CREDIT AND SECURITY AGREEMENT
Dated as of February 28, 2000
ORTHOLOGIC CORP., a Delaware corporation (the "Borrower"), and XXXXX FARGO
BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Accounts" means all of the Borrower's accounts, as such term is
defined in the UCC, including without limitation the aggregate unpaid
obligations of customers and other account debtors to the Borrower arising out
of the sale or lease of goods or rendition of services by the Borrower on an
open account or deferred payment basis.
"Advance" means a Revolving Advance.
"Affiliate" or "Affiliates" means any Person controlled by,
controlling or under common control with the Borrower, including (without
limitation) any Subsidiary of the Borrower. For purposes of this definition,
"control," when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement, as amended,
supplemented or restated from time to time.
"Allowed Investments" means Borrower's Co-Promotion Agreement with
Sanofi Pharmaceuticals, Inc. and Borrower's Minority Equity Investment with
Chrysalis Biotechnology, Inc.
"Availability" means the positive difference, if any, between (i) the
Borrowing Base, and (ii) the outstanding principal balance of the Revolving
Note.
"Banking Day" means a day other than a Saturday, Sunday or other day
on which banks are generally not open for business in Phoenix, Arizona.
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"Borrowing Base" means, at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's sole
discretion if the nature of the Collateral changes, 75% of Eligible
Accounts.
"Capital Expenditures" for a period means any expenditure of money for
the lease, purchase or other acquisition of any capital asset, or for the lease
of any other asset whether payable currently or in the future.
"Collateral" means all of the Borrower's Equipment, General
Intangibles (except Patents unless and until the occurrence of an Event of
Default), Inventory, Accounts, Receivables, all sums on deposit in any
Collection Account, and any items in any lockbox; together with (i) all
substitutions and replacements for and products of any of the foregoing; (ii)
proceeds of any and all of the foregoing; (iii) in the case of all tangible
goods, all accessions; (iv) all accessories, attachments, parts, equipment and
repairs now or hereafter attached or affixed to or used in connection with any
tangible goods; and (v) all warehouse receipts, bills of lading and other
documents of title now or hereafter covering such goods.
"Collection Account" has the meaning given in Section 4.3.
"Commitment" means the Lender's commitment to make Advances to or for
the Borrower's account pursuant to Article II.
"Credit Facility" means the credit facility being made available to
the Borrower by the Lender pursuant to Article II.
"Debt" of any Person means all items of indebtedness or liability
which in accordance with GAAP would be included in determining total liabilities
as shown on the liabilities side of a balance sheet of that Person as of the
date as of which Debt is to be determined. For purposes of determining a
Person's aggregate Debt at any time, "Debt" shall also include the aggregate
payments required to be made by such Person at any time under any lease that is
considered a capitalized lease under GAAP.
"Debt to Tangible Net Worth Ratio" as of a given date means the ratio
of the Borrower's Debt to the Borrower's Tangible Net Worth.
"Default" means an event that, with giving of notice or passage of
time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the first day
of any month during which a Default or Event of Default has occurred and ending
on the date the Lender notifies the Borrower in writing that such Default or
Event of Default has been cured or waived.
"Default Rate" means an annual rate equal to three percent (3%) over
the Floating Rate, which rate shall change when and as the Floating Rate
changes.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eligible Accounts" means all unpaid Accounts, net of any credits,
except the following shall not in any event be deemed Eligible Accounts:
(i) That portion of Accounts over 120 days past invoice date;
(ii) That portion of Accounts that is disputed or subject to a
claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the final
delivery of goods or rendition of services, as applicable, by the Borrower to
the customer;
(iv) Accounts owed by any unit of government (including without
limitation through the Medicare/Medicaid programs), whether foreign or domestic
(provided, however, that there shall be included in Eligible Accounts that
portion of Accounts owed by such units of government for which the Borrower has
provided evidence satisfactory to the Lender that (A) the Lender has a first
priority perfected security interest and (B) such Accounts may be enforced by
the Lender directly against such unit of government under all applicable laws);
(v) Accounts owed by an account debtor located outside the United
States which are not (A) backed by a bank letter of credit naming the Lender as
beneficiary or assigned to the Lender, in the Lender's possession and acceptable
to the Lender in all respects, in its sole discretion, or (B) covered by a
foreign receivables insurance policy acceptable to the Lender in its sole
discretion;
(vi) Accounts owed by an account debtor that is insolvent, the
subject of bankruptcy proceedings or has gone out of business;
(vii) Accounts owed by a Subsidiary, Affiliate, officer or
employee of the Borrower;
(viii) Accounts not subject to a duly perfected security interest
in the Lender's favor or which are subject to any lien, security interest or
claim in favor of any Person other than the Lender including without limitation
any payment or performance bond;
(ix) That portion of Accounts that has been restructured,
extended, amended or modified;
(x) That portion of Accounts that constitutes advertising,
finance charges, service charges or sales or excise taxes; and
(xi) Accounts, or portions thereof, otherwise deemed ineligible
by the Lender in its sole discretion.
"Environmental Laws" has the meaning specified in Section 5.12.
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"Equipment" means all of the Borrower's equipment, as such term is
defined in the UCC, whether now owned or hereafter acquired, including but not
limited to all present and future machinery, vehicles, furniture, fixtures,
manufacturing equipment, shop equipment, office and recordkeeping equipment,
parts, tools, supplies, and including specifically (without limitation) the
goods described in any equipment schedule or list herewith or hereafter
furnished to the Lender by the Borrower.
"Event of Default" has the meaning specified in Section 8.1.
"Existing Lockbox Agreement" has the meaning specified in Section
6.10.
"Floating Rate" means an annual rate equal to the Prime Rate, which
annual rate shall change when and as the Prime Rate changes.
"Funding Date" has the meaning given in Section 2.1.
"GAAP" means generally accepted accounting principles, applied on a
basis consistent with the accounting practices applied in the financial
statements described in Section 5.5, except for any change in accounting
practices to the extent that, due to a promulgation of the Financial Accounting
Standards Board changing or implementing any new accounting standard, the
Borrower either (i) is required to implement such change, or (ii) for future
periods will be required to and for the current period may in accordance with
generally accepted accounting principles implement such change, for its
financial statements to be in conformity with generally accepted accounting
principles (any such change is herein referred to as a "Required GAAP Change"),
provided that (1) the Borrower shall fully disclose in such financial statements
any such Required GAAP Change and the effects of the Required GAAP Change on the
Borrower's income, retained earnings or other accounts, as applicable, and (2)
the Borrower's financial covenants set forth in Sections 6.12 through 6.13, and
7.10 shall be adjusted as necessary to reflect the effects of such Required GAAP
Change.
"General Intangibles" means all of the Borrower's general intangibles,
as such term is defined in the UCC, whether now owned or hereafter acquired,
including (without limitation) all Patents, copyrights, trademarks, trade names,
trade secrets, customer or supplier lists and contracts, manuals, operating
instructions, permits, franchises, the right to use the Borrower's name, and the
goodwill of the Borrower's business.
"Hazardous Substance" has the meaning given in Section 5.12.
"Inventory" means all of the Borrower's inventory, as such term is
defined in the UCC, whether now owned or hereafter acquired, whether consisting
of whole goods, spare parts or components, supplies or materials, whether
acquired, held or furnished for sale, for lease or under service contracts or
for manufacture or processing, and wherever located.
"Loan Documents" means this Agreement, the Note and the Security
Documents.
"Lockbox Agreement" has the meaning specified in Section 6.10.
"Maturity Date" means February 28, 2003.
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"Maximum Line" means on any given day the lesser of (i)
$10,000,000.00, or (ii) an amount equal to 1.25 multiplied by the total cash
(resulting from continuing operations) received by the Borrower during the
immediately preceding 60 days. The Maximum Line may be reduced pursuant to
Section 2.6, in which event "Maximum Line" means the amount to which said amount
is reduced.
"Net Income" means fiscal year-to-date after-tax net income from
continuing operations as determined in accordance with GAAP.
"Net Loss" means fiscal year-to-date after-tax net loss from
continuing operations as determined in accordance with GAAP.
"Note" means the Revolving Note.
"Obligations" means the Note and each and every other debt, liability
and obligation of every type and description which the Borrower may now or at
any time hereafter owe to the Lender, whether such debt, liability or obligation
now exists or is hereafter created or incurred, whether it arises in a
transaction involving the Lender alone or in a transaction involving other
creditors of the Borrower, and whether it is direct or indirect, due or to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or sole, joint, several or joint and several, and including
specifically, but not limited to, all indebtedness of the Borrower arising under
this Agreement, the Note or any other loan or credit agreement or guaranty
between the Borrower and the Lender, whether now in effect or hereafter entered
into.
"Patents" means all present and future patents and patent
applications.
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan" means an employee benefit plan or other plan maintained for the
Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrower conducts its business
and has any rights of possession, including (without limitation) the premises
legally described in Exhibit C attached hereto.
"Prime Rate" means the rate of interest publicly announced from time
to time by Xxxxx Fargo Bank, N.A. as its "prime rate" or, if such bank ceases to
announce a rate so designated, any similar successor rate designated by the
Lender.
"Principal Premises" means Borrower's Premises in Phoenix, Arizona and
Xxxxxxx, Xxxxxxx, Xxxxxx.
"Quick Assets" means, on any date, the Borrower's consolidated,
unrestricted cash, cash equivalents, net billed accounts receivable and
investments with maturities of fewer than 12 months determined according to
GAAP.
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"Quick Ratio" means as of a given date the ratio of Borrower's Quick
Assets divided by Borrower's current liabilities, as determined in accordance
with GAAP.
"Receivables" means each and every right of the Borrower to the
payment of money, whether such right to payment now exists or hereafter arises,
whether such right to payment arises out of a sale, lease or other disposition
of goods or other property, out of a rendering of services, out of a loan, out
of the overpayment of taxes or other liabilities, or otherwise arises under any
contract or agreement, whether such right to payment is created, generated or
earned by the Borrower or by some other person who subsequently transfers such
person's interest to the Borrower, whether such right to payment is or is not
already earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all liens and
security interests) which the Borrower may at any time have by law or agreement
against any account debtor or other obligor obligated to make any such payment
or against any property of such account debtor or other obligor; all including
but not limited to all present and future accounts, contract rights, loans and
obligations receivable, chattel papers, bonds, notes and other debt instruments,
tax refunds and rights to payment in the nature of general intangibles.
"Reportable Event" shall have the meaning assigned to that term in
Title IV of ERISA.
"Revolving Advance" has the meaning given in Section 2.1.
"Revolving Note" means the Borrower's revolving promissory note,
payable to the order of the Lender in substantially the form of Exhibit A
hereto, as the same may hereafter be amended, supplemented or restated from time
to time, and any note or notes issued in substitution therefor, as the same may
hereafter be amended, supplemented or restated from time to time and any note or
notes issued in substitution therefor.
