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VIDAMED, INC.
LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION........................................................................... 1
1.1 Definitions................................................................................... 1
1.2 Accounting and Other Terms.................................................................... 8
2. LOANS AND TERMS OF PAYMENT............................................................................. 8
2.1 Advances...................................................................................... 8
2.2 Overadvances.................................................................................. 10
2.3 Interest Rates, Payments, and Calculations.................................................... 10
2.4 Crediting Payments............................................................................ 11
2.5 Fees.......................................................................................... 11
2.6 Additional Costs.............................................................................. 12
2.7 Term.......................................................................................... 12
3. CONDITIONS OF LOANS.................................................................................... 13
3.1 Conditions Precedent to Initial Advance....................................................... 13
3.2 Conditions Precedent to all Advances ......................................................... 13
4. CREATION OF SECURITY INTEREST.......................................................................... 13
4.1 Grant of Security Interest.................................................................... 13
4.2 Delivery of Additional Documentation Required................................................. 14
4.3 Right to Inspect.............................................................................. 14
5. REPRESENTATIONS AND WARRANTIES......................................................................... 14
5.1 Due Organization and Qualification............................................................ 14
5.2 Due Authorization; No Conflict................................................................ 14
5.3 No Prior Encumbrances......................................................................... 14
5.4 Bona Fide Eligible Accounts................................................................... 15
5.5 Merchantable Inventory........................................................................ 15
5.6 Intellectual Property......................................................................... 15
5.7 Name; Location of Chief Executive Office...................................................... 15
5.8 Litigation.................................................................................... 15
5.9 No Material Adverse Change in Financial Statements............................................ 15
5.10 Solvency...................................................................................... 16
5.11 Regulatory Compliance......................................................................... 16
5.12 Environmental Condition....................................................................... 16
5.13 Taxes......................................................................................... 16
5.14 Subsidiaries.................................................................................. 16
5.15 Government Consents........................................................................... 16
5.16 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 Inventory; Returns............................................................................ 18
6.5 Taxes......................................................................................... 18
6.6 Insurance..................................................................................... 18
6.7 Principal Depository.......................................................................... 19
6.8 Quick Ratio................................................................................... 19
6.9 Total Liabilities/Tangible Net Worth.......................................................... 19
6.10 Minimum Liquidity/Debt Service Coverage....................................................... 19
6.11 Net Losses.................................................................................... 19
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6.12 Further Assurances............................................................................ 19
7. NEGATIVE COVENANTS..................................................................................... 19
7.1 Dispositions.................................................................................. 20
7.2 Changes in Business, Ownership, Management or Business Locations.............................. 20
7.3 Mergers or Acquisitions....................................................................... 20
7.4 Indebtedness.................................................................................. 20
7.5 Encumbrances.................................................................................. 20
7.6 Distributions................................................................................. 20
7.7 Investments................................................................................... 20
7.8 Transactions with Affiliates.................................................................. 21
7.9 Subordinated Debt............................................................................. 21
7.10 Inventory..................................................................................... 21
7.11 Compliance.................................................................................... 21
8. EVENTS OF DEFAULT...................................................................................... 21
8.1 Payment Default............................................................................... 21
8.2 Covenant Default.............................................................................. 21
8.3 Material Adverse Change....................................................................... 22
8.4 Attachment.................................................................................... 22
8.5 Insolvency.................................................................................... 22
8.6 Other Agreements.............................................................................. 22
8.7 Subordinated Debt............................................................................. 22
8.8 Judgments..................................................................................... 23
8.9 Misrepresentations............................................................................ 23
9. BANK'S RIGHTS AND REMEDIES............................................................................. 23
9.1 Rights and Remedies........................................................................... 23
9.2 Power of Attorney............................................................................. 24
9.3 Accounts Collection........................................................................... 24
9.4 Bank Expenses................................................................................. 25
9.5 Bank's Liability for Collateral............................................................... 25
9.6 Remedies Cumulative........................................................................... 25
9.7 Demand; Protest............................................................................... 25
10. NOTICES................................................................................................ 25
11. CHOICE OF LAW AND VENUE................................................................................ 26
12. GENERAL PROVISIONS..................................................................................... 26
12.1 Successors and Assigns........................................................................ 26
12.2 Indemnification............................................................................... 27
12.3 Time of Essence............................................................................... 27
12.4 Severability of Provisions.................................................................... 27
12.5 Amendments in Writing, Integration............................................................ 28
12.6 Counterparts.................................................................................. 28
12.7 Survival...................................................................................... 28
12.8 Confidentiality............................................................................... 28
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This LOAN AND SECURITY AGREEMENT is entered into effective as of
January 13, 1998, by and between SILICON VALLEY BANK ("Bank") and VIDAMED, INC.
("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions.
As used in this Agreement, the following terms shall
have the following definitions:
"Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books relating
to any of the foregoing.
"Advance" or "Advances" means a cash advance under
the Committed Revolving Line.
"Affiliate" means, with respect to any Person, any
Person that owns or controls directly or indirectly such Person, any Person that
controls or is controlled by or is under common control with such Person, and
each of such Person's senior executive officers, directors, partners and, for
any Person that is a limited liability company, such Persons, managers and
members.
"Bank Expenses" means all: Bank's reasonable costs or
expenses (including reasonable attorneys' fees and expenses) incurred in
connection with the preparation, negotiation, administration, and enforcement of
the Loan Documents; and Bank's reasonable attorneys' fees and expenses incurred
in amending, enforcing or defending the Loan Documents (including fees and
expenses of appeal or review, or those incurred in any Insolvency Proceeding),
whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and
records including without limitation: ledgers; records concerning Borrower's
assets or liabilities, the Collateral, business operations or financial
condition; and all computer programs, or tape files, and the equipment,
containing such information.
"Borrowing Base" means an amount equal to
seventy-five percent (75%) of Eligible Accounts, provided, that Bank reserves
the right to adjust such percentage of Eligible Accounts based on the results of
any audit of the Collateral.
"Business Day" means any day that is not a Saturday,
Sunday, or other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the effective date of this
Agreement.
"Code" means the California Uniform Commercial Code.
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"Collateral" means the property described on Exhibit
A attached hereto.
"Committed Revolving Line" means a credit extension
of up to Three Million Dollars ($3,000,000).
"Committed Equipment Line" means a credit extension
of up to One Million Five Hundred Thousand Dollars ($1,500,000).
"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
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.
"Credit Extension" means each Advance, Equipment
Advance or any other extension of credit by Bank for the benefit of Borrower
hereunder.
"Current Assets" means, as of any applicable date,
all amounts that should, in accordance with GAAP, be included as current assets
on the consolidated balance sheet of Borrower and its Subsidiaries as at such
date.
"Current Liabilities" means, as of any applicable
date, all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Borrower and its Subsidiaries,
as at such date, plus, to the extent not already included therein, all
outstanding Credit Extensions made under this Agreement, including all
Indebtedness that is payable upon demand or within one year from the date of
determination thereof unless such Indebtedness is renewable or extendable at the
option of Borrower or any Subsidiary to a date more than one year from the date
of determination.
"Eligible Accounts" means those Accounts that arise
in the ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank's reasonable judgment and upon thirty (30) days prior written notification
thereof to Borrower in accordance with the provisions hereof. Unless otherwise
agreed to by Bank in writing, Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed
to pay within ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor,
fifty percent (50%) of whose Accounts the account debtor has failed to pay
within ninety (90) days of invoice date;
(c) Accounts with respect to an account debtor,
whose total obligations to Borrower exceed twenty-five percent (25%) of all
Accounts, except as approved in writing by Bank;
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(d) Accounts with respect to which the account
debtor does not have its principal place of business in the United States except
for Eligible Foreign Accounts;
(e) Accounts with respect to which the account
debtor is a federal, state or local governmental entity or any department,
agency, or instrumentality thereof except for those Accounts of the United
States or any department, agency or instrumentality thereof as to which the
payee has assigned its rights to payment thereof to Bank and the assignment has
been acknowledged, pursuant to the Assignment of Claims Act of 1940, as amended
(31 U.S.C. 3727);
(f) Accounts with respect to which Borrower is
liable to the account debtor, but only to the extent of any amounts owing to the
account debtor (sometimes referred to as "contra" accounts, e.g. accounts
payable, customer deposits, credit accounts, etc.);
(g) Accounts generated by demonstration or
promotional equipment, or with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, xxxx and hold, or other terms
by reason of which the payment by the account debtor may be conditional;
(h) Accounts with respect to which the account
debtor is an Affiliate, officer, employee, or agent of Borrower;
(i) Accounts with respect to which the account
debtor disputes liability or makes any claim with respect thereto as to which
Bank believes, in its sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(j) Accounts the collection of which Bank
reasonably determines after reasonable inquiry and reasonable consultation with
Borrower to be doubtful.
"Eligible Foreign Accounts" means Accounts with
respect to which the account debtor does not have its principal place of
business in the United States and that are: (1) covered by credit insurance in
form and amount, and by an insurer satisfactory to Bank less the amount of any
deductible(s) which may be or become owing thereon; or (2) supported by one or
more letters of credit either advised or negotiated through Bank or in favor of
Bank as beneficiary, in an amount and of a tenor, and issued by a financial
institution, acceptable to Bank; or (3) that Bank approves on a case-by-case
basis.
