investments pursuant to or arising under currency
agreements or interest rate agreements entered into in the ordinary course of
business for bona fide hedging purposes and not for speculation;
(i) Investments permitted under Section 7.3;
(j) Investments consisting of deposit accounts of Borrower
maintained in the ordinary course of business;
(k) Investments consisting of deposit accounts of any
Subsidiaries maintained in the ordinary course of business;
(l) Investments accepted in connection with Transfers
permitted by Section 7.1;
(m) Investments in an amount not to exceed an aggregate of
Twenty Million Dollars ($20,000,000) in Heartport Research and Training
Center Inc., provided an Event of Default does not exist immediately before
or would exist after giving effect to such Investments; and
(n) Investments in the form of warrants for common stock
of Vista Medical Technologies, Inc. (and the stock into which such warrants
may be exercised).
"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;
(c) Liens (i) upon or in any equipment or real property
acquired or held by Borrower or any of its Subsidiaries to secure the purchase
price of such equipment or indebtedness incurred solely for the purpose of
financing the acquisition of such equipment, or (ii) arising in connection
with the leasing of equipment or real property, or (iii) 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) Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness secured by Liens of the type
described in clauses (a) through (c) 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;
(e) Liens of materialmen, mechanics, warehousemen,
carriers, or other similar liens arising in the ordinary course of business
and securing obligations which are not delinquent or which are being
contested in good faith by appropriate proceedings;
(f) Liens in favor of customs and revenue authorities
which secure payment of customs duties in connection with the importation of
goods;
(g) Liens which constitute rights of set-off of a
customary nature or banker's liens on amounts on deposit, whether arising by
contract or by operation of law, in connection with arrangements entered into
with depository institutions in the ordinary course of business; and
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(h) Any judgment, attachment or similar lien in connection
with any event or circumstance described in Section 8.4 that is not an Event
of Default hereunder.
"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 from time to time by Servicing Agent, as its "prime
rate," whether or not such announced rate is the lowest rate available from
Servicing Agent.
"Prime Rate Advances" means any Advances made or a portion
thereof on which interest is payable based on the Prime Rate in accordance
with the terms hereof.
"Regulatory Change" means, with respect to a Bank, any change
on or after the date of this Agreement in United States federal, state or
foreign laws or regulations, including Regulation D, or the adoption or
making on or after such date of any written interpretations, directives or
requests applying to a class of lenders including Bank of or under any United
States federal or state, or any foreign, laws or regulations (whether or not
having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
"Reserve Requirement" means, for any Interest Period, the
average maximum rate at which reserves (including any marginal, supplemental
or emergency reserves) are required to be maintained during such Interest
Period under Regulation D against "Eurocurrency liabilities" (as such term is
used in Regulation D) by member banks of the Federal Reserve System. Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect
any other reserves required to be maintained by a Bank by reason of any
Regulatory Change against (i) any category of liabilities which includes
deposits by reference to which the LIBOR Rate is to be determined as provided
in the definition of "LIBOR Base Rate" or (ii) any category of extensions of
credit or other assets which include Advances.
"Remaining Months Liquidity" means, as at the end of each
fiscal quarter, or if monthly reporting is required pursuant to Section
6.3(b), as at the end of each fiscal month, the ratio of (i) Liquidity at
such time to (ii) the monthly average of Net Cash Losses.
"Responsible Officer" means each of the Chief Executive
Officer, Chief Operating Officer, the Chief Financial Officer, the Vice
President of Finance and Controller and the Treasurer of Borrower.
"Revolving Facility" means the facility under which Borrower
may request cash advances, as specified in Section 2.1 hereof.
"Schedule" means the schedule of exceptions attached hereto,
if any.
"Servicing Agent" means SVB in its capacity as agent for the
Banks under this Agreement and the Agency Agreement, or any successor
Servicing Agent under the Agency Agreement and Section 12 hereof.
"Subordinated Debt" means the outstanding convertible
subordinated notes of the Borrower due 2004 and any other debt incurred by
Borrower that is subordinated to the debt owing by Borrower hereunder on
terms acceptable to Banks (and identified as being such by Borrower and
Banks).
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"Subsidiary" means any corporation or partnership in which (i)
any general partnership interest or (ii) more than 50% of the stock of which
by the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through
an Affiliate.
"Tangible Net Worth" means at any date as of which the amount
thereof shall be determined, 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.
"Total Liabilities" means at 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.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
2. LOANS AND TERMS OF PAYMENT
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2.1 ADVANCES. Subject to the terms and conditions of this
Agreement, each Bank severally will make Advances to Borrower as set forth
herein. Each Bank severally will make its Percentage Share of Advances such
that the aggregate principal amount of each Bank's Advances under this
Agreement shall not exceed at any time such Bank's Percentage Share of the
Committed Line minus the face amount of all outstanding Letters of Credit.
Subject to the terms and conditions of this Agreement, amounts borrowed
pursuant to this Section 2.1 may be repaid and reborrowed at any time prior to
the Maturity Date.
(a) REQUESTS FOR ADVANCES. Whenever Borrower desires an
Advance, Borrower will notify Servicing Agent by facsimile transmission or
telephone no later than 11:00 a.m. California time on the Business Day that a
Prime Rate Advance is to be made, and noon California time on the Business
Day that is three (3) Business Days prior to the Business Day on which a
LIBOR Rate Advance is to be made. Servicing Agent shall promptly deliver
such notice to the Banks. Each Bank may make Advances under this Agreement,
based upon instructions received by Servicing Agent from a Responsible
Officer, or without instructions if in Servicing Agent's discretion such
Advances are necessary to meet Obligations under this Agreement which have
become due and remain unpaid. Each Bank shall be entitled to rely on any
notice by telephone or otherwise given by a person who Servicing Agent
reasonably believes to be a Responsible Officer, and Borrower shall indemnify
and hold such Bank harmless for any damages or loss suffered by such Bank as
a result of such reliance. Such Bank will wire or credit, as appropriate,
the amount of its Percentage Share of Advances in United States Dollars
requested to be made under this Section 2.1 to Borrower's deposit account
held by Servicing Agent or such other account as Borrower may specify from
time to time.
Each such notice shall specify:
(i) the date such Advance is to be made, which
shall be a Business Day;
(ii) the amount of such Advance;
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(iii) whether such Advance is to be a Prime Rate Advance or a LIBOR Rate
Advance; and
(iv) if the Advance is to be a LIBOR Rate Advance, the Interest Period
for such Advance.
Each written request for an Advance, and each confirmation of a telephone
request for such an Advance, shall be in the form of a Borrowing Certificate
in the form of Exhibit B-1 or Exhibit B-2 executed by Borrower.