"Security Documents" means this Agreement, the Collection Account
Agreement, the Lockbox Agreement, and any other document delivered to the Lender
from time to time to secure the Obligations, as the same may hereafter be
amended, supplemented or restated from time to time.
"Security Interest" has the meaning given in Section 3.1.
"Subordinated Debt" is debt incurred by Borrower subordinated to
Borrower's debt to Lender (and identified as subordinated by Borrower and
Lender).
"Subsidiary" means any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such corporation,
irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency, is at the time directly or indirectly owned by the Borrower, by the
Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries.
"Tangible Net Worth" means, on any date, the consolidated total assets
of Borrower and its Subsidiaries MINUS, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, AND (ii) Total Liabilities plus Subordinated Debt.
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"Termination Date" means the earliest of (i) the Maturity Date, (ii)
the date the Borrower terminates the Credit Facility, or (iii) the date the
Lender demands payment of the Obligations after an Event of Default pursuant to
Section 8.2.
"Threshold Amount" means the lesser of (i) $2,000,000.00, or (ii) an
amount equal to the value of 20% of Eligible Accounts as set forth in the most
recent collateral reporting complying with the requirements of Section 6.1
below.
"Threshold Event" means the earlier to occur of (i) Borrower's request
for an Advance which Lender has been informed by Borrower shall cause the
Threshold Amount to be outstanding for thirty days or more, or (ii) the date
when outstanding Revolving Advances shall have exceeded the Threshold Amount for
thirty consecutive days.
"Total Liabilities" is on any day, obligations that should, under
GAAP, be classified as liabilities on Borrower's consolidated balance sheet,
including all indebtedness, and current portion Subordinated Debt allowed to be
paid, but excluding all other Subordinated Debt.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the state designated in Section 9.13 as the state whose laws shall govern
this Agreement, or in any other state whose laws are held to govern this
Agreement or any portion hereof.
"Xxxxx Fargo Bank, N.A." means Xxxxx Fargo Bank, National Association.
SECTION 1.2 CROSS REFERENCES. All references in this Agreement to Articles,
Sections and subsections, shall be to Articles, Sections and subsections of this
Agreement unless otherwise explicitly specified.
ARTICLE II
Amount and Terms of the Credit Facility
SECTION 2.1 REVOLVING ADVANCES. The Lender agrees, on the terms and subject
to the conditions herein set forth, to make advances to the Borrower from time
to time from the date all of the conditions set forth in Section 4.1 are
satisfied (the "Funding Date") to the Termination Date, on the terms and subject
to the conditions herein set forth (the "Revolving Advances"). The Lender shall
have no obligation to make a Revolving Advance if, after giving effect to such
requested Revolving Advance, the sum of the outstanding and unpaid Revolving
Advances would exceed the Borrowing Base. The Borrower's obligation to pay the
Revolving Advances shall be evidenced by the Revolving Note and shall be secured
by the Collateral as provided in Article III. Within the limits set forth in
this Section 2.1, the Borrower may borrow, prepay pursuant to Section 2.6 and
reborrow. The Borrower agrees to comply with the following procedures in
requesting Revolving Advances under this Section 2.1:
(a) The Borrower shall make each request for a Revolving Advance to
the Lender before 11:00 a.m. (Phoenix time) of the day of the requested
Revolving Advance, provided however, that in the event that the requested
Revolving Advance shall cause a Threshold Event, the Borrower shall make such
request for a Revolving Advance to the Lender before 11:00 a.m. (Phoenix time)
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on that date which is thirty (30) days prior to the date of the disbursement of
the requested Revolving Advance. Requests may be made in writing or by
telephone, specifying the date of the requested Revolving Advance and the amount
thereof. Each request shall be by (i) any officer of the Borrower; or (ii) any
person designated as the Borrower's agent by any officer of the Borrower in a
writing delivered to the Lender; or (iii) any person whom the Lender reasonably
believes to be an officer of the Borrower or such a designated agent.
(b) Upon fulfillment of the applicable conditions set forth in Article
IV, the Lender shall disburse the proceeds of the requested Revolving Advance by
crediting the same to the Borrower's demand deposit account maintained with
Xxxxx Fargo Bank, N.A. unless the Lender and the Borrower shall agree in writing
to another manner of disbursement. Upon the Lender's request, the Borrower shall
promptly confirm each telephonic request for an Advance by executing and
delivering an appropriate confirmation certificate to the Lender. The Borrower
shall repay all Advances even if the Lender does not receive such confirmation
and even if the person requesting an Advance was not in fact authorized to do
so. Any request for an Advance, whether written or telephonic, shall be deemed
to be a representation by the Borrower that the conditions set forth in Section
4.2 have been satisfied as of the time of the request.
SECTION 2.2 INTEREST; DEFAULT INTEREST; PARTICIPATIONS; USURY. Interest
accruing on the Note shall be due and payable in arrears on the first day of
each month.
(a) REVOLVING NOTE. Except as set forth in Sections 2.2(b) and 2.2(d),
the outstanding principal balance of the Revolving Note shall bear interest at
the Floating Rate.
(b) DEFAULT INTEREST RATE. At any time during any Default Period,
commencing with the first day of the first month following the Default, in the
Lender's sole discretion and without waiving any of its other rights and
remedies, the principal of the Advances outstanding from time to time shall bear
interest at the Default Rate, effective for any periods designated by the Lender
from time to time during that Default Period.
(c) PARTICIPATIONS. If any Person shall acquire a participation in the
Advances under this Agreement, the Borrower shall be obligated to the Lender to
pay the full amount of all interest calculated under Section 2.2(a), along with
all other fees, charges and other amounts due under this Agreement, regardless
if such Person elects to accept interest with respect to its participation at a
lower rate than the Floating Rate, or otherwise elects to accept less than its
pro rata share of such fees, charges and other amounts due under this Agreement.
(d) USURY. In any event no rate change shall be put into effect which
would result in a rate greater than the highest rate permitted by law.
Notwithstanding anything to the contrary contained in any Loan Document, all
agreements which either now are or which shall become agreements between the
Borrower and the Lender are hereby limited so that in no contingency or event
whatsoever shall the total liability for payments in the nature of interest,
additional interest and other charges exceed the applicable limits imposed by
the usury laws of the State of California. If any payments in the nature of
interest, additional interest and other charges made under any Loan Document are
held to be in excess of the applicable limits imposed by the usury laws of the
State of California, it is agreed that any such amount held to be in excess
shall be considered payment of principal hereunder, and the indebtedness
evidenced hereby shall be reduced by such amount so that the total liability for
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payments in the nature of interest, additional interest and other charges shall
not exceed the applicable limits imposed by the usury laws of the State of
California, in compliance with the desires of the Borrower and the Lender. This
provision shall never be superseded or waived and shall control every other
provision of the Loan Documents and all agreements between the Borrower and the
Lender, or their successors and assigns.
(e) SAVINGS CLAUSE. The Borrower agrees that the interest rate
contracted for includes the interest rate set forth herein plus any other
charges or fees set forth herein and costs and expenses incident to this
transaction paid by the Borrower to the extent that the same are deemed interest
under applicable law.
SECTION 2.3 FEES.
(a) ORIGINATION FEE. The Borrower hereby agrees to pay the Lender a
fully earned and non-refundable origination fee of $50,000.00 due and payable
upon the execution of this Agreement.
(b) UNUSED LINE FEE. For the purposes of this Section 2.3(b), "Unused
Amount" means the Maximum Line reduced by outstanding Revolving Advances. The
Borrower agrees to pay to the Lender an unused line fee at the rate of
one-quarter of one percent (0.25%) per annum on the average daily Unused Amount
from the date of this Agreement to and including the Termination Date, due and
payable monthly in arrears on the first day of the month and on the Termination
Date.
(c) COMMITMENT FEE. The Borrower hereby agrees to pay the Lender an
annual commitment fee in the amount of $50,000.00 due and payable commencing on
the first anniversary of the Funding Date, and continuing on each subsequent
anniversary of the Funding Date.
(d) ADMINISTRATION FEE. The Borrower hereby agrees to pay the Lender
an administration fee in the amount of $1,000.00 per month commencing on the
first day of the first calendar month after the initial Revolving Advance and on
the first day of each month thereafter.
(e) AUDIT FEES. The Borrower hereby agrees to pay the Lender, on
demand, audit fees in connection with any audits or inspections conducted by the
Lender of any Collateral or the Borrower's operations or business at the rates
established from time to time by the Lender as its audit fees (which fees are
currently $75.00 per hour per auditor), together with all actual out-of-pocket
costs and expenses incurred in conducting any such audit or inspection;
PROVIDED, HOWEVER, that Lender will not perform such audits until either (i) a
Default, or (ii) the occurrence of the first Threshold Event.
SECTION 2.4 COMPUTATION OF INTEREST AND FEES; WHEN INTEREST DUE AND
PAYABLE. Interest accruing on the outstanding principal balance of the Advances
and fees hereunder outstanding from time to time shall be computed on the basis
of actual number of days elapsed in a year of 360 days. Interest shall be
payable in arrears on the first day of each month and on the Termination Date.
SECTION 2.5 [INTENTIONALLY OMITTED]
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SECTION 2.6 VOLUNTARY PREPAYMENT; TERMINATION OF CREDIT FACILITY BY THE
BORROWER; PERMANENT REDUCTION OF THE MAXIMUM LINE; WAIVER OF REDUCTION AND
TERMINATION FEES. Except as otherwise provided herein, the Borrower may
terminate the Credit Facility or prepay the Advances in whole at any time or
from time to time in part, and, subject to payment and performance of all
Obligations and termination of the Credit Facility, the Lender shall release or
terminate the Security Interest and the Security Documents to which the Borrower
is entitled by law.
(a) TERMINATION BY BORROWER. The Borrower may terminate the Credit
Facility at any time by (i) giving at least 30 days' prior written notice to the
Lender of the Borrower's intention to terminate the Credit Facility; and (ii)
paying the Lender fees in accordance with Subsection (b) if the Borrower
terminates the Credit Facility effective as of any date other than a Maturity
Date.
(b) PERMANENT REDUCTION OF MAXIMUM LINE. The Borrower may at any time
and from time to time, upon at least 30 days' prior written notice to the
Lender, permanently reduce in part or completely the Maximum Line or terminate
the Credit Facility in accordance with the following provisions:
(i) The Borrower may not reduce the Maximum Line to an amount
less than the then-aggregate outstanding balance of the Revolving Advances.
(ii) If a reduction of the Maximum Line occurs at any time other
than the Maturity Date, the Borrower shall pay to the Lender a premium in an
amount equal to one-half of one percent (0.5%) of the reduction.
(iii) Any reduction in the Maximum Line must be in an amount not
less than $1,000,000.00 or an integral multiple thereof.