"Equipment" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts,
substitutions, accessions and attachments in which Borrower has any interest.
"Equipment Advance" has the meaning set forth in
Section 2.1.2.
"Equipment Availability End Date" has the meaning set
forth in Section 2.1.2.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles
as in effect in the United States from time to time.
"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.
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"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 similar relief.
"Inventory" means all present and future inventory in
which Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above.
"Investment" means any beneficial ownership of
(including stock, partnership interest or other securities) any Person, or any
loan, advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust,
charge, pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement,
any note or notes executed by Borrower, and any other present or future
agreement entered into between Borrower and/or for the benefit of Bank in
connection with this Agreement, all as amended, extended, supplemented or
restated 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 July 13, 2001.
"Negotiable Collateral" means all of Borrower's
present and future letters of credit of which it is a beneficiary, notes,
drafts, instruments, securities, documents of title, and chattel paper.
"Obligations" means all debt, principal, interest,
Bank Expenses and other amounts owed to Bank by Borrower pursuant to this
Agreement or any other agreement, whether absolute or contingent, due or to
become due, now existing or hereafter arising, including any interest that
accrues after the commencement of an Insolvency Proceeding and including any
debt, liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise.
"Payment Date" means the thirteenth (13th) calendar
day of each month, commencing on the first such date after the Closing Date and
ending on the Maturity Date.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank
arising under this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date
and disclosed in the attached financial reports or the Schedule;
(c) Indebtedness to trade creditors and with
respect to surety bonds and similar obligations incurred in the ordinary course
of business;
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(d) Subordinated Debt;
(e) Indebtedness of Borrower to any Subsidiary;
(f) Indebtedness secured by Permitted Liens;
(g) Capital leases or indebtedness incurred
solely to purchase equipment which is secured in accordance with clause (c) of
"Permitted Liens" below and is not in excess of the lesser of the purchase price
of such equipment or the fair market value of such equipment on the date of
acquisition; and
(h) Extensions, refinancings, modifications,
amendments and restatements of any of items of Permitted Indebtedness (a)
through (g) above, provided that the principal amount thereof is not increased
or the terms thereof are not modified to impose more burdensome terms upon
Borrower.
"Permitted Investment" means:
(a) Investments existing on the Closing Date and
disclosed in the Schedule;
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Rating Services or Xxxxx'x Investors Service, Inc. and (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank or money market deposit accounts issued by a
domestic commercial bank or other financial institution having capital and
surplus in excess of $100 million in which Bank has a Lien prior to any other
Lien;
(c) Investments consisting of the endorsement of
negotiable instruments for deposit or collection or similar transaction in the
ordinary course of business;
(d) Investments accepted in connection with
Transfers permitted by Section 7.1;
(e) 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, and (iii)
loans to employees, officers or directors relating to the purchase of equity
securities of Borrower or its Subsidiaries pursuant to employee stock purchase
plans or agreements approved by Borrower's Board of Directors;
(f) Investments (including debt obligations)
received in connection with the bankruptcy or reorganization of customers or
suppliers and in settlement of delinquent obligations of, and other disputes
with, customers or suppliers arising in the ordinary course of business;
(g) Investments pursuant to or arising under
currency agreements or interest rate agreements entered into in the ordinary
course of business;
(h) Investments consisting of notes receivable
of, or prepaid royalties and other credit extensions to, customers and suppliers
who are not Affiliates, in the ordinary course of business; provided that this
paragraph (h) shall not apply to Investments by Borrower in any Subsidiary;
(i) Investments constituting acquisitions
permitted under Section 7.3;
(j) Deposit accounts of Borrower in which Bank
has a Lien prior to any other Lien; and
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(k) Deposit accounts of any Subsidiaries
maintained in the ordinary course of business.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and
disclosed in the Schedule or arising under this Agreement or the other Loan
Documents;
(b) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and as to which adequate reserves are
maintained on Borrower's Books in accordance with GAAP, provided the same have
no priority over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired
or held by Borrower or any of its Subsidiaries to secure the purchase price of
such Equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment, or (ii) existing on such Equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such Equipment;
(d) Liens on Equipment leased by Borrower or any
Subsidiary pursuant to an operating or capital lease in the ordinary course of
business (including proceeds thereof and accessions thereto) incurred solely for
the purpose of financing the lease of such Equipment (including Liens pursuant
to leases permitted pursuant to Section 7.1 and Liens arising from UCC financing
statements regarding leases permitted by this Agreement);
(e) Leases or subleases and licenses or
sublicenses granted to others in the ordinary course of Borrower's business not
interfering in any material respect with the business of Borrower and its
Subsidiaries taken as a whole, and any interest or title of a lessor, licensor
or under any lease or license, provided that such leases, subleases, licenses
and sublicenses do not prohibit the grant of the security interest granted
hereunder;
(f) Liens on assets (including the proceeds
thereof and accessions thereto) that existed at the time such assets were
acquired by Borrower or any Subsidiary (including Liens on assets of any
corporation that existed at the time it became or becomes a Subsidiary);
provided such Liens are not granted in contemplation of or in connection with
the acquisition of such asset by Borrower or a Subsidiary;
(g) Liens arising from judgments, decrees or
attachments in circumstances not constituting an Event of Default under Section
8.8;
(h) Easements, reservations, rights-of-way,
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances affecting real property not constituting a Material Adverse
Effect;
(i) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payments of customs duties in
connection with the importation of goods;
(j) Liens that are not prior to the Lien of Bank
which constitute rights of set-off of a customary nature or banker's Liens with
respect to amounts on deposit, whether arising by operation of law or by
contract, in connection with arrangements entered in to with banks in the
ordinary course of business;
(k) Earn-out and royalty obligations existing on
the date hereof or entered into in connection with an acquisition permitted by
Section 7.3;
(l) Liens on insurance proceeds in favor of
insurance companies granted solely as security for financed premiums;
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(m) Liens arising in the ordinary course of
business arising by operation of law or regulation, but only if payment in
respect of any such Lien is not at the time required and such Liens do not, in
the aggregate, materially detract from the value of the property of Borrower or
materially impair the use thereof in the operation of Borrower's business;
(n) Liens securing reimbursement of obligations
in respect of documentary letters of credit; provided, that such Liens attach
only to the documents, the goods covered thereby and the proceeds thereof;
(o) Liens of landlords arising under lease
contracts or by operation of law in the ordinary course of business; and
(p) Liens incurred in connection with the
extension, renewal or refinancing of the indebtedness secured by Liens of the
type described in clauses (a), (c), (d), (e), (f) and (k) 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.
"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.
"Prepayment Fee" means a fee on any portion of the
Obligations with a fixed interest rate (the "Fixed Obligations") that is paid
before the payment due date. The Prepayment Fee is calculated as follows: First,
Bank determines a "Current Market Rate" based on what the Bank would receive if
it loaned the amount on the prepayment date in a wholesale funding market
matching maturity, principal amount and principal and interest payment dates
(such aggregate payments received being deemed the "Current Market Rate
Amount"). Bank, in its sole discretion, may select any wholesale funding market
rate as the Current Market Rate. Second, Bank will take the prepayment amount
and calculate the present value of each principal and interest payment which,
without prepayment, the Bank would have received during term of the Fixed
Obligations using the applicable interest rate set forth in this Agreement. The
sum of the present value calculations is the "Xxxx to Market Amount". Third, the
Bank will subtract the Xxxx to Market Amount from the Current Market Rate
Amount. Any amount greater than zero is the Prepayment Fee.
"Prime Rate" means the variable rate of interest, per
annum, most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Quick Assets" means, as of any applicable date, the
unrestricted cash; unrestricted cash-equivalents; net, billed accounts
receivable and investments with maturities of fewer than one year of Borrower
determined in accordance with GAAP.
"Responsible Officer" means each of the Chief
Executive Officer, the President, the Chief Financial Officer and the Controller
of Borrower.
"Revolving Maturity Date" means the day before the
first anniversary of the Closing Date.
"Schedule" means the schedule of exceptions attached
hereto, if any.
"Subordinated Debt" means any debt incurred by
Borrower that is subordinated to the debt owing by Borrower to Bank on terms
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means with respect to any Person,
corporation, partnership, company association, joint venture, or any other
business entity of which more than fifty percent (50%) of the voting
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stock or other equity interests is owned or controlled, directly or indirectly,
by such Person or one or more Affiliates of such Person.
"Tangible Net Worth" means, as of any applicable
date, the consolidated total assets of Borrower and its Subsidiaries minus,
without duplication, (i) the sum of any amounts attributable to (a) goodwill,
(b) intangible items such as unamortized debt discount and expense, patents,
trade and service marks and names, copyrights and research and development
expenses except prepaid expenses, and (c) all reserves not already deducted from
assets, plus Subordinated Debt and (ii) Total Liabilities.
"Total Liabilities" means, as of any applicable date,
all obligations that should, in accordance with GAAP, be classified as
liabilities on the consolidated balance sheet of Borrower and its subsidiaries,
including in any event all Indebtedness, minus Subordinated Debt.