(b) PRIME RATE ADVANCES. Each Prime Rate Advance shall be in
an amount not less than Five Hundred Thousand Dollars ($500,000). The
outstanding principal balance of each Prime Rate Advance shall bear interest
until principal is due (computed daily on the basis of a 360 day year and
actual days elapsed), at a fluctuating rate per annum equal to the Prime
Rate. Borrower shall pay the entire outstanding principal amount of each
Prime Rate Advance and in any event on the Maturity Date.
(c) LIBOR RATE ADVANCES. Each LIBOR Rate Advance shall be in
an amount of not less than Five Hundred Thousand Dollars ($500,000). The
outstanding principal balance of each LIBOR Rate Advance shall bear interest
until principal is due (computed daily on the basis of a 360 day year and
actual days elapsed) at a rate per annum equal to the LIBOR Rate plus 150
basis points for such LIBOR Rate Advance. The entire outstanding principal
amount of each LIBOR Rate Advance shall be due and payable on the last day of
the Interest Period for such LIBOR Rate Advance and in any event on the
Maturity Date.
(d) PREPAYMENT OF THE ADVANCES. Borrower may at any time
prepay any Prime Rate Advance or any LIBOR Rate Advance, in full or in part.
Each partial prepayment for a LIBOR Rate Advance shall be in an amount not
less than Two Hundred Fifty Thousand Dollars ($250,000). Each prepayment
shall be made upon the irrevocable written or telephone notice of Borrower
received by Servicing Agent not later than 10:00 a.m. California time on the
date of the prepayment of a Prime Rate Advance and not less than three (3)
Business Days prior to the date of the prepayment of a LIBOR Rate Advance.
The notice of prepayment shall specify the date of the prepayment, the amount
of the prepayment, and the Advance or Advances to be prepaid. Each
prepayment of a LIBOR Rate Advance shall be accompanied by the payment of
accrued interest on the amount prepaid and any amount required by Section 2.9.
2.1.1 LETTERS OF CREDIT.
(a) At Borrower's written request, Issuing Bank shall
issue Letters of Credit for Borrower's account. Each Bank severally agrees
to participate in Letters of Credit, in accordance with such Bank's
Percentage Share.
(b) Issuing Bank shall issue the Letter of Credit upon
receipt of Borrower's written request and Issuing Bank's standard form of
application, stating (a) the date Borrower wishes to receive the Letter of
Credit (which shall be a Business Day); (b) the requested amount of such
Letter of Credit; (c) the aggregate principal amount of all Advances and
Letters of Credit then outstanding; (d) if appropriate, the conditions
requested by Borrower under which the Letter of Credit may be drawn upon; and
(e) any other information Issuing Bank might need to issue the Letter of
Credit. Issuing Bank shall promptly notify all of the Banks upon receipt of
a request for a Letter of Credit.
(c) The maximum aggregate principal obligation at any one
time for undrawn and drawn but unreimbursed Letters of Credit shall be Five
Million Dollars ($5,000,000). Each Letter of Credit shall be issued pursuant
to the terms and conditions of this Agreement and of the Issuing Bank's
standard form of application and security agreement for letters of credit.
Each Letter of Credit shall be issued pursuant to the terms and conditions
of this Agreement and of the Issuing Bank's standard form of application
and security agreement for letters of credit. Each Letter of Credit
9
shall (a) expire no later than the Maturity Date; and (b) be otherwise in
form and substance satisfactory to Issuing Bank. Upon issuing a Letter of
Credit, the Issuing Bank shall immediately notify Banks of such issuance and
shall, on a continuing basis, keep the Banks informed of the drawn and
undrawn but unreimbursed amount of each Letter of Credit for so long as such
Letter of Credit is outstanding. Borrower shall pay Servicing Agent
quarterly in arrears on the last day of each March, June, September and
December a fee equal to one and one-half percent (1.5%) per annum of the face
amount of each Letter of Credit issued hereunder during the period from the
date of issuance until expiration, which shall be shared by Banks in
accordance with the Agency Agreement. On the day on which Issuing Bank
honors any drawing made by the beneficiary of a Letter of Credit, Borrower
shall pay to Issuing Bank the full amount of the drawing so honored, or at
Borrower's option, shall treat the amount of such drawing as an Advance under
Section 2.1. The obligation to reimburse Issuing Bank for the amount of such
drawing is absolute, unconditional, and irrevocable.
(d) Borrower may request that Issuing Bank issue a Letter
of Credit payable in a currency other than United States Dollars. If a
demand for payment is made under any such Letter of Credit, Issuing Bank
shall treat payment on such demand as an Prime Rate Advance to Borrower of
the equivalent amount in United States Dollars. Upon the issuance of any
Letter of Credit payable in a currency other than United States Dollars,
Banks shall create a reserve under the Committed Line for letters of credit
against fluctuations in currency exchange rates, in an amount equal to ten
percent (10%) of the Dollar equivalent of the face amount of such Letter of
Credit at issuance. The amount of such reserve may be amended by Banks from
time to time to account for fluctuations in the exchange rate. The
availability of funds under the Committed Line shall be reduced by the amount
of such reserve for so long as such Letter of Credit remains outstanding.
2.2 INTEREST RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATE. Except as set forth in Section 2.2(b)
and subject to the following sentence, all outstanding Advances shall bear
interest, on the average Daily Balance thereof, at a rate equal to the rates
specified in the provisions relating to each facility hereunder.
(b) DEFAULT RATE. All Obligations shall bear interest,
from and after the occurrence of an Event of Default, at a rate equal to four
(4) percentage points above the interest rate applicable immediately prior to
the occurrence of the Event of Default. In the case of a LIBOR Rate Advance,
upon the expiration of the applicable Interest Period following and during
the continuance of an Event of Default, such rate will be four (4) percentage
points above the Prime Rate.
(c) PAYMENTS. All interest that accrues hereunder shall
be due and payable on last day of each March, June, September and December
during the term hereof. Bank shall, at its option, charge such interest, all
Bank Expenses, and all Periodic Payments against any of Borrower's deposit
accounts or against the Committed Line, in which case those amounts shall
thereafter accrue interest at the rate then applicable hereunder. 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. All principal and interest shall be paid in U.S.
dollars and shall be due and payable without demand on the Maturity Date.
(d) COMPUTATION. In the event the Prime Rate is changed
from time to time hereafter, the applicable rate of interest 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.
10
2.3 CREDITING PAYMENTS. Prior to the occurrence and continuance of
an Event of Default, Servicing Agent 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 and during the continuance of an
Event of Default, the receipt by Servicing Agent of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account 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 Servicing Agent after 12:00
noon California time shall be deemed to have been received by Servicing Agent
as of the opening of business on the immediately following Business Day.