(iv) If the Borrower reduces the Maximum Line to zero, all
Obligations shall be immediately due and payable.
(c) WAIVER OF REDUCTION FEES. The Borrower will not be required to pay
the fees otherwise due under Subsection (b) if such reduction is requested is
made because of increased cash flow generated from the Borrower's operations or
refinancing by an affiliate of the Lender.
SECTION 2.7 MANDATORY PREPAYMENT. Without notice or demand, if the
outstanding principal balance of the Revolving Advances shall at any time exceed
the Borrowing Base, the Borrower shall immediately prepay the Revolving Advances
to the extent necessary to eliminate such excess. Any payment received by the
Lender under this Section 2.7 or under Section 2.6 may be applied to the
Obligations, in such order and in such amounts as the Lender, in its discretion,
may from time to time determine. For each day or portion thereof that the
Revolving Advances shall exceed the Borrowing Base, the Borrower shall pay to
the Lender an overadvance charge (which charge shall be in addition to and not
in lieu of any other interest, fees, or charges payable by Borrower hereunder)
in the amount of $100.00; provided, however, that if such day occurs during a
Default Period, the overadvance charge for such day shall be $200.00.
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SECTION 2.8 PAYMENT. All payments to the Lender shall be made in
immediately available funds and shall be applied to the Obligations upon receipt
by the Lender. Notwithstanding anything in Section 2.1, the Borrower hereby
authorizes the Lender, in its discretion at any time or from time to time
without the Borrower's request and even if the conditions set forth in Section
4.2 would not be satisfied, to make a Revolving Advance in an amount equal to
the portion of the Obligations from time to time due and payable.
SECTION 2.9 PAYMENT ON NON-BANKING DAYS. Whenever any payment to be made
hereunder shall be stated to be due on a day which is not a Banking Day, such
payment may be made on the next succeeding Banking Day, and such extension of
time shall in such case be included in the computation of interest on the
Advances or the fees hereunder, as the case may be.
SECTION 2.10 USE OF PROCEEDS. The Borrower shall use the proceeds of
Advances for ordinary working capital purposes and to repay all outstanding
indebtedness of the Borrower owed to Silicon Valley Bank.
SECTION 2.11 LIABILITY RECORDS. The Lender may maintain from time to time,
at its discretion, liability records as to the Obligations. All entries made on
any such record shall be presumed correct until the Borrower establishes the
contrary. Upon the Lender's demand, the Borrower will admit and certify in
writing the exact principal balance of the Obligations that the Borrower then
asserts to be outstanding. Any billing statement or accounting rendered by the
Lender shall be conclusive and fully binding on the Borrower unless the Borrower
gives the Lender specific written notice of exception within 30 days after
receipt.
ARTICLE III
SECURITY INTEREST; OCCUPANCY; SETOFF
SECTION 3.1 GRANT OF SECURITY INTEREST. The Borrower hereby pledges,
assigns and grants to the Lender a security interest (collectively referred to
as the "Security Interest") in the Collateral, as security for the payment and
performance of the Obligations.
SECTION 3.2 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER OBLIGORS. The Lender
may at any time (upon a Default or the occurrence of a Threshold Event) notify
any account debtor or other person obligated to pay the amount due that such
right to payment has been assigned or transferred to the Lender for security and
shall be paid directly to the Lender. The Borrower will join in giving such
notice if the Lender so requests. At any time after the Borrower or the Lender
gives such notice to an account debtor or other obligor, the Lender may, but
need not, in the Lender's name or in the Borrower's name, (a) demand, xxx for,
collect or receive any money or property at any time payable or receivable on
account of, or securing, any such right to payment, or grant any extension to,
make any compromise or settlement with or otherwise agree to waive, modify,
amend or change the obligations (including collateral obligations) of any such
account debtor or other obligor; and (b) as the Borrower's agent and
attorney-in-fact, notify the United States Postal Service to change the address
for delivery of the Borrower's mail to any address designated by the Lender,
otherwise intercept the Borrower's mail, and receive, open and dispose of the
Borrower's mail, applying all Collateral as permitted under this Agreement and
holding all other mail for the Borrower's account or forwarding such mail to the
Borrower's last known address.
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SECTION 3.3 ASSIGNMENT OF INSURANCE. As additional security for the
payment and performance of the Obligations, the Borrower hereby assigns to the
Lender any and all monies (including, without limitation, proceeds of insurance
and refunds of unearned premiums) due or to become due under, and all other
rights of the Borrower with respect to, any and all policies of insurance now or
at any time hereafter covering the Collateral or any evidence thereof or any
business records or valuable papers pertaining thereto, and the Borrower hereby
directs the issuer of any such policy to pay all such monies directly to the
Lender. At any time, if a Default Period then exists, the Lender may (but need
not), in the Lender's name or in the Borrower's name, execute and deliver proof
of claim, receive all such monies, endorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim against the issuer of any such policy.
SECTION 3.4 OCCUPANCY.
(a) The Borrower hereby irrevocably grants to the Lender the right to
take possession of the Premises at any time during each Default Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise dispose of
goods that are Collateral and for other purposes that the Lender may in good
xxxxx xxxx to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and terminate
upon the earlier of (i) payment in full and discharge of all Obligations and
termination of the Commitment, (ii) final sale or disposition of all goods
constituting Collateral and delivery of all such goods to purchasers, or (iii)
the end of the applicable Default Period.
(d) The Lender shall not be obligated to pay or account for any rent
or other compensation for the possession, occupancy or use of any of the
Premises; provided, however, that if the Lender does pay or account for any rent
or other compensation for the possession, occupancy or use of any of the
Premises, the Borrower shall reimburse the Lender promptly for the full amount
thereof. In addition, the Borrower will pay, or reimburse the Lender for, all
taxes, fees, duties, imposts, charges and expenses at any time incurred by or
imposed upon the Lender by reason of the execution, delivery, existence,
recordation, performance or enforcement of this Agreement or the provisions of
this Section 3.4.
SECTION 3.5 LICENSE. The Borrower hereby grants to the Lender a
non-exclusive, worldwide and royalty-free license to use or otherwise exploit
all trademarks, franchises, trade names, copyrights and patents of the Borrower
for the purpose of selling, leasing or otherwise disposing of any or all
Collateral during any Default Period.
SECTION 3.6 FINANCING STATEMENT. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by the
Borrower is sufficient as a financing statement and may be filed as a financing
statement in any state to perfect the security interests granted hereby. For
this purpose, the following information is set forth:
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Name and address of Debtor:
OrthoLogic Corp.
0000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxx, XX 00000
Federal Tax Identification No. 00-0000000
Name and address of Secured Party:
Xxxxx Fargo Business Credit, Inc.
000 Xxxx Xxxxxxxxxx Xxxxxx, 0xx Floor
MAC S4101-076
Xxxxxxx, XX 00000
Federal Tax Identification No. 00-0000000
SECTION 3.7 SETOFF. The Borrower agrees that the Lender may at any time or
from time to time, at its sole discretion and without demand and without notice
to anyone, setoff any liability owed to the Borrower by the Lender, whether or
not due, against any Obligation, whether or not due. In addition, each other
Person holding a participating interest in any Obligations (so long as Borrower
has been made aware of such participation) shall have the right to appropriate
or setoff any deposit or other liability then owed by such Person to the
Borrower, whether or not due, and apply the same to the payment of said
participating interest, as fully as if such Person had lent directly to the
Borrower the amount of such participating interest.
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.1 CONDITIONS PRECEDENT TO THE INITIAL REVOLVING ADVANCE. The
Lender's obligation to make the initial Revolving Advance hereunder shall be
subject to the conditions precedent that (i) after giving effect to the initial
Revolving Advance there is not less than $1,500,000.00 in excess Availability,
and (ii) the Lender shall have received all of the following, each in form and
substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Note, properly executed by the Borrower.
(c) A true and correct copy of any and all leases pursuant to which
the Borrower is leasing the Principal Premises, together with a landlord's
disclaimer and consent with respect to the lease for the principal premises in
Phoenix, Arizona.
(d) A true and correct copy of any and all agreements pursuant to
which the Borrower's property at its Principal Premises is in the possession of
any Person other than the Borrower, together with, (i) an acknowledgment and
waiver of liens from each subcontractor who has possession of the Borrower's
goods from time to time, (ii) UCC financing statements sufficient to protect the
Borrower's and the Lender's interests in such goods, and (iii) UCC searches
showing that no other secured party has filed a financing statement covering
such Person's property other than the Borrower, or if there exists any such
secured party, evidence that each such secured party has received notice from
the Borrower and the Lender sufficient to protect the Borrower's and the
Lender's interests in the Borrower's goods from any claim by such secured party.
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(e) Current searches of appropriate filing offices showing that (i) no
state or federal tax liens have been filed and remain in effect against the
Borrower, (ii) no financing statements or assignments of patents, trademarks or
copyrights have been filed and remain in effect against the Borrower except
those financing statements and assignments of patents, trademarks or copyrights
relating to Permitted Liens or to liens held by Persons who have agreed in
writing that upon receipt of proceeds of the Advances, they will deliver UCC
releases and/or terminations and releases of such assignments of patents,
trademarks or copyrights satisfactory to the Lender, and (iii) the Lender has
duly filed all financing statements necessary to perfect the Security Interest,
to the extent the Security Interest is capable of being perfected by filing.
(f) A certificate of the Borrower's Secretary or Assistant Secretary
certifying as to (i) the resolutions of the Borrower's directors and, if
required, shareholders, authorizing the execution, delivery and performance of
the Loan Documents, (ii) the Borrower's articles of incorporation and bylaws,
and (iii) the signatures of the Borrower's officers or agents authorized to
execute and deliver the Loan Documents and other instruments, agreements and
certificates, including Advance requests, on the Borrower's behalf.
(g) A current certificate issued by the Secretary of State of
Delaware, certifying that the Borrower is in compliance with all applicable
organizational requirements of the State of Delaware.
(h) Evidence that the Borrower is duly licensed or qualified to
transact business in Arizona and Ontario, Canada.
(i) A certificate of an officer of the Borrower confirming, in his
corporate capacity, the representations and warranties set forth in Article V.
(j) An opinion of counsel to the Borrower, addressed to the Lender.
(k) Certificates of the insurance required hereunder, with all hazard
insurance containing a lender's loss payable endorsement in the Lender's favor
and with all liability insurance naming the Lender as an additional insured.
(l) Payment of the fees and commissions due through the date of the
initial Advance under Section 2.3 and expenses incurred by the Lender through
such date and required to be paid by the Borrower under Section 9.6, including
all legal expenses incurred through the date of this Agreement.
(m) Such other documents as the Lender in its sole discretion may
require.
