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LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
Page
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1 ACCOUNTING AND OTHER TERMS .............................................. 4
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2 LOAN AND TERMS OF PAYMENT ............................................... 4
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2.1 Promise to Pay................................................... 4
2.2 Overadvances..................................................... 4
2.3 Interest Rate, Payments.......................................... 4
2.4 Fees............................................................. 5
3 CONDITIONS OF LOANS ..................................................... 5
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3.1 Conditions Precedent to Initial Credit Extension ................ 5
3.2 Conditions Precedent to all Credit Extensions.................... 5
4 CREATION OF SECURITY INTEREST ........................................... 5
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4.1 Grant of Security Interest .......................................... 5
5 REPRESENTATIONS AND WARRANTIES........................................... 6
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5.1 Due Organization and Authorization............................... 6
5.2 Collateral....................................................... 6
5.3 Litigation....................................................... 6
5.4 No Material Adverse Change in Financial Statements............... 6
5.5 Solvency......................................................... 6
5.6 Regulatory Compliance............................................ 6
5.7 Subsidiaries .................................................... 7
5.8 Full Disclosure ................................................. 7
6 AFFIRMATIVE COVENANTS ................................................... 7
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6.1 Government Compliance ........................................... 7
6.2 Financial Statements, Reports, Certificates ..................... 7
6.3 Inventory; Returns .............................................. 8
6.4 Taxes ........................................................... 8
6.5 Insurance ....................................................... 8
6.6 Primary Accounts................................................. 9
6.7 Financial Covenants ............................................. 9
6.8 Registration of Intellectual Property Rights .................... 9
6.9 Further Assurances............................................... 9
7 NEGATIVE COVENANTS ...................................................... 9
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7.1 Dispositions .................................................... 9
7.2 Changes in Business, Ownership, Management or
Business Locations ..............................................10
7.3 Mergers or Acquisitions .........................................10
7.4 Indebtedness ....................................................10
7.5 Encumbrance .....................................................10
7.6 Distributions; Investments ......................................10
7.7 Transactions with Affiliates ....................................10
7.8 Subordinated Debt ...............................................11
7.9 Compliance ......................................................11
8 EVENTS OF DEFAULT .......................................................11
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8.1 Payment Default .................................................11
8.2 Covenant Default ................................................11
8.3 Material Adverse Change .........................................11
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8.4 Attachment ......................................................11
8.5 Insolvency ......................................................12
8.6 Other Agreements ................................................12
8.7 Judgments .......................................................12
8.8 Misrepresentations ..............................................12
9 BANKS RIGHTS AND REMEDIES ...............................................12
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9.1 Rights and Remedies .............................................12
9.2 Power of Attorney ...............................................13
9.3 Accounts Collection .............................................13
9.4 Bank Expenses ...................................................13
9.5 Bank's Liability for Collateral .................................13
9.6 Remedies Cumulative .............................................13
9.7 Demand Waiver ...................................................13
10 NOTICES .................................................................14
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11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER ..............................14
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12 GENERAL PROVISIONS ......................................................14
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12.1 Successors and Assigns ..........................................14
12.2 Indemnification .................................................14
12.3 Time of Essence .................................................14
12.4 Severability of Provision .......................................14
12.5 Amendments in Writing, Integration ..............................14
12.6 Counterparts ....................................................15
12.7 Survival ........................................................15
12.8 Confidentiality .................................................15
12.9 Attorneys' Fees, Costs and Expenses .............................15
13 DEFINITIONS .............................................................15
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13.1 Definitions .....................................................15
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THIS LOAN AND SECURITY AGREEMENT dated as of the Effective Date,
between SILICON VALLEY BANK ("Bank"), whose address is 0000 Xxxxxx Xxxxx, Xxxxx
Xxxxx, Xxxxxxxxxx 00000 and SYNTHETECH, INC. ("Borrower"), whose address is 0000
Xxxxxxxxxx Xxx, Xxxxxx, Xxxxxx 00000, provides the terms on which Bank will lend
to Borrower and Borrower will repay Bank. The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
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Accounting terms not defined in this Agreement will be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document.
2 LOAN AND TERMS OF PAYMENT
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2.1 PROMISE TO PAY.
Borrower promises to pay Bank the unpaid principal amount of all
Credit Extensions and interest on the unpaid principal amount of the Credit
Extensions.
2.1.1 REVOLVING ADVANCES.
(a) Bank will make Advances not exceeding (i) the lesser of (A) the
Committed Revolving Line or (B) the Borrowing Base; provided however, that the
Borrowing Base shall not limit the amount of Advances unless and until the
outstanding Advances exceed the sum of $500,000. Amounts borrowed under this
Section may be repaid and reborrowed during the term of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 12:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to such reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.
(d) Bank's obligation to lend the undisbursed portion of the
Obligations will terminate if, in Bank's sole discretion, there has been a
material adverse change in the general affairs, management, results of
operation, condition (financial or otherwise) or the prospect of repayment of
the Obligations, or there has been any material adverse deviation by Borrower
from the most recent business plan of Borrower presented to and accepted by Bank
prior to the execution of this Agreement.
2.2 OVERADVANCES.
If Borrower's Obligations under Section 2.1.1 exceed the lesser of
either (i) the Committed Revolving Line or (ii) the Borrowing Base, Borrower
must immediately pay Bank the excess; provided however, that so long as the
Advances are less than or equal to $500,000, then Borrower is not obligated to
pay Bank the excess of amounts that exceed the Borrowing Base.