1.2 Accounting and Other Terms.
All accounting terms not specifically defined herein
shall be construed in accordance with GAAP and all calculations and
determinations made hereunder shall be made in accordance with GAAP. When used
herein, the term "financial statements" shall include the notes and schedules
thereto.
2. LOANS AND TERMS OF PAYMENT
2.1 Advances.
Borrower promises to pay to the order of Bank, in
lawful money of the United States of America, the aggregate unpaid principal
amount of all Advances made by Bank to Borrower hereunder. Borrower shall also
pay interest on the unpaid principal amount of such Advances at rates in
accordance with the terms hereof.
2.1.1 Revolving Advances
(a) Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Advances to Borrower in an
aggregate outstanding amount not to exceed (i) the lesser of the Committed
Revolving Line or the Borrowing Base, minus (ii) in each case the face amount of
all Outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit). Subject to the terms and conditions of this Agreement, amounts borrowed
pursuant to this Section 2.1.1 may be repaid and reborrowed at any time up until
the Revolving Maturity Date. Prior to the first Advance, Bank shall have
conducted an audit of Borrower's Accounts with results satisfactory to Bank.
(b) Whenever Borrower desires an
Advance, Borrower will notify Bank by facsimile transmission or telephone no
later than 3:00 p.m. Pacific time, on the Business Day that the Advance is to be
made. Each such notification shall be promptly confirmed by a Loan
Payment/Advance Telephone Request Form in substantially the form of Exhibit B
hereto. Bank is authorized to make Advances under this Agreement, based upon
instructions received from a Responsible Officer or a designee of a Responsible
Officer. Bank shall be entitled to rely on any telephonic notice given by a
Person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1 to Borrower's deposit account.
(c) The Committed Revolving Line shall
terminate on the Revolving Maturity Date, at which time all outstanding Advances
made under this Section 2.1.1 shall be immediately due and payable.
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2.1.2 Equipment Advances.
(a) Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make a single advance (the
"Equipment Advance") to Borrower in an aggregate outstanding amount not to
exceed the Committed Equipment Line. To evidence the Equipment Advance, Borrower
shall deliver to Bank, at the time of the Equipment Advance request, an invoice
for the Equipment to be purchased. The Equipment Advance shall be used only to
purchase or refinance Equipment purchased on or before six (6) months prior to
the Closing Date and shall not exceed one hundred percent (100%) of the invoice
amount of such equipment or leasehold improvement cost approved from time to
time by Bank, excluding taxes, shipping, warranty charges, freight discounts and
installation expense. Leasehold improvements may not constitute in excess of
fifty percent (50%) of the Equipment Advance.
(b) Interest shall accrue from the date of
the Equipment Advance at the rate specified in Section 2.3(a). The Equipment
Advance will be payable in forty-two (42) equal monthly installments of
principal, plus interest, beginning on February 16, 1998, and continuing on the
Payment Date of each month thereafter through the Maturity Date, at which time
all outstanding Obligations under this Section 21.2 shall be immediately due and
payable. The Equipment Advance, once repaid, may not be reborrowed.
(c) When Borrower desires to obtain the
Equipment Advance, Borrower shall notify Bank (which notice shall be
irrevocable) by facsimile transmission no later than 3:00 p.m. Pacific time one
(1) Business Day before the day on which the Equipment Advance is to be made.
Such notice shall be substantially in the form of Exhibit B. The notice shall be
signed by a Responsible Officer or its designee and include a copy of the
invoice relating to the Equipment to be financed.
2.1.3 Letters of Credit.
(a) Subject to the terms and conditions
of this Agreement, Bank agrees to issue or cause to be issued letters of credit
(each a "Letter of Credit," collectively, the "Letters of Credit") for the
account of Borrower in an aggregate face amount not to exceed (i) the lesser of
the Committed Line or the Borrowing Base (ii) minus in each case the sum of the
then outstanding principal balance of the Advances; provided that the face
amount of outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit) shall not in any case exceed Five Hundred Thousand Dollars
($500,000). Each such Letter of Credit shall have an expiry date no later than
one hundred eighty (180) days after the Revolving Maturity Date provided that
Borrower's Letter of Credit reimbursement obligation shall be secured by cash
terms acceptable to Bank at any time after the Revolving Maturity Date if the
term of this Agreement is not extended by Bank. All such Letters of Credit shall
be, in form and substance, acceptable to Bank in its sole discretion and shall
be subject to the terms and conditions of Bank's form of application and letter
of credit agreement. All amounts actually paid by Bank in respect of a letter of
credit shall, when paid, constitute an Advance under this Agreement.
(b) The obligation of Borrower to
immediately reimburse Bank for drawings made under Letters of Credit shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement and such Letters of Credit, under
all circumstances whatsoever. Borrower shall indemnify, defend and hold Bank
harmless from any loss, cost, expense or liability, including, without
limitation, reasonable attorneys' fees, arising out of or in connection with any
Letters of Credit.
(c) Borrower may request that 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, Bank shall treat
such demand as an advance to Borrower of the equivalent of the amount thereof
(plus cable charges) in United States currency at the then prevailing rate of
exchange in San Francisco, California, for sales of that other currency for
cable transfer to the country of which it is the currency.
9
(d) Upon the issuance of any Letter of
Credit payable in a currency other than United States Dollars, Bank 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 face
amount of such Letter of Credit. The amount of such reserve may be amended by
Bank 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 Overadvances.
If, at any time or for any reason, the outstanding
principal amount of Obligations owed by Borrower to Bank pursuant to Section
2.1.1 of this Agreement is greater than the lesser of (i) the Committed
Revolving Line, minus the face amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit) or (ii) the Borrowing Base,
minus the face amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit), Borrower shall immediately pay to Bank, in
cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in
Section 2.3(b), any Advances shall bear interest on the average daily balance
thereof, at a per annum rate equal to one percentage point (1.0) above the Prime
Rate. The Equipment Advance shall bear interest at the following rate elected by
Borrower on or before the date of the Equipment Advance (if such election is not
made by Borrower on or before the date of the Equipment Advance, then the rate
under subsection (i) shall be applicable to the Equipment Advance): (i) a per
annum floating rate equal to one and one quarter (1.25) percentage points above
the Prime Rate, or (ii) a per annum fixed rate equal to the forty-two (42) month
United States Treasury Xxxx, plus four and one quarter (4.25) percentage points.
If Borrower elects the rate set forth in subsection (ii), then any amounts
prepaid on the Equipment Advance shall be accompanied by a Prepayment Fee,
payable on the date of prepayment (the "Prepayment Date").
(b) Default Rate. All Obligations shall bear
interest, from and after the occurrence of an Event of Default, at a rate equal
to five (5) percentage points above the interest rate applicable immediately
prior to the occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due
and payable on each Payment Date. Borrower hereby authorizes Bank to debit any
accounts with Bank, including, without limitation, Account Number 3300109852 for
payments of principal and interest due on the Obligations and any other amounts
owing by Borrower to Bank on the Payment Date or applicable due date, as the
case may be, in each case, taking into account any applicable grace periods.
Bank will notify promptly Borrower of all debits which Bank has made against
Borrower's accounts. Any such debits against Borrower's accounts in no way shall
be deemed a set-off. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is
changed from time to time hereafter, the applicable rate of interest hereunder
shall be increased or decreased effective as of 12:01 a.m. on the day the Prime
Rate is changed, by an amount equal to such change in the Prime Rate. All
interest chargeable under the Loan Documents shall be computed on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed.
2.4 Crediting Payments.
Prior to the occurrence of an Event of Default, Bank
shall credit a wire transfer of funds, check or other item of payment to such
deposit account or Obligation as Borrower specifies. After the occurrence of an
Event of Default, the receipt by Bank of any wire transfer of funds, check, or
other item of payment, whether directed to Borrower's deposit account with Bank
or to the Obligations or otherwise, shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment in
respect of the
10
Obligations unless such payment is of immediately available federal funds or
unless and until such check or other item of payment is honored when presented
for payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon Pacific time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due and payable (except by reason of acceleration)
on a date that is not a Business Day, such payment shall instead be due and
payable on the next Business Day, and additional fees or interest, as the case
may be, shall accrue and be payable for the period of such extension.
2.5 Fees.
Borrower shall pay to Bank the following:
(a) Facility Fee. A facility fee equal to
Fifteen Thousand Dollars ($15,000) for the Committed Revolving Line, a facility
fee of Fifteen Thousand Dollars ($15,000) for the Committed Equipment Line,
which fees shall be due and payable on the Closing Date and shall be fully
earned and non-refundable;
(b) Letter of Credit Fee. With respect to the
issuance of any Letter of Credit, a non-refundable fee for the period from and
including the date of issuance of the Letter of Credit, to and including the
date such Letter of Credit is drawn in full, expires or is terminated, equal to
two percent (2%) per annum on the stated amount of such Letter of Credit,
payable monthly in arrears on the Payment Date;
(c) Financial Examination and Appraisal Fees.
Bank's customary fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents;
provided, that unless an Event of Default has occurred and is continuing, such
audits and appraisals shall occur no more frequently than once every six
calendar months;
(d) Bank Expenses. Upon receipt of invoice
therefor from Bank which shall be paid in accordance with Borrower's customary
procedures for payment of such invoices, all Bank Expenses incurred through the
date hereof, including reasonable attorneys' fees and expenses and, after the
date hereof, all Bank Expenses, including reasonable attorneys' fees and
expenses.