SECTION 4.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The Lender's obligation
to make each Advance shall be subject to the further conditions precedent that
on such date:
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(a) the representations and warranties contained in Article V are
correct on and as of the date of such Advance as though made on and as of such
date, except to the extent that such representations and warranties relate
solely to an earlier date; and
(b) no event has occurred and is continuing, or would result from such
Advance which constitutes a Default or an Event of Default.
SECTION 4.3 CONDITIONS PRECEDENT TO AN ADVANCE CREATING A THRESHOLD EVENT.
The Lender's obligation to make any Advance which shall constitute a Threshold
Event shall be subject to the further conditions precedent that on such date:
(a) The Borrower shall have entered into an agreement with Lender and
Xxxxx Fargo Bank, N.A. or such other bank (including Silicon Valley Bank) as
Borrower and Lender shall agree, establishing a collection account into which
all payments on Receivables shall be deposited (the "Collection Account")
pursuant to terms satisfactory to Lender and Xxxxx Fargo Bank, N.A. or such
other bank.
(b) Borrower shall have directed all account debtors to make all
payments on Receivables to the lockbox established under the Lockbox Agreement
and/or the Existing Lockbox Agreement, as set forth in Section 6.10.
(c) If the Existing Lockbox Agreement shall then still exist, Borrower
shall have obtained either an acknowledgment from the bank maintaining the
Existing Lockbox Agreement that all Receivables deposited into the lockbox
maintained thereunder shall be directed to the Collection Account, or Borrower
shall have cooperated with Lender in submitting a change of address to all of
Borrower's account debtors to direct the payment of all Receivables to the
lockbox established under the Lockbox Agreement.
(d) Lender shall have completed a Collateral examination at the
expense of Borrower, the results of which shall be satisfactory to Lender.
(e) Lender shall have received an acknowledgment and agreement (in
form and substance satisfactory to Lender) from each licensor in favor of the
Lender, together with a true, correct and complete copy of all license
agreements.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
SECTION 5.1 CORPORATE EXISTENCE AND POWER; NAME; CHIEF EXECUTIVE OFFICE;
INVENTORY AND EQUIPMENT LOCATIONS; TAX IDENTIFICATION NUMBER. The Borrower is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly licensed or qualified to transact
business in all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such licensing or
qualification necessary. The Borrower has all requisite power and authority,
corporate or otherwise, to conduct its business, to own its properties and to
execute and deliver, and to perform all of its obligations under, the Loan
Documents. During its existence, the Borrower has done business solely under the
names set forth in Schedule 5.1 hereto. The Borrower's chief executive office
and principal place of business is located at the address set forth in Schedule
5.1 hereto, and all of the Borrower's records relating to its business or the
15
Collateral are kept at that location. All Inventory and Equipment is located at
that location or at one of the other locations set forth in Schedule 5.1 hereto.
The Borrower's tax identification number is correctly set forth in Section 3.6
hereto.
SECTION 5.2 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR
AGREEMENTS. The execution, delivery and performance by the Borrower of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the Borrower's stockholders; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
order, writ, injunction or decree presently in effect having applicability to
the Borrower or of the Borrower's articles of incorporation or bylaws; (iv)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other material agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature (other than the Security Interest) upon or with
respect to any of the properties now owned or hereafter acquired by the
Borrower.
SECTION 5.3 LEGAL AGREEMENTS. This Agreement constitutes and, upon due
execution by the Borrower, the other Loan Documents will constitute the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms.
SECTION 5.4 SUBSIDIARIES. Except as set forth in Schedule 5.4, the Borrower
has no Subsidiaries.
SECTION 5.5 FINANCIAL CONDITION; NO ADVERSE CHANGE. The Borrower has
heretofore furnished to the Lender unaudited financial statements of the
Borrower for the fiscal year ended December 31, 1999, and those statements
fairly present the Borrower's financial condition on the dates thereof and the
results of its operations and cash flows for the periods then ended and were
prepared in accordance with generally accepted accounting principles. Since the
date of the most recent financial statements, there has been no material adverse
change in the Borrower's business, properties or condition (financial or
otherwise).
SECTION 5.6 LITIGATION. Except as disclosed on Schedule 5.6, there are no
actions, suits or proceedings pending or, to the Borrower's knowledge,
threatened against or affecting the Borrower or any of its Affiliates or the
properties of the Borrower or any of its Affiliates before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which, if determined adversely to the Borrower or any of
its Affiliates, would have a material adverse effect on the financial condition,
properties or operations of the Borrower or any of its Affiliates.
16
SECTION 5.7 REGULATION U. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Advance will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
SECTION 5.8 TAXES. The Borrower and its Affiliates have paid or caused to
be paid to the proper authorities when due all federal, state and local taxes
required to be withheld by each of them. The Borrower and its Affiliates have
filed all federal, state and local tax returns which to the knowledge of the
officers of the Borrower or any Affiliate, as the case may be, are required to
be filed, and the Borrower and its Affiliates have paid or caused to be paid to
the respective taxing authorities all taxes as shown on said returns or on any
assessment received by any of them to the extent such taxes have become due.
SECTION 5.9 TITLES AND LIENS. The Borrower has good and absolute title to
all Collateral described in the collateral reports provided to the Lender and
all other Collateral, properties and assets reflected in the latest financial
statements referred to in Section 5.5 and all proceeds thereof, free and clear
of all mortgages, security interests, liens and encumbrances, except for
Permitted Liens. No financing statement naming the Borrower as debtor is on file
in any office except to perfect only Permitted Liens.
SECTION 5.10 PLANS. Except as disclosed to the Lender in writing prior to
the date hereof, neither the Borrower nor any of its Affiliates maintains or has
maintained any Plan. Neither the Borrower nor any Affiliate has received any
notice or has any knowledge to the effect that it is not in full compliance with
any of the requirements of ERISA. No Reportable Event or other fact or
circumstance which may have an adverse effect on the Plan's tax qualified status
exists in connection with any Plan. Neither the Borrower nor any of its
Affiliates has:
(a) Any accumulated funding deficiency within the meaning of ERISA; or
(b) Any liability or knows of any fact or circumstances which could
result in any liability to the Pension Benefit Guaranty Corporation, the
Internal Revenue Service, the Department of Labor or any participant in
connection with any Plan (other than accrued benefits which or which may become
payable to participants or beneficiaries of any such Plan).
SECTION 5.11 DEFAULT. The Borrower is in compliance with all provisions of
all agreements, instruments, decrees and orders to which it is a party or by
which it or its property is bound or affected, the breach or default of which
could have a material adverse effect on the Borrower's financial condition,
properties or operations.
SECTION 5.12 ENVIRONMENTAL MATTERS.
(a) DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(i) "Environmental Law" means any federal, state, local or other
governmental statute, regulation, law or ordinance dealing with the protection
of human health and the environment.
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(ii) "Hazardous Substances" means pollutants, contaminants,
hazardous substances, hazardous wastes, petroleum and fractions thereof, and all
other chemicals, wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
(b) To the Borrower's best knowledge, there are not present in, on or
under the Premises any Hazardous Substances in such form or quantity as to
create any liability or obligation for either the Borrower or the Lender under
common law of any jurisdiction or under any Environmental Law, and to the best
of Borrower's knowledge no Hazardous Substances have been stored, buried,
spilled, leaked, discharged, emitted or released in, on or under the Premises
during Borrower's occupancy of the Premises in such a way as to create any such
liability.
(c) To the Borrower's best knowledge, the Borrower has not disposed of
Hazardous Substances in such a manner as to create any liability under any
Environmental Law.
(d) There are not and there never have been, during Borrower's
occupancy of the Premises to the best of Borrower's knowledge, any requests,
claims, notices, investigations, demands, administrative proceedings, hearings
or litigation, relating in any way to the Premises or the Borrower, alleging
liability under, violation of, or noncompliance with any Environmental Law or
any license, permit or other authorization issued pursuant thereto. To the
Borrower's best knowledge, no such matter is threatened or impending.
(e) To the Borrower's best knowledge, the Borrower's businesses are
and have in the past always been conducted in accordance with all Environmental
Laws and all licenses, permits and other authorizations required pursuant to any
Environmental Law and necessary for the lawful and efficient operation of such
businesses are in the Borrower's possession and are in full force and effect. No
permit required under any Environmental Law is scheduled to expire within 12
months and there is no threat that any such permit will be withdrawn,
terminated, limited or materially changed.
(f) To the Borrower's best knowledge, the Premises are not and never
have been, during Borrower's occupancy of the Premises, listed on the National
Priorities List, the Comprehensive Environmental Response, Compensation and
Liability Information System or any similar federal, state or local list,
schedule, log, inventory or database.
(g) The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents describing
or relating in any way to the Premises or Borrower's businesses.
SECTION 5.13 SUBMISSIONS TO LENDER. All financial and other information
provided to the Lender by or on behalf of the Borrower in connection with the
Borrower's request for the credit facilities contemplated hereby is true and
correct in all material respects and, as to projections, valuations or proforma
financial statements, present a good faith opinion as to such projections,
valuations and proforma condition and results.
SECTION 5.14 FINANCING STATEMENTS. The Borrower has provided to the Lender
signed financing statements sufficient when filed to perfect the Security
Interest and the other security interests created by the Security Documents.
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When such financing statements are filed in the offices noted therein, the
Lender will have a valid and perfected security interest in all Collateral and
all other collateral described in the Security Documents which is capable of
being perfected by filing financing statements. None of the Collateral or other
collateral covered by the Security Documents is or will become a fixture on real
estate, unless a sufficient fixture filing is in effect with respect thereto.
SECTION 5.15 RIGHTS TO PAYMENT. Each right to payment and each instrument,
document, chattel paper and other agreement constituting or evidencing
Collateral or other collateral covered by the Security Documents is (or, in the
case of all future Collateral or such other collateral, will be when arising or
issued) the valid, genuine and legally enforceable obligation, subject to no
defense, setoff or counterclaim, of the account debtor or other obligor named
therein or in the Borrower's records pertaining thereto as being obligated to
pay such obligation.
SECTION 5.16 FINANCIAL SOLVENCY. Both before and after giving effect to the
transactions contemplated in the Loan Documents, none of the Borrower or its
Affiliates:
(a) was or will be insolvent, as that term is used and defined in
Section 101(32) of the United States Bankruptcy Code and Section 2 of the
Uniform Fraudulent Transfer Act;
(b) has unreasonably small capital or is engaged or about to engage in
a business or a transaction for which any remaining assets of the Borrower or
such Affiliate are unreasonably small;
(c) by executing, delivering or performing its obligations under the
Loan Documents or other documents to which it is a party or by taking any action
with respect thereto, intends to, nor believes that it will, incur debts beyond
its ability to pay them as they mature;
(d) by executing, delivering or performing its obligations under the
Loan Documents or other documents to which it is a party or by taking any action
with respect thereto, intends to hinder, delay or defraud either its present or
future creditors; and
(e) at this time contemplates filing a petition in bankruptcy or for
an arrangement or reorganization or similar proceeding under any law any
jurisdiction, nor, to the best knowledge of the Borrower, is the subject of any
actual, pending or threatened bankruptcy, insolvency or similar proceedings
under any law of any jurisdiction.