2.3 INTEREST RATE, PAYMENTS.
(a) Interest Rate. Advances accrue interest on the outstanding
principal balance at a per annum rate of the Prime Rate. After the occurrence
and during the continuation of an Event of Default, Obligations accrue interest
at 5 percent above the rate effective immediately before the Event of Default.
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The interest rate increases or decreases when the Prime Rate changes. Interest
is computed on a 360 day year for the actual number of days elapsed.
(b) Payments. Borrower shall pay interest due on the Committed
Revolving Line monthly on the 25th of each month. Bank may debit any of
Borrower's deposit accounts including Account Number _______________ for
principal and interest payments owing or any amounts Borrower owes Bank. Bank
will promptly notify Borrower when it debits Borrower's accounts. These debits
are not a set-off. Payments received after 12:00 noon Pacific time are
considered received at the opening of business on the next Business Day. When a
payment is due on a day that is not a Business Day, the payment is due the next
Business Day and additional fees or interest accrue.
2.4 FEES.
Borrower will pay:
(a) Revolving Line Fee. A fully earned, non-refundable facility fee of
$5,000.00 due on the Closing Date; and
(b) Bank Expenses. All Bank Expenses (including reasonable attorneys'
fees and reasonable expenses) incurred through and after the date of this
Agreement, are payable when due.
3 CONDITIONS OF LOANS
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3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.
Bank's obligation to make the initial Credit Extension is subject to
the condition precedent that it receives the agreements, documents and fees it
requires.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.
Bank's obligations to make each Credit Extension, including the
initial Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension and no Event of Default may have occurred and be continuing, or
result from the Credit Extension. Each Credit Extension is Borrower's
representation and warranty on that date that the representations and warranties
of Section 5 remain true.
4 CREATION OF SECURITY INTEREST
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4.1 GRANT OF SECURITY INTEREST.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. Bank may place a "hold" on any deposit account pledged as
Collateral. If this Agreement is terminated, Bank's lien and security interest
in the Collateral will continue until Borrower fully satisfies its Obligations.
If Borrower is profitable for two consecutive quarters, Bank agrees to
release its security interest in the Collateral only if the following conditions
have been performed or satisfied: (a) Borrower is in compliance with all of the
terms and conditions of this Agreement and no Event of Default has occurred; and
(b) Borrower executes and delivers to Bank a Negative Pledge Agreement with
respect to the Collateral, in form and substance satisfactory to Bank.
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5 REPRESENTATIONS AND WARRANTIES
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Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION.
Borrower and each Subsidiary is duly existing and in good standing in
its state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change.
The execution, delivery and performance of the Loan Documents have
been duly authorized, and do not conflict with Borrower's formation documents,
nor constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which or by
which it is bound in which the default could reasonably be expected to cause a
Material Adverse Change.
5.2 COLLATERAL.
Borrower has good title to the Collateral, free of Liens except
Permitted Liens. The Accounts are bona fide, existing obligations, and the
service or property has been performed or delivered to the account debtor or its
agent for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has no notice of any actual or imminent Insolvency Proceeding
of any account debtor whose accounts are an Eligible Account in any Borrowing
Base Certificate. All Inventory is in all material respects of good and
marketable quality, free from material defects. To the best of Borrower's
knowledge, Borrower is the sole owner of the Intellectual Property, except for
non-exclusive licenses granted to its customers in the ordinary course of
business. To the best of Borrower's knowledge, each Patent is valid and
enforceable and no part of the Intellectual Property has been judged invalid or
unenforceable, in whole or in part, and no claim has been made that any part of
the Intellectual Property violates the rights of any third party, except to the
extent such claim could not reasonably be expected to cause a Material Adverse
Change.
5.3 LITIGATION.
Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers, threatened by
or against Borrower or any Subsidiary in which a likely adverse decision could
reasonably be expected to cause a Material Adverse Change.
5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower, and any
Subsidiary, delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 SOLVENCY.
The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.
5.6 REGULATORY COMPLIANCE.
Borrower is not an "investment company" or a company "controlled" by
an "investment company" under the Investment Company Act. Borrower is not
engaged as one of its important activities in extending credit for margin stock
(under Regulations T and U of the Federal Reserve Board of Governors). Borrower
has complied in all material respects with the Federal Fair Labor Standards Act.
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Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate provision to pay, all material taxes,
except those being contested in good faith with adequate reserves under GAAP.
Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change.
5.7 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 FULL DISCLOSURE.
No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading. It
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected and forecasted results.
6 AFFIRMATIVE COVENANTS
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Borrower will do all of the following for so long as Bank has an
obligation to lend, or there are outstanding Obligations:
6.1 GOVERNMENT COMPLIANCE.
Borrower will maintain its and all Subsidiaries' legal existence and
good standing in its jurisdiction of formation and maintain qualification in
each jurisdiction in which the failure to so qualify would reasonably be
expected to cause a material adverse effect on Borrower's business or
operations. Borrower will comply, and have each Subsidiary comply, with all
laws, ordinances and regulations to which it is subject, noncompliance with
which could have a material adverse effect on Borrower's business or operations
or would reasonably be expected to cause a Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) within 5 days after filing with
the Securities and Exchange Commission ("SEC"), its quarterly Form 10Q report;
(ii) within 5 days after filing with the Sec, its annual 10K report; (iii) a
prompt 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 $100,000 or more; (iv) budgets, sales projections, operating plans or other
financial information Bank reasonably requests; and (v) within 30 days after the
end of each month, the monthly statement for its securities account at Xxxxxx
Xxxxxxx XX Inc., including any replacement securities account if the Borrower's
securities are moved to another broker. If Borrower has obtained any Advance
under the Committed Revolving Line, Borrower will deliver to Bank as soon as
available, but no later than 45 days after the last day of each month
thereafter, a company prepared consolidated balance sheet and income statement
covering Borrower's consolidated operations during the period certified by a
Responsible Officer and in a form acceptable to Bank.