2.6 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), in each case
after the date of this Agreement:
(a) subjects Bank to any tax with respect to
payments of principal or interest or any other amounts payable hereunder by
Borrower or otherwise with respect to the transactions contemplated hereby
(except for taxes on the overall net income of Bank imposed by the United States
of America or any political subdivision thereof);
(b) imposes, modifies or deems applicable any
deposit insurance, reserve, special deposit or similar requirement against
assets held by, or deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with
respect to its performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans made hereunder, Bank shall notify Borrower thereof. Borrower agrees to
pay to Bank the amount of such increase in cost, reduction in income or
additional expense
11
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall constitute
prima facie evidence of such amount provided, however, that Borrower shall not
be liable for any such amount attributable to any period prior to the date of
hundred eight (180) days prior to the date of such certificate.
2.7 Term.
Except as otherwise set forth herein, this Agreement
shall become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the Maturity Date.
Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination of this Agreement, Bank's lien on the
Collateral shall remain in effect for so long as any Obligations (excluding
Obligations under Section 2.6 and 12.2 to the extent they remain inchoate at the
time outstanding payment obligations are paid in full) are outstanding.
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 articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of this Agreement;
(c) a negative pledge agreement substantially in
the same form as Exhibit E hereto;
(d) financing statement (Form UCC-1);
(e) insurance certificate;
(f) Collateral audit;
(g) payment of the fees and Bank Expenses then
due 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 Bank to make each Advance,
including the initial Advance, is further subject to the following conditions:
(a) timely receipt by Bank of the Loan
Payment/Advance Telephone Request 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 Telephone Request 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
12
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).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest.
Borrower grants and pledges to Bank a continuing
security interest in all presently existing and hereafter acquired or arising
Collateral in order to secure prompt payment of any and all Obligations and in
order to secure prompt performance by Borrower of each of its covenants and
duties under the Loan Documents. Except as set forth in the Schedule, such
security interest constitutes a valid, first priority security interest in the
presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof. Borrower
acknowledges that Bank may place a "hold" on any Deposit Account pledged as
Collateral to secure the Obligations, in each case, to the extent that a
security interest in such Collateral can be perfected by the filing of a
financing statement or, in the case of Collateral consisting of instruments,
documents, chattel paper or certificated securities, to the extent that Bank
takes possession or control of such Collateral. Bank agrees to execute and
deliver to Borrower from time to time such subordination agreements as Borrower
may request and as are necessary to give to other lenders which finance
Equipment for Borrower a first priority security interest in the Equipment
financed so long as the Liens and the Indebtedness incurred with respect to such
Equipment financing are permitted under this Agreement. Notwithstanding
termination of this Agreement, Bank's Lien on the Collateral shall remain in
effect for so long as any Obligations are outstanding.
4.2 Delivery of Additional Documentation Required.
Borrower shall from time to time execute and deliver
to Bank, at the request of Bank, all Negotiable Collateral, all financing
statements and other documents that Bank may reasonably request, in form
satisfactory to Bank, to perfect and to continue Bank's security interests in
the Collateral and in order to fully consummate all of the transactions
contemplated under the Loan Documents.
4.3 Right to Inspect.
Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral; provided, that unless an Event of Default
has occurred and is continuing, such inspection and appraisals shall occur no
more frequently than once every six calendar months.
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 for states as to which any failure to so qualify
would not have a Material Adverse Effect.
5.2 Due Authorization; No Conflict.
The execution, delivery, and performance of the Loan
Documents are within Borrower's powers, have been duly authorized, and are not
in conflict with nor constitute a breach of any provision contained in
Borrower's Articles/Certificate of Incorporation or Bylaws, nor will they
constitute an
13
event of default under any material agreement to which Borrower is a party or by
which Borrower is bound except to the extent that certain intellectual property
agreements prohibit the assignment of the rights thereunder to a third party
without the Borrower's or other party's consent. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default would reasonably be expected to 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 Bona Fide Eligible Accounts.
The Eligible Accounts are bona fide existing
obligations. The service or property giving rise to such Eligible Accounts has
been performed or delivered to the account debtor or to the account debtor's
agent for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has not received notice of actual or imminent Insolvency
Proceeding of any account debtor whose accounts are included in any Borrowing
Base Certificate as an Eligible Account.
5.5 Merchantable Inventory.
All Inventory is in all material respects of good and
marketable quality, free from all material defects.
5.6 Intellectual Property.
Borrower is the sole owner of or owns the right to
use the Intellectual Property Collateral, except for non-exclusive licenses
granted by Borrower to its customers in the ordinary course of business. Each of
the Patents is valid and enforceable, and no part of the Intellectual Property
Collateral has been judged invalid or unenforceable, in whole or in part, and no
claim has been made that any part of the Intellectual Property Collateral
violates the rights of any third party. Except for and upon the filing with the
United States Patent and Trademark Office with respect to the Patents and
Trademarks and the Register of Copyrights with respect to the Copyrights
necessary to perfect the security interests created hereunder, and except as has
been already made or obtained, no authorization, approval or other action by,
and no notice to or filing with, any United States governmental authority or
United States regulatory body is required either (i) for the grant by Borrower
of the security interest granted hereby or for the execution, delivery or
performance of Loan Documents by Borrower in the United States or (ii) for the
perfection in the United States or the exercise by Bank of its rights and
remedies hereunder.
5.7 Name; Location of Chief Executive Office.
Except as disclosed in the Schedule, Borrower has not
done business and will not, without at least thirty (30) days written notice to
Bank, do business under any name other than that specified on the signature page
hereof. The chief executive office of Borrower is located at the address
indicated in Section 10 hereof.
5.8 Litigation.
Except as set forth in the Schedule, there are no
actions or proceedings pending or, to Borrower's knowledge, threatened by or
against Borrower or any Subsidiary before any court or administrative agency in
which an adverse decision would reasonably be expected to have a Material
Adverse Effect or a material adverse effect on Borrower's interest or Bank's
security interest in the Collateral.
14
5.9 No Material Adverse Change in Financial Statements.
All consolidated financial statements related to
Borrower and any Subsidiary that have been delivered by Borrower to Bank fairly
present in all material respects Borrower's consolidated financial condition as
of the date thereof and Borrower's consolidated results of operations for the
period then ended. There has not been a material adverse change in the
consolidated financial condition of Borrower since the date of the most recent
of such financial statements submitted to Bank on or about the Closing Date.
5.10 Solvency.
The fair saleable value of Borrower's assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; the Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement; and Borrower is generally able to
pay its debts (including trade debts) as they mature.
5.11 Regulatory Compliance.
Borrower and each Subsidiary has met the minimum
funding requirements of ERISA with respect to any employee benefit plans subject
to ERISA. No event has occurred resulting from Borrower's failure to comply with
ERISA that is reasonably likely to result in Borrower's incurring any liability
that would reasonably be expected to 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, as amended. Borrower
is not engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulations G, T and U of the Board of Governors of
the Federal Reserve System). Borrower has complied with all the provisions of
the Federal Fair Labor Standards Act. Borrower has not violated any statutes,
laws, ordinances or rules applicable to it, violation of which would have a
Material Adverse Effect.
5.12 Environmental Condition.
None of Borrower's or any Subsidiary's properties or
assets has ever been used by Borrower or any Subsidiary or, to the best of
Borrower's knowledge, by previous owners or operators, in the disposal of, or to
produce, store, handle, treat, release, or transport, any hazardous waste or
hazardous substance other than in accordance with applicable law; to the best of
Borrower's knowledge, none of Borrower's properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a hazardous waste or hazardous substance disposal site, or a
candidate for closure pursuant to any environmental protection statute to
Borrower's knowledge; no lien arising under any environmental protection statute
has attached to any revenues or to any real or personal property owned by
Borrower or any Subsidiary; and neither Borrower nor any Subsidiary has received
a summons, citation, notice, or directive from the Environmental Protection
Agency or any other federal, state or other governmental agency concerning any
action or omission by Borrower or any Subsidiary resulting in the release or
other disposition of hazardous waste or hazardous substances into the
environment.
5.13 Taxes.
Borrower and each Subsidiary has filed or caused to
be filed all tax returns required to be filed on a timely basis, and has paid,
or has made adequate provision for the payment of, all undisputed taxes
reflected therein, except those being contested in good faith by proper
proceedings with adequate reserves under GAAP.
5.14 Subsidiaries.
Borrower does not own any stock, partnership interest
or other equity securities of any Person, except for Permitted Investments.
15
5.15 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
where the failure to obtain any such consent, approval or authorization, to make
any such declaration or filing, or to be given any such notice would not
reasonably be expected to have a Material Adverse Effect.
5.16 Full Disclosure.
No representation, warranty or other statement made
by Borrower in any certificate or written statement furnished to Bank contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained in such certificates or
statements not misleading (it being recognized by Bank that the projections and
forecasts provided by Borrower are not to be viewed as facts and that actual
results during the period or period covered by any such projections and
forecasts may differ from the projected or forecasted results).
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of
all outstanding Obligations, and for so long as Bank may have any commitment to
make a Credit Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing.
Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify would reasonably be expected to 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
would reasonably be expect to 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
reasonably be expected to have a Material Adverse Effect or a material adverse
effect on the Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates.
Borrower shall deliver to Bank: (a) as soon as
available, but in any event within thirty (30) days after the end of each month,
a company prepared consolidated balance sheet and income statement covering
Borrower's consolidated operations during such period, in a form reasonably
acceptable to Bank and certified by a Responsible Officer of Borrower; (b)
within ten (10) days of filing, copies of all statements, reports and notices
sent or made available generally by Borrower to its security holders or to any
holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission; (c) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against Borrower or
any Subsidiary that would be likely to result in damages or costs to Borrower or
any Subsidiary of One Hundred Thousand Dollars ($100,000) or more in any single
action; (d) prompt notice of any material change in the composition of the
Intellectual Property Collateral, including, but not limited to, any subsequent
ownership right of Borrower in or to any Copyright, Patent or Trademark not
specified in any intellectual property security agreement between Borrower and
Bank or knowledge of an event that materially
16
adversely affects the value of the Intellectual Property Collateral; and (e)
such budgets, sales projections, operating plans or other financial information
as Bank may reasonably request from time to time.
Beginning after the initial Collateral audit by Bank,
within twenty (20) days after the last day of each month, Borrower shall deliver
to Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings of
accounts receivable and accounts payable and sell through reports.
Borrower shall deliver to Bank with the monthly
financial statements a Compliance Certificate signed by a Responsible Officer in
substantially the form of Exhibit D hereto.
Bank shall have a right from time to time hereafter
to audit Borrower's Accounts at Borrower's expense, provided that such audits
will be conducted no more often than every six (6) months unless an Event of
Default has occurred and is continuing.
6.4 Inventory; Returns.
Borrower shall keep all Inventory in good and
marketable condition, free from all material defects. Returns and allowances, if
any, as between Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist at
the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where any return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 Taxes.
Borrower shall make, and shall cause each Subsidiary
to make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, upon reasonable request, 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 reasonable request,
furnish Bank with proof satisfactory to Bank indicating that Borrower or a
Subsidiary has made such payments or deposits; provided that Borrower or a
Subsidiary need not make any payment required hereunder if the amount or
validity of such payment is (i)contested in good faith by appropriate
proceedings, (ii) is reserved against (to the extent required by GAAP) by
Borrower and (iii) no lien other than a Permitted Lien results.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the
Collateral insured against loss or damage by fire, theft, explosion, sprinklers,
and all other hazards and risks, and in such amounts, as ordinarily insured
against by other owners in similar businesses conducted in the locations where
Borrower's business is conducted on the date hereof. Borrower shall also
maintain insurance relating to Borrower's ownership and use of the Collateral in
amounts and of a type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in
such form, with such companies, and in such amounts as are reasonably
satisfactory to Bank. All such policies of property insurance shall contain a
lender's loss payable endorsement, in a form satisfactory to Bank, showing Bank
as an additional loss payee thereof and all liability insurance policies shall
show the Bank as an additional insured, and shall specify that the insurer must
give at least twenty (20) days notice to Bank before canceling its policy for
any reason. At Bank's request, Borrower shall deliver to Bank certified copies
of such policies of insurance and evidence of the payments of all premiums
therefor. So long as no Event of Default has occurred and is continuing,
Borrower shall have the option of applying the proceeds of any casualty policy
to the replacement or repair of destroyed or damaged property; provided, that
after the occurrence and during the continuance of an Event of Default, all
17
proceeds payable under any such policy shall, at the option of Bank, be payable
to Bank to be applied on account of the Obligations.
6.7 Principal Depository.
Borrower shall maintain its principal depository and
operating accounts with Bank.
6.8 Quick Ratio.
Borrower shall maintain, as of the last day of each
fiscal quarter, a ratio of Quick Assets to Current Liabilities of at least 1.00
to 1.00.
6.9 Total Liabilities/Tangible Net Worth.
Borrower shall maintain, as of the last day of each
fiscal quarter, a ratio of Total Liabilities to Tangible Net Worth of at least
2.50:1.
6.10 Minimum Liquidity/Debt Service Coverage.
Borrower shall maintain, as of the last day of each
calendar month the sum of cash and cash equivalents, minus the aggregate
principal balance drawn on the Committed Revolving Line of at least two (2.0)
times the outstanding principal amount of the Equipment Advance. Notwithstanding
the foregoing, from and after the time Borrower achieves for two consecutive
quarters, a Debt Service Coverage of at least 1.5 to 1.0, Borrower shall not be
subject to the minimum liquidity requirement set forth above, but instead shall
maintain, as of the last day of each fiscal quarter, a Debt Service Coverage of
at least 1.5 to 1.0. Debt Service Coverage means, as of any date of
determination, with respect to Borrower and its Subsidiaries on a consolidated
basis, a ratio of (a) the sum of (i) earnings after tax plus (ii) interest and
non-cash (i.e. depreciation and amortization) expense to (b) the sum of (i)
current portion of long term debt and capitalized leases plus (ii) interest
expense.
6.11 Net Losses.
Borrower may incur net losses in the quarters ending
on the following dates in amounts not to exceed the following for such
respective quarters: March 31, 1998 in the amount of Three Million Dollars
($3,000,000); June 30, 1998 in the amount of Three Million Three Hundred
Thousand Dollars ($3,300,000); September 30, 1998 in the amount of Two Million
Six Hundred Thousand Dollars ($2,600,000); December 31, 1998 in the amount of
One Million Nine Hundred Thousand Dollars ($1,900,000).
6.12 Further Assurances.
At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any Credit
Extension hereunder shall be outstanding and until payment in full of the
outstanding Obligations or for so long as Bank may have any commitment to make
any Advances, Borrower will not do any of the following:
7.1 Dispositions.
Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than Transfers (i) of inventory
in the ordinary course of business, (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business, (iii) of worn-out or obsolete
18
Equipment or Equipment financed by other vendors,
(iv) which constitute liquidation of Investments permitted under Section 7.7,
and (v) not otherwise permitted by this Section 7.1 not exceeding One Hundred
Thousand Dollars ($100,000) in the aggregate in any fiscal year.
7.2 Changes in Business, Ownership, Management or
Business Locations.
Engage in any business, or permit any of its
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a material change in Borrower's ownership.
Borrower will not, without at least thirty (30) days written notification to
Bank, relocate its chief executive office or add any new offices or business
locations.
7.3 Mergers or Acquisitions.
Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person, provided
that this Section 7.3 shall not apply to (i) the purchase of inventory,
equipment or intellectual property rights in any single transaction valued at
less than One Hundred Thousand Dollars ($100,000) in the ordinary course of
business or (ii) transactions among Subsidiaries or among Borrower and its
Subsidiaries in which Borrower is the surviving entity.
7.4 Indebtedness.
Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances.
Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions.
Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock, provided, that (i) Borrower may declare and make any dividend payment or
other distribution payable in its equity securities, (ii) Borrower may convert
any of its convertible securities into other securities pursuant to the terms of
such convertible securities or otherwise in exchange therefor and (iii) for so
long as an Event of Default has not occurred and is continuing, Borrower may
repurchase stock from former employees of Borrower in accordance with the terms
of repurchase or similar agreements between Borrower and such employees.
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 non-affiliated Person and except for transactions with
a Subsidiary that are upon fair and reasonable terms and transactions
constituting Permitted Investments.
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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 material provision
contained in any documentation relating to the Subordinated Debt without Bank's
prior written consent.
7.10 Inventory.
Store the Inventory with a bailee, warehouseman, or
similar party unless Bank has received a pledge of any warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as disclosed in the Schedule or as
Bank may approve in writing, Borrower shall keep the Inventory only at the
location set forth in Section 10 hereof and such other locations of which
Borrower gives Bank prior written notice and as to which Borrower signs and
files a financing statement where needed to perfect Bank's security interest.
7.11 Compliance.
Become an "investment company" or a company
controlled by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended, or become principally engaged in, or undertake
as one of its important activities, the business of extending credit for the
purpose of purchasing or carrying margin stock, or use the proceeds of any
Advance for such purpose; fail to meet the minimum funding requirements of
ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA,
to occur; fail to comply with the Federal Fair Labor Standards Act or violate
any other law or regulation, which violation could have a Material Adverse
Effect or a material adverse effect on the Collateral or the priority of Bank's
Lien on the Collateral, or permit any of its Subsidiaries to do any of the
foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an
Event of Default by Borrower under this Agreement:
8.1 Payment Default.
If Borrower fails to pay the principal of, or any
interest on, any Advances 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 perform any obligation under
Sections 6.3, 6.6, 6.7, 6.8, 6.9, 6.10 or 6.11 or violates any of the covenants
contained in Article 7 of this Agreement, or if Borrower fails or neglects to
perform, keep, or observe any other material term, provision, condition,
covenant, or agreement contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between Borrower and Bank
and as to any default under such other term, provision, condition, covenant or
agreement that can be cured, has failed to cure such default within ten (10)
days after the occurrence thereof; provided, however, that if the default cannot
by its nature be cured within the ten (10) day period or cannot after diligent
attempts by Borrower be cured within such ten (10) day period, and such default
is likely to be cured within a reasonable time, then Borrower shall have an
additional reasonable period (which shall not in any case exceed thirty (30)
days) to attempt to cure such default, and within such reasonable time period
the failure to have cured such default shall not be deemed an Event of Default
(provided that no Advances will be required to be made during such cure period);
20
8.3 Material Adverse Change.
If there (i) occurs a material adverse change in the
business, operations, or condition (financial or otherwise) of 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, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 Insolvency.