ARTICLE VI
BORROWER'S AFFIRMATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
SECTION 6.1 REPORTING REQUIREMENTS. The Borrower will deliver, or cause to
be delivered, to the Lender each of the following, which shall be in form and
detail acceptable to the Lender (provided that in the case of matters due on a
date certain pursuant to the terms of this Section 6.1, it shall not be a
Default so long as the reporting requirement shall be satisfied by Borrower
within 10 days after such due date):
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(a) as soon as available, and in any event within 90 days after the
end of each fiscal year of the Borrower, the Borrower's audited financial
statements with the unqualified opinion of independent certified public
accountants selected by the Borrower and acceptable to the Lender, which annual
financial statements shall include the Borrower's balance sheet as of the end of
such fiscal year and the related statements of the Borrower's income, retained
earnings and cash flows for the fiscal year then ended, prepared, if the Lender
so requests, on a consolidating and consolidated basis to include any
Affiliates, all in reasonable detail and prepared in accordance with GAAP,
together with (i) copies of all management letters prepared by such accountants;
(ii) a report signed by such accountants stating that in making the
investigations necessary for said opinion they obtained no knowledge, except as
specifically stated, of any Default or Event of Default hereunder and all
relevant facts in reasonable detail to evidence, and the computations as to,
whether or not the Borrower is in compliance with the requirements set forth in
Sections 6.12 through 6.14, and 7.10; and (iii) a certificate of the Borrower's
chief financial officer stating that such financial statements have been
prepared in accordance with GAAP and whether or not such officer has knowledge
of the occurrence of any Default or Event of Default hereunder and, if so,
stating in reasonable detail the facts with respect thereto;
(b) as soon as available and in any event within 20 days after the end
of each month, an unaudited/internal balance sheet and statements of income and
retained earnings of the Borrower as at the end of and for such month and for
the year to date period then ended, prepared, if the Lender so requests, on a
consolidating and consolidated basis to include any Affiliates, in reasonable
detail and stating in comparative form the figures for the corresponding date
and periods in the previous year, all prepared in accordance with GAAP, subject
to year-end audit adjustments; and accompanied by a certificate of the
Borrower's chief financial officer, substantially in the form of Exhibit B
hereto stating (i) that such financial statements have been prepared in
accordance with GAAP, subject to year-end audit adjustments, (ii) whether or not
such officer has knowledge of the occurrence of any Default or Event of Default
hereunder not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto, and (iii) all relevant facts
in reasonable detail to evidence, and the computations as to, whether or not the
Borrower is in compliance with the requirements set forth in Sections 6.12
through 6.14, and 7.10;
(c) within 20 days after the end of each month or more frequently if
the Lender so requires, agings of the Borrower's accounts receivable and its
accounts payable, an inventory certification report, and a calculation of the
Borrower's Accounts, Eligible Accounts, and Inventory as at the end of such
month or shorter time period;
(d) at least 30 days before the beginning of each fiscal year of the
Borrower, the projected balance sheets and income statements for each month of
such year, each in reasonable detail, representing the Borrower's good faith
projections and certified by the Borrower's chief financial officer as being the
most accurate projections available and identical to the projections used by the
Borrower for internal planning purposes, together with such supporting schedules
and information as the Lender may in its discretion require;
20
(e) immediately after the commencement thereof, notice in writing of
all litigation and of all proceedings before any governmental or regulatory
agency affecting the Borrower of the type described in Section 5.12 or which
seek a monetary recovery against the Borrower in excess of $500,000.00;
(f) as promptly as practicable (but in any event not later than five
business days) after an officer of the Borrower obtains knowledge of the
occurrence of any event which constitutes a Default or Event of Default
hereunder, notice of such occurrence, together with a detailed statement by a
responsible officer of the Borrower of the steps being taken by the Borrower to
cure the effect of such Default or Event of Default;
(g) as soon as possible and in any event within 30 days after the
Borrower knows or has reason to know that any Reportable Event with respect to
any Plan has occurred, the statement of the Borrower's chief financial officer
setting forth details as to such Reportable Event and the action which the
Borrower proposes to take with respect thereto, together with a copy of the
notice of such Reportable Event to the Pension Benefit Guaranty Corporation;
(h) as soon as possible, and in any event within 20 days after the
Borrower fails to make any quarterly contribution required with respect to any
Plan under Section 412(m) of the Internal Revenue Code of 1986, as amended, the
statement of the Borrower's chief financial officer setting forth details as to
such failure and the action which the Borrower proposes to take with respect
thereto, together with a copy of any notice of such failure required to be
provided to the Pension Benefit Guaranty Corporation;
(i) on and after the earlier to occur of (i) a Threshold Event, or
(ii) a Default, promptly upon knowledge thereof, notice of (i) any dispute or
claim by the Borrower's customers which exceeds $25,000.00; (ii) credit memos;
(iii) any goods returned to or recovered by the Borrower; and (iv) any change in
the persons constituting the Borrower's officers and directors;
(j) promptly upon knowledge thereof, notice of any loss of or material
damage to the Collateral or other collateral covered by the Security Documents
or of any substantial adverse change in the Collateral or such other collateral
or the prospect of payment thereof;
(k) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have sent to
its stockholders;
(l) promptly after the sending or filing thereof, copies of all
regular and periodic reports which the Borrower shall file with the Securities
and Exchange Commission or any national securities exchange;
(m) promptly upon knowledge thereof, notice of the Borrower's
violation of any law, rule or regulation, the non-compliance with which could
materially and adversely affect the Borrower's business or its financial
condition; and
(n) within 20 days after the end of each month until such time as a
Threshold Event shall occur and then thereafter from time to time with such
frequency as shall be required by Lender, with reasonable promptness, any and
all receivables schedules, collection reports, deposit records, equipment
21
schedules, copies of invoices to account debtors, shipment documents and
delivery receipts for goods sold, and such other material, reports, records or
information as the Lender may request.
SECTION 6.2 BOOKS AND RECORDS; INSPECTION AND EXAMINATION. The Borrower
will keep accurate books of record and account for itself pertaining to the
Collateral and pertaining to the Borrower's business and financial condition and
such other matters as the Lender may from time to time request in which true and
complete entries will be made in accordance with GAAP and, upon the Lender's
request, will permit any officer, employee, attorney or accountant for the
Lender to audit, review, make extracts from or copy any and all corporate and
financial books and records of the Borrower at all times during ordinary
business hours, to send and discuss with account debtors and other obligors
requests for verification of amounts owed to the Borrower, and to discuss the
Borrower's affairs with any of its directors, officers, employees or agents. The
Borrower will permit the Lender, or its employees, accountants, attorneys or
agents, to examine and inspect any Collateral, other collateral covered by the
Security Documents or any other property of the Borrower at any time during
ordinary business hours.
SECTION 6.3 ACCOUNT VERIFICATION. The Lender may at any time and from time
to time send or require the Borrower to send requests for verification of
accounts or notices of assignment to account debtors and other obligors. The
Lender may also at any time and from time to time telephone account debtors and
other obligors to verify accounts.
SECTION 6.4 COMPLIANCE WITH LAWS.
(a) The Borrower will (i) comply with the requirements of applicable
laws and regulations, the non-compliance with which would materially and
adversely affect its business or its financial condition and (ii) use and keep
the Collateral, and require that others use and keep the Collateral, only for
lawful purposes, without violation of any federal, state or local law, statute
or ordinance.
(b) Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply with all applicable Environmental Laws
and obtain and comply with all permits, licenses and similar approvals required
by any Environmental Laws, and will not generate, use, transport, treat, store
or dispose of any Hazardous Substances in such a manner as to create any
liability or obligation under the common law of any jurisdiction or any
Environmental Law.
SECTION 6.5 PAYMENT OF TAXES AND OTHER CLAIMS. The Borrower will pay or
discharge, when due, (a) all taxes, assessments and governmental charges levied
or imposed upon it or upon its income or profits, upon any properties belonging
to it (including, without limitation, the Collateral) or upon or against the
creation, perfection or continuance of the Security Interest, prior to the date
on which penalties attach thereto, (b) all federal, state and local taxes
required to be withheld by it, and (c) all lawful claims for labor, materials
and supplies which, if unpaid, might by law become a lien or charge upon any
properties of the Borrower; provided, that the Borrower shall not be required to
pay any such tax, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings and for
which proper reserves have been made.
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SECTION 6.6 MAINTENANCE OF PROPERTIES.
(a) The Borrower will keep and maintain the Collateral, the other
collateral covered by the Security Documents and all of its other properties
necessary or useful in its business in good condition, repair and working order
(normal wear and tear excepted) and will from time to time replace or repair any
worn, defective or broken parts; provided, however, that nothing in this Section
6.6 shall prevent the Borrower from discontinuing the operation and maintenance
of any of its properties if such discontinuance is, in the Lender's judgment,
desirable in the conduct of the Borrower's business and not disadvantageous in
any material respect to the Lender.
(b) The Borrower will defend the Collateral against all claims or
demands of all persons (other than the Lender and Permitted Liens) claiming the
Collateral or any interest therein.
(c) The Borrower will keep all Collateral and other collateral covered
by the Security Documents free and clear of all security interests, liens and
encumbrances except Permitted Liens. SECTION 6.7 INSURANCE. The Borrower will
obtain and at all times maintain insurance with insurers believed by the
Borrower to be responsible and reputable, in such amounts and against such risks
as may from time to time be required by the Lender, but in all events in such
amounts and against such risks as is usually carried by companies engaged in
similar business and owning similar properties in the same general areas in
which the Borrower operates. Without limiting the generality of the foregoing,
the Borrower will at all times maintain business interruption insurance
including coverage for force majeure and keep all tangible Collateral insured
against risks of fire (including so-called extended coverage), theft, collision
(for Collateral consisting of motor vehicles) and such other risks and in such
amounts as the Lender may reasonably request, with any loss payable to the
Lender to the extent of its interest, and all policies of such insurance shall
contain a lender's loss payable endorsement for the Lender's benefit acceptable
to the Lender. All policies of liability insurance required hereunder shall name
the Lender as an additional insured.
SECTION 6.8 PRESERVATION OF EXISTENCE. The Borrower will preserve and
maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall conduct
its business in an orderly, efficient and regular manner.
SECTION 6.9 DELIVERY OF INSTRUMENTS, ETC. Upon request by the Lender, the
Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel papers constituting Collateral, duly endorsed or assigned
by the Borrower.
SECTION 6.10 LOCKBOX AGREEMENTS AND COLLECTION ACCOUNT.