Whenever any payment to Servicing Agent 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.
2.4 FEES. Borrower shall pay to Servicing Agent the following to
be shared by Banks in accordance with the Agency Agreement:
(a) FACILITY FEE. Facility fees equal to (i) Sixty Two
Thousand Five Hundred Dollars ($62,500), which fee shall be due on the
Closing Date and shall be fully earned and nonrefundable and (ii) one quarter
of one percent (.25%) per annum of the unused portion of the Committed Line
per year payable quarterly in arrears on the last day of each March, June,
September and December for each quarter until the Maturity Date, which fee,
when paid, shall be fully earned and non-refundable;
(b) FINANCIAL EXAMINATION AND APPRAISAL FEES. Banks,
customary fees and out-of-pocket expenses for Banks, audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Banks or their agents;
(c) BANK EXPENSES. Upon the date hereof, all Bank
Expenses incurred through the Closing Date, including reasonable attorneys'
fees and expenses (not to exceed $10,000), and, after the date hereof, all
Bank Expenses, including reasonable attorneys' fees and expenses, as and when
they become due.
2.5 ADDITIONAL COSTS. In case any change in 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 or
any other Regulatory Change), in each case after the date of this Agreement:
(a) subjects any Bank to any United States of America tax
(including any tax imposed by any political subdivision of the United States
of America) 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 such Bank) and provided that Bank shall take all reasonable steps to
mitigate or limit any such taxes;
(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, any Bank; or
(c) imposes upon any Bank any other condition with
respect to its performance under this Agreement,
11
and the result of any of the foregoing is to increase the cost to such Bank,
reduce the income receivable by such Bank or impose any expense upon such
Bank with respect to any loans, Bank shall notify Borrower thereof. Borrower
agrees to pay to such 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 such Bank of a statement of the
amount and setting forth such Bank's calculation thereof, all in reasonable
detail, which statement shall be deemed true and correct absent manifest
error.
2.6 TERM. This Agreement shall become effective on the Closing
Date and, subject to Section 13.7, shall continue in full force and effect
for a term ending on the Maturity Date, provided that Banks may, in their
discretion, agree to a request from Borrower to extend the term for one
additional year. To request such extension, Borrower shall give Servicing
Agent and Banks written notice thereof not less than sixty (60) days' prior
to the first anniversary of the Closing Date. Notwithstanding the
foregoing, each Bank shall have the right to terminate its obligation to make
Advances or to issue any Letter of Credit under this Agreement immediately
upon the occurrence and during the continuance of an Event of Default.
Notwithstanding termination, the Lien of the Servicing Agent and the Banks on
the Collateral shall remain in effect for so long as any Obligations (other
than inchoate Obligations) are outstanding.
2.7 CONVERSION/CONTINUATION OF ADVANCES.
(a) Borrower may from time to time submit in writing a
request to Servicing Agent that Prime Rate Advances be converted to LIBOR
Rate Advances or that any existing LIBOR Rate Advances continue for an
additional Interest Period. Such request shall specify the amount of the
Prime Rate Advances which will constitute LIBOR Rate Advances (subject to the
limits set forth below) and the Interest Period to be applicable to such
LIBOR Rate Advances. Each written request for a conversion to a LIBOR Rate
Advance or a continuation of a LIBOR Rate Advance shall be substantially in
the form of a LIBOR Rate Conversion/Continuation Certificate as set forth on
EXHIBIT B-2, which shall be duly executed by a Responsible Officer. Subject
to the terms and conditions contained herein, three (3) Business Days after
Servicing Agent's receipt of such a request from Borrower, such Prime Rate
Advances shall be converted to LIBOR Rate Advances or such LIBOR Rate
Advances shall continue, as the case may be provided that:
(i) no Event of Default or event which with
notice or passage of time or both would constitute an Event of Default exists;
(ii) no party hereto shall have sent any notice
of termination of the Agreement;
(iii) Borrower shall have complied with such
customary procedures as Banks have established from time to time for
Borrower's requests for LIBOR Rate Advances;
(iv) Subject to the limitations of Section 2, the
amount of a Prime Rate Advance shall be $500,000 or more, and the amount of a
LIBOR Rate Advance shall be $500,000 or such greater amount which is an
integral multiple of $50,000; and
(v) Servicing Agent shall have determined that
the Interest Period or LIBOR Rate is available to Banks as of the date of the
request for such LIBOR Rate Advance.
Any request by Borrower to convert Prime Rate Advances to LIBOR Rate
Advances or continue any existing LIBOR Rate Advances shall be irrevocable
and must be received by Servicing agent at least three (3) business days
before the requested effective date of conversion to a LIBOR rate Advance or
continuation of a LIBOR Rate Advance. Notwithstanding anything to the
contrary contained herein, Banks shall not be required to purchase United
States Dollar deposits in the London
12
interbank market or other applicable LIBOR Rate market to fund any LIBOR Rate
Advances, but the provisions hereof shall be deemed to apply as if Banks had
purchased such deposits to fund the LIBOR Rate Advances.
(b) Any LIBOR Rate Advances shall automatically convert to
Prime Rate Advances upon the last day of the applicable Interest Period,
unless Servicing Agent has received and approved a complete and proper
request to continue such LIBOR Rate Advance at least three (3) Business Days
prior to such last day in accordance with the terms hereof. Any LIBOR Rate
Advances shall, at Banks' option, convert to Prime Rate Advances in the event
that an Event of Default shall exist and as such shall be subject to Section
2.2(b). Borrower shall pay to Banks, upon demand by Banks (or Servicing
Agent may, at its option, charge Borrower's deposit account) any amounts
required to compensate Banks for any loss (including loss of anticipated
profits), cost or expense incurred by such person, as a result of the
conversion of LIBOR Rate Advances to Prime Rate Advances following an Event
of Default.
2.8 ADDITIONAL REQUIREMENTS/PROVISIONS REGARDING LIBOR RATE ADVANCES.
(a) If for any reason (including voluntary or mandatory
prepayment or acceleration), Banks receive all or part of the principal
amount of a LIBOR Rate Advance prior to the last day of the Interest Period
for such LIBOR Rate Advance, Borrower shall on demand by Servicing Agent
which shall be made at the request of any Bank, pay Servicing Agent the
amount (if any) by which (i) the additional interest which would have been
payable on the amount so received had it not been received until the last day
of such Interest Period or term exceeds (ii) the interest which would have
been recoverable by Banks by placing the amount so received on deposit in the
certificate of deposit markets or the offshore currency interbank markets or
United States Treasury investment products, as the case may be, for a period
starting on the date on which it was so received and ending on the last day
of such Interest Period at the interest rate determined by Servicing Agent in
its reasonable discretion. Servicing Agent's determination as to such amount
shall be conclusive absent manifest error.