(b) In the event the outstanding Advances under the Committed
Revolving Line exceed $500,000 or if Borrower has failed to comply with any
terms or conditions of this Agreement or an Event
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of Default has occurred, then within 20 days after the last day of each month,
Borrower will deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in the form of Exhibit C, with aged listings of accounts
receivable and accounts payable, and within 45 days after the last day of each
month, Borrower will deliver to Bank an inventory report.
(c) Borrower will deliver to Bank with the Form 10-Q and Form 10-K
reports and, when required hereunder, the monthly financial statements, a
Compliance Certificate signed by a Responsible Officer in the form of Exhibit D.
(d) In the event the outstanding Advances under the Committed
Revolving Line exceed $500,000 or if Borrower has failed to comply with any
terms or conditions of this Agreement or an Event of Default has occurred,
Borrower will allow Bank to audit Borrower's Collateral at Borrower's expense.
Such audits will be conducted no more often than every 12 months unless an Event
of Default has occurred and is continuing. The inclusion of any raw material
Inventory in the Borrowing Base is subject to a satisfactory audit of the raw
material Inventory by Bank.
6.3 INVENTORY; RETURNS.
Borrower will keep all Inventory in good and marketable condition,
free from material defects. Returns and allowances between Borrower and its
account debtors will follow Borrower's customary practices as they exist at
execution of this Agreement. Borrower must promptly notify Bank of all returns,
recoveries, disputes and claims that involve more than $100,000.
6.4 TAXES.
Borrower will make, and cause each Subsidiary to make, timely payment
of all material federal, state, and local taxes or assessments (other than taxes
and assessments which Borrower is contesting in good faith, with adequate
reserves maintained in accordance with GAAP) and will deliver to Bank, on
demand, appropriate certificates attesting to the payment.
6.5 INSURANCE.
Borrower will keep its business and the Collateral insured for risks
and in amounts standard for Borrower's industry, and as Bank may reasonably
request. Insurance policies will be in a form, with companies, and in amounts
that are satisfactory to Bank in Bank's reasonable discretion. All property
policies will have a lender's loss payable endorsement showing Bank as an
additional loss payee and all liability policies will show the Bank as an
additional insured and provide that the insurer must give Bank at least 20 days
notice before canceling its policy. At Bank's request, Borrower will deliver
certified copies of policies and evidence of all premium payments. Proceeds
payable under any policy will, at Bank's option, be payable to Bank on account
of the Obligations.
WARNING
UNLESS YOU PROVIDE US WITH EVIDENCE OF THE INSURANCE COVERAGE AS
REQUIRED BY OUR CONTRACT OR LOAN AGREEMENT, WE MAY PURCHASE INSURANCE AT YOUR
EXPENSE TO PROTECT OUR INTEREST. THIS INSURANCE MAY, BUT NEED NOT, ALSO PROTECT
YOUR INTEREST. IF THE COLLATERAL BECOMES DAMAGED, THE COVERAGE WE PURCHASE MAY
NOT PAY ANY CLAIM YOU MAKE OR ANY CLAIM MADE AGAINST YOU. YOU MAY LATER CANCEL
THIS COVERAGE BY PROVIDING EVIDENCE THAT YOU HAVE OBTAINED PROPERTY COVERAGE
ELSEWHERE.
YOU ARE RESPONSIBLE FOR THE COST OF ANY INSURANCE PURCHASED BY US. THE
COST OF THIS INSURANCE MAY BE ADDED TO YOUR CONTRACT OR LOAN BALANCE. IF THE
COST IS ADDED TO YOUR CONTRACT OR LOAN BALANCE, THE INTEREST RATE ON THE
UNDERLYING CONTRACT OR LOAN WILL APPLY TO THIS ADDED AMOUNT. THE EFFECTIVE DATE
OF COVERAGE MAY BE THE DATE YOUR PRIOR COVERAGE LAPSED OR THE DATE YOU FAILED TO
PROVIDE PROOF OF COVERAGE.
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THIS COVERAGE WE PURCHASED MAY BE CONSIDERABLY MORE EXPENSIVE THAN
INSURANCE YOU CAN OBTAIN ON YOUR OWN AND MAY NOT SATISFY ANY NEED FOR PROPERTY
DAMAGE COVERAGE OR ANY MANDATORY LIABILITY INSURANCE REQUIREMENTS IMPOSED BY
APPLICABLE LAW.]
6.6 PRIMARY ACCOUNTS.
Borrower will maintain its primary banking relationship with Bank,
including operating and cash management products and services.