If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements.
If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that would reasonably be expected to 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 the terms
of such Subordinated Debt or any subordination agreement entered into with Bank;
8.8 Judgments.
If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least Fifty Thousand
Dollars ($50,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of thirty (30) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment); or
8.9 Misrepresentations.
If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate or writing delivered to Bank by Borrower or any
Person acting on Borrower's behalf pursuant to this Agreement or to induce Bank
to enter into this Agreement or any other Loan Document.
21
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies.
Upon the occurrence and during the continuance of an
Event of Default, Bank may, at its election, without demand, do any one or more
of the following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced
by this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default
described in Section 8.5 all Obligations shall become immediately due and
payable without any action by Bank);
(b) Cease advancing money or extending credit to
or for the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(c) Settle or adjust disputes and claims
directly with account debtors for amounts, upon terms and in whatever order that
Bank reasonably considers advisable;
(d) Without notice to or demand upon Borrower,
make such payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may reasonably designate. Borrower authorizes Bank to enter the premises
where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien which in Bank's determination appears to be prior
or superior to its security interest and to pay all expenses incurred in
connection therewith. With respect to any of Borrower's premises, Borrower
hereby grants Bank a license to enter such premises and to occupy the same,
without charge, in order to exercise any of Bank's rights or remedies provided
herein, at law, in equity, or otherwise;
(e) Without notice to Borrower set off and apply
to the Obligations any and all (i) balances and deposits of Borrower held by
Bank, or (ii) indebtedness at any time owing to or for the credit or the account
of Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein and pursuant to applicable law) the Collateral. Bank is
hereby granted a non-exclusive, royalty-free license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, mask works, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any property of a similar nature, as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral and,
in connection with Bank's exercise of its rights under this Section 9.1,
Borrower's rights under all licenses and all franchise agreements shall inure to
Bank's benefit;
(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 Bank determines is commercially reasonable, and apply the proceeds thereof to
the Obligations in whatever manner or order Bank deems appropriate;
(h) Bank may credit bid and purchase at any
public sale, or at any private sale as permitted by law.
Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
22
9.2 Power of Attorney.
Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney with full power of substitution to: (a) send requests for
verification of Accounts or notify account debtors of Bank's security interest
in the Accounts; (b) endorse Borrower's name on any checks or other forms of
payment or security that may come into Bank's possession; (c) sign Borrower's
name on any invoice or xxxx of lading relating to any Account, drafts against
account debtors, schedules and assignments of Accounts, verifications of
Accounts, and notices to account debtors; (d) make, settle, and adjust all
claims under and decisions with respect to Borrower's policies of insurance; (e)
settle and adjust disputes and claims respecting the Accounts directly with
account debtors, for amounts and upon terms which Bank determines to be
reasonable; (f) modify, in its sole discretion, any intellectual property
security agreement entered into between Borrower and Bank without first
obtaining Borrower's approval of or signature to such modification by amending
Exhibit A, Exhibit B, Exhibit C and Exhibit D, thereof, as appropriate, to
include reference to any right, title or interest in any Copyrights, Patents or
Trademarks acquired by Borrower after the execution hereof or to delete any
reference to any right, title or interest in any Copyrights, Patents or
Trademarks in which Borrower no longer has or claims any right, title or
interest; (g) file, in its sole discretion, one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of Borrower where permitted by law; and (h)
dispose of the Collateral into the name of Bank or a third party to the extent
permitted under the Code, provided Bank may exercise such power of attorney to
sign the name of Borrower on any of the documents described in Section 4.2
regardless of whether an Event of Default has occurred. The appointment of Bank
as Borrower's attorney in fact, and each and every one of Bank's rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully repaid and performed and Bank's obligation to
provide advances hereunder is terminated.
9.3 Accounts Collection.
At any time after the occurrence and during the
continuance of an Event of Default, Bank may notify any Person owing funds to
Borrower of Bank's security interest in such funds and verify the amount of such
Account. Borrower shall collect all amounts owing to Borrower for Bank, receive
in trust all payments as Bank's trustee, and, if requested or required by Bank,
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses.
If Borrower fails to pay any amounts when due (after
taking into account any applicable grace period) or furnish any required proof
of payment due to third persons or entities, as required under the terms of this
Agreement, then Bank may do any or all of the following: (a) make payment of the
same or any part thereof; (b) set up such reserves under the Committed Revolving
Line as Bank deems necessary to protect Bank from the exposure created by such
failure; or (c) obtain and maintain insurance policies of the type discussed in
Section 6.6 of this Agreement, and take any action with respect to such policies
as Bank deems prudent. Any amounts so paid or deposited by Bank shall constitute
Bank Expenses, shall be immediately due and payable, and shall bear interest at
the then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5 Bank's Liability for Collateral.
So long as Bank complies with its obligations under
Section 9207 of the Code, and only so long as any Obligations remain outstanding
and unpaid under the Loan Documents, Bank shall not in any way or manner be
liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss
or damage thereto occurring or arising in any manner or fashion from any cause;
(c) any diminution in the value thereof; or (d) any act or default of any
carrier, warehouseman, bailee, forwarding agency, or other person whomsoever.
All risk of loss, damage or destruction of the Collateral shall be borne by
Borrower.
23
9.6 Remedies Cumulative.
Bank's rights and remedies under this Agreement, the
Loan Documents, and all other agreements shall be cumulative. Bank shall have
all other rights and remedies not expressly set forth herein as provided under
the Code, by law, or in equity. No exercise by Bank of one right or remedy shall
be deemed an election, and no waiver by Bank of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be
effective unless made in a written document signed on behalf of Bank and then
shall be effective only in the specific instance and for the specific purpose
for which it was given.
9.7 Demand; Protest.
Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by a recognized
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to Borrower or to Bank, as the case may be, at
its addresses set forth below:
If to Borrower: VidaMed, Inc.
00000 Xxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attn: Xxxx Xxxxxxxxxx
FAX: (510) _________
If to Bank: Silicon Valley Bank
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx
FAX: (000) 000-0000
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE
The Loan Documents shall be governed by, and construed in
accordance with, the internal laws of the State of California, without regard to
principles of conflicts of law. Each of Borrower and Bank hereby submits to the
exclusive jurisdiction of the state and federal courts located in the County of
Santa Xxxxx, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND
24
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.
12. GENERAL PROVISIONS
12.1 Successors and Assigns.
(a) This Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participations in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder, subject to the provisions of this
Section 12.1 and Section 12.8.
(b) Bank may sell, negotiate or grant
participations to other financial institutions in all or part of the obligations
of the Borrower outstanding under the Loan Documents, without notice to or the
approval of Borrower; provided that any such sale, negotiation or participation
shall be in compliance with the applicable federal and state securities laws and
the other requirements of this Section 12.1 and Section 12.8. Any sale,
negotiation or grant by the Bank may not materially alter, to the detriment of
the Borrower, the obligations of the Borrower under this Agreement.
Notwithstanding the sale, negotiation or grant of participations, Bank shall
remain solely responsible for the performance of its obligations under this
Agreement, and Borrower shall continue to deal solely and directly with Bank in
connection with this Agreement and the other Loan Documents.
(c) The grant of a participation interest shall
be on such terms as Bank determines are appropriate, provided only that (1) the
holder of such a participation interest shall not have any of the rights of Bank
under this Agreement except, if the participation agreement so provides, rights
to demand the payment of costs of the type described in Section 2.6, provided
that the aggregate amount that the Borrower shall be required to pay under
Section 2.6 with respect to any ratable share of the Committed Revolving Line or
any Advance (including amounts paid to participants) shall not exceed the amount
that Borrower would have had to pay if no participation agreements had been
entered into, and (2) the consent of the holder of such a participation interest
shall not be required for amendments or waivers of provisions of the Loan
Agreement other than those which (i) increase the amount of the Committed
Revolving Line, (ii) extend the term of this Agreement, (iii) decrease the rate
of interest or the amount of any fee or any other amount payable to Bank under
this Agreement, (iv) reduce the principal amount payable under this Agreement,
or (v) extend the date fixed for the payment of principal or interest or any
other amount payable under this Agreement.
(d) Bank may assign, from time to time, all or
any portion of the Committed Revolving Line to an Affiliate of Bank or to The
Federal Reserve Bank or, subject to the prior written approval of Borrower
(which approval will not be unreasonably withheld), to any other financial
institution; provided, that (i) the principal amount of the Committed Revolving
Line being assigned pursuant to each such assignment shall in no event be less
than Five Hundred Thousand Dollars ($500,000) and shall be in an integral
multiple of One Hundred Thousand Dollars ($100,000) in excess thereof and (ii)
the parties to each such assignment shall execute and deliver to Borrower an
assignment agreement in a form reasonably acceptable to each. Upon such
execution and delivery, from and after the effective date specified in such
assignment agreement (x) the assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such assignment agreement, have the rights and obligations of Bank
hereunder and (y) Bank shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such assignment agreement,
relinquish its rights and be released from its obligations under this Agreement
(other than pursuant to this Section 12.1(d)), and, in the case of an assignment
agreement covering all or the remaining portion of Bank's rights and obligations
under this Agreement, Bank shall cease to be a party hereto. In the event of an
assignment hereunder, the parties agree to amend this Agreement to the extent
necessary to reflect the mechanical changes which are necessary to document such
assignment. Each party shall bear its own expenses (including without limitation
attorneys' fees and costs) with respect to such an amendment.