(b) Borrower shall pay to a Bank, upon the request of such
Bank, such amount or amounts as shall be sufficient as determined by such
Bank to be necessary to compensate it for any loss, costs or expense incurred
by it as a result of any failure by Borrower to borrow a LIBOR Rate Advance
on the date for such borrowing specified in the relevant timely notice of
borrowing hereunder.
(c) If a Bank shall determine that the adoption or
implementation of any applicable law, rule, regulation or treaty regarding
capital adequacy, or any change therein, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by Bank (or its applicable lending office) with any respect or
directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, in each case, on or
after the date hereof, has or would have the effect of reducing the rate of
return on capital of such Bank or any person or entity controlling Bank (a
"Parent") as a consequence of its obligations hereunder to a level below that
which Bank (or its Parent) could have achieved but for such adoption, change
or compliance (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by Bank to be material, then from time to time,
within 15 days after demand by such Bank, Borrower shall pay to Bank such
additional amount or amounts as will compensate such Bank for such reduction.
A statement of such Bank claiming compensation under this Section and
setting forth the additional amount or amounts to be paid to it hereunder
shall be conclusive absent manifest error.
13
(d) If at any time a Bank, in its sole and absolute
discretion, determines that: (i) the amount of the LIBOR Rate Advances for
periods equal to the corresponding Interest Periods or any other period are
not available to such Bank in the offshore currency interbank markets, or
(ii) the LIBOR Rate does not accurately reflect the cost to Bank of lending
the LIBOR Rate Advance, then such Bank shall promptly give notice thereof to
Borrower, and upon the giving of such notice such Bank's obligation to make
the LIBOR Rate Advances shall terminate, unless Banks and Borrower agree in
writing to a different interest rate applicable to LIBOR Rate Advances. If
it shall become unlawful for a Bank to continue to fund or maintain any
Advances, or to perform its obligations hereunder, upon demand by such Bank,
Borrower shall prepay the Advances in full with accrued interest thereon and
all other amounts payable by Borrower hereunder (including, without
limitation, any amount payable in connection with such prepayment pursuant to
Section 2.9(a)).
3. CONDITIONS OF LOANS
-------------------
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of
Bank to make the initial Advance 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 incumbency and resolutions authorizing the execution and delivery
of this Agreement;
(c) negative pledge agreement in substantially the form of
EXHIBIT D hereto;
(d) financing statement (Form UCC-1) or UCC-2 as the Banks
may require, naming the Servicing Agent and the banks as secured parties, in
form and substance acceptable to the Servicing Agent and the Banks;
(e) insurance certificate;
(f) payment of the fees and Bank Expenses then due as
specified in Section 2.5 hereof; 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 ADVANCES. The obligation of Banks
to make each Advance, including the initial Advance, is further subject to
the following conditions:
(a) timely receipt by Servicing Agent of the
Payment/Advance Form and/or LIBOR Rate Advance Form as provided in Section
2.1; and
(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 or LIBOR Rate Advance Form and on the
effective date of each Advance 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 Advance. The making of each Advance shall be deemed to be a
representation and warranty by Borrower on the date of such Advance as to the
accuracy of the facts referred to in this Section 3.2(b).
14
4. CREATION OF SECURITY INTEREST
-----------------------------
4.1 GRANT OF SECURITY INTEREST.
(a) Borrower grants and pledges to Servicing Agent,
for itself and as agent for Banks and to each Bank, a continuing security
interest in all presently existing and hereafter acquired or arising
Collateral in order to secure prompt repayment 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 will constitute a valid, first priority security
interest in the Collateral except for Permitted Liens as of the Effective
Date.
(b) Notwithstanding anything contained in this
Agreement to the contrary, the grant of security interest contained herein
shall not be effective or otherwise deemed given until the Effective Date, at
which date the terms of Sections 4.1 and 4.2 shall become immediately
effective without notice or action by Servicing Agent or any Bank. Servicing
Agent may file the financing statement referred to in Section 3.1(d) with the
California Secretary of State on or after, but not before, the Effective Date.
4.2 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED.
Borrower shall from time to time execute and deliver to Servicing Agent, at
the request of Servicing Agent, all Negotiable Collateral on or after the
Effective Date, all financing statements and other documents that Servicing
Agent may reasonably request, in form satisfactory to Servicing Agent, to
perfect and continue perfected Servicing Agent'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. Servicing Agent and Banks (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 appraise the Collateral in order to verify Borrower's financial
condition or the amount, condition of, or any other matter relating to, the
Collateral.
4.4 REQUIREMENT FOR CASH COLLATERAL. If Borrower does not
comply with any covenant contained in Sections 6.7, 6.8 or 6.9 herein, then
Borrower shall pledge cash or a certificate of deposit to Servicing Agent in
an amount equal to one hundred five percent (105%) of the aggregate amount
without duplication of (i) all the outstanding Advances and (ii) all
outstanding Letters of Credit, in each case to the extent not already
cash-secured. Servicing Agent agrees to release the cash pledged pursuant to
this Section 4.4 upon Borrower's achieving compliance with the covenant
giving rise to the pledge hereunder. Notwithstanding anything to the
contrary in this Agreement, failure to comply with any such covenant shall
not be a default or an Event of Default so long as the Borrower complies with
this Section 4.4 on the next Business Day after the Borrower becomes aware of
the noncompliance with any such covenant.
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, except to the
extent that failure to so qualify would not have a Material Adverse Effect on
the Borrower.
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
15
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 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE. Except as
disclosed in the Schedule, Borrower has not done 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.
5.5 LITIGATION. Except as set forth in the Schedule,
there are no actions or proceedings pending by or against Borrower or any
Subsidiary before any court or administrative agency in which an adverse
decision could have a Material Adverse Effect or a material adverse effect on
Borrower's interest or Servicing Agent's and the Banks' security interest in
the Collateral. Borrower does not have knowledge of any such pending or
threatened actions or proceedings.
5.6 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements related to Borrower and any Subsidiary
that have been delivered by Borrower to Servicing Agent and Banks 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. Except as disclosed to the Servicing Agent or the
Borrower's public filings and announcements, 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.
5.7 SOLVENCY. Borrower is solvent and able to pay its
debts (including trade debts) as they mature.
5.8 REGULATORY COMPLIANCE. Borrower and each Subsidiary
have 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 the
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, and
Borrower has not violated any statutes, laws, ordinances or rules applicable
to it, noncompliance with which or violation of which could have a Material
Adverse Effect.
5.9 ENVIRONMENTAL CONDITION. Except as set forth in the
Schedule, 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
16
resulting in the releasing, or otherwise disposing of hazardous waste or
hazardous substances into the environment.