6.7 FINANCIAL COVENANTS.
Borrower will maintain the following financial covenants as of the
last day of each quarter, but if Borrower is required to provide monthly
financial statements to Bank pursuant to Section 6.2 of this Agreement, then
Borrower will maintain the following financial covenants as of the last day of
each month:
(i) QUICK RATIO. A ratio of Quick Assets to Current Liabilities of at
least 1.50 to 1.00.
(ii) TANGIBLE NET WORTH. A Tangible Net Worth of at least $19,000,000.
6.8 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
Borrower will register with the United States Patent and Trademark
Office or the United States Copyright Office its Intellectual Property and
additional Intellectual Property rights developed or acquired including
revisions or additions with any product before the sale or licensing of the
product to any third party in a manner consistent with Borrower's past practice.
Borrower will (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in writing
of material infringements and (ii) not allow any Intellectual Property material
to Borrower's business to be abandoned, forfeited or dedicated to the public
without Bank's written consent, except to the extent that the failure to do so
does not cause a Material Adverse Change.
6.9 FURTHER ASSURANCES.
Borrower will execute any further instruments and take further action
as Bank reasonably requests to perfect or continue Bank's security interest in
the Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
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Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld, for so long as Bank has an
obligation to lend or there are any outstanding Obligations:
7.1 DISPOSITIONS.
Except as otherwise permitted by Section 7.5, convey, sell, lease,
transfer or otherwise dispose of (collectively "Transfer"), or permit any of its
Subsidiaries to Transfer, all or any part of its business or property, except
for Transfers (i) of Inventory in the ordinary course of business; (ii) of
non-exclusive licenses and similar arrangements for the use of the property of
Borrower or its Subsidiaries in the ordinary course of business; or (iii) of
worn-out or obsolete Equipment.
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7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto or have a material change in its ownership of greater than 25% (other
than by the sale of Borrower's equity securities in a public offering or to
venture capital investors so long as Borrower identifies the venture capital
investors prior to the closing of the investment) or either its chief financial
officer or chief executive officer is replaced by a person or persons not
reasonably acceptable to Bank. Borrower will not, without at least 30 days prior
written notice, relocate its chief executive office, change its state of
incorporation or add any new offices or business locations in which Borrower
maintains or stores over $50,000 in Borrower's assets or property.
7.3 MERGERS OR ACQUISITIONS.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action during the term of this
Agreement and (ii) such transaction would not result in a decrease of more than
25% of Tangible Net Worth. A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.
7.4 INDEBTEDNESS.
Create, incur, assume, or be liable for any Indebtedness, or permit
any Subsidiary to do so, other than Permitted Indebtedness.
7.5 ENCUMBRANCE.
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
here, subject to Permitted Liens.
7.6 DISTRIBUTIONS; INVESTMENTS.
Except as otherwise permitted by Section 7.3, directly or indirectly
acquire or own any Person, or make any Investment in any Person, other than
Permitted Investments, or permit any of its Subsidiaries to do so. Pay any
dividends or make any distribution or payment or redeem, retire or purchase any
capital stock; provided however that Borrower may redeem Borrower's stock
pursuant to such stock repurchase plan(s) as are adopted from time to time by
Borrower's Board of Directors so long as no Event of Default has occurred and is
continuing and the redemption would not cause any Event of Default to occur
under any other provision of this Agreement or the other Loan Documents, and
Borrower may pay dividends so long as Borrower gives Bank at least 15 days'
written notice of its intent to declare a dividend, together with pro forma
financial information that demonstrates to Bank's reasonable satisfaction that
payment of such dividend will not cause an Event of Default.
7.7 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.
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7.8 SUBORDINATED DEBT.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.
7.9 COMPLIANCE.
Become an "investment company" or a company controlled by an
"investment company," under the Investment Company Act of 1940 or undertake as
one of its important activities extending credit to purchase or carry margin
stock, or use the proceeds of any Credit Extension for that purpose; fail to
meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower's business or operations or would reasonably be expected to cause a
Material Adverse Change, or permit any of its Subsidiaries to do so.
8 EVENTS OF DEFAULT
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Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT.
If Borrower fails to pay any of the Obligations within 5 days after
their due date. During the additional period the failure to cure the default is
not an Event of Default (but no Credit Extension will be made during the cure
period);
8.2 COVENANT DEFAULT.
If Borrower does not perform any obligation in Section 6 or violates
any covenant in Section 7; or
If Borrower does not perform or observe any other material term,
condition or covenant in this Agreement, any Loan Documents, or in any agreement
between Borrower and Bank and as to any default under a term, condition or
covenant that can be cured, has not cured the default within 10 days after it
occurs, or if the default cannot be cured within 10 days or cannot be cured
after Borrower's attempts within 10 day period, and the default may be cured
within a reasonable time, then Borrower has an additional period (of not more
than 30 days) to attempt to cure the default. During the additional time, the
failure to cure the default is not an Event of Default (but no Credit Extensions
will be made during the cure period);
8.3 MATERIAL ADVERSE CHANGE.
If there (i) occurs a material adverse change in the business,
operations, or condition (financial or otherwise) of the Borrower, or (ii) is a
material impairment of the prospect of repayment of any portion of the
Obligations or (iii) is a material impairment of the value or priority of Bank's
security interests in the Collateral.