(a) As of the date of this Agreement, the Borrower maintains a lockbox
under the "Existing Lockbox Agreement" with Silicon Valley Bank. At such time as
a Threshold Event may occur, Borrower shall irrevocably and permanently ensure
that all Receivables deposited in the lockbox under the Existing Lockbox
Agreement shall be deposited directly to the Collection Account.
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(b) After the date of this Agreement, but in any event not later than
the earlier to occur of, (i) a Threshold Event, or (ii) 18 months from the date
of this Agreement, Borrower shall have entered into the Lockbox Agreement with
Lender, Xxxxx Fargo Bank, N.A. and Regulus West, LLC pursuant to an agreement
with terms and conditions satisfactory to Lender (the "Lockbox Agreement"). As
each account debtor's contract is renewed, Borrower shall direct that all
Receivables thereafter be directed to the lockbox established under the Lockbox
Agreement. The following provisions shall apply to the Lockbox Agreement:
(i) The Lockbox Agreement will require all payments on
Receivables to be deposited in the Collection Account so long as any Revolving
Advance remains outstanding after the occurrence of a Threshold Event. If the
Borrower receives any payments on Receivables after the occurrence of a
Threshold Event and while any Revolving Advance is outstanding, the Borrower
shall deposit such payments into the Collection Account. Until so deposited, the
Borrower shall hold all such payments in trust for and as the property of the
Lender and shall not commingle such payments with any of its other funds or
property.
(ii) Amounts deposited in the Collection Account shall not bear
interest and shall not be subject to withdrawal by the Borrower, except after
full payment and discharge of all Obligations.
(iii) All deposits in the Collection Account shall constitute
proceeds of Collateral and shall not constitute payment of the Obligations. The
Lender from time to time at its discretion may, apply deposited funds in the
Collection Account to the payment of the Obligations, in any order or manner of
application satisfactory to the Lender, by transferring such funds to the
Lender's general account.
(iv) All items deposited in the Collection Account shall be
subject to final payment. If any such item is returned uncollected, the Borrower
will immediately pay the Lender, or, for items deposited in the Collection
Account, the bank maintaining such account, the amount of that item, or such
bank at its discretion may charge any uncollected item to the Borrower's
commercial account or other account. The Borrower shall be liable as an endorser
on all items deposited in the Collection Account, whether or not in fact
endorsed by the Borrower.
(c) Until the earlier to occur of (i) a Default, or (ii) a Threshold
Event, Borrower may have monies deposited in any lockbox deposited to its
operating account rather than to the Collection Account.
SECTION 6.11 PERFORMANCE BY THE LENDER. If the Borrower at any time fails
to perform or observe any of the foregoing covenants contained in this Article
VI or elsewhere herein, and if such failure shall continue for a period of ten
calendar days after the Lender gives the Borrower written notice thereof (or in
the case of the agreements contained in Sections 6.5, 6.7 and 6.10, immediately
upon the occurrence of such failure, without notice or lapse of time), the
Lender may, but need not, perform or observe such covenant on behalf and in the
name, place and stead of the Borrower (or, at the Lender's option, in the
Lender's name) and may, but need not, take any and all other actions which the
Lender may reasonably deem necessary to cure or correct such failure (including,
without limitation, the payment of taxes, the satisfaction of security
interests, liens or encumbrances, the performance of obligations owed to account
debtors or other obligors, the procurement and maintenance of insurance, the
execution of assignments, security agreements and financing statements, and the
24
endorsement of instruments); and the Borrower shall thereupon pay to the Lender
on demand the amount of all monies expended and all costs and expenses
(including reasonable attorneys' fees and legal expenses) incurred by the Lender
in connection with or as a result of the performance or observance of such
agreements or the taking of such action by the Lender, together with interest
thereon from the date expended or incurred at the Floating Rate. To facilitate
the Lender's performance or observance of such covenants of the Borrower, the
Borrower hereby irrevocably appoints the Lender, or the Lender's delegate,
acting alone, as the Borrower's attorney in fact (which appointment is coupled
with an interest) with the right (but not the duty) from time to time to create,
prepare, complete, execute, deliver, endorse or file in the name and on behalf
of the Borrower any and all instruments, documents, assignments, security
agreements, financing statements, applications for insurance and other
agreements and writings required to be obtained, executed, delivered or endorsed
by the Borrower under this Section 6.12.
SECTION 6.12 TANGIBLE NET WORTH. The Borrower covenants that as of the date
of this Agreement, the Borrower has a Tangible Net Worth of not less than
$43,000,000.00. The Borrower covenants that commencing with the month ending
January 31, 2000 and continuing each month thereafter, the Borrower's Tangible
Net Worth as of the last day of each month shall be not less than
$43,000,000.00.
SECTION 6.13 QUICK RATIO. The Borrower covenants that commencing with the
month ending January 31, 2000 and continuing each month thereafter, the Borrower
will maintain during each month a Quick Ratio of not less than 2.0 to 1.0 as
determined at the end of each month.
SECTION 6.14 DEBT TO TANGIBLE NET WORTH. The Borrower covenants that
commencing with the month ending January 31, 2000 and continuing each month
thereafter, the Borrower will maintain during each month a Debt to Tangible Net
Worth Ratio of not less than 0.50 to 1.00 as determined at the end of each
month.
ARTICLE VII
NEGATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower agrees that, without the Lender's prior
written consent:
SECTION 7.1 LIENS. The Borrower will not create, incur or suffer to exist
any mortgage, deed of trust, pledge, lien, security interest, assignment or
transfer upon or of any of its assets (including, without limitation, the
Patents), now owned or hereafter acquired, to secure any indebtedness;
EXCLUDING, HOWEVER, from the operation of the foregoing, the following
(collectively, "Permitted Liens"):
(a) in the case of any of the Borrower's property which is not
Collateral or other collateral described in the Security Documents, covenants,
restrictions, rights, easements and minor irregularities in title which do not
materially interfere with the Borrower's business or operations as presently
conducted;
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(b) mortgages, deeds of trust, pledges, liens, security interests,
capital leases and assignments listed in Schedule 7.1 hereto, securing
indebtedness for borrowed money permitted under Section 7.2;
(c) the Security Interest and liens and security interests created by
the Security Documents; and
(d) purchase money security interests relating to the acquisition of
machinery and equipment of the Borrower not exceeding the cost or fair market
value thereof and so long as no Default Period is then in existence and none
would exist immediately after such acquisition.
SECTION 7.2 INDEBTEDNESS. The Borrower will not incur, create, assume or
permit to exist any indebtedness or liability on account of deposits or advances
or any indebtedness for borrowed money or letters of credit issued on the
Borrower's behalf, or any other indebtedness or liability evidenced by notes,
bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in existence on the date hereof and
listed in Schedule 7.2 hereto; and
(c) indebtedness relating to liens permitted in accordance with
Section 7.1.
SECTION 7.3 GUARANTIES. The Borrower will not assume, guarantee, endorse or
otherwise become directly or contingently liable in connection with any
obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the Borrower for
deposit or collection or similar transactions in the ordinary course of
business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in existence on
the date hereof and listed in Schedule 7.2 hereto.
SECTION 7.4 INVESTMENTS AND SUBSIDIARIES.
(a) The Borrower will not purchase or hold beneficially any stock or
other securities or evidences of indebtedness of, make or permit to exist any
loans or advances to, or make any investment or acquire any interest whatsoever
in, any other Person, including specifically but without limitation any
partnership or joint venture, except:
(i) investments in direct obligations of the United States of
America or any agency or instrumentality thereof whose obligations constitute
full faith and credit obligations of the United States of America having a
maturity of one year or less, commercial paper issued by U.S. corporations rated
"A-1" or "A-2" by Standard & Poors Corporation or "P-1" or "P-2" by Xxxxx'x
Investors Service or certificates of deposit or bankers' acceptances having a
maturity of one year or less issued by members of the Federal Reserve System
26
having deposits in excess of $100,000,000.00 (which certificates of deposit or
bankers' acceptances are fully insured by the Federal Deposit Insurance
Corporation); and
(ii) travel advances or loans to the Borrower's officers and
employees; and
(iii) advances in the form of progress payments, prepaid rent not
exceeding three (3) months or security deposits; and
(iv) the Allowed Investments;
(b) The Borrower will not create or permit to exist any Subsidiary
other than the Subsidiary shown on Schedule 5.4.
SECTION 7.5 DIVIDENDS. The Borrower will not declare or pay any dividends
(other than dividends payable solely in stock of the Borrower) on any class of
its common stock or make any payment on account of the purchase, redemption or
other retirement of any shares of such stock or make any distribution in respect
thereof, either directly or indirectly (provided that, except during a Default
Period, Borrower may pay dividends on its common shares, or redeem or retire
shares of such stock, so long as all such dividends or payments for redemption
or retirement in any fiscal year of Borrower shall not exceed, in the aggregate,
the lesser of (i) 10% of Borrower's total assets, or (ii) 10% of Borrower's
total sales for such period.
SECTION 7.6 SALE OR TRANSFER OF ASSETS; SUSPENSION OF BUSINESS OPERATIONS.
The Borrower will not sell, lease, assign, transfer or otherwise dispose of (i)
the stock of any Subsidiary, (ii) all or a substantial part of its assets, or
(iii) any Collateral or any interest therein (whether in one transaction or in a
series of transactions) to any other Person other than the sale of Inventory in
the ordinary course of business and will not liquidate, dissolve or suspend
business operations. The Borrower will not in any manner transfer any property
without prior or present receipt of full and adequate consideration.
SECTION 7.7 CONSOLIDATION AND MERGER; ASSET ACQUISITIONS. The Borrower will
not consolidate with or merge into any Person, or permit any other Person to
merge into it, or acquire (in a transaction analogous in purpose or effect to a
consolidation or merger) all or substantially all the assets of any other
Person.
SECTION 7.8 SALE AND LEASEBACK. The Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Borrower intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
SECTION 7.9 RESTRICTIONS ON NATURE OF BUSINESS. The Borrower will not
engage in any line of business materially different from that presently engaged
in by the Borrower and will not purchase, lease or otherwise acquire assets not
related to its business.
SECTION 7.10 CAPITAL EXPENDITURES. The Borrower will not incur or contract
to incur Capital Expenditures of more than (i) $4,000,000.00 in the aggregate
during any fiscal year applicable to Borrower's rental fleet, or (ii) more than
$3,000,000.00 in the aggregate during any fiscal year which are not applicable
to Borrower's rental fleet.
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SECTION 7.11 ACCOUNTING. The Borrower will not adopt any material change in
accounting principles other than as required by GAAP. The Borrower will not
adopt, permit or consent to any change in its fiscal year.