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12.2 Indemnification.
Borrower shall indemnify, defend, protect and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys' fees and
expenses), except for losses caused by Bank's gross negligence or willful
misconduct.
12.3 Time of Essence.
Time is of the essence for the performance of all
obligations set forth in this Agreement.
12.4 Severability of Provisions.
Each provision of this Agreement shall be severable
from every other provision of this Agreement for the purpose of determining the
legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration.
This Agreement cannot be amended or terminated except
by a writing signed by Borrower and Bank. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts.
This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival.
All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations (excluding Obligations under Section 2.6 and 12.2 to the extent they
remain inchoate at the time the outstanding payment Obligations are paid in
full) remain outstanding. The obligations of Borrower to indemnify Bank with
respect to the expenses, damages, losses, costs and liabilities described in
Section 12.2 shall survive until all applicable statute of limitations periods
with respect to actions that may be brought against Bank have run, provided that
so long as the obligations referred to in the first sentence of this Section
12.7 have been satisfied, and Bank has no commitment to make any Credit
Extensions or to make any other loans to Borrower, Bank shall release all
security interests granted hereunder and redeliver all Collateral held by it in
accordance with applicable law.
12.8 Confidentiality.
In handling any confidential information, Bank shall
exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement,
except that disclosure of such information may be made (i) to the Subsidiaries
or Affiliates of Bank in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Credit Extensions, 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
26
investigation of Bank and (v) as Bank may deem appropriate in connection with
the exercise of any remedies hereunder. Confidential information hereunder shall
not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
VIDAMED, INC.
By: /s/ XXXXXXX X. XXXXXXXXXX
-------------------------------------------
Title: Vice President, Chief Financial Officer
----------------------------------------
By:
-------------------------------------------
Title:
----------------------------------------
SILICON VALLEY BANK
By: /s/ XXXX XXXXXX
-------------------------------------------
Title: Vice President
----------------------------------------
27
EXHIBIT A
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) 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;
(b) 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;
(c) 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;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, letters of credit, certificates of deposit,
instruments and chattel paper now owned or hereafter acquired and Borrower's
Books relating to the foregoing; and
(f) 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 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 claims for damages by way of any past, present and
future infringement of any of the foregoing; provided Collateral shall include
the proceeds of any disposition of any of the foregoing.
Subject to the next sentence, the Collateral shall not include
Equipment that Borrower leases from Dominion Ventures Inc. and Linc Capital
Management Services, Ltd. or Equipment that is financed by Dominion Ventures
Inc. and Linc Capital Management Services, Ltd. to the extent that contracts
evidencing such lease or financing prohibit the granting of a security interest
therein to Bank. The term "Collateral" shall not include any general intangibles
or contract rights of Borrower (whether now owned or held as licensee or lessee,
or otherwise) to the extent that (i) such general intangibles or contract rights
are not assignable or capable of being encumbered as a matter of law or under
the terms of the license, lease or other agreement applicable thereto (but
solely to the extent that such restriction shall be enforceable under applicable
law) without the consent of the licensor or lessor thereof or other applicable
party thereto and (ii) such consent has not been obtained: provided, however,
that "Collateral" shall include, (A) any general intangible or contract right
which is an Account or a proceed of, or otherwise related to the enforcement or
collection of, any Account or goods which are the subject of any Account, and
(B) any and all proceeds of any general intangibles or contract rights which are
otherwise excluded to the extent that the assignment or encumbrance of such
proceeds is not so
A-1
restricted, and (C) upon obtaining the consent of any such licensor, lessor, or
other applicable party with respect to any such otherwise excluded general
intangibles, contract rights and Equipment or upon Borrower's payoff of all
amounts owed to Dominion Ventures Inc. and Linc Capital Management Services,
Ltd. on Equipment that Borrower leases from Dominion Ventures Inc. and Linc
Capital Management Services, Ltd. or Equipment that is financed by Dominion
Ventures Inc. and Linc Capital Management Services, Ltd., such general
intangibles, contract rights and Equipment as well as any and all proceeds
thereof that might theretofore have been excluded from the term "Collateral".
A-2
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
-------------------------------
FAX#: (000) 000-0000 TIME:
-------------------------------
================================================================================
FROM:
---------------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
-------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
-----------------------------------------------------------
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 VidaMed, Inc. ("Borrower") stated in the
Loan and Security Agreement dated as of January 13, 1998, between Borrower and
Silicon Valley Bank 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)
================================================================================
B-1
EXHIBIT C
BORROWING BASE CERTIFICATE
------------------------------------------------------------------------------------------------------------------------------------
Borrower: VidaMed, Inc. Lender: Silicon Valley Bank
Commitment Amount: $3,000,000
------------------------------------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of $_____________
2. Additions (please explain on reverse) $_____________
3. TOTAL ACCOUNTS RECEIVABLE $_____________
_____________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due (exclusive of credit balances) $_____________
5. Balance of 50% over 90 day accounts $_____________
6. Concentration Limits $_____________
7. Foreign Accounts $_____________
8. Governmental Accounts $_____________
9. Contra Accounts $_____________
10. Promotion or Demo Accounts $_____________
11. Intercompany/Employee Accounts $_____________
12. Other (please explain on reverse) $_____________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_____________
14. Eligible Accounts (#3 minus #13) $_____________
15. LOAN VALUE OF ACCOUNTS (75% of #14)* $_____________
BALANCES
16. Maximum Loan Amount $_____________
17. Total Funds Available [Lesser of #16 or #15] $_____________
18. Present balance owing on Line of Credit $_____________
19. Letters of Credit $_____________
20. RESERVE POSITION (#17 minus #18 minus #19) $_____________
* Bank reserves the right to change the advance rate of the Borrowing Base based
upon the results of any audit by Bank of Borrower's Accounts.
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement dated as of January 13, 1998 between the undersigned and
Silicon Valley Bank.
COMMENTS:
=======================================
BANK USE ONLY
Rec'd By:
------------------------------
Auth. Signer
Date:
----------------------------------
VidaMed, Inc.
Verified:
------------------------------
Auth. Signer
By: Date:
------------------------- ----------------------------------
Authorized Signer ---------------------------------------
=======================================
C-1
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: VidaMed, Inc.
The undersigned authorized officer of VidaMed, Inc. hereby certifies
that in accordance with the terms and conditions of the Loan and Security
Agreement dated as of January 13, 1998 between Borrower and Bank (the
"Agreement"), (i) Borrower is in complete compliance for the period ending
_______________ with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and
correct in all material respects as of the date hereof. Attached herewith are
the required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes. The Officer
expressly acknowledges that no borrowings may be requested by Borrower at any
time or date of determination that Borrower is not in compliance with any of the
terms of the Agreement, and that such compliance is determined not just at the
date this certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
SEC filings 10 days after filing Yes No
A/R & A/P Agings* Monthly within 20 days Yes No
A/R Audit Initial and Semi-Annual Yes No
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Minimum Quick Ratio 1:0:1.0 _____:1.0 Yes No
Total Liabilities/Tangible Net Worth 2.5:1.0 _____:1.0 Yes No
Liquidity 2.0:1.0 _____:1.0 Yes No
Debt Service Coverage** 1.5:1.0 _____:1.0 Yes No
Profitability: Quarterly*** $________ Yes No
* After initial Collateral audit by Bank.
** After 2 consecutive quarters of 1.5 to 1.0, the Liquidity ratio is no longer in effect.
*** 03/31/98 net loss less than$3,000,000; 06/30/98 net loss less than$3,300,000; 09/30/98
net loss less than $2,600,000; 12/31/98 net loss less thab $1,900,000.
Comments Regarding Exceptions: See Attached.
Sincerely,
VidaMed, Inc.
SIGNATURE
-----------------------------------------------------
TITLE
-----------------------------------------------------
DATE
D-1
EXHIBIT E
NEGATIVE PLEDGE AGREEMENT
This Negative Pledge Agreement is made as of January 13, 1998, by and
between VidaMed, Inc. ("Borrower") and SILICON VALLEY BANK ("Bank").
In connection with the Loan and Security Agreement being concurrently
executed between Borrower and Bank, Borrower agrees as follows:
1. Except as permitted in the Loan and Security Agreement, 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.
The foregoing not withstanding, Borrower shall be able to grant
security interests or licenses of its intellectual property in connection with
corporate partnering arrangements entered into in the ordinary course of
business.
2. It shall be an Event of Default under the Loan Documents between
Borrower and Bank 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 Loan and Security Agreement of even date herewith.