8.4 ATTACHMENT.
If any material portion of Borrower's assets is attached, seized,
levied on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business or if a judgment or other claim becomes a Lien on a material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed against
any of Borrower's assets by any government agency and not paid within 10 days
after Borrower receives notice. These are not Events of Default if stayed or if
a bond is posted pending contest by Borrower (but no Credit Extensions will be
made during the cure period);
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8.5 INSOLVENCY.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);
8.6 OTHER AGREEMENTS.
If there is a default in any agreement between Borrower and a third
party that gives the third party the right to accelerate any Indebtedness
exceeding $100,000 or that could cause a Material Adverse Change;
8.7 JUDGMENTS.
If a money judgment(s) in the aggregate of at least $100,000 is
rendered against Borrower and is unsatisfied and unstayed for 10 days (but no
Credit Extensions will be made before the judgment is stayed or satisfied);
8.8 MISREPRESENTATIONS.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.
9 BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and continues Bank may, without notice
or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an
Event of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank's rights
or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name,
trade secrets, trade names, Trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
12
connection with Bank's exercise of its rights under this Section, Borrower's
rights under all licenses and all franchise agreements inure to Bank's benefit;
and
(g) Dispose of the Collateral according to the Code.
9.2 POWER OF ATTORNEY.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign Borrower's name
on any invoice or xxxx of lading for any Account or drafts against account
debtors, (iii) make, settle, and adjust all claims under Borrower's insurance
policies; (iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as the Code
permits. Bank may exercise the power of attorney to sign Borrower's name on any
documents necessary to perfect or continue the perfection of any security
interest regardless of whether an Event of Default has occurred. Bank's
appointment as Borrower's attorney in fact, and all of Bank's rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and Bank's obligation to provide Credit Extensions
terminates.
9.3 ACCOUNTS COLLECTION.
When an Event of Default occurs and continues, Bank may notify any
Person owing Borrower money of Bank's security interest in the funds and verify
the amount of the Account. Borrower must collect all payments in trust for Bank
and, if requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank's waiver of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices and the Code, it is
not liable for: (a) the safekeeping of the Collateral; (b) any loss or damage to
the Collateral; (c) any diminution in the value of the Collateral; or (d) any
act or default of any carrier, warehouseman, bailee, or other person. Borrower
bears all risk of loss, damage or destruction of the Collateral.
9.6 REMEDIES CUMULATIVE.
Bank's rights and remedies under this Agreement, the Loan Documents,
and all other agreements are cumulative. Bank has all rights and remedies
provided under the Code, by law, or in equity. Bank's exercise of one right or
remedy is not an election, and Bank's waiver of any Event of Default is not a
continuing waiver. Bank's delay is not a waiver, election, or acquiescence. No
waiver is effective unless signed by Bank and then is only effective for the
specific instance and purpose for which it was given.
9.7 DEMAND WAIVER.
Borrower waives demand, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.
13
10 NOTICES
-------
All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses set forth at the beginning of
this Agreement. A party may change its notice address by giving the other party
written notice.
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
------------------------------------------
Oregon law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Multnomah County, Oregon.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
------------------
12.1 SUCCESSORS AND ASSIGNS.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.
12.2 INDEMNIFICATION.
Borrower will indemnify, defend and hold harmless Bank and its
officers, employees, and agents against: (a) all obligations, demands, claims,
and liabilities asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or Bank Expenses
incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower (including reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge into this
Agreement and the Loan Documents.
14
12.6 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 SURVIVAL.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8 CONFIDENTIALITY.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans (provided, however, Bank shall use
commercially reasonable efforts in obtaining such prospective transferee or
purchasers agreement of the terms of this provision), (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with Bank's
examination or audit and (v) as Bank considers appropriate exercising remedies
under this Agreement. Confidential information does not include information that
either: (a) is in the public domain or in Bank's possession when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank other than
as a result of the Bank's violation of the other provisions of this Section
12.8; or (b) is disclosed to Bank by a third party, if Bank does not know that
the third party is prohibited from disclosing the information.
12.9 ATTORNEYS' FEES, COSTS AND EXPENSES.
In any action or proceeding between Borrower and Bank arising out of
the Loan Documents, the prevailing party will be entitled to recover its
reasonable attorneys' fees and other reasonable costs and expenses incurred at
trial, on appeal and in any arbitration or bankruptcy proceeding, in addition to
any other relief to which it may be entitled.
13 DEFINITIONS
-----------
13.1 DEFINITIONS
In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs
and expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals, arbitrations or Insolvency Proceedings).
15
"BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.
"BORROWING BASE" is 80% of Eligible Accounts plus 25% of raw material
Inventory, subject to a maximum amount of $250,000, as determined by Bank from
Borrower's most recent Borrowing Base Certificate; provided, however, that Bank
may lower the percentage of the Borrowing Base after performing an audit of
Borrower's Collateral.
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on
which the Bank is closed.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the Uniform Commercial Code, as applicable.
"COLLATERAL" is the property described on Exhibit A.
"COMMITTED REVOLVING LINE" is an Advance of up to $1,000,000.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"COPYRIGHTS" are all copyright rights, applications or registrations
and like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"CREDIT EXTENSION" is each Advance or any other extension of credit by
Bank for Borrower's benefit.
"CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year.
"EFFECTIVE DATE" is the date Bank executes this Agreement.
"ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5;
but Bank may change eligibility standards by giving Borrower notice. Unless Bank
agrees otherwise in writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has not paid within 90 days of
invoice date;
(b) Accounts for an account debtor, 50% or more of whose Accounts have
not been paid within 90 days of invoice date;
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, for the amounts
that exceed that percentage, unless the Bank
16
approves in writing, except that if Borrower provides financial
information requested by Bank with respect to the following account
debtors and Bank approves in advance, the percentage may be 50% for
Accounts from the following account debtors:
(e) Accounts for which the account debtor does not have its principal
place of business in the United States, to the extent they exceed the
sum of $250,000;
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality;
(g) Accounts for which Borrower owes the account debtor, but only up
to the amount owed (sometimes called "contra" accounts, accounts
payable, customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on
approval, xxxx and hold, or other terms if account debtor's payment
may be conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes
any claim and Bank believes there may be a basis for dispute (but only
up to the disputed or claimed amount), or if the Account Debtor is
subject to an Insolvency Proceeding, or becomes insolvent, or goes out
of business;
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"GAAP" is generally accepted accounting principles.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INTELLECTUAL PROPERTY" is:
(a) Copyrights, Trademarks, Patents, and Mask Works including
amendments, renewals, extensions, and all licenses or other rights to use and
all license fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created, acquired
or held;
(c) All design rights which may be available to Borrower now or later
created, acquired or held;
(d) Any claims for damages (past, present or future) for infringement
of any of the rights above, with the right, but not the obligation, to xxx and
collect damages for use or infringement of the intellectual property rights
above;
17
All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.
"INVENTORY" is 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 later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"Lien" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note or notes
executed by Borrower, and any other present or future agreement between Borrower
and/or for the benefit of Bank in connection with this Agreement, all as
amended, extended or restated.
"MASK WORKS" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"MATERIAL ADVERSE CHANGE" is described in Section 8.3.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
"PATENTS" are patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues, extensions
and continuations-in-part of the same.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or any other
Loan Document;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule and all renewals and extensions of such Indebtedness, so long as the
principal amount thereof is not increased over the amount set forth on the
Schedule and the collateral, if any, granted to such lender does not change;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business;
(e) Indebtedness secured by Permitted Liens; and
(f) Equipment lease obligations, excluding leases arising out of any
sale/leaseback transactions.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Schedule and existing on the Closing
Date;
(b) Investments permitted under the Borrower's investment policy
approved by its Board of Directors; and
18
(c) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within 1
year from its acquisition, (ii) commercial paper maturing no more than 1 year
after its creation and having the highest rating from either Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc., and (iii) Bank's certificates of
deposit issued maturing no more than 1 year after issue.
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;
(d) Licenses or sublicenses granted in the ordinary course of
Borrower's business and any interest or title of a licensor or under any license
or sublicense, if the licenses and sublicenses permit granting Bank a security
interest;
(e) Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if
it is not Bank's lowest rate.
"QUICK ASSETS" is, on any date, the Borrower's consolidated,
unrestricted cash, cash equivalents, net billed accounts receivable and
investments with maturities of fewer than 12 months determined according to
GAAP.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President, the Chief Financial Officer, Vice President of Operations and the
Controller of Borrower.
"REVOLVING MATURITY DATE" is December 23, 2004.
"SCHEDULE" is any attached schedule of exceptions.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.
"SUBSIDIARY" is for any Person, or any other business entity of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates of
the Person.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized
19
debt discount and expense, Patents, trade and service marks and names,
Copyrights and research and development expenses except prepaid expenses, and
(c) reserves not already deducted from assets, and (ii) Total Liabilities.
"TOTAL LIABILITIES" is on any day, obligations that should, under
GAAP, be classified as liabilities on Borrower's consolidated balance sheet,
including all Indebtedness, and current portion Subordinated Debt allowed to be
paid, but excluding all other Subordinated Debt.
"TRADEMARKS" are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.
20
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK AFTER
OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR
PERSONAL FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE
ENFORCEABLE.
BORROWER:
SYNTHETECH, INC.
By: ____________________
Title: _________________
Date: __________________
BANK:
SILICON VALLEY BANK
By: ____________________
Title: _________________
Date: __________________
21
Schedule to Loan and Security Aqreement
---------------------------------------
The exact correct corporate name of Borrower is (attach a copy of the formation
documents, e.g., articles, partnership agreement):
Synthetech, Inc.
Borrower's State of formation:
Oregon.
Borrower has operated under only the following other names (if none, so state):
None.
All other address at which the Borrower does business are as follows (attach
additional sheets if necessary and include all warehouse addresses):
0000 Xxxxxxxxxx Xxx, Xxxxxx, Xxxxxx 00000 (not a mailing address).
Borrower has deposit accounts and/or investment accounts located only at the
following institutions:
MorganStanley
Xxxxx Xxxxxxxxx
US Bank General Account
US Bank Money Market Account
List Acct. Numbers: See above.
Liens existing on the Closing Date and disclosed to and accepted by Bank in
writing:
City of Albany - SDC
Investments existing on the Closing Date and disclosed to and accepted by Bank
in writing:
Synthetech FSC, Inc.
Subordinated Debt:
None.
Indebtedness on the Closing Date and disclosed to and consented to by Bank in
writing:
City of Albany.
The following is a list of the Borrower's copyrights (including copyrights of
software) which are registered with the United States Copyright Office. (Please
include name of the copyright and registration number and attach a copy of the
registration):
None.
The following is a list of all software which the Borrower sells, distributes or
licenses to others, which is not registered with the United States Copyright
Office. (Please include versions which are not registered:
None.