SECTION 7.12 DISCOUNTS, ETC. The Borrower will not, after notice from the
Lender, grant any discount, credit or allowance to any customer of the Borrower
outside the ordinary course of Borrower's business or accept any return of goods
sold, or at any time (whether before or after notice from the Lender) modify,
amend, subordinate, cancel or terminate the obligation of any account debtor or
other obligor of the Borrower.
SECTION 7.13 DEFINED BENEFIT PENSION PLANS. The Borrower will not adopt,
create, assume or become a party to any defined benefit pension plan, unless
disclosed to the Lender pursuant to Section 5.10.
SECTION 7.14 OTHER DEFAULTS. The Borrower will not permit any breach or
default (beyond any applicable notice and cure period) or event of default to
occur under any note, loan agreement, indenture, lease, mortgage, contract for
deed, security agreement or other contractual obligation binding upon the
Borrower.
SECTION 7.15 PLACE OF BUSINESS; NAME. The Borrower will not transfer its
chief executive office or principal place of business, or move, relocate, close
or sell any business location. The Borrower will not permit any tangible
Collateral or any records pertaining to the Collateral to be located in any
state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. The Borrower will not change
its name.
SECTION 7.16 ORGANIZATIONAL DOCUMENTS; S CORPORATION STATUS. The Borrower
will not amend its certificate of incorporation, articles of incorporation or
bylaws in any material manner or in any manner adverse to the interests of
Lender hereunder. The Borrower will not become an S Corporation.
ARTICLE VIII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
SECTION 8.1 EVENTS OF DEFAULT. "Event of Default", wherever used herein,
means any one of the following events:
(a) Default in the payment of the Obligations when they become due and
payable;
(b) Default in the payment of any fees, commissions, costs or expenses
required to be paid by the Borrower under this Agreement;
(c) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in this Agreement;
28
(d) The Borrower shall be or become insolvent, or admit in writing its
inability to pay its debts as they mature, or make an assignment for the benefit
of creditors; or the Borrower shall apply for or consent to the appointment of
any receiver, trustee, or similar officer for it or for all or any substantial
part of its property; or such receiver, trustee or similar officer shall be
appointed without the application or consent of the Borrower (and in the case of
such appointment without the consent of Borrower, such appointment order shall
not be vacated or reversed within 60 days after such appointment); or the
Borrower shall institute (by petition, application, answer, consent or
otherwise) any bankruptcy, insolvency, reorganization, arrangement, readjustment
of debt, dissolution, liquidation or similar proceeding relating to it under the
laws of any jurisdiction; or any such proceeding shall be instituted (by
petition, application or otherwise) against the Borrower (provided, however,
that in the case of such proceeding being instituted against the Borrower
without the Borrower's consent, such proceeding shall not have been dismissed
within 60 days after the filing thereof); or any judgment, writ, warrant of
attachment or execution or similar process shall be issued or levied against a
substantial part of the property of the Borrower;
(e) A petition shall be filed by or against the Borrower under the
United States Bankruptcy Code naming the Borrower as debtor (provided, however,
that in the event of an involuntary filing Borrower shall fail to have the same
dismissed within 60 days after the filing thereof);
(f) Any representation or warranty made by the Borrower in this
Agreement, or by the Borrower (or any of its officers) in any agreement,
certificate, instrument or financial statement or other statement contemplated
by or made or delivered pursuant to or in connection with this Agreement or any
such guaranty shall prove to have been incorrect in any material respect when
deemed to be effective;
(g) The rendering against the Borrower of a final judgment, decree or
order for the payment of money in excess of $250,000.00 and the continuance of
such judgment, decree or order unsatisfied and in effect for any period of 30
consecutive days without a stay of execution;
(h) A default under any bond, debenture, note or other evidence of
indebtedness of the Borrower owed to any Person other than the Lender, or under
any indenture or other instrument under which any such evidence of indebtedness
has been issued or by which it is governed, or under any lease of any of the
Principal Premises, and the expiration of the applicable period of grace, if
any, specified in such evidence of indebtedness, indenture, other instrument or
lease;
(i) Any Reportable Event, which the Lender determines in good faith
might constitute grounds for the termination of any Plan or for the appointment
by the appropriate United States District Court of a trustee to administer any
Plan, shall have occurred and be continuing 30 days after written notice to such
effect shall have been given to the Borrower by the Lender; or a trustee shall
have been appointed by an appropriate United States District Court to administer
any Plan; or the Pension Benefit Guaranty Corporation shall have instituted
proceedings to terminate any Plan or to appoint a trustee to administer any
Plan; or the Borrower shall have filed for a distress termination of any Plan
under Title IV of ERISA; or the Borrower shall have failed to make any quarterly
contribution required with respect to any Plan under Section 412(m) of the
Internal Revenue Code of 1986, as amended, which the Lender determines in good
29
faith may by itself, or in combination with any such failures that the Lender
may determine are likely to occur in the future, result in the imposition of a
lien on the Borrower's assets in favor of the Plan;
(j) An event of default shall occur under any Security Document or
under any other security agreement, mortgage, deed of trust, assignment or other
instrument or agreement securing any obligations of the Borrower hereunder or
under any note evidencing any obligations of the Borrower hereunder;
(k) The Borrower shall liquidate, dissolve, terminate or suspend its
business operations or otherwise fail to operate its business in the ordinary
course, or sell all or substantially all of its assets, without the Lender's
prior written consent;
(l) The Borrower shall fail to pay, withhold, collect or remit any tax
or tax deficiency in excess of $150,000.00 when assessed or due (other than any
tax deficiency which is being contested in good faith and by proper proceedings
and for which it shall have set aside on its books adequate reserves therefor)
or notice of any state or federal tax liens shall be filed or issued;
(m) Default in the payment of any amount owed by the Borrower to the
Lender other than any indebtedness arising hereunder;
(n) Any breach, default or event of default by or attributable to any
Affiliate under any agreement between such Affiliate and the Lender.
SECTION 8.2 RIGHTS AND REMEDIES. During any Default Period, the Lender may
exercise any or all of the following rights and remedies:
(a) the Lender may, by notice to the Borrower, declare the Commitment
to be terminated, whereupon the same shall forthwith terminate;
(b) the Lender may, by notice to the Borrower, declare the Obligations
to be forthwith due and payable, whereupon all Obligations shall become and be
forthwith due and payable, without presentment, notice of dishonor, protest or
further notice of any kind, all of which the Borrower hereby expressly waives;
(c) the Lender may, without notice to the Borrower and without further
action, apply any and all money owing by the Lender to the Borrower to the
payment of the Obligations;
(d) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC, including,
without limitation, the right to take possession of Collateral, or any evidence
thereof, proceeding without judicial process or by judicial process (without a
prior hearing or notice thereof, which the Borrower hereby expressly waives) and
the right to sell, lease or otherwise dispose of any or all of the Collateral,
and, in connection therewith, the Borrower will on demand assemble the
Collateral and make it available to the Lender at a place to be designated by
the Lender which is reasonably convenient to both parties;
30
(e) the Lender may exercise and enforce its rights and remedies under
the Loan Documents; and
(f) the Lender may exercise any other rights and remedies available to
it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section 8.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind.
SECTION 8.3 INTELLECTUAL PROPERTY. In addition to the rights and remedies
set forth in Section 8.2 above, upon the occurrence of an Event of Default, the
Borrower shall, upon the request of Lender, immediately execute and deliver to
Lender a Patent and Trademark Security Agreement, in form and substance
satisfactory to the Lender, covering all of the Borrower's Patents, and
trademarks, and creating a first and prior lien thereon in favor of Lender.
SECTION 8.4 CERTAIN NOTICES. If notice to the Borrower of any intended
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given (in the manner specified in Section 9.3) at least ten calendar days before
the date of intended disposition or other action.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay by the
Lender in exercising any right, power or remedy under the Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other or further exercise thereof or
the exercise of any other right, power or remedy under the Loan Documents. The
remedies provided in the Loan Documents are cumulative and not exclusive of any
remedies provided by law.
SECTION 9.2 AMENDMENTS, ETC. No amendment, modification, termination or
waiver of any provision of any Loan Document or consent to any departure by the
Borrower therefrom or any release of a Security Interest shall be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
SECTION 9.3 ADDRESSES FOR NOTICES, ETC. Except as otherwise expressly
provided herein, all notices, requests, demands and other communications
provided for under the Loan Documents shall be in writing and shall be (a)
personally delivered, (b) sent by first class United States mail, (c) sent by
overnight courier of national reputation, or (d) transmitted by telecopy, in
each case addressed or telecopied to the party to whom notice is being given at
its address or telecopier number as set forth below:
31
If to the Borrower:
OrthoLogic Corp.
0000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxx, XX 00000
Telecopier: 602/937-5520
Attention: Xxxxx X. Xxxxx
With a copy to (provided such copy shall not be required to effect official
notice to Borrower):
Xxxxxxx & Xxxxx LLP
Xxx Xxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
Telecopier: 602/230-5598
Attention: P. Xxxxxx Xxxx
If to the Lender:
Xxxxx Fargo Business Credit, Inc.
000 Xxxx Xxxxxxxxxx Xxxxxx, 0xx Floor
MAC S4101-076
Xxxxxxx, XX 00000
Telecopier: 602/378-6215
Attention: Xxxxx Xxxxxx
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article II shall not be
effective until received by the Lender.
SECTION 9.4 FURTHER DOCUMENTS. The Borrower will from time to time execute
and deliver or endorse any and all instruments, documents, conveyances,
assignments, security agreements, financing statements and other agreements and
writings that the Lender may reasonably request in order to secure, protect,
perfect or enforce the Security Interest or the Lender's rights under the Loan
Documents (but any failure to request or assure that the Borrower executes,
delivers or endorses any such item shall not affect or impair the validity,
sufficiency or enforceability of the Loan Documents and the Security Interest,
regardless of whether any such item was or was not executed, delivered or
endorsed in a similar context or on a prior occasion).
SECTION 9.5 COLLATERAL. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
32
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application.
SECTION 9.6 COSTS AND EXPENSES. The Borrower agrees to pay on demand all
costs and expenses, including (without limitation) attorneys' fees, incurred by
the Lender in connection with the Obligations, this Agreement, the Loan
Documents, and any other document or agreement related hereto or thereto, and
the transactions contemplated hereby, including without limitation all such
costs, expenses and fees incurred in connection with the negotiation,
preparation, execution, amendment, administration, performance, collection and
enforcement of the Obligations and all such documents and agreements and the
creation, perfection, protection, satisfaction, foreclosure or enforcement of
the Security Interest.