5.10 TAXES. Borrower and each Subsidiary have filed or
caused to be filed all tax returns required to be filed, and has paid, or has
made adequate provision for the payment of, all taxes reflected therein,
except for taxes the amount or validity of which Borrower is contesting in
good faith by appropriate proceedings and with respect to which Borrower has
taken adequate reserves in accordance with GAAP.
5.11 SUBSIDIARIES. As of the date hereof, Borrower does
not own any stock, partnership interest or other equity securities of any
Person, except for Permitted Investments.
5.12 GOVERNMENT CONSENTS. Borrower and each Subsidiary
have obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all governmental
authorities that are necessary for the continued operation of Borrower's
business as currently conducted, except to the extent that failure to do so
would not have a Material Adverse Effect on Borrower.
5.13 FULL DISCLOSURE. No representation, warranty or
other statement made by Borrower in any certificate or written statement
furnished to Servicing Agent or any Bank in connection with this Agreement
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 an Advance 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.
(a) Borrower shall deliver to Servicing Agent for
distribution to the Banks: (a) as soon as available, but in any event within
ninety (90) days after the end of Borrower's fiscal year, 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 the Banks; (b) within ten (10) days upon becoming
available, 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 and 10-Q filed with the
Securities and Exchange Commission; (c) promptly upon receipt of
17
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 Five Hundred Thousand Dollars ($500,000) or more; and
(d) such financial information as Bank may reasonably request from time to
time.
(b) If at any time and during such time that
Borrower's Liquidity is less than (i) two and one quarter (2.25) times the
outstanding Obligations hereunder or (ii) an amount equal to twelve (12)
times the then applicable Remaining Months Liquidity, Borrower shall deliver
to Servicing Agent for distribution to the Banks a company prepared
consolidated balance sheet and income statement covering Borrower's
consolidated operations for the relevant month, certified by a Responsible
Officer within thirty (30) days after the last day of each calendar month.
(c) Borrower shall deliver to Servicing Agent for
distribution to the Banks with each of the quarterly or monthly financial
statement required above a Compliance Certificate signed by a Responsible
Officer in substantially the form of EXHIBIT C hereto.
6.4 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 Servicing Agent, 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 Servicing Agent with proof
satisfactory to the Banks 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 contested in
good faith by appropriate proceedings and is reserved against (to the extent
required by GAAP) by Borrower.
6.5 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 reasonably
satisfactory to the Banks. After the Effective Date only, all such policies
of property insurance shall contain a lender's loss payable endorsement, in a
form satisfactory to the Banks, showing Servicing Agent and the Banks as an
additional loss payee thereof and all liability insurance policies shall show
the Servicing Agent and the Banks 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. After the Effective Date only, upon
Servicing Agent's request, Borrower shall deliver to Servicing Agent
certified copies of such policies of insurance and evidence of the payments
of all premiums therefor. After the Effective Date only, all proceeds
payable under any such policy shall, at the option of Servicing Agent, be
payable to Servicing Agent to be applied on account of the Obligations.
6.6 PRINCIPAL DEPOSITORY. Borrower shall either (i)
maintain its principal domestic depository and operating accounts with
Servicing Agent or (ii) shall maintain a minimum balance of no less than Four
Million Dollars ($4,000,000) in a deposit account with Servicing Agent.
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6.7 DEBT-NET WORTH RATIO. Subject to the following
sentence, Borrower shall maintain, as of the last day of each of Borrower's
fiscal quarters, a ratio of Total Liabilities less Subordinated Debt to
Tangible Net Worth plus Subordinated Debt of not more than 0.75 to 1.00. At
any time Borrower is subject to the monthly reporting requirements of Section
6.3(b), Borrower shall maintain, as of the last day of each calendar month, a
ratio of Total Liabilities less Subordinated Debt to Tangible Net Worth plus
Subordinated Debt of not more than 0.75 to 1.00.
6.8 TANGIBLE NET WORTH. Subject to the following
sentence, Borrower shall maintain, as of the last day of each of Borrower's
fiscal quarters, a Tangible Net Worth of not less than Fifty Million Dollars
($50,000,000). At any time Borrower is subject to the monthly reporting
requirements of Section 6.3(b), Borrower shall maintain, as of the last day
of each calendar month, a Tangible Net Worth of not less than Fifty Million
Dollars ($50,000,000).
6.9 MINIMUM LIQUIDITY. Borrower shall maintain, as of the
last day of each of Borrower's fiscal quarters, a minimum Liquidity of the
greater of (a) one and three quarters (1.75) times the amount of outstanding
obligations hereunder OR (b) an amount equal to six (6) time the then
applicable Remaining Months Liquidity.
6.10 CO-BORROWERS; FURTHER ASSURANCES. At any time and
from time to time, Borrower shall, at Servicing Agent's request in the
exercises of the Banks' sole discretion, cause any Subsidiary to become party
to this Agreement as a co-borrower and to grant a security interest in its
assets to secure the Obligations, all on terms acceptable to the Banks. 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 the Banks to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations
or for so long as the Banks may have any commitment to make any Advances or
to issue or make any payment under any Letter of Credit, 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: (i) Transfers of Inventory and other assets in the ordinary course of
business; (ii) Transfers of non-exclusive licenses and similar arrangements
for the use of the property of Borrower or its Subsidiaries and exclusive and
non-exclusive license entered into in good faith in connection with the
distribution of Borrower's products; (iii) Transfers of worn-out or obsolete
Equipment; or (iv) as disclosed in writing to the Banks prior to date hereof.
7.2 CHANGE IN BUSINESS. 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). Borrower will not, without thirty
(30) days prior written notification to the Banks and Servicing Agent,
relocate its chief executive office.
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 except (i) if Borrower is the surviving entity of any such merger or
consolidation (except for the merger or consolidation of one Subsidiary into
another Subsidiary) and (ii) no Event of Default has occurred and is
continuing or would result from such action.
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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, except (i) repurchases from current or former
employees, directors or consultants of the Borrower under the terms of any
stock option or stock purchase plans or agreements up to a maximum of
$500,000 in any one fiscal year (provided an Event of Default has not
occurred and is continuing at the time of such repurchase or would exist
after giving effect to such repurchase), and (ii) dividends payable solely in
common stock.
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 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.
