AMENDMENT TO LOAN DOCUMENTS
Exhibit 10.1
AMENDMENT TO LOAN DOCUMENTS
THIS AMENDMENT to Loan Documents (this “Amendment”) is entered into as of April 24, 2006 (the
“April 2006 Amendment Date”), by and between SILICON VALLEY BANK, a California corporation
(“Bank”), and ENDOCARE, INC., a Delaware corporation (“Borrower”), whose chief executive office is
located at 000 Xxxxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxx 00000.
Recitals
A. Borrower and Bank are parties to that certain Loan and Security Agreement, with an
Effective Date of October 26, 2005 (as amended, restated, supplemented or otherwise modified from
time to time, the “Loan Agreement”).
B. Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.
C. Borrower has requested that Bank amend the Loan Agreement to, among other things: (i)
extend the Maturity Date; (ii) modify the Tangible Net Worth financial covenant; (iii) provide for
a new $500,000 fully-reserved Term Loan; and (iv) make certain other revisions to the Loan
Agreement; in each case, all as more fully set forth herein.
D. Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the
extent, in accordance with the terms, subject to the conditions and in reliance upon the
representations and warranties set forth below.
Agreement
Now, Therefore, in consideration of the foregoing recitals and other good and
valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to
be legally bound, the parties hereto agree as follows:
1. Definitions. Capitalized terms used but not defined in this Amendment shall have the
meanings given to them in the Loan Agreement. The term “April 2006 Amendment Date” as defined in
the preamble to this Amendment hereby is incorporated into the Loan Agreement.
2. Amendments to Loan Documents.
2.1 Extension of Maturity Date. The definition of “Maturity Date” set forth in Section 13.1
of the Loan Agreement hereby is amended and restated in its entirety to read as follows:
“Maturity Date” is February 28, 2007.
2.2 Modification of Tangible Net Worth Financial Covenant. Section 6.9(a) of the Loan
Agreement hereby is amended and restated in its entirety to read as follows:
(a) Tangible Net Worth. A Tangible Net Worth of at least the sum of the
following (the “Required TNW Amount”): (a) the TNW Base Amount (as defined below),
plus (b) 25% of all consideration received after January 31, 2006 for issuances of
Endocare’s equity securities and the principal amount of Subordinated Debt of the
Borrower, plus (c) 25% of the Endocare’s positive consolidated Net Income in each
fiscal quarter ending after January 31, 2006.
As used herein, the term “TNW Base Amount” means, as of any date of determination:
(a) $9,000,000 with respect to the month ending February 28, 2006;
(b) $8,000,000 with respect to the month ending March 31, 2006;
(c) $8,000,000 with respect to the month ending April 30, 2006;
(d) $7,500,000 with respect to the month ending May 31, 2006;
(e) $7,500,000 with respect to the month ending June 30, 2006;
(f) $7,000,000 with respect to the month ending July 31, 2006;
(g) $6,500,000 with respect to the month ending August 31, 2006;
(h) $6,000,000 with respect to the month ending September 30, 2006;
(i) $5,500,000 with respect to the month ending October 31, 2006;
(j) $4,500,000 with respect to the month ending November 30, 2006;
(k) $4,000,000 with respect to the month ending December 31, 2006;
(l) $3,500,000 with respect to the month ending January 31, 2007; and
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(m) $2,500,000 with respect to the month ending February 28, 2007.
Increases in the Required TNW Amount based on consideration received for equity
securities and Subordinated Debt of the Borrower shall be effective as of the end of
the month in which such consideration is received, and shall
continue effective thereafter. Increases in the Required TNW Amount based on Net
Income shall be effective on the last day of the fiscal quarter in which such Net
Income is realized, and shall continue effective thereafter. In no event (except for
step-downs in the TNW Base Amount as expressly set forth in the definition thereof)
shall the Required TNW Amount be decreased from one fiscal period to another
subsequent fiscal period.
2.3 Addition of New Term Loan. The following hereby is added, in proper numerical order, as a
new Section 2.1.5 of the Loan Agreement:
2.1.5 Term Loan.
(a) Availability. Subject to the terms and conditions of this Agreement,
during the period commencing on the April 2006 Amendment Date and ending 6 months
thereafter (the “Term Loan Draw Period”), Bank shall make one or more term loans
(individually and collectively, the “Term Loan”) in an aggregate original principal
amount not to exceed $500,000. Each Term Loan must be in an amount equal to at least
$100,000. Borrower may only request up to three (3) Term Loans hereunder. After
repayment, no Term Loan or portion thereof may be reborrowed.
(b) Repayment. Term Loans outstanding on the last day of the Term Loan
Draw Period are payable in consecutive equal monthly installments of principal, each
in the amount of 1/30th of the aggregate outstanding Term Loan balance as of the last
day of the Term Loan Draw Period, beginning on the first day of each month following
the last day of the Term Loan Draw Period and ending on the Maturity Date; provided,
however, that on the Maturity Date, all outstanding principal for the Term Loan, plus
all accrued and unpaid interest thereon, plus all other Obligations, shall be due and
payable. Interest on the Term Loans shall accrue from and after the date of funding
and shall be payable, in arrears, in monthly payments of accrued interest, beginning
on the first day of each month following the date in which the applicable Term Loan is
funded and ending on the Maturity Date.