VIDAMED, INC. SILICON VALLEY BANK
By: By:
----------------------------- -----------------------------
D-2
Title: Title:
--------------------------- --------------------------
D-3
SCHEDULE OF EXCEPTIONS TO LOAN AND SECURITY AGREEMENT
-----------------------------------------------------
Existing Litigation
-------------------
VidaMed, Inc. v. ProSurg, Inc.
Case No. CC-97 20459 RMW EAI
On May 20, 1997, VidaMed filed a complaint against ProSurg, Inc., in
the U.S. District Court for the Northern District of California, San Xxxx
Division. The complaint charges ProSurg, Inc. with infringing three VidaMed
patents, U.S. Patent Nos. 5,531,677; 5,531,676; and 5,536,240. In its Second
Amended Answer, ProSurg, Inc. denies any infringement and counterclaims that the
VidaMed patents are invalid. No other claims are made against VidaMed. With
regard to the status of the litigation, Initial Disclosures have been exchanged
by the parties and discovery is slowly getting underway. The factual discovery
cut-off is June 1, 1998.
Permitted Investments -- Notes Receivable from Stockholders.
------------------------------------------------------------
VidaMed has lent an aggregate of approximately $206,000 to several of
its stockholders. Interest on the notes receivable from such stockholders
accrues at a rate of 6.73% per annum. Principal and interest payments are due at
various times after December 2000.
VidaMed intends to fund its subsidiaries up to an aggregate amount of
$1,500,000 through the Maturity Date, and any such funding is to be considered a
"Permitted Investment" for purposes of the Loan and Security Agreement.
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: VidaMed, Inc. Bank: Silicon Valley Bank
================================================================================
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $3,000,000 and a Variable Rate Equipment Line of up to $1,500,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is working capital and
equipment finance.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line Equipment Line
-------------- --------------
Amount paid to Borrower directly: $ __________ $ __________
Undisbursed Funds $ __________ $ __________
Principal 3,000,000 $ 1,500,000
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Charges Paid in Cash:
$30,000 Loan Fee (less $5,000 previously paid to Bank)
$______ Accounts Receivables Audit
$100 UCC Search Fees
$100 UCC Filing Fees
$______ Intellectual Property Filing Fees
$__________ Outside Counsel Fees and Expenses (Estimate)
Total Charges Paid in Cash $ __________
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered __________ the amount of any loan payment. If the
funds in the account are insufficient to cover any payment, Bank shall not be
obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENTS PROVIDED TO BANK.
THIS AUTHORIZATION IS DATED AS OF JANUARY 13, 1998.
BORROWER:
VidaMed, Inc.
_________________________
Authorized Officer
_________________________
Authorized Officer
================================================================================
AGREEMENT TO PROVIDE INSURANCE
Grantor: VidaMed, Inc. Bank: Silicon Valley Bank
================================================================================
INSURANCE REQUIREMENTS. VidaMed, Inc. ("Grantor") understands that
insurance coverage is required in connection with the extending of a loan or the
providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents (as defined in the Loan
Agreement (defined below)). The following minimum insurance coverages must be
provided on the following described collateral (the "Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation
that coverage will not be canceled or
diminished without a minimum of twenty (20)
days' prior written notice to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance
company Grantor may choose that is reasonably acceptable to Bank. Grantor
understands that credit may not be denied solely because insurance was not
purchased through Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of January 13, 1998, or earlier. Grantor acknowledges and agrees
that if Grantor fails to provide any required insurance or fails to continue
such insurance in force, Bank may do so at Grantor's expense as provided in the
Loan and Security Agreement dated as of January 16, 1998 between Grantor and
Bank (the "Loan Agreement"). The cost of such insurance, at the option of Bank,
shall be payable on demand or shall be added to the indebtedness as provided in
the Loan Agreement. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED EFFECTIVE
JANUARY 13, 1998.
GRANTOR:
VidaMed, Inc.
x /s/ XXXXXXX X. XXXXXXXXXX
--------------------------
Authorized Officer
================================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE:
-----------------------
PHONE:
----------------------------
AGENT'S NAME:
------------------------------------------------------------------
INSURANCE COMPANY:
-------------------------------------------------------------
POLICY NUMBER:
-----------------------------------------------------------------
EFFECTIVE DATES:
--------------------------------------------------------------
COMMENTS:
----------------------------------------------------------------------
================================================================================
CORPORATE RESOLUTIONS TO BORROW
--------------------------------------------------------------------------------
Borrower: VidaMed, Inc.
--------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of VidaMed, Inc.
(the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the State of its incorporation.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Certificate of Incorporation and Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that by Unanimous Written Consent of the Directors,
the following resolutions were adopted (whether directly or indirectly) by the
Board of Directors of the Corporation:
BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
Xxxxx X. Xxxxxx President & CEO /s/ XXXXX XXXXXX
-------------------------- ------------------------ --------------------------
Xxxxxxx X. Xxxxxxxxxx VP & CFO /s/ XXXXXXX X. XXXXXXXXXX
-------------------------- ------------------------ --------------------------
-------------------------- ------------------------ --------------------------
-------------------------- ------------------------ --------------------------
-------------------------- ------------------------ --------------------------
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
Borrow Money. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated effective as of January 13, 1998 (the
"Loan Agreement").
Execute Notes. To execute and deliver to Bank the promissory note or
notes of the Corporation, on Lender's forms, at such rates of interest and on
such terms as may be agreed upon, evidencing the sums of money so borrowed or
any indebtedness of the Corporation to Bank, and also to execute and deliver to
Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion of
the notes.
Grant Security. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
Negotiate Items. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable,
provided, however, that any one of the above listed officers may sign on behalf
of the corporation for any actions listed in this section, "Negotiate Items,"
that arise in the ordinary course of business.
2
Letters of Credit; Foreign Exchange. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
Further Acts. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances thereunder, and
in all cases, to do and perform such other acts and things, to pay any and all
fees and costs, and to execute and deliver such other documents and agreements
as they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the Corporation;
and that the Resolutions are in full force and effect and have not been modified
or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on January 13, 1998 and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X /s/ XXXXXXXXXXX X. XXXXXXXX
---------------------------
Xxxxxxxxxxx X. Xxxxxxxx
Assistant Secretary
3
NEGATIVE PLEDGE AGREEMENT
This Negative Pledge Agreement is made as of January 13, 1998, by and
between VidaMed, Inc. ("Borrower") and SILICON VALLEY BANK ("Bank").
In connection with the Loan and Security Agreement being concurrently
executed between Borrower and Bank, Borrower agrees as follows:
1. Except as permitted in the Loan and Security Agreement, 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.
The foregoing not withstanding, Borrower shall be able to grant
security interests or licenses of its intellectual property in connection with
corporate partnering arrangements entered into in the ordinary course of
business.
2. It shall be an Event of Default under the Loan Documents between
Borrower and Bank 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 Loan and Security Agreement of even date herewith.
VIDAMED, INC. SILICON VALLEY BANK
By: /s/ XXXXXXX X. XXXXXXXXXX By: /s/ XXXX XXXXXX
---------------------------- -----------------------------------
Title: Vice President, Chief Financial Title: Vice President
Officer ---------------------------------
---------------------------------
BORROWER: VIDAMED, INC.
SECURED PARTY: SILICON VALLEY BANK
EXHIBIT A
---------
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) 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;
(b) 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;
(c) 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;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, letters of credit, certificates of deposit,
instruments and chattel paper now owned or hereafter acquired and Borrower's
Books relating to the foregoing; and
(f) 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 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 claims for damages by way of any past, present and
future infringement of any of the foregoing; provided Collateral shall include
the proceeds of any disposition of any of the foregoing.
Subject to the next sentence, the Collateral shall not include
Equipment that Borrower leases from Dominion Ventures Inc. and Linc Capital
Management Services, Ltd. or Equipment that is financed by Dominion Ventures
Inc. and Linc Capital Management Services, Ltd. to the extent that contracts
evidencing such lease or financing prohibit the granting of a security interest
therein to Bank. The term "Collateral" shall not include any general intangibles
or contract rights of Borrower (whether now owned or held as licensee or lessee,
or otherwise) to the extent that (i) such general intangibles or contract rights
are not assignable or capable of being encumbered as a matter of law or under
the terms of the license, lease or other agreement applicable thereto (but
solely to the extent that such restriction shall be enforceable under applicable
law) without the consent of the licensor or lessor thereof or other applicable
party thereto and (ii) such consent has not been obtained: provided, however,
that "Collateral" shall include, (A) any general intangible or contract right
which is an Account or a proceed of, or otherwise related to the enforcement or
collection of, any Account or goods
which are the subject of any Account, and (B) any and all proceeds of any
general intangibles or contract rights which are otherwise excluded to the
extent that the assignment or encumbrance of such proceeds is not so restricted,
and (C) upon obtaining the consent of any such licensor, lessor, or other
applicable party with respect to any such otherwise excluded general
intangibles, contract rights and Equipment or upon Borrower's payoff of all
amounts owed to Dominion Ventures Inc. and Linc Capital Management Services,
Ltd. on Equipment that Borrower leases from Dominion Ventures Inc. and Linc
Capital Management Services, Ltd. or Equipment that is financed by Dominion
Ventures Inc. and Linc Capital Management Services, Ltd., such general
intangibles, contract rights and Equipment as well as any and all proceeds
thereof that might theretofore have been excluded from the term "Collateral".