7.10 COMPLIANCE. Become an "investment 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 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 the
principal of, or any interest on, any Advances or fails to repay any amount
paid under any Letter of Credit when due and payable; or fails to pay any
portion of any other Obligations not constituting such principal or interest,
including without limitation Bank Expenses, within thirty (30) days of
receipt by Borrower of an invoice for such other Obligations;
8.2 COVENANT DEFAULT. If Borrower fails to timely perform
any obligation under Sections 4.4, 6.7, 6.8 or 6.9 or violates any of the
covenants contained in Article 7 of this Agreement, or 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
20
future agreement between Borrower and any 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 twenty (20) days after Borrower
receives notice thereof or any officer of Borrower becomes aware thereof;
provided, however, that if the default cannot by its nature be cured within
the twenty (20) day period or cannot after diligent attempts by Borrower be
cured within such twenty (20) 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 occurs a material
adverse change in Borrower's business or consolidated financial condition, or
if there is a material impairment of the prospect of repayment of any portion
of the Obligations or a material impairment of the value or priority of
Servicing Agent's and the Banks' security interests in the Collateral;
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 Advances will be required to be made during such cure
period) or to the extent that such Lien is a Permitted Lien;
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 twenty (20) 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 Five Hundred Thousand Dollars ($500,000) 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 the Banks;
8.8 JUDGMENTS. If a judgment or judgments for the payment
of money, the uninsured amount of which is, individually or in the aggregate,
at least Five Hundred Thousand Dollars ($500,000), shall be rendered against
Borrower and shall remain unsatisfied and unstayed for a period of thirty
(30) days (provided that no Advances will be made prior to the satisfaction
or stay of such judgment); or
8.9 MISREPRESENTATIONS. If there exists any material
misrepresentation or material misstatement on or as of the date made in any
warranty or representation set forth herein or in any certificate delivered
to Servicing Agent or any Bank by any Responsible Officer pursuant to this
Agreement or to induce the Banks to enter into this Agreement or any other
Loan Document.
21
9. BANKS' RIGHTS AND REMEDIES
--------------------------
9.1 RIGHTS AND REMEDIES. Upon the occurrence and during
the continuance of an Event of Default, Servicing Agent may, at the election
and direction of the Banks in accordance with the Agency Agreement, 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 such declaration);
(b) Cease advancing money or extending credit to
or for the benefit of Borrower under this Agreement and the Issuing Bank may
cease issuing Letters of Credit;
(c) Settle or adjust disputes and claims directly
with account debtors for amounts, upon terms and in whatever order that
Servicing Agent reasonably considers advisable;
(d) Without notice to or demand upon Borrower,
make such payments and do such acts as Servicing Agent considers necessary or
reasonable to protect the Banks' security interest in the Collateral.
Borrower agrees to assemble the Collateral if Servicing Agent so requires,
and to make the Collateral available to Servicing Agent as Servicing Agent
may designate. Borrower authorizes Servicing Agent 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 in Servicing Agent'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
owned premises, Borrower hereby grants Servicing Agent a license to enter
into possession of such premises and to occupy the same, without charge, in
order to exercise any of Servicing Agent's rights or remedies provided
herein, at law, in equity, or otherwise;
(e) Without notice to Borrower set off and apply
to the Obligations any and all (i) balances and deposits of Borrower held by
any Bank, or (ii) indebtedness at any time owing to or for the credit or the
account of Borrower held by any Bank;
(f) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the
manner provided for herein) the Collateral. Servicing Agent is hereby
granted a license or other right, solely pursuant to the provisions of this
Section 9.1, to use, without charge, Borrower's labels, patents, copyrights,
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 Servicing Agent's
exercise of its rights under this Section 9.1, Borrower's rights under all
licenses and all franchise agreements shall inure to Servicing Agent's
benefit;
(g) 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 Servicing Agent determines is commercially reasonable, and apply
any proceeds to the Obligations in whatever manner or order Bank deems
appropriate;
(h) Any Bank may credit bid and purchase at any
public sale; and
(i) Any deficiency that exists after disposition
of the Collateral as provided above will be paid immediately by Borrower.
22
9.2 POWER OF ATTORNEY. At any time after the Effective
Date, but effective only upon the occurrence and during the continuance of an
Event of Default, Borrower hereby irrevocably appoints Servicing Agent (and
any of Servicing Agent'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 Servicing Agent'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 Servicing Agent'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
Servicing Agent determines to be reasonable; provided Servicing Agent 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 Servicing Agent as Borrower's attorney in
fact, and each and every one of Servicing Agent's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have
been fully repaid and performed and the Banks' obligation to provide Advances
hereunder and the Issuing Bank's obligation to issue and make any payments
under Letters of Credit is terminated.
9.3 ACCOUNTS COLLECTION. At any time from the Effective
Date, Servicing Agent may notify any Person owing funds to Borrower of
Servicing Agent's and the Banks' security interest in such funds and verify
the amount of such Account. Borrower shall collect all amounts owing to
Borrower for Servicing Agent, receive in trust all payments as Servicing
Agent's trustee, and immediately deliver such payments to Servicing Agent 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 Servicing Agent may do any
or all of the following: (a) make payment of the same or any part thereof;
or (b) obtain and maintain insurance policies of the type discussed in
Section 6.5 of this Agreement, and take any action with respect to such
policies as Servicing Agent deems prudent. Any amounts so paid or deposited
by Servicing Agent 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
Servicing Agent shall not constitute an agreement by Servicing Agent to make
similar payments in the future or a waiver by Servicing Agent of any Event of
Default under this Agreement.
9.5 SERVICING AGENT'S LIABILITY FOR COLLATERAL. So long
as Servicing Agent complies with reasonable banking practices, Servicing
Agent 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. Servicing Agent and each Bank shall have all other rights and
remedies not inconsistent herewith as provided under the Code, by law, or in
equity. No exercise by Servicing Agent or a Bank of one right or remedy
shall be deemed an election, and no waiver of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by Servicing
Agent or a Bank shall constitute a waiver, election, or acquiescence by it.
No waiver shall be effective unless made in a written document signed on
behalf of Servicing Agent and each Bank, as appropriate and then shall be
effective only in the specific instance and for the specific purpose for
which it was given.
23
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 a 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, certified mail, postage prepaid,
return receipt requested, or by telefacsimile as follows:
If to Borrower: Heartport, Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attn: Xx. Xxxxxxx Xxxx
FAX: (000) 000-0000
If to SVB: Silicon Valley Bank
(as a Bank or 0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
as Servicing Agent) Xxxx Xxxx, XX 00000
Attn: Xx. Xxxx Xxxxxx
FAX: (000) 000-0000
If to BNP: Banque Nationale de Paris
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xx. Xxxxxxxxx Xxxxx
FAX: (000) 000-0000
Each of the parties hereto may change the address at which it is to
receive notices hereunder, by notice in writing in the foregoing manner given
to the other parties.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
------------------------------------------
This Agreement 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, Servicing Agent and
each Bank hereby submits to the exclusive jurisdiction of the state and
Federal courts located in the County of Santa Xxxxx, State of California.
BORROWER, SERVICING AGENT AND EACH 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.