22
The following is a list of all of the Borrower's patents which are registered
with the United States Patent Office. (Please include name of the patent and
registration number and attach a copy of the registration.):
See attached patent schedule.
The following is a list of all of the Borrower's patents which are pending with
the United States Patent Office. (Please include name of the patent and a copy
of the application.):
None.
The following is a list of all of the Borrower's registered trademarks. (Please
include name of the trademark and a copy of the registration.):
None.
Borrower is not subject to litigation which would have a material adverse effect
on the Borrower's financial condition, except the following (attach additional
comments, if needed):
None.
Tax ID Number: 00-0000000
Organizational Number, if any: N/A.
23
EXHIBIT A
---------
The Collateral consists of all of Borrower's right, title and interest
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;
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;
All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
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;
All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower's Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not be deemed to
include any copyrights, copyright applications, copyright registrations and like
protection in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; any patents, patent
applications and like protections including without limitation improvements,
divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same, trademarks, servicemarks and applications
therefor, whether registered or not, and the goodwill of the business of
Borrower connected with and symbolized by such trademarks, any trade secret
rights, including any rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; or any claims for damage by way of any past, present and
future infringement of any of the foregoing (collectively, the "Intellectual
Property"), except that the Collateral shall include the proceeds of all the
Intellectual Property that are accounts, (i.e. accounts receivable) of Borrower,
or general intangibles consisting of rights to payment, if a judicial authority
(including a U.S. Bankruptcy Court) holds that a security interest in the
underlying Intellectual Property is necessary to have a security interest in
such accounts and general intangibles of Borrower that are proceeds of the
Intellectual Property, then the Collateral shall automatically, and effective as
of the Closing Date, include the Intellectual Property to the extent necessary
to permit perfection of Bank's security interest in such accounts and general
intangibles of Borrower that are proceeds of the Intellectual Property.
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T.
FAX TO: DATE:_____________
================================================================================
LOAN PAYMENT:
Client Name (Borrower): SYNTHETECH, INC.
From Account #________________________ To Account #________________________
(Deposit Account #) (Loan Account #)
Principal $______________________________and/or Interest $_____________________
All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects to on the date of the
telephone transfer request for and advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date:
AUTHORIZED SIGNATURE:___________________________ Phone Number:________________
================================================================================
================================================================================
LOAN ADVANCE:
COMPLETE OUTGOING WIRE REQUEST SECTION BELOW IF ALL OR A PORTION OF THE FUNDS
FROM THIS LOAN ADVANCE ARE FOR AN OUTGOING WIRE.
From Account #________________________ To Account #________________________
(Loan Account #) (Deposit Account #)
Amount of Advance $___________________
All Borrower's representation and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects to on the date of the
telephone transfer request for and advance, but those representations and
warranties expressly referring to another date shall be true, correct and
complete in all material respects as of the date:
AUTHORIZED SIGNATURE:___________________________ Phone Number:________________
================================================================================
================================================================================
OUTGOING WIRE REQUEST
COMPLETE ONLY IF ALL OR A PORTION OF FUNDS FROM THE LOAN ADVANCE ABOVE ARE TO
BE WIRED.
Deadline for same day processing is 12:00pm, P.S.T.
Beneficiary Name:_____________________ Amount of Wire: $____________________
Beneficiary Bank:_____________________ Account Number: _____________________
City and Sate:________________________
Beneficiary Bank Transit (ABA) #: Beneficiary Bank Code (Swift, Sort,
Chip, etc.):_________________________
-- -- -- -- -- -- -- -- -- (FOR INTERNATIONAL WIRE ONLY)
Intermediary Bank:____________________ Transit (ABA) #:_____________________
For Further Credit to:__________________________________________________________
Special Instruction:____________________________________________________________
BY SIGNING BELOW, I (WE) ACKNOWLEDGE AND AGREE THAT MY (OUR) FUNDS TRANSFER
REQUEST SHALL BE PROCESSED IN ACCORDANCE WITH AND SUBJECT TO THE TERMS AND
CONDITIONS SET FORTH IN THE AGREEMENTS(S) COVERING FUNDS TRANSFER SERVICE(S),
WHICH AGREEMENTS(S) WERE PREVIOUSLY RECEIVED AND EXECUTED BY ME (US).
Authorized Signature:_________________ 2nd Signature (If Required):_________
Print Name/Title:_____________________ Print Name/Title:____________________
Telephone #___________________________ Telephone #__________________________
================================================================================
EXHIBIT C
BORROWING BASE CERTIFICATE
--------------------------------------------------------------------------------
Borrower: SYNTHETECH, INC. Bank: Silicon Valley Bank
0000 Xxxxxxxxxx Xxx 0000 Xxxxxx Xxxxx
Xxxxxx, XX 00000 Xxxxx Xxxxx, XX 00000
Commitment Amount: $1,000,000
--------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value net of reserves as of______ $_________
2. Additions (please explain on reverse) $_________
3. TOTAL ACCOUNTS RECEIVABLE $_________
INVENTORY
4. Raw Material Inventory Book Value as of___________________ $_________
5. LOAN VALUE OF INVENTORY (25% of #4, up to $250,000) $_________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
6. Amounts over 90 days due $_________
7. Balance of 50% over 90 day accounts $_________
8. Credit balances over 90 days $_________
9. Concentration Limits* $_________
10. Foreign Accounts in excess of $250,000 $_________
11. Governmental Accounts $_________
12. Contra Accounts $_________
13. Promotion or Demo Accounts $_________
14. Intercompany/Employee Accounts $_________
15. Other (please explain on reverse) $_________
16. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_________
17. Eligible Accounts (#3 minus #16) $_________
18. LOAN VALUE OF ACCOUNTS (80% of #17) $_________
*25%, but if pre-approved by Bank after review of financial information.