SECTION 9.7 INDEMNITY. In addition to the payment of expenses pursuant to
Section 9.6, the Borrower agrees to indemnify, defend and hold harmless the
Lender, and any of its participants, parent corporations, subsidiary
corporations, affiliated corporations, successor corporations, and all present
and future officers, directors, employees, attorneys and agents of the foregoing
(the "Indemnitees") from and against any of the following (collectively,
"Indemnified Liabilities"):
(a) any and all transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by reason of the execution and
delivery of the Loan Documents or the making of the Advances;
(b) any claims, loss or damage to which any Indemnitee may be
subjected if any representation or warranty contained in Section 5.12 proves to
be incorrect in any respect or as a result of any violation of the covenant
contained in Section 6.4(b); and
(c) any and all other liabilities, losses, damages, penalties,
judgments, suits, claims, costs and expenses of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of
counsel) in connection with the foregoing and any other investigative,
administrative or judicial proceedings, whether or not such Indemnitee shall be
designated a party thereto, which may be imposed on, incurred by or asserted
against any such Indemnitee, in any manner related to or arising out of or in
connection with the making of the Advances and the Loan Documents or the use or
intended use of the proceeds of the Advances except to the extent the same arise
out of the gross negligence or willful misconduct of Indemnitees.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 9.7 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder.
33
SECTION 9.8 PARTICIPANTS. The Lender and its participants, if any, are not
partners or joint venturers, and the Lender shall not have any liability or
responsibility for any obligation, act or omission of any of its participants.
All rights and powers specifically conferred upon the Lender may be transferred
or delegated to any of the Lender's participants, successors or assigns.
SECTION 9.9 EXECUTION IN COUNTERPARTS. This Agreement and other Loan
Documents may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
SECTION 9.10 BINDING EFFECT; ASSIGNMENT; COMPLETE AGREEMENT; EXCHANGING
INFORMATION. The Loan Documents shall be binding upon and inure to the benefit
of the Borrower and the Lender and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
This Agreement, together with the Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof. Without
limiting the Lender's right to share information regarding the Borrower and its
Affiliates with the Lender's participants, accountants, lawyers and other
advisors, the Lender, Xxxxx Fargo Bank, N.A. or Norwest Corporation, and all
direct and indirect subsidiaries of Xxxxx Fargo Bank, N.A. or Norwest
Corporation, may exchange any and all information they may have in their
possession regarding the Borrower and its Affiliates, and the Borrower waives
any right of confidentiality it may have with respect to such exchange of such
information.
SECTION 9.11 SEVERABILITY OF PROVISIONS. Any provision of this Agreement
which is prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
SECTION 9.12 HEADINGS. Article and Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
SECTION 9.13 GOVERNING LAW; JURISDICTION; VENUE; WAIVER OF JURY TRIAL. The
Loan Documents shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of California. The
parties hereto hereby (i) consents to the personal jurisdiction of the state and
federal courts located in the State of California in connection with any
controversy related to this Agreement; (ii) waives any argument that venue in
any such forum is not convenient, (iii) agrees that any litigation initiated by
the Lender or the Borrower in connection with this Agreement or the other Loan
Documents shall be venued in either the Superior Court of Los Angeles County, or
the Central District Court of California; and (iv) agrees that a final judgment
in any such suit, action or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on the judgment or in any other manner provided
by law. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED ON OR PERTAINING TO THIS AGREEMENT.
34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
ORTHOLOGIC CORP., a Delaware corporation
By
-------------------------------------
Its
---------------------------------
XXXXX FARGO BUSINESS CREDIT, INC.
By
-------------------------------------
Its
---------------------------------
35
Table of Exhibits and Schedules
Exhibit A Form of Revolving Note
Exhibit B Compliance Certificate
Exhibit C Premises
Schedule 5.1 Trade Names, Chief Executive Office, Principal
Place of Business, and Locations of Collateral
Schedule 5.4 Subsidiary
Schedule 5.6 Pending Litigation
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties
36
Exhibit A to Credit and Security Agreement
REVOLVING NOTE
$10,000,000.00 ____________, _________
_____________, 2000
For value received, the undersigned, OrthoLogic Corp., a Delaware
corporation (the "Borrower"), hereby promises to pay on the Termination Date
under the Credit Agreement (defined below), to the order of Xxxxx Fargo Business
Credit, Inc., a Minnesota corporation (the "Lender"), at its main office in
Phoenix, Arizona, or at any other place designated at any time by the holder
hereof, in lawful money of the United States of America and in immediately
available funds, the principal sum of TEN MILLION DOLLARS ($10,000,000.00) or,
if less, the aggregate unpaid principal amount of all Revolving Advances made by
the Lender to the Borrower under the Credit Agreement (defined below) together
with interest on the principal amount hereunder remaining unpaid from time to
time, computed on the basis of the actual number of days elapsed and a 360-day
year, from the date hereof until this Note is fully paid at the rate from time
to time in effect under the Credit and Security Agreement of even date herewith
(as the same may hereafter be amended, supplemented or restated from time to
time, the "Credit Agreement") by and between the Lender and the Borrower. The
principal hereof and interest accruing thereon shall be due and payable as
provided in the Credit Agreement. This Note may be prepaid only in accordance
with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
Revolving Note referred to in the Credit Agreement. This Note is secured, among
other things, pursuant to the Credit Agreement and the Security Documents as
therein defined, and may now or hereafter be secured by one or more other
security agreements, mortgages, deeds of trust, assignments or other instruments
or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when due,
whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest are
expressly waived.
ORTHOLOGIC CORP., a Delaware corporation
By
-------------------------------------
Its
---------------------------------
EXHIBIT A
Exhibit B to Credit and Security Agreement
COMPLIANCE CERTIFICATE
To: _________________________________
Xxxxx Fargo Business Credit, Inc.
Date: _________________, _____
Subject: OrthoLogic Corp.
Financial Statements
In accordance with our Credit and Security Agreement dated as of
_____________, 2000 (the "Credit Agreement"), attached are the financial
statements of OrthoLogic Corp., a Delaware corporation (the "Borrower") as of
and for ________________, 2000 (the "Reporting Date") and the year-to-date
period then ended (the "Current Financials"). All terms used in this certificate
have the meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in accordance
with GAAP, subject to year-end audit adjustments, and fairly present the
Borrower's financial condition and the results of its operations as of the date
thereof.
EVENTS OF DEFAULT. (Check one):
[ ] The undersigned does not have knowledge of the occurrence of a
Default or Event of Default under the Credit Agreement.
[ ] The undersigned has knowledge of the occurrence of a Default or
Event of Default under the Credit Agreement and attached hereto
is a statement of the facts with respect to thereto.
I hereby certify to the Lender as follows:
[ ] The Reporting Date does not xxxx the end of one of the Borrower's
fiscal quarters, hence I am completing only paragraph __ below.
[ ] The Reporting Date marks the end of one of the Borrower's fiscal
quarters, hence I am completing all paragraphs below except
paragraph __.
[ ] The Reporting Date marks the end of the Borrower's fiscal year,
hence I am completing all paragraphs below.
[TO COME]
EXHIBIT B
Exhibit C to Credit and Security Agreement
PREMISES
The Premises referred to in the Credit and Security Agreement are legally
described as follows:
(See attached 3 pages)
EXHIBIT C
Schedule 5.1 to Credit and Security Agreement
Trade Names, Chief Executive Office, Principal Place of Business, and Locations
of Collateral
TRADE NAMES:
Iatromed Inc., a Delaware corporation, which changed its name to OrthoLogic
Corp. on June 28, 1991.
CHIEF EXECUTIVE OFFICE/PRINCIPAL PLACE OF BUSINESS:
0000 Xxxx Xxxxxxxxxx Xxxxxx
Xxxxx, XX 00000
OTHER INVENTORY AND EQUIPMENT LOCATIONS:
Most of the collateral is located at the principal place of business, however,
the Company keeps some equipment at the various sales peoples' sites throughout
the country.
SCHEDULE 5.1
Schedule 5.4 to Credit and Security Agreement
SUBSIDIARY
OrthoLogic Canada (previously Toronto Medical Corp.)
SCHEDULE 5.4
Schedule 5.6 to Credit and Security Agreement
Pending Litigation
Case Number: Name: Location:
------------ ----- ---------
96 CV 01514 Chan v. OrthoLogic Corp. Arizona Dist. Ct.
96 CV 01520 Xxxxx x. Xxxxxxxxx Arizona Dist. Ct.
96 CV 01563 Xxxxxxxx x. Xxxxxxxxx Arizona Dist. Ct.
96 CV 01615 Xxxxx v. OrthoLogic Corp. Arizona Dist. Ct.
96 CV 01643 Xxxxxx x. Xxxxxxxxx Arizona Dist. Ct.
96 CV 01667 Draker x. Xxxxxxxxx Arizona Dist. Ct.
96 CV 01678 Xxxxxx x. Xxxxxxxxx Arizona Dist. Ct.
96 CV 01713 XxXxxxxx v. OrthoLogic Corp. Arizona Dist. Ct.
96 CV 01891 Xxxxxxxx x. Xxxxxxxxx Arizona Dist. Ct.
96 CV 01910 Xxxxxx x. Xxxxxxxxx Arizona Dist. Ct.
96 CV 01937 Xxxxx v. OrthoLogic Corp. Arizona Dist. Ct.
96 CV 02451 Rapport x. Xxxxxxxxx Arizona Dist. Ct.
98 CV 00621 OrthoLogic Corp. x. Xxxxxxx Arizona Dist. Ct.
96 CV 01668 Xxxx, et al. v. OrthoLogic Corp. Arizona Dist. Ct.
XX00-00000 XxxxxXxxxx Xxxx./Xxxxxxxx Xxxxx XXX Xxxxxxxx Xxxxxx Sup. Ct.
CV96-10799 Xxxxxx x. Xxxxxxxxx Maricopa County Sup. Ct.
CV99-12910 Xxxxxxxxx Xxxxxx v. Samaritan Health Maricopa County Sup. Ct.
System/OrthoLogic Corp.
SCHEDULE 5.6
Schedule 7.1 to Credit and Security Agreement
Permitted Liens
Creditor: Collateral:
--------- -----------
CAPITAL LIENS:
Norstan Financial Services, Inc. Telephone Equipment
Associates Leasing, Inc. Equipment
The CIT Group Computer Equipment
The CIT Group Computer Software
Pitney Xxxxx Credit Equipment
The CIT Group Equipment
The CIT Group Equipment
T&W Funding Company II, LLC Flooring Equipment
CURRENT CREDIT FACILITY:
Silicon Valley Bank
SCHEDULE 7.1
Schedule 7.2 to Credit and Security Agreement
Permitted Indebtedness and Guaranties
Creditor: Collateral:
--------- -----------
CAPITAL LIENS:
Norstan Financial Services, Inc. Telephone Equipment
Associates Leasing, Inc. Equipment
The CIT Group Computer Equipment
The CIT Group Computer Software
Pitney Xxxxx Credit Equipment
The CIT Group Equipment
The CIT Group Equipment
T&W Funding Company II, LLC Flooring Equipment
CURRENT CREDIT FACILITY:
Silicon Valley Bank
SCHEDULE 7.2