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12. INTERCREDITOR PROVISIONS
------------------------
12.1 PROPORTIONATE INTERESTS. Except as otherwise
provided in this Agreement, the rights, interests, and obligations of each
Bank under this Agreement and the Loan Documents at any time shall be
severally shared in the ratio of (a) the maximum amount the Bank has
committed to advance as set forth on the signature page signed by the Bank to
(b) the Committed Line. Any reference in this Agreement or the Loan
Documents to an allocation between or sharing by the Banks of any right,
interest, or duty "ratably," "proportionally," "pro rata," or in similar
terms shall refer to this ratio. No Bank is obligated to advance any funds
in lieu of or for the account of the other Bank if the latter Bank fails to
make such Advance.
12.2 DESIGNATION OF SERVICE AGENT. To facilitate the
administration of this Agreement, SVB shall act as "Servicing Agent" for
itself and all Banks. Servicing Agent shall have only such duties as are
expressly set forth in this Agreement and the Agency Agreement, or as
otherwise agreed in writing by the Banks. Servicing Agent shall be deemed to
act on behalf of all Banks whenever Servicing Agent acts under this Agreement.
12.3 RESIGNATION. Servicing Agent may resign as Servicing
Agent, upon thirty (30) day's written notice to the other Banks and to
Borrower and appointment of a successor Servicing Agent in accordance with
the Agency Agreement. Upon receipt of notice of resignation, the Banks shall
appoint a successor Servicing Agent in accordance with the Agency Agreement.
The resigning Servicing Agent shall cooperate fully in delivering to the
successor Servicing Agent the Loan Documents and copies of all records
relating to the Advances and payments made hereunder that the successor
Servicing Agent reasonably requests.
12.4 SERVICING AGENT AS BANK. SVB shall have the same
rights and powers under this Agreement as any other Bank and may exercise the
same as though it were not Servicing Agent. The term "Banks" includes
Servicing Agent in Servicing Agent's individual capacity. Servicing Agent
and its Subsidiaries and Affiliates may accept deposits from, lend money to,
act as agent or trustee for other lenders to, and generally engage in any
kind of banking, trust, or other business with, the Borrower or any
Subsidiary or Affiliates as if Servicing Agent were not Servicing Agent.
12.5 NO AGENCY. EXCEPT AS SPECIFIED HEREIN, NEITHER BANK
IS AN AGENT OF THE OTHER. NEITHER BANK HAS ANY AUTHORITY TO ACT OR FAIL TO
ACT FOR THE OTHER. THE OBLIGATIONS OF EACH BANK HEREUNDER ARE SEVERAL. NO
BANK SHALL BE LIABLE FOR THE FAILURE OF ANY OTHER BANK TO PERFORM ITS
OBLIGATIONS HEREUNDER.
12.6 NO RELIANCE. The provisions of this Article 12 are
solely for the benefit of Banks in specifying their rights and obligations
with respect to each other, and not for the benefit of any Borrower or its
assigns or successors. In the event of any conflict between the terms of the
Agency Agreement and the terms of this Article 12, the terms of the Agency
Agreement shall control.
13. GENERAL PROVISIONS
------------------
13.1 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 the Banks' prior
written consent, which consent may be granted or withheld in the exercise of
the Bank's sole discretion. Each 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, such Bank's
obligations, rights and benefits hereunder.
25
13.2 INDEMNIFICATION. Borrower shall defend, indemnify
and hold harmless Servicing Agent and each 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 this Agreement; and (b) all losses or Bank Expenses in any
way suffered, incurred, or paid by Servicing Agent or any Bank as a result of
or in any way arising out of, following, or consequential to transactions
between Servicing Agent or any Bank and Borrower under the Loan Documents
(including without limitation reasonable attorneys fees and expenses), except
for losses caused by Servicing Agent's or such Bank's gross negligence or
willful misconduct.
13.3 TIME OF ESSENCE. Time is of the essence for the
performance of all obligations set forth in this Agreement.
13.4 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.
13.5 AMENDMENTS IN WRITING, INTEGRATION. This Agreement
cannot be amended or terminated orally. 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.
13.6 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.
13.7 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 the parties with respect to the expenses, damages, losses, costs
and liabilities described in Section 13.2 shall survive until all applicable
statute of limitations periods with respect to actions that may be brought
against Banks or Servicing Agent have run.
13.8 CONFIDENTIALITY. In handling any confidential
information Servicing Agent and each 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 Servicing Agent or such Bank in connection with their present
or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Advances and Letters of
Credit, 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 Servicing Agent or such Bank and (v) as
Servicing Agent or such Bank may determine in connection with the enforcement
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 Servicing Agent or such Bank when disclosed to
Servicing Agent or such Bank, or becomes part of the public domain after
disclosure to Servicing Agent or such Bank through no fault of Servicing
Agent or such Bank; or (b) is disclosed to Servicing Agent or such Bank by a
third party, provided Servicing Agent or such Bank does not have actual
knowledge that such third party is prohibited from disclosing such
information.
13.9 AMENDED AND RESTATED AGREEMENT. This Agreement
amends and restates, and supercedes in its entirety, that certain Loan and
Security Agreement, dated as of December 31, 1996 between SVB and the
Borrower, and SVB's successors and assigns, pursuant to the terms of which
there are no amounts outstanding as of the date of this Agreement.
26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
HEARTPORT, INC.
By:______________________________________
Title:___________________________________
SILICON VALLEY BANK, as Servicing Agent
By:______________________________________
Title:___________________________________
SILICON VALLEY BANK, as Bank
By:______________________________________
Title:___________________________________
Percentage Share: Fifty Percent (50%)
BANQUE NATIONALE DE PARIS
By:______________________________________
Title:___________________________________
By:______________________________________
Title:___________________________________
Percentage Share: Fifty Percent (50%)
27
EXHIBIT A
---------
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor
vehicles and trailers), 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;
(a) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, 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 Borrower's Books relating to any of the foregoing;
(b) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, claims, literature, reports, catalogs, income
tax refunds, payments of insurance and rights to payment of any kind;
(c) 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 and
Borrower's Books relating to any of the foregoing;
(d) All documents, cash, deposit accounts, securities, letters of
credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Borrower's Books relating to the foregoing; and
(e) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not include any
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; any patents,
trademarks, servicemarks and applications therefor; 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 other intellectual property rights; or any claims
for damages by way of any past, present and future infringement of any of the
foregoing; provided the foregoing shall not restrict the security interest of
Servicing Agent and Banks in Accounts arising from the sale of Borrower's
products in the ordinary course of business that relate directly or
indirectly to the use of intellectual property rights.