BALANCES
19. Maximum Loan Amount $_________
20. Total Funds Available [Lesser of #19 or the sum of #5 + #18] $_________
21. Present balance owing on Line of Credit $_________
22. RESERVE POSITION (#20 minus #21) $_________
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THIS IS TRUE, COMPLETE AND CORRECT,
AND THAT THE INFORMATION IN THIS BORROWING BASE CERTIFICATE COMPLIES WITH THE
REPRESENTATIONS AND WARRANTIES IN THE LOAN AND SECURITY AGREEMENT BETWEEN THE
UNDERSIGNED AND SILICON VALLEY BANK.
COMMENTS: =====================
BANK USE ONLY
Rec'd By:____________
Auth. Signer
Date:________________
Verified:____________
Auth. Signer
Date:________________
_____________________
=====================
Borrower
SYNTHETECH, INC.
By:_____________________________
Authorized Signer
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
0000 Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
FROM: SYNTHETECH, INC.
0000 Xxxxxxxxxx Xxx
Xxxxxx, XX 00000
The undersigned authorized officer of Synthetech, Inc. ("Borrower")
certifies in his capacity as such officer that under the terms and conditions of
the Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i)
Borrower is in complete compliance for the period ending______________ with all
required covenants except as noted below and (ii) all representations and
warranties in the Agreement are true and correct in all material respects on
this date. Attached are the required documents supporting the certification. The
Officer certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) consistently applied from one period to the next
except as explained in an accompanying letter or footnotes. The Officer
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- -----------
10Q + CC Quarterly within 5 days of SEC filing Yes No
10K + CC Annually, within 5 days of SEC filing Yes No
Xxxxxx Xxxxxxx statement Monthly within 30 days Yes No
*Monthly financial statements + CC Monthly within 45 days Yes No
**A/R & A/P Agings Monthly within 20 days Yes No
**A/R Audit and Collateral Exam Initial and Annually Yes No
**Borrowing Base Certificate Monthly within 20 days Yes No
**Inventory Report Monthly within 45 days Yes No
* Monthly financial statements and Compliance Certificates will be required
beginning when Borrower has obtained an Advance under the Committed Revolving
Line and continues each month thereafter.
**These will be required in the event the outstanding Advances under the
Committed Revolving Line exceed $500,000 or if Borrower fails to comply with the
Agreement or upon occurrence of an Event of Default.
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Quarterly Basis, changing to monthly if monthly financial
statements are required above:
Minimum Quick Ratio 1.50:1.00 :1.00 Yes No
------
Minimum Tangible Net Worth $19,000,000 $ Yes No
----------
Have there been updates to Borrower's intellectual property, if appropriate? Yes No
COMMENTS REGARDING EXCEPTIONS:
See Attached. ______________________________________
BANK USE ONLY
Sincerely, Received by:__________________________
AUTHORIZED SIGNER
SYNTHETECH, INC. Date:_________________________________
______________________________ Verified:_____________________________
SIGNATURE AUTHORIZED SIGNER
Date:_________________________________
______________________________
TITLE
Compliance Status: Yes ___ No ___
______________________________ ______________________________________
DATE
CORPORATE BORROWING RESOLUTION
BORROWER: SYNTHETECH, INC. BANK: SILICON VALLEY BANK
0000 XXXXXXXXXX XXX 0000 XXXXXX XXXXX
XXXXXX, XX 00000 XXXXX XXXXX, XX 00000-0000
I, THE SECRETARY OR ASSISTANT SECRETARY OF SYNTHETECH, INC. ("BORROWER"),
CERTIFY that Borrower is a corporation existing under the laws of the State of
Oregon.
I certify that at a meeting of Borrower's Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.
It is resolved that ANY ONE of the following officers of Borrower, whose name,
title and signature is below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
________________________ ________________________ ________________________
________________________ ________________________ ________________________
________________________ ________________________ ________________________
________________________ ________________________ ________________________
may act for Borrower and:
BORROW MONEY. Borrow money from Silicon Valley Bank ("Bank").
EXECUTE LOAN DOCUMENTS. Execute any loan documents Bank requires.
GRANT SECURITY. Grant Bank a security interest in any of Borrower's assets.
NEGOTIATE ITEMS. Negotiate or discount all drafts, trade acceptances, promissory
notes, or other indebtedness in which Borrower has an interest and receive cash
or otherwise use the proceeds.
LETTERS OF CREDIT. Apply for letters of credit from Bank.
FOREIGN EXCHANGE CONTRACTS. Execute spot or forward foreign exchange contracts.
ISSUE WARRANTS. Issue warrants for Borrower's stock.
FURTHER ACTS. Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrowers right to a jury trial) they think necessary to
effectuate these Resolutions.
Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.
I certify that the persons listed above are Borrower's officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.
CERTIFIED TO AND ATTESTED BY:
x
---------------------------------
*Secretary or Assistant Secretary
x ---------------------------------
*NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.