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2.4 Reservation of Term Loan Against Revolving Advances. Section 2.1.1(a) of the Loan
Agreement hereby is amended and restated in its entirety to read as follows:
(a) Availability. Subject to the terms and conditions of this Agreement
and to deduction of Reserves, Bank will make Advances to Borrower up to an amount
(“Net Borrowing Availability”) not to exceed the result of: (i) the lesser of (y) the
Maximum Revolver Amount, or (z) amounts available under the Borrowing Base; minus (ii)
the then aggregate outstanding amount of the Term Loan; provided,
however, that Bank shall have no obligation to make, or permit to remain
outstanding, Advances based on
Borrower’s Eligible Inventory (“Inventory Advances”) if and to the extent the
Inventory Advances exceed, or would exceed, 50% of the aggregate outstanding amount of
Advances based on Borrower’s Eligible Accounts. Advances and other Credit Extensions
will be made to each Borrower based on the Eligible Accounts and Eligible Inventory of
such Borrower, subject to the Maximum Revolver Amount for all Advances and other
Credit Extensions to all Borrowers combined. Advances borrowed pursuant to this
Section may be repaid and, subject to the terms and conditions hereof, reborrowed
during the term of this Agreement.
2.5 Term Loan Interest Rate. Section 2.3(a) of the Loan Agreement hereby is amended and
restated in its entirety to read as follows:
(a) Interest Rate; Obligations. Subject to Section 2.3(b), the amounts
outstanding under the Revolving Line and the Term Loan shall accrue interest at a per
annum rate equal to the Loan Margin above the Prime Rate, which interest shall be
payable monthly. As used herein, the term “Loan Margin” means, as of any date of
determination: (a) at all times during the period that Phase I is in effect, 1.00
percentage points; and (b) at all times during the period that Phase II is in effect,
1.50 percentage points.
2.6 Additional Conforming Modifications relative to the Term Loan.
(a) The defined term “Credit Extension” set forth in Section 13.1 of the Loan Agreement hereby
is amended and restated in its entirety to read as follows:
“Credit Extension” is any Advance, any Term Loan, or any other extension of
credit by Bank for Borrower’s benefit.
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(b) The following new defined terms hereby are added, in proper alphabetical order, to Section
13.1 of the Loan Agreement:
“Term Loan” has the meaning ascribed to such term in Section 2.1.5. hereof.
“Term Loan Draw Period” has the meaning ascribed to such term in Section
2.1.5. hereof
3. Limitation of Amendments.
3.1 The amendments set forth in Section 2, above, are effective for the purposes set forth
herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any
amendment, waiver or modification of any other term or condition of any Loan Document, or (b)
otherwise prejudice any right or remedy which Bank may now have or may have in the future under or
in connection with any Loan Document.
3.2 This Amendment shall be construed in connection with and as part of the Loan Documents and
all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan
Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full
force and effect.
4. Representations and Warranties. To induce Bank to enter into this Amendment, Borrower
hereby represents and warrants to Bank as follows:
4.1 Immediately after giving effect to this Amendment (a) the representations and warranties
contained in the Loan Documents are true, accurate and complete in all material respects as of the
date hereof (except to the extent such representations and warranties relate to an earlier date, in
which case they are true and correct as of such date), and (b) no Event of Default has occurred and
is continuing;
4.2 Borrower has the power and authority to execute and deliver this Amendment and to perform
its obligations under the Loan Documents, as amended by this Amendment;
4.3 The organizational documents of Borrower delivered to Bank on the Effective Date remain
true, accurate and complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;
4.4 The execution and delivery by Borrower of this Amendment and the performance by Borrower
of its obligations under the Loan Documents, as amended by this Amendment, have been duly
authorized;
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4.5 The execution and delivery by Borrower of this Amendment and the performance by Borrower
of its obligations under the Loan Documents, as amended by this Amendment, do not and will not
contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual
restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or
other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d)
the organizational documents of Borrower;
4.6 The execution and delivery by Borrower of this Amendment and the performance by Borrower
of its obligations under the Loan Documents, as amended by this Amendment, do not require any
order, consent, approval, license, authorization or validation of, or filing, recording or
registration with, or exemption by any governmental
or public body or authority, or subdivision thereof, binding on either Borrower, except as
already has been obtained or made; and
4.7 This Amendment has been duly executed and delivered by Borrower and is the binding
obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or
other similar laws of general application and equitable principles relating to or affecting
creditors’ rights.
5. Fee. In consideration for Bank entering into this Amendment, Borrower shall pay Bank a fee
of $16,000 concurrently with the execution and delivery of this Amendment, which fee shall be
non-refundable and in addition to all interest and other fees payable to Bank under the Loan
Documents. Bank is authorized to charge said fee to Borrower’s loan account.
6. Counterparts. This Amendment may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute one and the same instrument.
7. Effectiveness. This Amendment shall be deemed effective upon the due execution and
delivery to Bank of this Amendment by each party hereto.
[Remainder of page intentionally left blank; signature page immediately follows.]
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In Witness Whereof, the parties hereto have caused this Amendment to be duly executed
and delivered as of the date first written above.
ENDOCARE, INC.
| By: | /s/ Xxxxxxx X. Xxxxxxxxx | ||
| Name: | Xxxxxxx X. Xxxxxxxxx | ||
| Title: | SVP, Finance & CFO | ||
SILICON VALLEY BANK
| By: | /s/ Xxxx Xxxxxxxxx | ||
| Name: | Xxxx Xxxxxxxxx | ||
| Title: | Vice President | ||
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