Notwithstanding the foregoing, the Collateral shall not include any
equipment or related general intangibles that are the subject of an equipment
lease to the extent that and for so long as, such equipment lease prohibits
the granting of a security interest in such equipment and related general
intangibles.
28
EXHIBIT B-1
-----------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING OF PRIME ADVANCE IS 11:00 A.M., PACIFIC TIME
DEADLINE FOR LIBOR RATE ADVANCE IS 12:00 P.M., PACIFIC TIME
3 BUSINESS DAYS IN ADVANCE
DEADLINE FOR SAME DAY REPAYMENT PROCESSING IS 12:00 P.M., PACIFIC TIME
TO: CENTRAL CLIENT SERVICE DIVISION DATE: ____________________
FAX#: (000) 000-0000 TIME: ____________________
--------------------------------------------------------------------------------
FROM: Heartport, Inc.
---------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
--------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
------------------------------------------------------
PHONE NUMBER:
--------------------------------------------------------------
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
Agreement are true, correct and complete in all material respects as of the
date of the telephone request for and Advance confirmed by this Borrowing
Certificate; 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 Phone #
__________________________________ __________________________________
Received By (Bank) Phone #
___________________________
Authorized Signature (Bank)
--------------------------------------------------------------------------------
29
EXHIBIT B-2
LIBOR RATE ADVANCE/CONVERSION/CONTINUATION CERTIFICATE
The undersigned hereby certifies as follows:
I,_____________________, am the duly elected and acting __________________
of Heartport, Inc. ("Borrower"), a Responsible Officer (as defined in the
Agreement hereafter defined).
This certificate is delivered on behalf of Borrower to Silicon Valley
Bank, as Servicing Agent, pursuant to Section 2.8 of that certain Amended and
Restated Loan Agreement dated as of _____________, 1998, between Borrower and
Banks named therein (the "Agreement"). The terms used in this LIBOR Rate
Conversion/Continuation Certificate which are defined in the Agreement have
the same meaning herein as ascribed to them therein.
Borrower hereby requests on _______________, 19__ a LIBOR Rate Advance
(the "Advance") as follows:
(a) _____ (i) A new LIBOR Rate Advance; or
_____ (ii) A rate conversion of an existing Prime Rate Advance from
a Prime Rate Advance to a LIBOR Rate Advance; or
_____ (iii) A continuation of an existing LIBOR Rate Advance as a
LIBOR Rate Advance.
[CHECK (i) OR (ii) OR (iii) ABOVE]
(b) The date on which the Advance is to be made is _________________, 19__.
(c) The amount of the Advance is to be ($___________), for an Interest
Period of ______ month(s).
All representations and warranties of Borrower stated in the Agreement
are true, correct and complete in all material respects as of the date of this
request for a loan; 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.
IN WITNESS WHEREOF, this LIBOR Rate Conversion/Continuation Certificate
is executed by the undersigned as of this ____day of ________________, 19__.
HEARTPORT, INC.
By:_________________________________
Title:______________________________
FOR INTERNAL BANK USE ONLY
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
LIBOR Pricing Date LIBOR Rate LIBOR Rate Variance Maturity Date
-------------------------------------------------------------------------------
___%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
30
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK, AS SERVICING AGENT
FROM: HEARTPORT, INC.
The undersigned authorized officer of Heartport, Inc. hereby certifies
that in accordance with the terms and conditions of the Amended and Restated
Loan and Security Agreement, dated as of ___________, 1998, between Borrower
and the Banks named therein (the "Agreement"), (i) Borrower is in complete
compliance for the period ending ______________ with all financial covenants
except as noted below, (ii) all representations and warranties of Borrower
stated in the Agreement are true and correct in all material respects as of
the date hereof, provided however, that those representations and warranties
expressly referring to another date shall be true and complete in all material
respects as of such date, and (iii) he/she is a Responsible Officer under the
Agreement. 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.
PLEASE INDICATE COMPLIANCE STATUS
BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days(1) Yes No
Annual (CPA Audited) FYE within 90 days Yes No
10K & 10Q Within 10 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Quarterly/
Monthly(2) Basis:
Liquidity (3) _________ Yes No
Minimum Tangible Net Worth $50,000,000 $________ Yes No
Maximum Debt/Tangible Net Worth .75:1.00 _____:1.00 Yes No
(1) Only required if Liquidity is less than 2.25x loan balance or RML is
less than 12 months.
(2) Tested Quarterly unless Liquidity is less than 2.25x loan balance or
RML is less than 12 months.
(3) 1.75x outstanding obligations or 6x Remaining Months Liquidity
COMMENTS REGARDING EXCEPTIONS: See Attached.
Sincerely,
_____________________________________________
SIGNATURE
_____________________________________________
TITLE
_____________________________________________
DATE
---------------------------------------------
BANK USE ONLY
Received by:_______________________________
AUTHORIZED SIGNER
Date:______________________________________
Verified:__________________________________
AUTHORIZED SIGNER
Date:______________________________________
Compliance Status: Yes No
---------------------------------------------
31
EXHIBIT D
NEGATIVE PLEDGE AGREEMENT
This Negative Pledge Agreement is made as of March 20, 1998, by and among
HEARTPORT, INC. ("Borrower") and SILICON VALLEY BANK, as Servicing Agent
("Servicing Agent").
In connection with the Loan Documents being concurrently executed between
Borrower, Servicing Agent and the Banks named therein, Borrower agrees as
follows:
1. Borrower shall not sell, transfer, assign, mortgage, pledge, lease,
grant a security interest in, or encumber any of Borrower's intellectual
property, including, without limitation, the following:
a. Any and all copyright rights, copyright applications,
copyright registrations and like protection 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 (collectively, the "Copyrights");
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. All patents, patent applications and like protections,
including, without limitation, improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same,
including, without limitation, the patents and patent applications
(collectively, the "Patents");
e. 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 (collectively, the "Trademarks");
f. Any and all claims for damages by way of past, present and
future infringements 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;
g. All licenses or other rights to use any of the Copyrights,
Patents or Trademarks and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
h. All amendments, extensions, renewals and extensions of any of
the Copyrights, Patents or Trademarks; and
i. 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.
Notwithstanding the foregoing, Borrower may sell, license and otherwise
dispose of the foregoing (i) to the extent set forth in the Loan Documents,
and (ii) in the ordinary course of business.
2. It shall be an Event of Default under the Loan Documents if there is
a breach of any term of this Negative Pledge Agreement.
3. Capitalized items used herein without definition shall have the same
meanings as set forth in the Amended and Restated Loan and Security Agreement
of even date herewith.
HEARTPORT, INC. SILICON VALLEY BANK, AS SERVICING AGENT
By:_________________________________ By:_____________________________________
Title:______________________________ Title:__________________________________
32
